Governance
Page 2 — Corporate Governance
Page 11 — Compliance
Page 15 — Risk Management

Updated on February 16, 2024

GovernanceCorporate Governance
Basic Views of Corporate Governance
Sumitomo Realty is a comprehensive real estate enterprise of
the Sumitomo Group which has a history of 430 years andinherits Sumitomo’s business philosophy of “Placing prime
importance on integrity” and “Under no circumstances, shall it
pursue easy gains.” The Company’s slogan, “Integrity andInnovation” expresses its corporate stance to all stakeholders
including its employees, customers, business partners,
creditors and shareholders. This includes the pride as adeveloper which values “Integrity” above all, and creates new
corporate value with a pioneering spirit, without pursuing easy
gains under any circumstances.
Under this slogan, we have set forth our fundamental
mission as to “Create even better social assets for the next
generation,” and our basic management policy aims tocontribute to addressing various social issues such as theenvironment, while maximizing corporate value through eachbusiness.

This fundamental mission also includes a reminder “Do notrest on seniors’ laurels and make the best efforts for a better
company for the next generation.” At this point in time, we
believe that the management of the Company should continue
to be carried out by people mainly from within the Company
who have inherited the strong will to sow the seeds of growth
for the sake of the next generation. In doing so, we believe that
employees will be able to maintain a high level of motivation to
eventually participate in management.
In consideration of this basic stance, we are working tofurther strengthen and enhance corporate governance so as tocontribute to the enhancement of the Company’s corporate
value over the medium- to long-term, by working on
collaboration and dialogue with all stakeholders including
shareholders, improving the efficiency of decision-making,appropriate supervision of execution, and proper disclosure of
information.

Corporate Governance System
Reasons for Adopting an Organizational Structure of a Company with Corporate Auditors
Under the Companies Act of Japan, companies may adopt oneof the following three forms of organizational structure: (i) acompany with corporate auditors, in which the Board of
Directors assumes executive responsibility, while corporate
auditors are in charge of the monitoring of management; (ii) a
company with a nominating committee, etc., wherein the Boardof Directors is tasked with the management monitoring
function and the Board of Executive Officers assumes
executive responsibility; and (iii) a company with an audit andsupervisory committee, in which the management monitoring
function of corporate auditors is incorporated into the functionsof the Board of Directors. In this way, companies may selectthe optimum governance structure that best suits theircircumstances.
As stated in the Basic Views above, in order for theCompany to continue growing, we believe that people fromwithin the Company who are deeply familiar with thesignificance of continuing to invest, always looking resolutely

forward even in difficult times, should be the core members ofmanagement and execution, and the motivation of juniors, whowill acquire experience in the real estate business andeventually join the management team, should be maintained;
hence we have a structure as a company with corporate
auditors, where the Board of Directors bears responsibility forexecution, and corporate auditors take on the management
supervision function.
Six directors from within the Company, who are deeply
familiar with the business content, are in charge ofmanagement and execution, while three outside directors andfour corporate auditors for a total of seven persons, which
accounts for over half of the 13 attendees of the Board of
Directors meeting, are responsible for the management
supervision function. In order to fully demonstrate thesupervisory function, we have built a system to accurately
grasp the management condition and issues and to cooperatewith each other as follows.

Role and Structure of the Board of Directors
The Board of Directors promotes the sustainable growth of theCompany and the enhancement of corporate value over the
medium- to long-term, improves profitability and businessefficiency, and prevents fraud before it occurs. In order to doso, it is responsible for deliberating and deciding importantmatters for the Company such as basic management policy
and management strategy, as well as supervising theexecution of duties by each director and executive officer.
The maximum number of directors in the Board stipulated in

the Articles of Incorporation is 12. The Board of Directors iscomprised of six directors from within the Company who are in
charge of business execution as they are deeply familiar withthe significance of always looking resolutely forward andcontinuing to invest for sustainable growth, and three outside
directors with experience as a chairman, a president or othermanagement executives, who have superior character andinsight and understand the Company’s management principles.

2

GovernanceCorporate GovernanceCorporate Governance System
Executive Officer System
Due to the limited number of directors, we have introduced an
executive officer system comparable with directors so that we
can appoint officers necessary for business expansion, and wehave appointed 14 executive officers who do not concurrently
serve as directors. Compensation for executive officers who

are non-concurrent directors is not an employee salary, but is
to be paid from the total compensation for directors, which isclearly based on the Company’s performance set at 1% ofconsolidated ordinary profit for the previous fiscal year,
because they are considered to be comparable with directors.

Role and Structure of the Board of Corporate Auditors
Corporate auditors are responsible to supervise whether
directors are performing their duties properly by using thepowerful authority endorsed by law.

The Board of Corporate Auditors consists of four corporate
auditors, half of whom are the two outside corporate auditors.

Cooperation among Internal Audit Department, Independent Auditor and Corporate Auditors
We have established the Internal Audit Department to checkthe business execution status of each department of the Groupand the operational status of internal controls, to prevent fraud
and errors, and to make proposals for operational
improvement.

The Internal Audit Department reports the results of its
internal audits to, and exchanges views as appropriate with,corporate auditors and the independent auditor in an effort toforge closer collaboration between the three parties andincrease the quality and efficiency of individual audits.

General Meeting of Shareholders

Board of Corporate Auditors
Board of Directors

Independent Auditor
Committee of Outside
Directors and Auditors

President

Executive Committee
Internal Audit Department

Departments, Divisions, etc.

3GovernanceCorporate GovernanceInitiatives to Strengthen Corporate Governance
Steps Taken to Strengthen Corporate Governance
June 2002 Appointed two outside corporate auditors, making half of the four corporate auditors outside
members
April 2004 Reformed the management system, reducing the number of directors from 23 to 12
June 2004 Introduced a fully performance-based compensation system for officers
Abolished the retirement benefit and bonus system for officers
June 2015 Appointed two outside directors
Established a Committee of Outside Directors and Auditors and began holding briefings foroutside directors on a regular basis, to strengthen the supervision function of outside directors
and outside corporate auditors
April 2020 Introduced an executive officer system
June 2020 Appointed one female officer (outside corporate auditor)
June 2023 Increased the number of outside directors to three / Appointed one female director

Roles of Outside Directors and Outside Corporate Auditors
As part of its initiatives to strengthen corporate governance,
the Company appointed two outside corporate auditors in 2002
and two outside directors in 2015. The number of outside
directors has been increased to three including one female, in
2023.
Corporate auditor is a system that has taken root in Japanfor a long time. Corporate auditors use the strong investigative
power granted by the law to audit whether the directors are
conducting their duties appropriately. Although full-time
corporate auditors from within the Company are familiar with
the Company’s internal affairs and have excellent informationgathering skills, they might become somewhat lenient, albeit
unconsciously, when it comes to auditing their colleagues.
Therefore, the Company ensures that at least half of thecorporate auditors are outside members to add an objective
perspective and thereby ensure the effectiveness of audits.
Likewise, it is undeniable that the Board of Directors may
become narrow-minded if it consists only of people from within
the Company, and it is possible that the Board may find itself
left behind by the changes in the world. Therefore, theCompany has appointed outside directors who have excellent
character and insight, who understand its management
philosophy, and who have experience as a chairman, apresident or other management executives, in order to havethem advise the management team and monitor the officers by
utilizing their wide range of knowledge and insight based on
their experience in corporate management.

Efforts to Strengthen the Supervision Function
The Company has three outside directors and four corporate
auditors for a total of seven persons, which accounts for overhalf of the 13 attendees of the Board of Directors meeting,responsible for the management supervision function. In orderto ensure that outside directors and outside corporate auditors
can fully perform their roles, in fiscal 2022 the Company (i)held eight briefings for outside directors in which they werebriefed on the agendas for the Board of Directors meetings,
the content of discussions at Executive Committee, and otherissues; and (ii) convened 14 meetings of the Board of
Corporate Auditors wherein they received reports from theindependent auditor and the Internal Audit Department andconducted interviews about the operating situation with theheads of each department.
In addition, (iii) we have established a Committee of Outside
Directors and Auditors, comprised only of outside directors andoutside corporate auditors. The Committee of Outside
Directors and Auditors directly hears from each officer about
the execution status of the duties of which he or she is incharge and the issues they are aware of, as well as giving
appropriate advice. In the event of a whistleblowing report on
officers, outside corporate auditors receive a report directly
and share the information at the Committee of Outside
Directors and Auditors.
Through these initiatives, we believe that the Company’s
corporate governance has achieved a certain level of quality.

Conflict-of-interest Transactions and Related Party Transactions
The Board of Directors monitors the appropriateness ofconflict-of-interest transactions by directors, by requiring
material facts pertaining to such transactions to be reported
and approved in accordance with the Companies Act.
In addition, the Board of Directors monitors theappropriateness of related party transactions by requiring
periodical reporting and verification every year in accordancewith the disclosure requirements prescribed in the
Implementation Guidance on Accounting Standard by the
Accounting Standards Board of Japan.

4

GovernanceCorporate Governance
Policies for Appointment of Officers
Basic Policy
Regarding nomination of candidates for directors andcorporate auditors, and appointment of executive officers,
persons with a wealth of experience, high-level insight andsophisticated expertise who will contribute to the Company’ssustainable growth and medium- to long-term enhancement ofcorporate value are narrowed down to candidates throughmultiple meetings of the Executive Committee. The final
decision is then made by the Board of Directors based on
thorough deliberation, reflecting independent and objective

opinions of independent outside directors and outside
corporate auditors. Independent outside directors and outside
corporate auditors have sufficient opportunities to know
relevant information such as the background, insights andachievements of internal directors, executive officers andinternal corporate auditors at several occasions including
meetings of the Committee of Outside Directors and Auditors,
briefings for outside directors, and meetings of the Board of
Corporate Auditors.

Compliance with the Independence Criteria of Outside Directors and Outside Corporate Auditors
and Reasons for Appointment Thereof
Regarding appointment of outside directors and outside corporate auditors, the Company has adopted the requirements foroutside directors and outside corporate auditors prescribed in the Companies Act and the independence criteria set by the
Tokyo Stock Exchange.
Name

Yozo
IzuharaNobumasa
Kemori

ChiyonoTeradaTakashi
Sakai

Naoko
Hasegawa

Position

Director

Director

Director

Corporate
AuditorCorporate
AuditorIndependence

Supplementary explanation of
the relationship〇

Mr. Izuhara served as Director, Chairman of theCompany’s business partner Nippon Sheet Glass Co.,
Ltd. until June 2010. However, since the transaction
amount between said company and the Company in themost recent fiscal year was small, accounting for lessthan 1% of sales for both companies, the Company
deems there is no impact on independence.

〇

Mr. Kemori served as Director, Chairman of theMr. Kemori had served as President andCompany’s business partner Sumitomo Metal Mining Co., Chairman of Sumitomo Metal Mining Co.,
Ltd. until June 2017. However, since the transaction
Ltd., and he has extensive knowledge ofamount between said company and the Company in the the mining industry from a long-term
most recent fiscal year was small, accounting for lessperspective and overseas business as athan 1% of sales for both companies, the Company
manager. The Company deems him todeems there is no impact on independence.
be suitable as an outside director.

〇

Ms. Terada served as President and CEO of theCompany’s business partner Art Moving Company Co.,
Ltd. until December 2019. However, since thetransaction amount between said company and theCompany in the most recent fiscal year was small,accounting for less than 1% of sales for both companies,
the Company deems there is no impact on
independence.

Ms. Terada founded Art Hikkoshi Centerand had served as its President andChairperson, etc., and she has extensive
knowledge and wide discernment as amanager. The Company deems her to besuitable as an outside director.

〇

Mr. Sakai served as Representative Director, Executive
Vice-President of the Company’s business partner
Osaka Gas Co., Ltd. until March 2013. However, since
the transaction amount between said company and theCompany in the most recent fiscal year was small,accounting for less than 1% of sales for both companies,
the Company deems there is no impact on
independence.

Mr. Sakai has served as Executive VicePresident of Osaka Gas Co., Ltd. andPresident of Honshu-Shikoku Bridge
Expressway Company Limited, and hehas extensive knowledge and wide
discernment as a manager. The
Company deems him to be suitable as
an outside corporate auditor.

〇

Ms. Hasegawa worked for the Company’s subsidiary
Sumitomo Fudosan Fitness Co., Ltd. (currently
Sumitomo Fudosan Esforta Co., Ltd.) from April 1987 to
October 2002. However, since more than 20 years havepassed since she resigned from said company and she
has not been involved in execution of business of said
company after her resignation, the Company deems
there is no impact on independence.

Ms. Hasegawa has served as Executive
Officer and Chief Business Ethics Officerof The Prudential Life Insurance
Company, Ltd. and she has extensive
experience and wide discernment incorporate management and corporate
ethics. The Company deems her to besuitable as an outside corporate auditor.

5

Reasons of appointment
Mr. Izuhara had served as President andChairman of Nippon Sheet Glass Co.,
Ltd., and he has extensive knowledge on
overseas business and M&A as amanager. The Company deems him tobe suitable as an outside director.

GovernanceCorporate Governance
Officers’ Compensation
Overview of Compensation System for Officers and Resolutions of the General Meeting of
Shareholders concerning Officers’ Compensation, etc.
At the Ordinary General Meeting of Shareholders held on June29, 2004, a resolution was passed to set the total annualcompensation for directors at just 1% of consolidated ordinary
profit for the previous consolidated fiscal year. The number of
directors as of the conclusion of that General Meeting of
Shareholders was 12.
On April 1, 2020, the Company introduced an executive
officer system, which enables the appointment of officers
comparable to directors necessary for business expansion,
with the aim of the further broadening the scope of businessand enhancing employee morale. Accordingly, with theagreement of all directors, the compensation of executive
officers is also to be paid from the aforementioned total
amount of compensation for directors (hereinafter, directors
and executive officers are collectively referred to as “directors,etc.”).
The monetary compensation for corporate auditors isdetermined to be within 6.5 million yen per month, in
accordance with the resolution made at the Ordinary General
Meeting of Shareholders held on June 29, 1999. The numberof corporate auditors as of the conclusion of that General
Meeting of Shareholders was five.

Policies Related to the Determination of the Content of Compensation, etc. for Individual Directors,
etc., and Authorization for the Determination Thereof
The policy for the determination of the content ofcompensation, etc. for individual directors, etc. (hereinafterreferred to as the “determination policy”) is established byresolution of the Board of Directors. Under the determination
policy, compensation for each director, etc., consists only of
fixed compensation, and the specific content (payment amount,
timing of payment, payment method, etc.) of the compensation
for individual directors is determined by agreement between
the Chairman of the Board and Representative Directors,
based on a resolution of authorization by the Board of
Directors. When making this agreement, each director’s duties
and level of contribution to performance are considered.
Whereas the total annual amount of directors’ compensationis set at 1% of ordinary profit for the previous consolidated
fiscal year, the full amount is not paid to the individual directors,
etc., in the current fiscal year, and part of directors’compensation is retained without fixing the amount per director,
etc., for future use as retirement benefits for directors, etc.,
and supplementation of declines in the compensation of
directors, etc., due to downturns in business performance, etc.
With regard to compensation for directors, etc., in fiscal
2022, based on authority resolved by the Board of Directors at

a meeting held on June 29, 2022, the specific content(payment amount, timing of payment, payment method, etc.) of
the compensation for individual directors was determined byagreement between Mr. Kenichi Onodera (Director – Chairman/ Chairman of the Board), Mr. Kojun Nishima (Representative
Director and President / Head of Office Leasing Business
Division), Mr. Masato Kobayashi (Representative Director and
Deputy President / Head of Condominium Sales Business
Division), and Mr. Yoshiyuki Odai (Representative Director and
Deputy President / Head of Corporate Planning Division).
These four directors are, respectively, the Chairman of theBoard, Representative Director and President, Representative
Director and Deputy President in charge of the businessdivision, and Representative Director and Deputy President incharge of the management division, and as these persons
received this authorization based on the judgment that theywould be able to comprehensively examine and appropriately
assess the duties and contributions to performance of eachdirector by bringing in their respective viewpoints, the Board of
Directors has judged that the content of the compensation ofindividual directors, etc., for the fiscal year under review is inline with the determination policy.

6GovernanceCorporate Governance
Officers’ Compensation
Compensation etc. for Each Category of Officers
Amount paid to each director and executive officer
Amount paid
(Million yen)

Category

Amount by type of compensation (Million yen)
Basiccompensation Stock options

Retirement
benefitBonus(FY2022)
Number of
officers
eligible(Persons)

Directors(excluding Outside Directors)

730

730

—

—

—

8

Executive Officers

420

420

—

—

—

9

Outside Directors

48

48

—

—

—

2

1,198

1,198

—

—

—

19

Total

Note: Whereas the total annual amount of compensation for directors including outside directors for fiscal year ended March 31, 2023 is fixedat 2,213 million yen, the full amount has not been paid to the individual directors and executive officers in the same fiscal year, and 1,014
million yen, the difference from the above-mentioned amount paid, has been retained as provision for future use such as their retirement
benefits and supplementation of declines in their compensation due to future downturns in business performance, etc. Regarding theretained amount, the timing of payment and the amount for individual officers cannot be determined, and thus, the retained amount will
become subject to calculation of compensation etc. of individual officers upon payment in the future or upon confirmation of future
payment.

Total amount of compensation etc. for each category of officers and number of officers eligible
Amount by type of compensation (Million yen)
Total
compensation
Basic
Retirement
Bonusbenefit(Million yen) compensation Stock options

Category
Directors(excluding Outside Directors)(FY2022)
Number of
officers
eligible(Persons)

2,165

2,165

—

—

—

8

Corporate Auditors(excluding Outside
Corporate Auditors)

32

32

—

—

—

2

Outside Directors /Outside Corporate Auditors

74

74

—

—

—

4

*With the agreement of all directors, a portionof the amount of2,278
directors’ compensation
Total
2,278
— has been allocated— to the five executive— officers.

14

Notes: 1. With the agreement of all directors, a portion of the amount of directors’ compensation has been allocated to the nine executive
officers.
2. The breakdown of total amount of compensation etc. for outside directors and outside corporate auditors is 48 million yen for outside
directors and 26 million yen for outside corporate auditors.

Total Amount of Compensation of Persons with Total Compensation of 100 Million Yen or More
(FY2022)Amount by type of compensation (Million yen)
Name

Category

Basiccompensation

Stock options

Bonus

Retirement
benefit

Total
compensation(Million yen)

Kenichi Onodera

Director

150

—

—

—

150

Kojun Nishima

Director

150

—

—

—

150

Masato Kobayashi

Director

120

—

—

—

120

7

GovernanceCorporate GovernanceInitiatives for Promoting Diversity
For some time, we have been actively promoting diversity
based on the recognition that the presence of diverse
perspectives and values reflecting a variety of experiences,skills and attributes within the Company is an advantage that
ensures the sustainable growth of the Company.
For more than 20 years, we have been actively hiring
people with diverse careers at other companies as individuals
who can be immediately effective in the Company. Today, midcareer hires with work experience at other companies accountfor 90% of our employees at Sumitomo Realty & Development,
and are the source of the Company’s growth.
In addition, for increasing employees’ motivation, we believethat equal opportunity in promotion to managerial positions is
the most important factor, so we promote employees based
solely on their enthusiasm, ability and achievements,
regardless of gender or whether they were hired as new
graduates or as mid-career workers. As a result, mid-careerhires account for more than 60% of managerial personnel,
thus ensuring diversity in the managerial positions.
We are also actively working on the promotion of female
participation and career advancement. Firstly, we haveannounced a numerical target for the ratio of female
employees newly hired in sales and engineering positions that

support our front line operations (25% in sales and 13% inengineering positions) in order to increase the number offemale employees to be promoted in the future by increasing
the ratio of women in our workforce. Secondly, we are also
working to support women’s career development. For example,
in 2022, we implemented reforms to apply personnel systems
centered on job evaluation-based pay to all employees, andcreated a system that enables employees with medium- tolong-term gaps in their career owing to life events such as
childbirth and raising children to immediately assume positionsof responsibility with no disadvantage after returning to work.
In July 2023, we established Diversity Promotion Office tofocus on the development of future executive candidates. We
are also actively working to engage female officers. As of thesubmission of this report, we have two female officers.
We believe that diversity in managerial positions should beensured naturally as a result of fair employment policies,
systems and appointments, such as those described above.
We believe that setting a numerical target for diversity inmanagerial positions may distort equal opportunity in theappointment of managers and lower the morale of employees
as a whole, and therefore we will not set such a numericaltarget.

Timely and Appropriate Information Disclosure and Communication with Shareholders
and Investors
System for Information Disclosure
The Company considers that it is important to ensure
soundness and transparency of management by means oftimely and appropriate information disclosure.
In accordance with this basic policy, the Company has put inplace systems that enable swift reporting to the responsible
department at the head office and implementation of
appropriate information management measures, if a material
fact that may have an impact on investors’ investment
decisions arises at the Company’s departments or at
subsidiaries.

Upon emergence of a material fact and reporting thereof, theresponsible department, the Administration Department, theCorporate Planning Department, and other relevant
departments, discuss whether there is need for timely
disclosure, and if it is judged that disclosure is necessary,
timely disclosure is performed without delay following thenecessary internal procedures. Subsequently, the disclosurematerials are posted on the Company website for thoroughinformation disclosure.

Policy for Constructive Dialogue with Shareholders
The Company strives to give an account of the Company’s
corporate management and business activities throughgeneral meetings of shareholders, financial results briefing
sessions, individual meetings, and other opportunities forcommunication with shareholders and investors. If ashareholder requests a dialogue, the Company’s policy is that
the Investor Relations & ESG Section will respond to such
request appropriately under the supervision of the responsible
director, etc. depending on the objective of the dialogue, themethod of communication, the number of shares held, theattributes, etc.
We hold more than 100 individual meetings each year withboth domestic and foreign institutional investors to exchange
views mainly on growth strategies, shareholder returns, capitalefficiency, takeover defense measures, reduction of strategic
shareholdings, and decarbonization initiatives.
Regarding dialogues with shareholders, we exercise due
care concerning the handling of insider information, and sharethe contents of the dialogues, as necessary, at important
meetings such as meetings of the Executive Committee
attended by directors and executive officers in order to utilizes
them for the formulation of management plans and medium- tolong-term outlook, etc.

8GovernanceCorporate GovernanceTakeover Defense Measures
Basic Policy and Initiatives to Ensure It(1) Aiming to surpass 300 billion yen in ordinary profit in the next medium-term management plan
With top priority placed on achieving objectives of themedium-term management plans it has formulated every three
years, the Company has increased its corporate value as aresult of having steadily implemented the plans. The Company
has executed eight management plans, and has achieved
increases in ordinary profit in 23 fiscal years, excluding thethree fiscal years under the global financial crisis and the
COVID-19 pandemic.
In the fiscal year ended March 31, 2023, the first year of theNinth Management Plan, we achieved record ordinary profit
for the second consecutive year and record profit for the tenthconsecutive year, making a good start toward achieving thegoals for the cumulative three-year period of the medium-term
management plan.
For the fiscal year ending March 31, 2024, we aim to renew
record-high profits with expecting higher profits in all businesssegments of the mainstay office building leasing (Leasing
segment), condominium sales (Sales segment), housing(Construction segment) and Brokerage segment.
At the time of the announcement of the Ninth Management
Plan in May last year, when the business environment outlook
was uncertain due to the COVID-19 pandemic and thesituation in the Ukraine, the Company has set its long-term
vision to achieve 300 billion yen in ordinary profit by FY2030
at the latest through the contribution of earnings fromoperations of new buildings to be completed. However, theoutlook for each business segment including the hotel andmultipurpose hall businesses, which were affected by the
COVID-19 pandemic, has improved compared to a year ago,and surpassing 300 billion yen in ordinary profit is now
expected to be achievable during the next medium-term
management plan (2026-2028), earlier than initially expected.

(2) Growth underpinned by central Tokyo office building leasing business and corporate value
The real estate leasing business primarily involving officebuildings in central Tokyo has been a driving force
underpinning the Company’s growth thus far. Given that thisbusiness accounts for nearly 70% of the Company’s operating
income overall, it clearly forms the core aspect of its corporate
value acting as a major pillar of operations.
The Company has been expanding its business platform bypromoting development of office buildings with a specific focus
on central Tokyo over roughly half a century since the early
1970s, an era that ushered in completion of the Shinjuku
Sumitomo Building, often referred to as “Sankaku Biru”(triangular building). The Company has experienced
unprecedented economic crises such as the bursting ofJapan’s bubble economy and the 2008 global financial crisis
in wake of the Lehman Brothers collapse, and various
changes in the business environment such as Japan’s bubble
economy and business conditions under Abenomics policies.
Still, the Company has consistently persisted with respect tounwaveringly implementing its management policies suchthat: (i) the Company will not pursue temporary gains by
selling assets; (ii) the Company will develop sites andconstruct buildings; and (iii) the Company will hold ownershipof the buildings constructed on sites it has developed togenerate stable leasing income over the long-term by owningand leasing such buildings. The Company has consequently
grown to become a building owner with a diverse portfolio of

more than 230 buildings located in central Tokyo, and cash
flows from the leasing business exceeded 220 billion yen in
the fiscal year ended March 31, 2023 (operating income of thereal estate leasing business + depreciation).
The office building leasing business calls forcomprehensive strengths for carrying out businessencompassing everything from acquisition of development
sites to operations that include planning projects, marketing
tenants, providing services for tenants and managing
buildings. Given that acquiring development sites is the mostimportant of these operations, the Company has beendeveloping sites for buildings as if it were a manufacturer interms of the approach it takes to redevelopment in terms ofpurchasing multiple small parcels of land to integrate theminto a larger scale and coordinating rights and interests oflandowners. In addition, the Company attaches importance toperforming building management, tenant marketing, etc.
directly, thus grasping the actual conditions of clients and sites
appropriately and always eagerly working on the improvementof project planning and making operations more efficient. As aresult, we have realized high profitability, and have increased
the value of the property possessed as well as of thecorporation. As of March 31, 2023, unrealized gains fromrental and other investment properties amounted toapproximately 3.7 trillion yen having accumulated over theyears.

(3) The necessity for the takeover defense measures
In the Ninth Management Plan, the Company has set forth thecontinuation and promotion of investment in leasing officeassets in central Tokyo as its third target, and it aims to further
expand its earnings base, increase its corporate value, andaugment shareholder returns by successively completing
concrete development plans, centered on redevelopment, witha gross floor area of over 700,000 tsubo (one tsubo is roughly
3.3m2), which constitutes more than 40% of the 1,700,000
tsubo in gross floor area for leasing as of March 31, 2022, andputting these buildings into operation. Such large-scale
development plans involve ultimately generating revenues

from the substantial amount of cumulative upfront investment
made thus far. The Company has long managed tocontinuously expand its business platform by developing leasebuildings while avoiding exposure to vicissitudes of the realestate market and economic conditions, given that it has
always been buoyed by cash flows from the leasing business
which have been a stable source of revenues. As such, theCompany needs to maintain and further expand its cash flows
from the leasing business, which have grown to exceed 200
billion yen, in order to confidently carry out such upfront
investment without having to continually resort to interest-9GovernanceCorporate GovernanceTakeover Defense Measuresbearing debt. Moreover, it is likely to take another two or three
medium-term management plan periods before the Company
achieves full profitability given that the focus has been on
large-scale redevelopment.
On the other hand, amid large-scale financial easing,appetite for investment in top-class domestic revenuegenerating real estate has increased, and it cannot be denied
that there is a risk that a large-scale acquisition will beforcefully conducted in a one-sided manner in relation toshares of the Company, which holds many top-class buildingsin Tokyo. If the management policies of the Company, which
aim to sustainably enhance corporate value through the steady
accumulation of leasing assets that the Company has
continued to build up over the past half a century, are rejected
and a short-term management policy is adopted to seek
temporary earnings and realizes latent gains by selling realestate holdings prior to having accomplished the objectives ofthe development plans formulated to contribute to higher
corporate value in the future, cash flows from the leasing
business that act as a stable revenue source will decrease as aresult, thereby exposing the development plans to financial risk.
As such, the Company is unable to rule out a possible threat ofdamage to the foundations of the Company’s corporate value.
The Company’s management policy aims to steadily increase
corporate value based on a medium- to long-term outlook, andis consequently incompatible with such short-term
management policies. As such, until there is a general timeline
for the generation of revenues from development planscovering over 700,000 tsubo, which is equivalent to over 40%of the current gross floor area in operation, and development
plans that are not reflected in corporate value have decreased
to a certain proportion, the Company needs to seek a mandate
from its shareholders upon having ensured sufficient
information and time for completing discussions in case aninvestor seeking to orchestrate a takeover emerges.
In addition, under the Financial Instruments and Exchange
Act of Japan, there is a tender offer system in place as aprocess for ensuring transparency and fairness for sharetransactions that affect the control of companies, and it is thus
ensured that shareholders will have information and time tomake an assessment. The tender offer period is however short,
at 30 business days, and thus cannot be said to provide
sufficient time for consideration. In addition, the Company
believes issues remain in relation to the legal system, such as
the fact that high-handed purchases and other abusive
purchases cannot necessarily be eliminated because partial
tender offers are permitted, and the fact that the tender offer
system will not be applied in the first place if the purchaser only
purchases shares through market transactions.
Based on the above, the Company deems that in order tocontinue to sustainably enhance the corporate value of theCompany in the future, the provision of procedures through the“Policy for Takeover Defense Measures Against Purchase
Proposals That Undermine the Corporate Value of theCompany (Policy on Large-Scale Purchase of Shares of theCompany)” (hereinafter referred to as “the Policy”), continues
to align with the common interests of shareholders. The Policy
was adopted based on the decision of the meeting of its Boardof Directors dated May 17, 2007. It was continued based on
the resolution of shareholders’ meeting of the 74th fiscal year
dated June 2007, and was continued or renewed uponreceiving approval from shareholders at the 77th, the 80th, the83rd, the 86th and the 89th ordinary general meetings ofshareholders. The term of the Policy will expire upon the
conclusion of the 92nd ordinary general meeting ofshareholders scheduled to be held in June 2025.

The Policy on Measures to a Large-Scale Purchase of Shares of the Company and the Board’s Stance
The Company believes that if a large-scale purchase of theCompany shares (“Large-Scale Purchase”) is initiated, theshareholders should decide to accept or reject the Large-Scale
Purchase. In order for the shareholders to correctly recognize
the effect on the corporate value and common interests ofshareholders, however, it is necessary that both the party
making the Large-Scale Purchase (the “Large-Scale
Purchaser”) and the Board of Directors provide to theshareholders necessary and sufficient information, opinions,alternative proposals, etc., and necessary and sufficient time toconsider them.
The Policy sets out rules on Large-Scale Purchases (“LargeScale Purchase Rules”) and requests the Large-Scale
Purchaser to comply with the Large-Scale Purchase Rules.
The Large-Scale Purchase Rules state that the Large-Scale
Purchaser provides the Board of Directors necessary andsufficient information regarding the Large-Scale Purchase inadvance, and commence the Large-Scale Purchase after acertain period of evaluation by the Board of Directors has
elapsed. The Board of Directors shall take measures that it
deems necessary if the Large-Scale Purchaser does notcomply with the Large-Scale Purchase Rules, or even though
the Large-Scale Purchaser complies with the Large-Scale
Purchase Rules, if it is clear that the Large-Scale Purchase willcause unrecoverable damages to the Company or if the LargeScale Purchase significantly damages the corporate value andcommon interests of shareholders.
Additionally, the Board of Directors shall consult with aSpecial Committee consisting of outside directors, outside
corporate auditors, persons with corporate management
experience, lawyers, certified public accountants, etc., andtake such recommendation to the fullest account, when judging
whether or not the Large-Scale Purchaser complies with theLarge-Scale Purchase Rules, whether or not it is clear that theLarge-Scale Purchase will cause unrecoverable damages to
the Company, whether or not the Large-Scale Purchase will
significantly damage the corporate value and common
interests of shareholders, and whether or not countermeasures
should be taken.
As stated above, the Policy stipulates rules to secure thenecessary information and time for shareholders to deliberateon the Large-Scale Purchase, as well as countermeasures if
the Large-Scale Purchaser does not comply with the LargeScale Purchase Rules or if it is clear that the Large-Scale
Purchase will cause unrecoverable damages to the Company.
The purpose of the Policy is not to maintain the status of theCompany's officers but to contribute to the Company's
corporate value and the common interests of its shareholders.

* For details, please refer to “Notice of convocation of the 89th ordinary general meeting of shareholders.” https://www.sumitomo-rd.co.jp/english/ir

10

GovernanceCompliance
Issue Awareness and Action Plans
The Sumitomo Realty Group has set forth its fundamental
mission which is based on Sumitomo’s business philosophy,
and it established the Code of Conduct as guidelines to govern
all our officers and employees in order to fulfill thisfundamental mission. The Code of Conduct upholds theconcept of implementation of compliance and promotes
compliance activities based on the understanding thatcompliance is an important management issue.
The Company defines implementation of compliance as not
only complying with laws and regulations, but also sensitively
responding and adapting to social demands that underlie laws
and regulations. We promote our business activities by
responding to laws, regulations, internal rules, social common
sense, corporate ethics and social demands that underlie them.

Fundamental Mission
Create even better social assets for the next generation

Code of Conduct
6. Trust with Our Stakeholders
Sustaining trust with our employees, customers,
business partners, local communities,
shareholders/investors, and governmentorganizations
7. Environmental Protection
Protecting the global environment through efforts
such as resource saving, energy saving,
resource recycling, and CO₂ reduction

1. Open Culture … Opportunity
2. Higher Goals … Innovation
3. New Approaches … Pioneering
4. ComplianceBusiness activities in compliance with laws
and regulations, corporate rules, social
norms, and ethics
5. Rejection of Antisocial Forces

Management Structure
The Group has established the Sustainability Committee
chaired by the President, and its subordinate organization, theInternal Control Meeting (hosted by the Company’s Internal
Audit Department), monitors compliance promotion activities*of the Group and reports the result to the Sustainability
Committee. The Internal Audit Department performs internal
audits to check the business execution status of eachdepartment of the Group and the operational status of internal
controls, prevent any illegal acts or misconduct, and provide
suggestions for business improvement. Moreover, thedepartment and the independent auditor report the results of
their audits to the corporate auditors and exchange opinions in
an appropriate manner. These activities help to improve thequality and efficiency of the audit work of the corporate
auditors, the independent auditor and the Internal Audit
Department. The Group has a system in which the Board of
Directors supervises the compliance promotion activities. Of
the matters examined by respective department andsubsidiaries, important matters are reported to the Board of
Directors.

* Compliance promotion activities refer to activities to prevent all types of corruption including bribery and money laundering, as well asactivities to comply with various laws and regulations concerning the environment and society.

11GovernanceCompliance
Initiatives
 Whistleblowing System
The Sumitomo Realty Group has established a whistleblowing
system for the entire Group, business partners, and customers,
which aims to enable early detection of compliance violations
and appropriate response. In order to encourage active
consultation and reporting, we have designed the system toprovide strict legal protection for those who report violations aswell as to allow them the option of anonymous reporting. In
this system, we respond to not only clear compliance violations
but also potential violations.
We have established a compliance system by preparing two
points of contact for reporting; the Internal Audit Department,
which is independent of business divisions or other internalorganizations, serves as the internal point of contact, and an
external law firm, which is independent of the management,

serves as the external point of contact.
In addition, we have established consultation hotlines ineach Group company’s Human Resources Department toprovide consultation on harassment and other issues related to
the working environment.
The personal information of whistleblowers is kept
confidential with strict legal protections, so they do not suffer
any negative consequences by contacting the consultation
hotlines.
Should a compliance violation be identified, we takeappropriate action and then work to prevent a similar situationfrom reoccurring by alerting our employees through theintranet and other means. In addition, remedial measures areprovided for victims.

Whistleblowing System
The Sumitomo Realty Group

Complianceviolations, etc.
Anonymous
reportingAll employees of theSumitomo Realty
GroupGroup consultation
hotlines

Internal Audit
Department

Reporting on
officers
ReportingResponding* Strict legal
protections

Outsidecorporate
auditors

External attorneyat-law

Sharing
information

HR Department ofeach company

The Committee of
Outside Directors
and Auditors

Harassment, etc.
Consultation

Responding

Consultation
hotline of eachcompany

 Compliance Handbook

 Compliance Training

In order to be thoroughly acquainted with legal compliance, theCompliance Handbook, which describes appropriate behavior
in terms of compliance in given situations, is posted on the
Intranet at all times for employees to check anytime. We
update the contents as needed, following the process where
we check the adherence to the code of ethics, identify
compliance violations, and verify the effectiveness based on
feedback from the worksites.

Employees are educated on implementation of compliance as
Sumitomo Realty Group employees through various training
programs including new employee training, compliancetraining for all employees and managerial position training.

 Handling Compliance Violations
When compliance violations are discovered, the Company conducts prompt investigations and takes strict disciplinary actions
as well as measures to prevent the reoccurrence of such violations. At the same time, all officers and employees are warned.

12GovernanceCompliance
Initiatives
Anti-Corruption
 Issue Awareness and Action Plans

Basic Policy on Anti-Corruption
The Sumitomo Realty Group is committed to preventing all types of corruption, including bribery and money
laundering. In order to prevent the occurrence of the following situations, the Group is thoroughly promoting
awareness among all employees.
◆ Offering or receiving excessive entertainment or gifts in any form of relationship with stakeholders, regardlessof whether they are public or private◆ Especially, offering bribing or rendering any other favors that are suspected to be bribes (including facilitation
payments) to public officials or persons in a similar position, domestic or overseas, in order to gain an unfair
advantage◆ Engaging in all other types of corruption that violate corporate compliance, such as money laundering, acts offraud/compulsion, and insider trading Identification of and Responses to the Risk of Corruption in BusinessIn pursuing its business activities, the Sumitomo Realty Group has identified potential corrupt practices that are considered ashigh risk in each business, such as bribery and excessive entertainment/gifts, collusion through political donations, acts offraud/compulsion, and insider trading. In order to prevent such corruption, the Group has a set of procedures for dealing witheach situation that are to be followed by each employee of Sumitomo Realty in a Q&A format.
These are summarized in the Compliance Handbook, which is posted on the Intranet at all times for employees to checkanytime, and they are thoroughly enforced through compliance training and other means. In the unlikely event that corrupt
practices described above be discovered, the Company will take strict actions including disciplinary actions, and conduct
awareness-raising activities within the company to prevent their reoccurrence.

 Policy on Political Donations
When supporting the activities of political groups, the Sumitomo Realty Group will appropriately act in accordance with the
Public Offices Election Act, the Political Funds Control Act, and other relevant laws and regulations. The Group does not makedonations to individual politicians.

 Fines, Administrative Monetary Penalties, and Settlement Monies Resulting from Corrupt Practices
At the Sumitomo Realty Group, there were no serious violations of laws and regulations related to corruption such as bribery infiscal 2022. Accordingly, there have been no fines, administrative monetary penalties, or settlement monies paid.

 Participation in a Consortium
The Sumitomo Realty Group signed the “UN Global Compact” on October 2020 as part of initiatives toward anti-corruption. It is
working to promote anti-corruption activities based on the principle of “Businesses should work against corruption in all its forms,
including extortion and bribery.”◆ UN Global Compact
The “UN Global Compact” is a global initiative advocated by then UN Secretary-General Kofi
Annan in 1999 and was officially inaugurated in July 2000 in New York. It aims to realize asustainable global society through each participating company and organization working toward
solving social issues by demonstrating responsible and creative leadership.

13

GovernanceCompliance
Initiatives
Tax Transparency
 Issue Awareness and Action Plans
The Group complies with tax laws in all countries where it operates in accordance with the spirit of the law, and pays taxes
appropriately according to its profits. Furthermore, in order to address “Base Erosion and Profit Shifting (BEPS)” wheremultinational corporations artificially manipulate taxable income, we are committed to preventing fraud including tax evasion, in
accordance with the 15-point action plan set out by the OECD.

 Supervisory System

 Examination of Tax Matters by External Parties

The Sumitomo Realty Group periodically receives reports
from each subsidiary on the performance of duties including
the status of business execution and the financial condition
including tax matters. Depending on the matter, it provides
instructions related to the business as necessary. The
corporate auditors and the Internal Audit Department also
perform audits as necessary on the financial condition
including tax matters. Furthermore, a system has been
established in which the Director responsible for the
Accounting Department oversees general tax matters, andimportant matters are reported to and supervised by the
Board of Directors.

KPMG AZSA LLC audits the Sumitomo Realty Group’s
consolidated financial statements including tax-effectaccounting.
◆Action Plan on Base Erosion and Profit Shifting (BEPS)
The 15 actions set out by the OECD to deal with “Base Erosion and Profit
Shifting (BEPS)” in which multinational enterprises artificially manipulate
taxable income (2015 Final Reports)
Action 1: Addressing the Tax Challenges of the Digital Economy
Action 2: Neutralising the Effects of Hybrid Mismatch Arrangements
Action 3: Designing Effective Controlled Foreign Company Rules
Action 4: Limiting Base Erosion Involving Interest Deductions and Other Financial
Payments

 The Amount of Tax Payment

Action 5: Countering Harmful Tax Practices More Effectively, Taking into AccountTransparency and Substance

The amount of tax payment of the Sumitomo Realty Groupinside and outside the country for FY2022 are shown below.
Area

Amount of tax payment(Million yen)Japan

79,094

U.S.A., etc.
Total

Action 6: Preventing the Granting of Treaty Benefits in Inappropriate Circumstances
Action 7: Preventing the Artificial Avoidance of Permanent Establishment Status
Action 8: Assuring that Transfer Pricing Outcomes are in Line with Value Creation Intangibles
Action 9: Assuring that Transfer Pricing Outcomes are in Line with Value Creation Risk and Capital
Action 10: Assuring that Transfer Pricing Outcomes are in Line with Value Creation Other High-risk Transactions

47

Action 11: Measuring and Monitoring BEPS
Action 12: Mandatory Disclosure Rules

79,141

Action 13: Guidance on Transfer Pricing Documentation and Country-by-Country
Reporting
Action 14: Making Dispute Resolution Mechanisms More Effective* KPMG AZSA LLC audits the amount of tax payment of the Sumitomo
Realty Group.

Action 15: Developing a Multilateral Instrument(National Tax Agency Website)

Ensuring Fair Competition Issue Awareness and Action Plans
The Sumitomo Realty Group strives to maintain fair relationships with its business partners by complying with laws andregulations including the Antimonopoly Act and the Subcontract Act.

Response to Anti-Social Forces Issue Awareness and Action Plans
The Company shall take a resolute attitude toward antisocial forces that threaten social order and safety, and have no
relationships with such antisocial forces. Designating the Administration Department as a division in charge of countermeasuresagainst antisocial forces, the Company has appointed a person responsible for the prevention of unjust claims. Furthermore, theCompany collects and manages information concerning antisocial forces by collaborating with the police and other relevant
institutions, and shares such information internally along with cautionary notices.

14

GovernanceRisk Management
Issue Awareness and Action Plans
The Sumitomo Realty Group recognizes that it is important for corporate management to take measures to prevent, mitigate andavoid various business risks, as well as respond to emergencies that are expected to have a significant impact on corporate
activities, based on an understanding of the various risks involved in business.
In addition to risk management by each business department, the Group strives to stabilize its business activities andsustainably enhance corporate value by understanding, analyzing and appropriately dealing with risks associated withmanagement and businesses through the establishment of cross-sectional organizations.

Management Structure
In order to address various business risks, the Company
established the Sustainability Committee chaired by theCompany’s President. For monitoring and addressing the risks
associated with the business, such as investment risk andmarket risk, the executive officers in charge of and responsible
for respective departments and subsidiaries report them to the
President and the Board of Directors. The President and theBoard of Directors then discuss and respond to these risks.
With the process above, we have established a system thatthe Board of Directors monitors the risk management andreviews the operational status as appropriate.

We have also established a system whereby the BCP
Council responsible for the risks of large-scale disasters, etc.
affecting business continuity, the Sustainability Promotion
Council responsible for issues affecting corporate activities,
including environmental problems and climate change, and for
issues and risks related to human capital etc., and the Internal
Audit Department responsible for the risks related tocompliance, respectively discuss policies for the Group,
monitor the status, and report the results to the Sustainability
Committee.

◆Examples of risks that the Company recognizes and the Board of Directors supervises
・Risk related to force majeure events, including
disasters

・Risk related to suppliers・Risk related to information security

・Risk related to compliance・Risk related to finance・Risk related to climate change

・Risk related to the spread of COVID-19

15

GovernanceRisk Management
Initiatives
Management and Business Risks
The Sumitomo Realty Group refers to external risk management standards such as ISO 31000, to individually identify the
impact of various risks on its business activities, and take appropriate measures.

(1) Risk related to Force Majeure Events, including Disasters
In order to be prepared for force majeure events, including
disasters, the Group strives to improve its business continuity
by adopting base isolation and quake-absorption structures at
its properties and equipping facilities with emergency
generators to ensure uninterrupted operation. We also create
manuals and carry out disaster drills based on expectedscenarios in our business activities in order to ensure
operational sustainability. Moreover, the BCP Council, asubordinate organization of the Sustainability Committee,
determines specific policies to manage BCP measures for theGroup and monitors the status of such management.
However, if a force majeure event occurs in an extent that
far exceeds our assumptions, the Group’s businessperformance or financial position may be affected as it faces
costs to reconstruct its properties or slowdown in businessactivities.

Scenario assumed in a major earthquake
In order to prepare for the risk of major
earthquakes, the Office Leasing Business Division
has formulated a scenario, which assumes theearthquake’s impact on company assets, roads,
traffic conditions, etc., based on the scale of theearthquake assumed by the “Tokyo Inland
Earthquake Working Group.” The Division carries
out periodic disaster drills based on this scenario.

Overview of the assumed earthquake
Magnitude: 7.3
Seismic intensity: 6 upper
Epicenter: Depth of 30 to 50 km in the Northern Part ofTokyo Bay
Aftershocks: Strong aftershocks of around seismic intensity
4 to 5 will continue.
Public transportation (trains and buses) damage scenario
・Services will completely halt for 24 hours immediately
following the earthquake.
・Even after the resumption of some services, commuting
times are expected to take at least twice as long as undernormal circumstances.

(2) Risk related to ComplianceBusinesses operated by the Group are subject to wide-ranging
laws and regulations, including the Building Lots and Buildings
Transaction Business Act, the Construction Business Act, theBuilding Standards Act and the Labor Standards Act. We
closely monitor any change in them and work to ensure timely
and appropriate compliance. The Internal Control Meeting,subordinate to the Sustainability Committee, monitors theGroup’s compliance promotion activities, while the Internal
Audit Department conducts internal audit on entities including
subsidiaries and operates multiple whistleblowing desk in andoutside the Company, aiming to detect and deter misconduct
and illegal acts.
Still, there is possibility that the Group’s businessperformance and financial position may be affected throughimpacts of changes to laws, etc. on business activities.
Furthermore, if the Group and its officers and employees
commit compliance violation, the Group’s businessperformance or financial position may be affected asconfidence in the Group is undermined and demand for theGroup’s products decreases.

(3) Risk related to Climate Change
The Group aims to respond to physical risks associated withclimate change such as storm and flood damage, as well astransition risks entailed by various systems for curbing climatechange and changes in the business environment. Based on
the TCFD Framework, we organize, analyze and disclose thefinancial impacts brought by climate change and responses tothose impacts from the four perspectives of governance,
strategy, risks, and targets. In addition, the Sustainability
Promotion Council, a subordinate organization of the
Sustainability Committee, promotes various initiatives. As a
supplier of social assets, we are promoting decarbonation

initiatives as climate change measures through our businessactivities. We are particularly focusing on the development of
new properties and products with high environmental
performance, raising awareness for saving energy in theoperation of our properties, and renovating existing buildings
to improve their environmental performance, etc.
However, the Group’s operating results and financial
position may be affected by a rise in construction costs andoperational costs due to events such as restrictions thatexceed our assumptions and drastic changes in the businessenvironment.

16

GovernanceRisk Management
Initiatives
Management and Business Risks(4) Risk related to Suppliers
The Group promotes its business involving many suppliers,
including the construction companies, and personnel
involved in operation of the leasing assets such as cleaning
staff, service staff, security staff, and operators responsible
for facility maintenance and inspections. To reduce the risks
associated with suppliers, the Company’s employees
conduct due diligence at the beginning of a transaction with a
new supplier, make all parties thoroughly aware of our“Sustainable Procurement Guidelines,” supervise
transactions, provide safety training to suppliers, and engage
in other activities under the Sustainability Promotion Council,
a subordinate organization of the Sustainability Committee.
However, the Group’s operating results and financial
position may be affected by suppliers due to unforeseen
circumstances.

 Supplier Due Diligence Supplier Management in Existing Businesses

When starting a transaction with a new supplier, theGroup examines the potential risks in terms of various
items such as legal compliance, environmental pollution,
human rights violations, occupational health, corruption
in all its forms such as money laundering and bribery,
and relationships with antisocial forces, as necessary, inorder to mitigate the risks related to suppliers.

 Thoroughly Communicating and Enforcing
the Sustainable Procurement Guidelines

At the Group, our employees manage the suppliers at thedevelopment sites, building administration sites, etc. of
all the properties. We assess the risks associated withour businesses from a broad perspective thatencompasses environmental quality, occupational health,labor standards, corrupt practices and other factors, andtake corrective measures as necessary.

 Mitigation of Risks through Supplier
Training
In an effort to prevent risks related to suppliers, theGroup conducts supplier training to mitigate the risks,
especially in the high-risk areas such as health andsafety. Through the training, we strive to educate
suppliers by sharing examples of hazards as well as
examples of effective countermeasures. In fiscal 2022,
we conducted training for 3,969 individuals from ourbusiness partners.

In order to promote a sustainable society throughout
our supply chain, the Group established theSustainable Procurement Guidelines for compliance,
respect for human rights, anti-corruption, environmental
consideration, etc.
All business partners are requested to cooperate withthe guidelines, and we shall strive to prioritize
procurement from business partners taking initiatives
on sustainability.

◆The Sustainable Procurement Guidelines(Excerpts of each item only)
The full text of the guidelines is available on our
website:https://english.sumitomord.co.jp/sustainability/management

1. Compliance with Laws andRegulations
2. Respect for Human Rights
3. Ensuring the Corporate Ethics

17

4. Consideration for the Environment
5. Ensuring and Enhancing Quality
6. Securing Information Security

GovernanceRisk Management
Initiatives
Management and Business Risks(5) Risk related to Information Security
The Group’s businesses hold large amounts of important
information, including personal data. The Group has
cybersecurity measures in place to prevent information leaks
and trains employees on information security.
However, if information is leaked due to cyberattacks or

negligence on the part of our employees, the Group’s businessperformance or financial position may be affected due topayment of compensation for the damage or decreases indemand for its products as confidence in the Group isundermined.

Basic Policy on Information Security
The Group recognizes the importance of information security, including cybersecurity. In order toprotect the social credibility in our business activities and realize sustainable enhancement of ourcorporate value, with the Head of Corporate Planning Division as a responsible official, we continue tostrengthen and improve our initiatives concerning information security.
1. Information Security Management System
We are committed to identifying information security risks and taking measures against them, under theleadership of Information & Technology Section within the Corporate Planning Department of the
Corporate Planning Division, which is in charge of information security.
2. Compliance with Laws and Regulations
We comply with laws, regulations, rules and other social norms related to information security.
3. Management of Information Assets
We appropriately manage personal information and other information assets held by us, based on ourInformation Management Rules, and strive to prevent leakage, loss and misuse of such information.
4. Education and Awareness Raising on Information Security
We ensure that our officers and employees fully understand the importance of appropriately managing
information assets, and continue to conduct education and raise awareness to help them acquire thenecessary knowledge and judgment.

18

GovernanceRisk Management
Initiatives
Management and Business Risks(6) Risk related to FinanceIn the real estate leasing and sales businesses we operate,
investment is made up front, and revenue is not claimed until
we first purchase land and the building is completed. Thismeans we need to secure a stable supply of operating funds
by borrowing from banks or issuing bonds.
To achieve this, we strive to stabilize funding by extending
the period of and promoting fixed interest rates forconsolidated interest-bearing debts while working to solidify
stable relationship with diverse financial institutions.
However, a rapid and significant change in the financial
environment, a change in the operational situation of lenders,etc. may inflict a negative impact on the Group’s earnings
performance or financial position in the forms of rises inborrowing rates and deteriorated cash flows.

Consolidated interest-bearing debts, etc. in recent fiscal years
FY2018FY2019FY2020

FY2021

FY2022

Interest-bearing debts

3,342,786

3,440,908

3,561,293

3,559,993

3,938,021

Equity1,202,103

1,294,998

1,503,021

1,634,049

1,799,372

ND/E ratio*

2.6

2.5

2.2

2.1

2.1

Long-term debt ratio

99%

96%

96%

98%

95%

Fixed-interest rate debt ratio

96%

95%

94%

96%

86%

(Million yen)

* Net interest-bearing debts / Equity(7) Risk related to the Spread of COVID-19
While the COVID-19 pandemic has wound down andeconomic and social activities have normalized, we willcontinue to implement appropriate measures based on theknowledge we have accumulated thus far. We will strive tosecure revenue by undertaking necessary preventive
measures for our customers and employees in the event ofresurgence.

Furthermore, if the spread of COVID-19 resurges in Japanand other major countries overseas, causing prolonged periodof restrictions on people’s movements and gatherings, theGroup’s business performance and financial position may beaffected by decline of revenue from commercial facility
business such as hotels and event halls.

◆ For our customers’ safety
In the event of a resurgence, in order to ensure that customers
can feel safe while using our services, we will take basic
measures, such as wearing face masks and setting up handsanitizers in all of our businesses. In addition, we take theinfection prevention measures in accordance with thecharacteristics of each business and the situation.

19