Kozo Keikaku Engineering : Annual Shareholders Newsletter for FY2022

like to extend my heartfelt gratitude to our shareholders for their continued support and understanding for our business. In presenting the shareholders newsletter for FYE June 2022 of KKE, I would like to offer a few words.

As a "Professional Design & Engineering Firm" that bridges the academic and industrial worlds, KKE has engaged in its business operations aiming to create a future society full of wisdom. During FYE June 2022, together with our diverse stakeholders, we strived to promote our initiatives to solve social issues using advanced technologies based on our engineering knowledge.

Since July 2021, KKE has accelerated its pursuit of further corporate growth under the system of two representatives consisting of Representative Executive Officer and Chairman and Representative Executive Officer and President. These two representatives of different careers and expertise played their roles while sharing the passion for "creating a future society full of wisdom." By doing so, we made a solid stride toward "sustainable growth of existing businesses and development of new businesses" and "improvement of organizational quality" stated in our management basic policy for FYE June 2022.

On the financial front, both the Engineering Consulting business and the Product Service business remained steady. In our view, one factor behind this robust performance is that our unique services contribute to solving environment, society, and corporate governance (ESG)-related issues and promoting ESG strategies for companies and local governments that are urged to make serious efforts. For example, while the public and private sectors closely cooperate to widely spread renewable energy toward achieving a decarbonized society, our teams collaborate with each other to support the planning, designing, operation and maintenance, etc. of "onshore and offshore wind power generation" by leveraging their long years of expertise accumulated for structural design and analysis technologies. In addition, our real-time flood prediction system RiverCast has gained public attention. This system was jointly developed with the University of Tokyo to

address intensifying natural disasters resulting from climate change. Furthermore, our services include NavVis-a 3D digitalization solutions for large-scale facilities, which promotes digitalization of complex spaces such as factories-andRemoteLOCK-a cloud service for room entry and exit management, which promotes a contactless use of public facilities and accommodations between administrators and users. These services encourage innovation for a sustainable society and are expected to grow as new business fields.

The sustainable growth of these businesses is underpinned by "collaborative professionals," the source of our value creation. Therefore, the recruitment and development of "collaborative professionals" are our essential management issues. KKE faces an intensifying competition for acquiring collaborative professionals who behave in an autonomous and independent manner for contributing to the realization of a better society, but we aim to become a group of excellent collaborative professionals by making our workplaces more attractive. We are also considering steadily developing next-generation collaborative professionals for a management position.

Therefore, we ask our shareholders for their continued encouragement and support.

September 2022

Initiatives in the wind power-relatedbusiness-Toward a sustainable energy society-

Background and mission

To maintain a creative future society, it is indispensable to supply economical and environmentally-friendly energy safely and stably. As the world seeks to achieve an energy mix without dependence on particular energy sources, an interest in renewable energy has been growing globally.

Over the past ten years, KKE has played a role in widely spreading renewable energy by engaging in the structural design of support structures for onshore wind power generation facilities (foundation and tower parts). We are eager to help achieve a sustainable energy society by leveraging our track records and partnerships obtained through the process and providing engineering solutions.

Catching an invisible radio wave using radio wave propagation technology

Background and mission

Radio waves are currently used in various fields, and wireless communication systems, including mobile phones and wireless LANs, have become indispensable for our daily lives. Wireless communication requires balancing between the ensured transmission of radio waves and the feature of not impacting others. First of all, we need to know how physical radio waves behave (the degree of intensity and range of transmitted radio waves). However, it is challenging to grasp the situation because radio waves are invisible and transmitted differently depending on the peripheral environment such as buildings and vegetation as well as weather conditions including rainfall.

Leveraging our expertise into the "radio wave propagation technology" developed with many research institutions, universities, etc. in addition to our research results, KKE analyzes how radio waves behave using its simulation technology and visualize invisible radio waves. By doing so, we grasp the situation of radio waves and help customers design their current and new wireless communication systems and also evaluate and take measures against the systems.

Achievement of "radio wave propagation technology"

Collaboration among multiple departments and lively work of diverse collaborative professionals

Among renewable energies, the offshore wind power field aims to achieve a high target of "10 GW by 2030" and attracts particular attention. However, we must overcome various technological obstacles to ensure the safety of wind power generation facilities exposed to the severe natural environment such as ocean waves, typhoons, earthquakes, and thunderbolts. Close English communication with overseas windmill manufacturers is also indispensable. KKE engages in solving designing issues for offshore wind power by aggregating the engineering knowledge of multiple departments obtained through their diligent study of the structural design of skyscrapers and the simulation technology of natural phenomena, in addition to the lively work of our foreign national members.

We also possess the underlying technology for the construction of offshore wind power plants and their operational phase, including the technology of optimizing transport and distribution routes and the technology of sophisticating the maintenance of infrastructure buildings. By providing these technologies to power generation operators, we will contribute

KKE has so far been involved in various research and development and consulting projects for diverse companies in many industries and the Ministry of Internal Affairs and Communications. We provide optimal services such as analysis, products, and system development catering to the needs of each customer because their communication systems and issues are different from one another.

We also pay attention to international trends related to the radio wave propagation technology. By attending the related international conferences, we understand the recent standardization situations and utilize the information to offer more sophisticated services.

Last year, we initiated offering a one-stop service ranging from simulation to actual assessment in collaboration with AK Radio Design and have accumulated our track record of offering high added-value services.

Offering consulting services to solve issues in various industries

to reducing costs across the business and supplying energy stably considering its operational stage.

Future development

In July 2022, we established our Spain Representative Office to learn advanced European wind power-related technologies and bridge the gap with Japan. In Japan, we closely collaborate with the academic community and relevant ministries and agencies leveraging our experience of designing a safety review system related to wind power generation.

Through this academia-industry cooperation, aggregation of expertise in Japan and overseas, and a company-wide effort, we pursue not only expanding the wind power generation-related business but also creating new value in the renewable energy field.

Stages of KKE's solutions in the phases of the offshore wind power generation business

Future development

Moving forward, the performance of existing wireless communication systems is expected to improve and their application areas will expand. New use of radio waves is also expected to occur by combining higher frequencies, on-the-sky data of drones and satellites, and ground data three-dimensionally. By reproducing in cyberspace the indoor and outdoor 3D models of buildings and the behavior of radio waves under such e n v i r o n m e n t a s w e l l a s d a t a communication between devices, KKE aims to significantly contribute to considering and building new wireless communication systems to underpin a safe, secure, and better future society.

Business Introduction

Data assimilation initiatives to predict future events precisely by integrating simulation with observation data

Recently, we have observed an acceleration in the initiative to integrate digital space, including digital twins and BIM, with information in the real world. Therefore, these technologies are expected to generate a wide range of applications including prevention, maintenance and enhanced efficiency of manufacturing lines, maintenance and management of buildings and social infrastructure, and disaster prevention measures utilizing urban digitalization.

However, we can only measure a limited amount of information in the real world because the areas and number of sensors installed have limitations, thereby leading to a gap between digital and real spaces all the time.

KKE engages in solving social issues in various fields using its data assimilation technology that predicts future events precisely by bridging the gap between digital and real spaces.

Data assimilation has developed in the meteorological field such as weather forecasting, and refers to the technology to enhance simulation accuracy by integrating a limited amount of measured data. KKE has focused on the application of this technology in the meteorological field for several years and engaged in developing the application of this technology for various engineering simulations and implementing it for society.

This section introduces our application examples in three fields: manufacturing, disaster prevention, and energy.

(1) Manufacturing: Real-time digital twin of structures using data assimilation technology

Sophistication and labor savings are required for preventing and maintaining manufacturing lines under the background of a declining birthrate and aging population as well as labor shortages. By integrating image measurement technology with structural simulations using data assimilation technology, we developed a digital twin technology that estimates the state of structures real time.

1. Disaster prevention: prediction of river levels as a flood-control measure and operational optimization of disaster prevention facilities

The higher frequency and intensification of flood damages due to climate change and other causes have become an issue of public concern. Collaborating with our water level prediction team, we create a new flood-control system with local governments by combining data assimilation and AI technologies.

(3) Energy: estimation of subsurface structure for enhancing the production prediction of natural resources

As measured data of resources lying unexploited underground was scarce and their structure was often unknown, it was tough to precisely predict their production using simulation technology. Using data assimilation technology, we engage in developing the technology to estimate subsurface structures based on a small amount of measured data and enhancing the accuracy of predicting production.

Moving forward, we will make efforts to solve more issues of our customers and society through developing our business centered on data assimilation technology and providing new solutions.

Data

assimilation

Measurement dataSimulations

Achieving data assimilation-based digital twin

High-interpretability prediction leveraging high-precision

simulations that reproduce the reality

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Topics

P o s t e d u p o u r advertisement at the Baggage Claim of Domestic Passenger Terminal Building (1F) at Aso Kumamoto Airport

KKE has engaged in the castle reconstruction projects for the entire Kyushu region since 1956 and also handled the structural design for reconstructing the main tower (tenshukaku) of Kumamoto Castle. In 1983, we decided to expand our business into Kumamoto Prefecture, supporting the Technopolis plan proposed by the then Ministry of International Trade and Industry. In 1986, under the support of Morihiro Hosokawa, then Governor of Kumamoto Prefecture, we established the Kumamoto Office in Ozu Town as our software development base. Approximately 40 years have passed since the Technopolis plan, but many KKE members still work at the Kumamoto Office, and a large number of KKE members from Kumamoto Prefecture play an active role across the Company. When the Kumamoto Earthquake occurred in 2016, our technological consulting service contributed to reconstructing the Kumamoto Castle.

This 4m x 2m screen displays many years of our deep connection with Kumamoto Prefecture since our foundation. We would be appreciative if you could see this screen on your travel via Aso Kumamoto Airport.

In the 11th Excellent Architecture and Contributor Award for Seismic Retrofitting 2021 hosted by The Japan Building Disaster Prevention Association, the main tower (tenshukaku) of Kumamoto Castle (Kumamoto-shi, Kumamoto) won the Minister of Land, infrastructure, Transport and Tourism Award in the category of Excellent Architecture Award for Seismic Retrofitting, for which we cooperated in researching damages and considering designs for the repair work. Among existing buildings conducted seismic retrofitting, this award is presented to the buildings excellent especially in earthquake resistance, disaster prevention and safety, designs and other features as well as to individuals or entities that contributed to the promotion of seismic retrofitting, development of seismic retrofitting technologies, and others.

From the late 1950s to the early 1960s, a boom of reconstructing castle towers occurred across the country as a symbol of postwar recovery, and we engaged in reconstructing many castles at that time. Our projects included a structural design of the main tower (tenshukaku) of Kumamoto Castle. Castle restoration required construction work surrounded by stone walls, moats, and many other cultural assets that need to be conserved carefully. Unlike ordinary structural design, this project was complicated and required special attention and high techniques.

Going forward, as part of a member to hand down historically valuable buildings to future generations, we will engage in their reconstruction and restoration work.

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To our stakeholders, we define our "people" as "collaborative professionals" by focusing on individual talents, not as "human resource" for management, and disseminate their meaning and value. For KKE, where people bring knowledge and that knowledge is the source of value, participation of diverse collaborative professionals is essential for sustainable growth in the future. In addition, we have focused on human value from an early stage, considered the importance on the human value that cannot be expressed in financial statements, and invested in human capital proactively. Under the idea that "No growth of the Company without human development," we state our vision of becoming an organization that learns all the time.

To recruit such diverse collaborative professionals, we separately establish dedicated recruitment teams for new graduates, foreign nationals, and mid-career hires while each team collaborates with each other. For new graduates, we recruit not only engineering students including those majoring in architecture but also students with a science background including mathematics, physics, biology and pharmacy. Recently, we also focus on recruiting liberal arts students, and as one example, hired a unique collaborative professional who majored in philosophy at a graduate school. In addition, we have recruited foreign nationals proactively since 2014. As of the end of FYE June 2022, as a result, we have 34

diverse foreign nationals, accounting for approximately 5.5% of all KKE members. Their countries include not only China and Korea but also Southeast Asian countries including India and Indonesia in addition to distant countries such as Columbia, Peru, Turkey, and Morocco. For mid-career hires, we succeeded in recruiting 17 mid- career hires as an experienced senior recruitment member has joined us from FYE June 2022. In more details about mid-career hires, they account for approximately 20% of all KKE members. The retention rate of those who joined us in the past ten years is

Ratio of mid-career hires

Approx.

20%

• Mid-career hires
• New graduates

Countries from which foreign nationals come

Spain TurkeyChina South Korea

Japanese national

(As of June 30, 2022)

KKE emphasizes "providing opportunities," "creating a workplace," and "evaluating carefully" to encourage our members to grow proactively. Under such environment, KKE members actively work on career development and self-improvement while considering their visions about what they wand to be as autonomous and independent individuals.

In terms of support for growth, we "provide various opportunities" with the idea that it is important for our members to gain a wide range of experience. As an opportunity to accumulate experience in various organizations in Japan and overseas, we have overseas partners we invest in and the Social Cooperation Programs we established with the University of Tokyo.

Leveraging these opportunities, dispatched KKE members make efforts to cultivate technologies, develop new businesses, and obtain diverse discernment through human interactions.

We also continue to dispatch our candidates for next- generational leaders to external training in which they interact with knowledgeable external workers. This dispatch provides opportunities for those candidates to learn leadership and establish a wide external network of contacts. In addition, we carry out a human resource rotation system that goes beyond a single area of expertise in order to provide an opportunity to watch the internal and external environment broadly. These activities allow for developing future executives and managers.

We also focus on "creating a workplace" to make "KKE" a better place. Recently, we reviewed our compensation system to ensure the recruitment of excellent young workers and abolished a mandatory retirement system to enable highly-motivated KKE members to continue their work regardless of their ages. As part of the effort to create an attractive workplace, we hold an internal event in which KKE members interact with each other and share our corporate philosophy and also open a private event "KKE Vision" to exchange internal and external knowledge.

We especially focus on "evaluating carefully" to drive our members' growth. First, staff members with the title equal to or above manager declare their own mission and

action plans at the beginning of the fiscal year. Secondly, those staff members engage in their daily work based on their declaration, and report results at the end of the fiscal year. Finally, management evaluates the performance.

KKE members excluding at the positions mentioned above set their own annual goals and work to create business results and hone their skills under the support of their superiors. We provide an opportunity to take a promotion examination once a year and to challenge the higher position. By evaluating the results and growth of KKE members carefully and offering appropriate feedback, we encourage our members to grow proactively.