(1) Basic Approach for Corporate Governance

In order to improve the soundness and transparency of management in the pursuit of sustainable growth and high earnings capability for our company, we believe it important to have in place a management organizational structure and mechanisms which facilitate the swift implementation of necessary measures and, therefore, have made stronger corporate governance one of our top management priorities.

(2) Overview of the Corporate Governance System and Reasons for Adopting the System

The Audit & Supervisory Board system which we have adopted as a corporate governance system is a system which utilizes an Audit & Supervisory Board to audit the Board of Directors. Two of the four Audit & Supervisory Board members are outside members who monitor the Company from a fair and neutral standpoint, thereby facilitating a system in which the management monitoring function is fully implemented.

(a) Board of Directors

The Board of Directors is comprised of eight directors (three of whom are outside directors), and it meets, with Audit & Supervisory Board members in attendance, to decide on the Company’s important business operations and to supervise the execution of duties by the directors. Individuals who have extensive experience and insight into corporate management, and who can provide advice and supervision from a fair and neutral standpoint, are invited to serve as outside directors. Additionally, with the aim of establishing a management system that can respond quickly and accurately to changes in the rapidly changing business environment, we clearly define the roles and responsibilities of directors, who are in charge of management decision-making functions and the supervision of business execution, and of executive officers, who are responsible for business execution, in order to accelerate management strategy decision-making and further strengthen our supervisory and business execution systems.
The composition of the Board of Directors is as follows.

Position	Name	Outside
Representative Director and President	Takeo Watanabe	-
Representative Director	Yoji Ito	-
Director	Hidetoshi Suzuki	-
Director	Masaru Komori	-
Director	Hidetaka Yoshikawa	-
Director	Motoki Takahashi	✔️
Director	Ken Hashimoto	✔️
Director	Kazumi Maeda	✔️

(b) Audit & Supervisory Board

We have adopted an Audit & Supervisory Board system which is comprised of four Audit & Supervisory Board members (two of whom are outside members). The Audit & Supervisory Board audits the execution of duties by directors from the perspective of legality and propriety and strives to ensure management transparency and stronger monitoring functions.
Individuals who have extensive experience and insight into corporate management, as well as expertise in areas such as corporate legal affairs and corporate finance, are invited to serve as outside Audit & Supervisory Board members.
Audit & Supervisory Board members attend meetings of the Board of Directors and other important meetings, express their opinions as necessary, and seek to ascertain important decision-making processes and the status of business execution. Also, in addition to conducting interviews and engaging in opinion exchange with the representative director as appropriate, in order to improve the quality of audits by increasing the effectiveness of internal audits, Audit & Supervisory Board audits and accounting audits, the Audit & Supervisory Board members report on audit results, engage in opinion exchange, etc., as part of efforts to strengthen mutual cooperation.
The composition of the Audit & Supervisory Board is as follows.

Position	Name	Outside
Standing Audit & Supervisory Board Member	Shintaro Nakashima	-
Standing Audit & Supervisory Board Member	Hiroshi Hada	-
Standing Audit & Supervisory Board Member	Yutaka Kondo	✔️
Audit & Supervisory Board Member	Kazuhiro Iida	✔️

(c) Nomination and Remuneration Committee

We have voluntarily established a Nomination and Remuneration Committee to ensure objectivity and transparency regarding the nomination and remuneration of directors. The members of this committee are internal directors and outside directors, with half of the members being outside directors.
The composition of the Nomination and Remuneration Committee is as follows.

Position	Name	Outside
Representative Director and President	Takeo Watanabe	-
Representative Director	Yoji Ito	-
Director	Motoki Takahashi	✔️
Director	Ken Hashimoto	✔️

(3) Other Matters Relating to Corporate Governance(Basic Policy on Internal Control System Development)

We have established the following Basic Policy on Internal Control System Development.

(a) System to ensure that the execution of duties by directors and employees complies with laws and regulations and the Articles of Incorporation

In order to improve the soundness and transparency of management in the pursuit of sustainable growth and high earnings capability for the Company and its subsidiaries, we will put in place a management organizational structure and mechanisms and ensure all duties are appropriately executed based on internal regulations and manuals conforming to laws and regulations and the Articles of Incorporation.
In addition, we will establish an Audit Office which will serve as an internal audit department to conduct operational audits of all business activities of the Company and its subsidiaries and to investigate and provide guidance regarding such matters as business process appropriateness and effectiveness and compliance with internal regulations and rules.

(b) System for storing and managing information related to the execution of duties by directors

We will store and manage documents and other data and resources in accordance with internal regulations.

(c) Regulations and other systems for managing the risk of loss

Risk management associated with the operations of the Company and its subsidiaries shall be the responsibility of the heads of each department, and risks relating to company-wide and cross-organizational business processes will be systematically checked and dealt with through organizations and regulations that have mutual check-and-balance functions. In the event of a major disaster or accident, the president will convene an Emergency Response Meeting and then undertake a swift response.

(d) System to ensure that directors’ duties are executed efficiently

In accordance with the Regulations of the Board of Directors, we hold regular Board of Directors meetings, as well as extraordinary meetings as necessary, to decide on important matters and supervise the status of business execution by directors. Furthermore, with the aim of strengthening our business execution systems and accelerating decision-making, we have introduced an executive officer system and have clarified the roles and responsibilities of said officers.
Regarding the execution of duties at the Company and its subsidiaries, we have a system in which each officer and department head will be responsible for the scope of his or her duties in accordance with internal regulations specifying divisions of duties, matters for approval, approval authority, and other matters.

(e) System for ensuring the appropriateness of operations within the corporate group consisting of the Company and its subsidiaries

We operate under systems and regulations that are uniform across our entire corporate group to ensure appropriate standards of business operations. In addition, subsidiaries attend major meetings of the Company and share basic policies and measures. Furthermore, we have a system in place to report business results to the Company on a regular basis, as well as whenever important business events occur.

(f) Matters relating to employees, and the independence of employees from directors, in cases where Audit & Supervisory Board members request the appointment of employees to assist in said members’ duties

If an Audit & Supervisory Board member requests the appointment of an employee, the Audit Office, which serves as the internal audit department, will assist with this as necessary. Directors do not give instructions with regard to the duties with which employees will assist.

(g) System for reporting to Audit & Supervisory Board members and other systems for ensuring that audits by Audit & Supervisory Board members are conducted effectively

Audit & Supervisory Board members receive reports on the status of execution of important business through their attendance at meetings of the Board of Directors and through timely reports provided by the Audit Office which summarize the status of internal audits. In addition, if directors and employees of the Company and its subsidiaries become aware of facts that may cause significant damage to the Company, or of serious facts that violate laws and regulations or the Articles of Incorporation, they shall promptly report these to the Audit & Supervisory Board members, and no one who makes such a report shall be treated unfavorably on the basis of having done so.

(h) Matters related to policies regarding processing of expenses or debts arising from the execution of duties by Audit & Supervisory Board members

We will promptly process expenses incurred in the execution of duties by Audit & Supervisory Board members.

(Overview of Internal Control System Operational Status)

We operate systems to ensure the appropriateness of business operations in line with the Basic Policy on Internal Control System Development approved by the Board of Directors. In addition to operating under systems and regulations that are uniform across our entire corporate group to ensure appropriate standards of business operations, our internal audit department conducts business audits, operates an independent reporting system for Audit & Supervisory Board members regarding significant risks, and reports on the operational status of internal controls to the Board of Directors.

(Overview of Content of the Liability Limitation Agreement)

Based on the provisions of Article 427, Paragraph 1 of the Companies Act, the Company and each non-executive director and Audit & Supervisory Board member have entered into an agreement limiting their liability for damages under Article 423, Paragraph 1 of the same Act, and the maximum amount of compensation for damages based on this agreement is the minimum liability amount stipulated by law.

(Overview of Content of the Officer Liability Insurance Agreement)

The Company has entered into an officer liability insurance agreement with an insurance company, as stipulated in Article 430-3, Paragraph 1 of the Companies Act, with the directors, Audit & Supervisory Board members and executive officers of the Company and its subsidiaries as insured persons, and the Company pays the entire insurance premium.
Under this insurance agreement, the insured will be compensated for legal damages and litigation costs incurred when a claim is made for compensation for damages arising from an act committed by the insured based on his or her position as a company officer.
However, reasonable grounds for exclusion, such as of compensation for damage, exist, such as when the damage is caused by the insured’s criminal acts or when the insured knowingly violated laws and regulations to illegally obtain personal benefits or favors.

(Number of Directors)

Our Articles of Incorporation stipulate that the number of directors shall be no more than twenty-five.

(Resolutions for Appointment or Dismissal of Directors)

The Articles of Incorporation state that resolutions for the appointment of directors must be made in the presence of shareholders who represent one-third or more of the voting rights of shareholders able to exercise their voting rights, must be based on a majority vote of the voting rights represented, and must not be based on cumulative voting. The Articles of Incorporation state that resolutions for dismissal of directors shall be made in the presence of shareholders who represent one-third or more of the voting rights of shareholders able to exercise their voting rights and must be made with a vote of at least two-thirds of the voting rights present.

(General Meeting of Shareholders Special Resolution Requirements)

In order to ensure the smooth operation of the General Meeting of Shareholders, the Articles of Incorporation state that special resolutions, as stipulated in Article 309, Paragraph 2 of the Companies Act, must be made in the presence of shareholders who represent one-third or more of the voting rights of shareholders able to exercise their voting rights and must be made with a vote of at least two-thirds of the voting rights present.

(Interim Dividends)

In accordance with the provisions of Article 454, Paragraph 5 of the Companies Act, the Company's Articles of Incorporation stipulate that interim dividends may be paid by resolution of the Board of Directors, with September 30th of each year being the record date. This is to make it possible to provide flexible return of profits to shareholders.

(Purchase of Treasury Shares)

In order to implement flexible capital policies in response to changes in the business environment, the Company's Articles of Incorporation provide that, in accordance with the provisions of Article 165, Paragraph 2 of the Companies Act, the Company may purchase its treasury shares by resolution of the Board of Directors.

(4)　Activities of the Board of Directors and Nomination and Remuneration Committee

(a) Board of Directors

Specific matters considered by the Board of Directors include medium-term management plans, business plans, and governance systems. With regard to medium-term management plans and business plans, in addition to confirming the status of progress, such as whether the individual strategies are being implemented appropriately, the Board of Directors also reviewed the various management issues which have arisen from changes in the business environment and discussed countermeasures. They will continue to make decisions regarding these matters and supervise business execution.
The Board of Directors met a total of twelve times during the fiscal year under review, and the attendance status of individual directors is as follows.

Name	Attendance at Board of Directors Meetings
Takeo Watanabe	Attended 12 of 12 meetings
Yoji Ito	Attended 12 of 12 meetings
Hidetoshi Suzuki	Attended 11 of 12 meetings
Hidetaka Yoshikawa	Attended 10 of 12 meetings
Motoki Takahashi	Attended 12 of 12 meetings
Ken Hashimoto	Attended 12 of 12 meetings

(b) Nomination and Remuneration Committee

The specific content of discussion by the Nomination and Remuneration Committee included selection of director candidates, reappointment of directors, review of directors’ individual skills and the overall balance of skills, review of the remuneration system, discussion of issues relating to it, and the appropriateness of remuneration levels. The Committee has made recommendations on these matters to the Board of Directors.
The Nomination and Remuneration Committee met a total of six times during the fiscal year under review, and the attendance status of individual members is as follows.

Name	Attendance at Nomination and Remuneration Committee Meetings
Takeo Watanabe	Attended 6 of 6 meetings
Yoji Ito	Attended 6 of 6 meetings
Motoki Takahashi	Attended 6 of 6 meetings
Ken Hashimoto	Attended 6 of 6 meetings