Corporate governance is central to our operations, and we continue to improve our capabilities to optimize enterprise value.Our corporate governance policy is to enhance efficiency, maintain sound management, and operate more transparently. This policy is the basis for addressing such important management issues as choosing board nominees, deciding compensation for directors and corporate auditors, and overseeing management.

The Group will maximize corporate value by establishing speedy and proper decision-making processes and by making management more efficient. Shareholders and other stakeholders will benefit from these efforts.

We will maximize corporate value in volatile business conditions by identifying and managing diverse risks. We will also reinforce compliance systems to adhere strictly to social norms and legal requirements.

In light of the growing importance of corporate disclosure, we will fulfill our obligation to explain corporate actions to shareholders and other stakeholders and will undertake proactive investor relations.

To further promote productive discussions by the Board of Directors and to strengthen its oversight functions, the Company has chosen the structure of a company with an Audit and Supervisory Committee.
This will allow it to delegate a considerable portion of important decisions on business execution to executive directors. In addition, by considering that directors with a wealth of knowledge and experience regarding the industry, market trends, products, merchandise, services, etc. can generate prompt and optimal management decisions, the Group companies have chosen the structure of a company with company auditors. The Company and the Group also appoint external directors and strengthen the executive officer and internal auditing systems, thereby improving corporate governance from the aspects of both oversight and execution.

At ordinary Board of Directors meetings held once a month in principle and extraordinary Board of Directors meetings held as appropriate,the Board of Directors aims to achieve flexible management through the current level of 12 directors. Certain important managerial matters at each business company are also resolved or reported at various bodies, including the Company’s Board of Directors.

The Audit and Supervisory Committee consists of four Audit and Supervisory Committee members and holds its meetings generally once a month, or when otherwise necessary. The Audit and Supervisory Committee assigns duties to respective Audit and Supervisory Committee members, and deliberates on key matters for consideration such as those involving the status of establishing and operating the Group’s corporate governance and internal control systems, and evaluations of the independent auditor.

The Company shall perform analyses and evaluations of the effectiveness of the Board of Directors each year to ensure that the Board of Directors effectively fulfills its roles and responsibilities to “improve efficiency,” “secure soundness,” and “enhance transparency” of the Company’s corporate management.

For the fiscal year ended March 31, 2023, the Company provided questionnaires to all directors and Audit and Supervisory Committee members to evaluate the effectiveness of the Board of Directors.

In addition to confirming matters considered important in the effective fulfillment of the Company’s Board of Directors’ roles and responsibilities (including composition, operation, status of deliberations concerning strategy, and other matters put before the Board of Directors), the Company confirmed matters related to the roles expected of the Board of Directors by the market, such as the Board’s involvement in initiatives related to human capital.

To ensure objective evaluations, we leveraged an external organization to designthe questionnaire and analyze and evaluate the responses.
Based on the results of the analysis of questionnaire responses, deliberations took place at meetings of the Independent Advisory Committee and the Board of Directors on matters such as the effectiveness of the Board of Directors during the fiscal year and where issues might lie.

As the result of these deliberations, the Board of Directors was judged to be functioning effectively based on the diversity of independent external directors and their contributions to constructive discussions. It was also favorably evaluated that deepening discussions on matters such as overall Group policies by the Board of Directors, pointed out as an issue in the previous fiscal year, saw an improvement in more productive and fulfilling discussions from a medium-to long-term business perspective.

To enhance effectiveness still further, the Board of Directors recognizes the need to deepen discussions on matters such as strengthening monitoring for the sophistication of the risk management structure for the entire Group and optimal allocation of resources among the entire Group.
Having acknowledged these issues, the Company will strive to allow the Board of Directors to function even more effectively.

The Company has formulated a skills matrix based on the experience and knowledge required for management of a listed company and the experience and knowledge required to achieve the Company’s long-term vision. The basic policy calls for selecting and determining director candidates based on comprehensive assessment of both character and fit with the skills matrix. The Independent Advisory Committee examines a proposal for such candidates submitted by the President (Representative Director), conducts interviews and the like with such candidates, and submits the evaluation results as its opinion to the President (Representative Director). Based on these evaluation results, the President (Representative Director) judges the director candidates in accordance with the above-mentioned policy. The Board of Directors then discusses and approves such judgment. The same applies when the Independent Advisory Committee recommends director candidates to the President (Representative Director).

If a director is deemed unable to perform his or her duties due to mental or physical incapacity or if a material fact such as misconduct or violation of laws, regulations, or the Articles of Incorporation is recognized in the performance of his or her duties, the Independent Advisory Committee shall deliberate to determine the appropriate action in a timely manner. Base on the results of such deliberation compiled in a report to the Board of Directors, the appropriate action with regard to the director shall be determined by the Board of Directors.

The Company’s compensation system for directors and Audit &Supervisory Board members is designed to ensure transparency and provide greater incentive to increase corporate value.The compensation system for directors (excluding directors

who are Audit and Supervisory Committee members and external directors) is determined based on the following basic policy.

In addition, based on the basic policy, the compensation system for directors of the Company (excluding directors who are Audit and Supervisory Committee members and external directors) includes director’s bonuses as fixed compensation and stock compensation with restriction of transfer as performance-based compensation.

A compensation table shall be formulated specifying the compensation amounts for each component, namely, basic compensation and role-based compensation, and the Company shall provide the sum of these components as monthly fixed compensation.

Directors’ bonuses are paid at the amount determined by multiplying the above fixed compensation by coefficients calculated based on a bonus table that defines the number of months for directors’ bonuses in accordance with the three elements of the level of the amount of ordinary income, the business plan achievement level,and the year-on-year growth level.

The Company has introduced a stock compensation plan with restriction of transfer (continuous service-based and performance-based stock compensation) for directors (excluding directors who are Audit and Supervisory Committee members and external directors) to incentivize efforts to continuously increase corporate value and to further enhance the sharing of value with all shareholders. Specific payments and allocations are determined using a ratio of approximately 1:1:1 for fixed compensation, performance-based bonuses, and stock compensation with restriction on transfer for a single fiscal year at the time the medium-term management plan is achieved.In the current medium-term management plan, the ratio of continuous service-based shares with restriction on transfer and performance-based shares with restriction on transfer is expected to be approximately 1:3

Compensation for directors and Audit & Supervisory Board members for the fiscal year ended March 2023 is as follows.

Directors who received ¥100 million or more in total compensation for the fiscal year ended March 2023 is as follows.

To improve corporate governance in the Company and the Group as a whole, the Company has established a Group Risk and Compliance Promotion Committee, and deliberates and confirms any problems occurring in constructing internal control for the management of the Group and the progress thereof, and thus strive to maintain and improve the level of corporate governance.
In addition, the Group started the Group Internal Control project during the fiscal year ended March 31, 2006; established a scheme for evaluation and reporting of the internal control system required for corporate groups under the Internal Control Report System Relating to Financial Reporting (the Japanese Version of the “SOX Act”), as stipulated in the Financial Instruments and Exchange Act; and remedied inadequacies discovered in the course of conducting such evaluation.
As a result, efforts to assure trust/reliability in financial reporting have resulted in the Company’s judgment that it has achieved effective internal control related to the financial reporting of the Group for the fiscal year ended March 31, 2023. The Company will continue to strive to assure continuing trust/reliability in our financial reporting and to maintain and develop our internal control system, taking into consideration issues such as improving efficiency and securing soundness.