Overview of the Governance System

The Company has an audit and supervisory committee to monitor the Board of Directors’ performance of duties as well as expedite and streamline decision-making. In addition to the audit and supervisory committee, and the board of directors, the Company also has a financial auditor.

The Company believes that including independent outside directors who have extensive experience and insight will stimulate the Board of Directors’ discussions and will ensure the effective monitoring of appropriate decision making and operation execution. The Company’s policy for electing appropriate independent outside directors is that a third or more of the directors will be independent outside directors.

The Company appoints three independent outside directors as members of the Audit and Supervisory Committee. The committee consists of four members to enhance its auditing and monitoring functions.

Organization chart for corporate governance

Organization chart for corporate governance

1.Board of Directors

For constructive, frank, and efficient discussion at Board of Director meetings, the Company sets the number of directors at 15 or less. For an effective monitoring system, a third or more of the directors shall be independent outside directors.

The Company currently has 10 directors, of whom four are outside directors. The Company aims to develop and strengthen the Board of Directors’ function to monitor and check management and the execution of operations.

The Company established Internal Board of officer to discuss important items related to the execution of operations in advance of discussion at board meetings. The Company has introduced an executive officer system for prompt decision-making and business execution to respond promptly and appropriately to changes in the business environment..

2.Audit and Supervisory Committee

The Company sets the number of Audit and Supervisory Committee members at five or less. The Audit and Supervisory Committee monitors management from a fair and independent perspective in accordance with the audit policy and audit plan for the current period.

The Audit and Supervisory Committee currently has three directors, of whom three are outside directors. The three outside directors audit and monitor the execution of operations by the directors by participating in Board of Directors meetings and using the internal regulation system. The director who is a full-time Audit and Supervisory Committee member audits and monitors the execution of operations by the directors by participating in Board of Directors meetings and Internal Board of officer investigating documents regarding important decisions, reports from the Internal Audit Division, and interviewing those involved.

The Audit and Supervisory Committee cooperates with the financial auditor, communicating about the financial auditor’s audit policy, audit plans and audit reports as needed .

The Company has established an Audit and Supervisory Committee Office as a department to assist the Audit and Supervisory Committee.

3.Financial auditor

The Company has chosen Deloitte Touche Tohmatsu LLC. as its financial auditor. The Company receives advice and guidance from an independent perspective from the financial auditor about the appropriateness and legality of accounting and internal regulations related to accounting.

4.Internal Audit Division

The Company has established a Corporate Risk Control Division as an Internal Audit Division.

The Corporate Risk Control Division checks, based on its annual audit plan, whether each division executed operations appropriately and efficiently under laws and regulations, the Articles of Incorporation, and internal regulations. The Internal Regulation Office regularly reports its findings and related information to the Audit and Supervisory Committee. The Internal Regulation Office maintains organizational cooperation with the Audit and Supervisory Committee, the Board of Directors, and the financial auditor, reporting important matters to these entities.

5.Optional Nominating and Compensation Committee

The Company has established a Nominating and Compensation Committee as an optional advisory organ for the Board of Directors. They ensure objectivity and transparency when the Board of Directors determines policies and procedures related to the nomination of director candidates and compensation as well as enhance the corporate governance system.

The Company stipulates that the majority of the Nominating and Compensation Committee members shall be independent outside directors. The committee consists of five members, three independent outside directors and two representative directors.

Directors

The forecasts and projected operating results contained in this report are based on information available at the time of preparation, and thus involve inherent risks and uncertainties.
Accordingly, readers are cautioned that actual results may differ materially from those projected as a result of a variety of factors.

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