Corporate Governance

Basic Policy

• 1.

  Ensuring shareholder rights and equality

  • ・ We provide shareholders with the necessary information to enable them to exercise their rights in a timely and accurate manner, and strive to create an environment for exercising voting rights.
  • ・ When shareholders attempt to exercise their rights, the Company responds in good faith in accordance with laws.
• 2.

  Cooperating appropriately with stakeholders other than shareholders

  • ・ We commit to fulfilling our obligations and responsibilities to various stakeholders through the practice of our corporate philosophy, credos, code of conduct, and other relevant policies, and to building even stronger relationships of trust with them.
• 3.

  Ensuring appropriate information disclosure and transparency

  • ・ We strive to enhance trust in the market by proactively disclosing information to shareholders and investors at the right time.
  • ・ We aim to realize transparent management by communicating smoothly with stakeholders through information disclosure.
• 4.

  Responsibilities of the Board of Directors, etc.

  • ・We set goals for enhancing long-term corporate value based on our corporate philosophy and determine the direction of the Company that will give concrete shape to the strategies and measures designed to achieve those goals.
  • ・We continue to appoint Outside Directors to maintain and further improve the supervisory function of Directors in the execution of their duties.
• 5.

  Dialogue with shareholders

  • ・ We seek to communicate constructively with shareholders and investors by actively providing them with information relating to the Company’s financial conditions, progress on initiatives, and other similar matters not only at the general meeting of shareholders but also at financial results presentation meetings and other IR activities.

Status of compliance with the Corporate Governance Code

Our group implements all items outlined in the Corporate Governance Code. For further details,

• Corporate Governance ReportPlease refer to the following.

Board of Directors

Our Board of Directors has appointed a majority of its 10 directors, six of whom are External Director, and two of these are women.
The names of the members of the Board of Directors are as listed in the table "Composition, Attendance, and Length of Service of the Board of Directors, Audit and Supervisory Committee, and Nomination and Compensation Committee," with the President and Representative Director serving as the chairperson.
External Director play an important role in strengthening management functions and overseeing the execution of duties by directors, based on their knowledge and experience in their respective fields of expertise. Furthermore, External Director who are members of the Nomination and Compensation Committee appropriately participate in determining the compensation of officers and other personnel and nominating candidates for directors, by providing recommendations to the Board of Directors as members of the Nomination and Compensation Committee.
Our directors, including External Director, are selected based on their thorough knowledge of the industry and Business of our company, as well as its functions, and their considerable knowledge, experience, and abilities in management. We believe that our current directors possess the background necessary to address key management challenges, make swift and decisive decisions, and represent a well-balanced composition considering our company's size and business model.
Our selection policy involves a comprehensive review of each individual, considering factors such as their expertise, ability to make sound decisions and provide proper oversight, and the expected contribution to improving corporate value in the medium to long term.
The Board of Directors, in accordance with internal regulations, resolves basic policies regarding the company's management, important matters concerning management and business execution, matters authorized by resolutions of the Shareholders' Meeting, as well as matters stipulated by laws and regulations and the Articles of Incorporation. It also receives reports on matters stipulated by laws and regulations and the status of important business execution.

Audit and Supervisory Committee

The Audit and Supervisory Committee consists of four members, including three External Director, one of whom is a female director. The names of the members of the Audit and Supervisory Committee are as listed in the table "Composition, Attendance, and Length of Service of the Board of Board of Directors, Audit and Supervisory Committee, and Nomination and Compensation Committee," and an External Director serves as the chairperson.
External Director play important roles in establishing an objective and fair audit system. We believe that appointing External Director is an appropriate system for our company to secure the trust of our shareholders and investors, as it strengthens management accountability and improves transparency in management.
The Audit and Supervisory Committee audits the execution of duties by the directors based on the audit policy and audit plan, through regular exchanges of opinions with the Representative Director, attendance at important meetings such as the Board of Directors and various committees, cooperation with the accounting auditor and the Internal Audit Office, and investigations of the status of operations and assets.

Nomination and Compensation Committee

The Nomination and Compensation Committee consists of four members: the President and Representative Director, and three External Director, with one of the External Director serving as the chairperson.
The Nominating and Compensation Committee, in determining the compensation of directors (excluding directors who are audit and supervisory committee members) and nominating director candidates, receives consultation from the Board of Directors, conducts appropriate deliberations primarily with External Director, and submits its recommendations to the Board of Directors.
The Board of Directors gives maximum respect to the contents of the report when making decisions regarding the compensation of directors (excluding directors who are audit and supervisory committee members) and the nomination of director candidates.

Executive Officer System and Management Council

The company has 15 Executive Officer(two of whom also serve as directors). This structure is primarily aimed at establishing a management system that enables swift and accurate business execution by separating the Board of Directors' decision-making and supervisory functions from its operational execution functions. In addition, a "Management Meeting" has been established, chaired by the President and Representative Director and composed mainly of directors and Executive Officer , to discuss policies, plans, and other important matters for the President and President and Representative Director in carrying out Management Council.

Risk Management Committee

To appropriately manage various risks, we have established a Risk Management Committee chaired by the President and Representative Director, and composed mainly of directors and Executive Officer. The committee regularly conducts risk assessments and identifies problems, formulates and implements response plans, and monitors whether or not risks occur.

Corporate Governance Structure Diagram

Composition and attendance records of the Board of Directors, Audit and Supervisory Committee, and Nomination and Compensation Committee, as well as years of service.

*1 Up to four of the skills possessed are marked with a "●" if their application is particularly desired. Therefore, the items marked do not represent all of the knowledge and experience the individual possesses.

*2 Since Kazumasa Taninaka assumed the position of Director on June 24, 2025, the attendance count and attendance rate for meetings held after his appointment are listed.

*3 Since Shigeo Kizaki assumed the positions of Director and Nomination and Compensation Committee Member on June 24, 2025, the number of times he attended and his attendance rate for meetings held after his appointment are listed.

*4 Since Mr. Yutaka Nakamura assumed the position of Director on June 24, 2025, the number of times he attended and his attendance rate for meetings held after his appointment are listed.

With the aim of improving the functions of the Board of Directors and increasing corporate value, we have been analyzing and evaluating the effectiveness of Board of Directors since fiscal year 2018. The outline of this analysis is as follows:

• 1.

  Implementation Method Implementation Period: November to December 2025 Evaluation Method: Self-evaluation by all directors (including audit and supervisory committee members) [10 directors, including 6 External Director]
  Main interview topics: Board of Directors' operations, composition, roles and functions of the Board of Directors, content of Board of Directors deliberations, support for directors, operation of the Audit and Supervisory Committee, operation of the Nomination and Compensation Committee, and gathering opinions on discussion topics related to corporate governance.

• 2.

  Initiatives based on the previous year's evaluation results, etc. In the previous year, the following initiatives were taken to improve the effectiveness of the Board of Directors.
  - The Board of Directors will regularly monitor the progress of the medium-term management plan, which will begin in fiscal year 2025. - We will increase opportunities to provide information on on-site initiatives and strengthen support for External Director.

• 3.

  Evaluation Results The evaluation results showed that all officers gave positive feedback, such as "The number of Board of Directors and the balance of internal and external directors are appropriate, and diversity is ensured," "The medium-term management plan was discussed in a substantial manner," and "It was very good that External Director had the opportunity to hear directly from employees on the ground about the company's business situation." We recognize that the effectiveness of our Board of Directors is ensured.

• 4.

  Actions taken based on evaluation results, etc.
  To improve the effectiveness of the Board of Directors, we will be implementing the following measures.
  - The Board of Directors will continue to regularly monitor the progress of the medium-term management plan. - We will continue to provide opportunities for External Director to receive information on the status of on-site initiatives and other relevant information.

Executive compensation determination policy

The compensation for our directors who are not audit and supervisory committee members (excluding External Director) is determined based on a comprehensive consideration of past payment records and company performance, and consists of fixed compensation, performance-linked compensation, and non-monetary compensation. External Director(excluding directors who are audit and supervisory committee members) receive only fixed compensation.
The compensation structure is such that as one's position rises, the proportion of fixed compensation (basic salary) decreases, while the proportion of performance-linked compensation (bonuses) and non-monetary compensation (stock-based compensation) increases. Fixed compensation is paid monthly, while bonuses and stock-based compensation are paid once a year, except for External Director.
Furthermore, starting with executive compensation for the fiscal year ending March 2027, we have revised the evaluation indicators and composition ratios for bonuses and stock-based compensation. Bonuses will reflect individual performance according to position, in addition to company performance, and stock-based compensation will be calculated based on stock price indicators during the medium-term management plan period and the achievement rate of targets in the medium-term management plan.
The decision-making policy is determined by the Board of Directors after consulting with the Nomination and Compensation Committee, which is comprised of a majority of External Director , and receiving its recommendations. Individual compensation amounts are calculated by the President and Representative Director , who is delegated authority by the Board of Directors , after the Committee has considered various factors, including consistency with the decision-making policy, and are therefore judged to be in line with the policy.
Furthermore, the fixed compensation for directors who are audit and supervisory committee members is determined through discussions among the audit and supervisory committee members, and bonuses and stock-based compensation are not paid.

About the Clawback System

We have a system in place (clawback system) that allows the Board of Directors to request the return of all or part of the bonus already paid if a serious violation of laws or regulations occurs after the bonus has been paid.
In a restricted stock compensation plan, if the Board of Directors determines that a recipient of restricted stock has committed a misconduct as defined in the restricted stock allocation agreement, it includes a clause (MARS clause) that allows the Board to acquire all of the granted shares without compensation.

Policy on holding policies

Our company holds shares in customers and business partners for purposes such as maintaining and developing long-term business relationships, or for gathering information with a view to future business partnerships.

Verification of the appropriateness of holding policy-held shares

In reviewing the appropriateness of our strategic shareholdings, we comprehensively examine each year the ratio of the total value of strategic shareholdings to net assets, whether the benefits and risks associated with each shareholding are commensurate with the cost of capital, and whether the purpose of holding the shares is consistent. After deliberation by the Board of Directors, we confirm that the holding of all strategic shareholdings held by our company is appropriate.
Furthermore, depending on future changes in circumstances, we will review our holdings, such as reducing them, if we determine that their appropriateness is no longer recognized.

Criteria for exercising voting rights related to policy-held shares

Regarding the exercise of voting rights for shares held, we believe that appropriate exercise of voting rights will lead to the medium- to long-term value enhancement and sustainable growth of the issuing company. Therefore, we will make a comprehensive decision on whether to support or oppose a proposal, taking into account the issuing company's financial and non-financial situation.

Policy regarding constructive dialogue with shareholders

The policy regarding system development and initiatives to promote constructive dialogue with shareholders is as follows.

• 1.

  Dialogue with shareholders is overseen by the director in charge of the corporate division.

• 2.

  The Sustainability Promotion Department will take the lead in handling dialogue with shareholders, and directors and Executive Officer will also respond appropriately within a reasonable scope, taking into account the wishes of shareholders.

• 3.

  The Sustainability Promotion Department will collect information necessary for dialogue with shareholders from relevant departments and use it to the extent that it can be disclosed to facilitate meaningful dialogue with shareholders.

• 4.

  As a means of dialogue other than individual interviews, in addition to quarterly Results Presentation for analysts and institutional investors, we will strive to expand our means of communication, such as by participating in briefings for individual investors.

• 5.

  Shareholders' opinions and requests obtained through communication with shareholders shall be reported to the Board of Directors on a regular basis and used for management decisions.

• 6.

  In order to properly manage insider information, we have established "Insider Trading Management Regulations" and are working to ensure thorough information management.

• 7.

  In order to prevent leaks of financial results information and ensure fairness, the several weeks leading up to the announcement of financial results will be a quiet period. During this period, we will refrain from responding to comments, questions, etc. related to financial results.

• 8.

  In order to engage in dialogue with substantial shareholders, we will conduct surveys of our substantial shareholders as appropriate.

• 9.

  In order to improve dialogue with foreign shareholders, we will prepare and provide English translations of documents that we deem useful for foreign shareholders.

Status of dialogue with shareholders (Fiscal year ending March 2026)

• 1.

  Main person in charge of dialogue with shareholders

  • Head of Corporate Operations (Director Managing Executive Officer), Head of Sustainability Promotion (Executive Officer)

• 2.

  Shareholders or investors with whom we have had dialogue

  • <IR Activities> Fund Manager (159 companies in the fiscal year ending March 2026), Analyst (20 companies in the fiscal year ending March 2026)
  • <SR Activities> ESG representatives, proxy voting representatives (11 companies in the fiscal year ending March 2026)
  • * If the same company conducts dialogue for IR and SR activities, it is counted separately.

• 3.

  Main themes of dialogue and matters of interest to shareholders

  • ESG, performance, medium-term management plan, and realization of "management that is mindful of the cost of capital and stock price"

• 4.

  Implementation status of feedback to management and the Board of Directors regarding shareholder opinions and concerns identified through dialogue

  • <IR Activities> Provide feedback to the Board of Directors quarterly (June, September 2025, January, May 2026)
  • <SR Activities> Feedback will be provided to the Board of Directors once a year (May 2026)

• 5.

  Matters adopted through dialogue and subsequent feedback

  • Disclosure, improvement of the content of the Integrated Report, disclosure regarding "management that is mindful of the cost of capital and stock price."

Our company is committed to providing appropriate and fair disclosure of company information that is required to be disclosed in a timely manner under the Financial Instruments and Exchange Act and the Securities Listing Regulations established by the Tokyo Stock Exchange, as well as other company information that has a significant impact on investment decisions. We also strive to improve the quality of information disclosure, including transparency and the enrichment of the content of our disclosure materials.
At our company, we have designated a Director Managing Executive Officer in charge of the Corporate Division as the Information Handling Officer. We have established a system to ensure that important company information is reported to the Information Handling Officer promptly and without omission, and that appropriate information management is carried out until disclosure. The Information Handling Officer reviews the content of the reported important information, considers the necessity and method of disclosure, and promptly reports to the President and Representative Director .
Important information requiring timely disclosure will be disclosed promptly after deliberation by the Management Council , which is primarily composed of Executive Officer , and approval by the Board of Directors. The Board of Directors will meet as needed to obtain approval, but in the case of urgent events, disclosure will be made with the approval of the President and Representative Director, and then reported to the Board of Directors at a later date.
For timely disclosure, the Sustainability Promotion Department, under the direction of the Information Handling Officer, makes the disclosure via TDnet of the Tokyo Stock Exchange, Inc., and posts it on our company website.