Basic Policy for Corporate Governance

Roles and Responsibilities of Board of Directors

Article 2

In order to fulfill its fiduciary responsibility to shareholders, the Board of Directors determines the goals of the Group. The Board also proactively and flexibly makes decisions on basic management policies and other important company matters for the sustainable growth of the Group and the improvement of corporate value over the medium- to long-term. Another role of the Board is to appropriately monitor and supervise the execution of duties by directors.

• 2.

  In addition to matters stipulated by laws, regulations, and the Articles of Incorporation, the Board of Directors deliberates and decides on matters stipulated by the rules of the Board of Directors, and delegates other matters to representative directors or executive directors.

Composition of the Board of Directors

Article 3

As stipulated in the Articles of Incorporation, the Board of Directors shall be composed of 10 or fewer members. In order to fulfill the roles of decision-making on important matters and monitoring / supervision, our basic approach is to ensure the establishment of systems required to manage the execution of business by the Group and systems required to ensure substantive discussion at the Board of Directors.

• 2.

  In principle, the Company shall have at least one-third of its directors be independent outside directors who satisfy the "Standards for Independence of Outside Officers." This is done in order to ensure the ability to advise and supervise management from an outside perspective.

Nomination of Director Candidates and Appointment, Dismissal, Etc., of Senior Management

Article 4

Director candidates shall possess extensive experience in management, etc., and have excellent character and insight. Personal attributes such as gender and nationality shall not be considered.

• 2.

  Outside director candidates shall be able to supervise management from an independent outside perspective and provide advice on the Group's corporate activities based on a variety of extensive experience.

• 3.

  The nomination of director candidates and the appointment and dismissal of senior management shall be deliberated and decided by the Board of Directors with advice and recommendations from the Nomination and Remuneration Advisory Committee.

Appointment and Dismissal of Chief Executive Officer

Article 5

When selecting a Chief Executive Officer, the Board of Directors shall consider the ability to lead company management toward the sustainable growth of the Group and the improvement of corporate value over the medium- to long-term.

• 2.

  The appointment and dismissal of the Chief Executive Officer shall be deliberated and decided upon by directors with advice and recommendations from the Nomination and Remuneration Advisory Committee.

Initiatives to Improve the Effectiveness of the Board of Directors

Article 6

The Board of Directors will make the following efforts to improve the effectiveness of the Board of Directors.

Policy for Determining Director Remuneration and Remuneration System, Etc.

Article 7

The director remuneration system is designed to increase motivation for contributing to improved business performance not only in the short-term but also in the medium- to long-term, thereby enabling continuous improvement of the Group's corporate value.

• 2.

  The remuneration of directors (excluding outside directors) consists of fixed remuneration that is not linked to business performance, executive bonuses that are linked to the consolidated performance of the relevant business year, and stock remuneration in the form of a Board Benefit Trust that fluctuates according to the achievement status of medium-term plans, etc.

• 3.

  Remuneration for outside directors shall consist only of fixed remuneration that is not linked to performance.

• 4.

  The Board of Directors consults the Nomination and Remuneration Advisory Committee on remuneration proposals for directors, and makes decisions based on the Committee's deliberations and reports.

Conflict of Interest Transactions

Article 8

Before conducting transactions with the Company's directors, corporate auditors, major shareholders, etc., the Group must obtain approval from the Board of Directors through predetermined procedures in order to prevent said transactions from harming the interests of the Company and the common interests of its shareholders, except for cases in which it is obvious that the transaction conditions are the same as general transactions.

• 2.

  The Group will report to the Board of Directors regarding the results of transactions between the Group and the Company's directors, corporate auditors, major shareholders, etc., that were approved by the Board of Directors.

Establishment and Role of the Nomination and Remuneration Advisory Committee

Article 9

With the aim of ensuring fair and highly transparent procedures for the nomination of directors and corporate auditors, the procedures for determining director remuneration, the appointment and dismissal of senior management, and the appointment and dismissal of the CEO, we will establish the Nomination and Remuneration Advisory Committee as an advisory body of the Board of Directors.

• 2.

  The Nomination and Remuneration Advisory Committee shall fulfill the roles of a Nomination Advisory Committee and a Remuneration Advisory Committee.

Composition of the Nomination and Remuneration Advisory Committee

Article 10

The Nomination and Remuneration Advisory Committee shall be composed of three or more directors, the majority of whom shall be outside directors, and the chairperson of the committee shall be the Representative Director & President. Furthermore, outside corporate auditors may attend the committee as observers.

Consultation Matters, Etc.

Article 11

The Nomination and Remuneration Advisory Committee receives requests for consultation on the following matters, deliberates on those matters, and reports to the Board of Directors.

• (1)

  Matters related to the election of candidates for directors and corporate auditors and the dismissal of directors and corporate auditors to be submitted to the General Meeting of Shareholders

• (2)

  Matters concerning the selection and dismissal of the representative director (CEO)

• (3)

  Matters related to the appointment of independent officers (including matters concerning the review of standards for independence of outside officers)

• (4)

  Matters related to policy and decision-making methods for remuneration of directors

• (5)

  Matters concerning remuneration for individual directors

• (6)

  Other matters for which the Board of Directors have requested consultation

Basic Assignment

Article 12

In order to strengthen the execution of business in each region and business field, and to make prompt and appropriate management decisions, the Company will assign executive officers responsible for business execution to major organizations by region and business field, as well as to each division and department of the head office.

• 2.

  The Company has established a Board of Executive Officers, as well as Executive Officer Regulations and Regulations for the Board of Executive Officers which clarify the scope of authority and decision-making process given to executive officers. In this way, the Company has established a system for enabling prompt and appropriate management decisions.

Policy for Election of Executive Officers

Article 13

Upon proposals from the Representative Director & President, the Board of Directors will appoint persons capable of executing certain important business operations of the Group in the role of executive officers.

• 2.

  Executive officers shall possess expertise in the Company's business and operations, and have excellent character and insight. Personal attributes such as gender and nationality shall not be considered.

Roles and Responsibilities of Corporate Auditors and Board of Corporate Auditors

Article 14

Based on their fiduciary responsibilities to shareholders, the main role and duty of corporate auditors and the Board of Corporate Auditors is to conduct business audits and accounting audits, such as auditing the execution of duties by directors, appointing and dismissing outside independent auditors, and exercising authority in relation to audit fees. However, without overly narrowing the scope of one's own defense, corporate auditors will strive to achieve high-quality auditing activities by dynamically and proactively exercising authority, and appropriately providing opinions on overall management at the Board of Directors or to the management from an independent and objective standpoint.

• 2.

  The Board of Corporate Auditors will increase the effectiveness of audits by organically combining the independent perspectives of outside corporate auditors with information such as information obtained by statutory corporate auditors through attending important meetings and information obtained through interviews with management, Group companies, and offices.

Nomination of Corporate Auditor and Alternate Corporate Auditor Candidates

Article 15

Candidates for corporate auditors and alternate corporate auditors must be individuals of outstanding character and insight, who are well versed in company management and the Company's operations, who possess a high level of expertise and abundant experience in fields such as law, government, accounting, and education, and who are capable of appropriately performing audit work. Personal attributes such as gender and nationality shall not be considered.

• 2.

  Candidates for corporate auditors and alternate corporate auditors are decided upon based on the content of deliberations and reports of the Nomination and Remuneration Advisory Committee. Consent must be obtained from the Board of Corporate Auditors before making such a decision.

Policy on Reappointment, Dismissal, Non-Reappointment and Selection of Independent Auditors

Article 16

The Board of Corporate Auditors will formulate basic policy on the reappointment, dismissal, non-reappointment, and selection of independent auditors.

• 2.

  Pursuant to the provisions of Article 340 of the Companies Act, the Board of Corporate Auditors will deliberate upon dismissal in the event that an independent auditor is found to have breached their duties or neglected their duties, or to have engaged in misconduct unsuitable for an independent auditor. If a resolution is passed to dismiss an independent auditor based on the unanimous consent of corporate auditors, the Board of Corporate Auditors will decide upon the content of reports at the General Meeting of Shareholders or the content of the dismissal proposal.

• 3.

  The Board of Corporate Auditors will formulate evaluation standards (independence, expertise, quality control system, etc.) for independent auditors with reference to materials such as the practical guidelines of the Japan Audit & Supervisory Board Members Association. The Board will evaluate independent auditors based on these evaluation standards. If a resolution is passed for non-reappointment, the Board will decide on the content of the non-reappointment proposal for the General Meeting of Shareholders.

• 4.

  The Board of Corporate Auditors will formulate selection standards for independent auditors in preparation for a resolution to dismiss or not to reappoint an independent auditor, while referring to materials such as the practical guidelines of the Japan Audit & Supervisory Board Members Association. If the Board of Corporate Auditors selects an independent auditor, it shall decide on the content of the appointment proposal for the independent auditor for the General Meeting of Shareholders.

Response to Audits by Independent Auditors

Article 17

The Board of Directors and the Board of Corporate Auditors will develop the systems necessary for proper audits by independent auditors.

• 2.

  In order to conduct appropriate audits, the Company will formulate an audit schedule in consultation with independent auditors. The Company will also take necessary response, such as creating opportunities for communication between independent auditors, representative directors, corporate auditors, the Internal Audit Department, and outside directors.

• 3.

  If an independent auditor requests that the Company take appropriate action, the director in charge will take the lead in investigating and correcting the matter under the direction of a representative director. The Board of Corporate Auditors, led by statutory corporate auditors, will also conduct investigations and take necessary corrective measures through cooperation with the Internal Audit Department and related departments.

Training for Directors and Corporate Auditors

Article 18

As necessary, the Company provides directors (excluding outside directors) and statutory corporate auditors with training on related laws and regulations, as well as on the Group's business, finance and internal control systems, etc. Furthermore, in order to deepen understanding toward the Group among outside directors and outside corporate auditors, we will provide the necessary information by utilizing various reporting sessions and presentations held in-house.