Corporate Governance

Transcription

1 Disclaimer: This is an English translation of the captioned release. This translation is prepared and provided for the purpose of the reader s convenience. All readers are recommended to refer to the original version in Japanese of the release for complete information. Corporate Governance Last updated:april 17, 2018 SOFTBRAIN Co.,Ltd. President & CEO Hirofumi Toyoda Phone (Code No.: 4779 Tokyo Stock Exchange, First Section) Our situation of corporate governance is follows. Ⅰ.Basic Policy on Corporate Governance and Capital Structure, Corporate Attributes, and Other Basic Information 1. Basic policy We have always regarded every stakeholder, such as customer, shareholder, employee, society, as important. In that, we recognize that accomplish growth with the profit continuously and maximize a shareholders value is one of the most important. So, we work on following things. 1We observe laws and ordinances. 2We try the reinforcement of supervision, inspection functions of the board of directors and the supervisory board. 3We correspond to law revision about the corporate governance 4We maintain a posture of investors protection, stockholders-weighted. Reason not to enforce each principle of Corporate governance code (Principle 3-1)(5)Disclosure of the election reason of a director, the inspector candidate We disclosed it about the inspector outsider with an outside director, but haven t disclosed it about the candidate in the company. When we elect a new candidate in the company, we disclose it. Disclosure based on each principle of corporate governance code The following items called for in a corporate governance cord have been already equivalent. (Principle 1-4) Stock cross-holdings (Supplement principle 1-2-4) English translation of the notice of annual general meeting of shareholders (Principle 1-7) Business between parties (Principle 3-1) Improvement of information disclosure (Supplement principle 3-1-2) Disclosure in English (Supplement principle 4-1-1) Range of the commission for the management (Supplement principle 4-1-2) Disclosure of the Medium-Term Management Plan (Principle 4-7) (Supplement principle 4-8-1) (Supplement principle 4-8-2) (Supplement principle ) (Principle 4-8) Election of two or more external directors (Principle 4-9) The independency criterion and capacity of the independent external director (Supplement principle ) Way of thinking about balance, variety, scale as the whole board of directors (Supplement principle ) The additional post situation of the external director and inspector (Supplement principle ) Analysis and evaluation about the effect of the whole board of directors (Supplement principle ) Policy of the training for a director and the inspector (Principle 5-1) Policy about the constructive talks with the shareholders

2 2. Capital structure Percentage of shares owned by foreign shareholders: Under 10% Principal shareholders Name Number of shares held (Shares) Percentage of total shares issued (%) Scala, Inc. 14,770, SOFTBRAIN Co., Ltd. 1,550, The Master Trust Bank of Japan, Ltd. 1,015, Japan Trustee Services Bank, Ltd. (Number of trust accounts: 1) Japan Trustee Services Bank, Ltd. (Number of trust accounts: 2) Japan Trustee Services Bank, Ltd. (Number of trust accounts: 5) 396, , , Masayuki Shichida 252, Japan Trustee Services Bank, Ltd. (Number of trust accounts) Japan Trustee Services Bank, Ltd. (Number of trust accounts: 6) CHASE MANHATTAN BANK GTS CLIENTS ACCOUNT ESCROW 234, , , Controlling shareholders exist or not: Not applicable Parent company exist or not: Scala, Inc. (Tokyo Stock Exchange, First Section: 4845) 3.Corporate Attributes Listed exchange Fiscal year-end: Industry: Number of employees at the most recent fiscal year-end (consolidated): Consolidated net sales for the most recent fiscal year: Number of consolidated subsidiaries at the most recent fiscal year-end Tokyo Stock Exchange, First Section December Information and communication More than 100 and less than 500 Less than 10 billion Under Guidelines on Measures to Protect Minority Shareholders When Dealing with Controlling Shareholders At our company, when transactions occur with controlling shareholders, we fully consider the rationality of the transactions (business necessity) as well as the appropriateness of the transaction conditions and the decision policies for said conditions; we plan to respond appropriately to ensure minority shareholders rights are not unfairly infringed upon.

3 5. Other Special Circumstances that May Materially Affect Corporate Governance:- Ⅱ. Corporate Governance Structure for Management Administration Pertaining to Management Decision-making, Execution, and Supervision, and Others 1. Matters Concerning Institutional Structure and Organizational Operations Organization form: Company with auditors Directors Number of directors specified in the Articles of Incorporation: Terms of office specified in the Articles of Incorporation: Chairperson of the Board of Directors: Number of directors: Number of outside directors Number of outside directors designated as independent directors: Fifteen Two years President Seven Two Two Outside Directors Relationship with the Company (1) Name Attribute Relationship with the Company(*) a b c d e f g h i j k Yoshinari Fujimoto From other company Akira Murakami From other company * Categories for Relationship with the Company * when the director presently falls or has recently fallen under the category; when the director fell under the category in the past * when a close relative of the director presently falls or has recently fallen under the category; when a close relative of the director fell under the category in the past a Executive of the Company or its subsidiary b Non-executive director or executive of a parent company of the Company c Executive of a fellow subsidiary company of the Company d A party whose major client or supplier is the Company or an executive thereof e Major client or supplier of the listed company or an executive thereof f Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as a director/statutory auditor g Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a legal entity) h Executive of a client or supplier company of the Company (which does not correspond to any of d, e, or f) (the director himself/herself only) i Executive of a company, between which and the Company outside directors/statutory auditor are mutually appointed (the director himself/herself only) j Executive of a company or organization that receives a donation from the Company (the director himself/herself only) k Others

4 Outside Directors Relationship with the Company (2) Full name Independent officer Footnote The reason of election Yoshinari Fujimoto - Regarding these external directors and/or independent officers relationships with our company, no standards of independence or weighted disclosure conditions are applicable, and since they hold no special interests vis a vis our company, there is no risk of a conflict of interest with general stockholders occurring. Since they have experience as representative directors of listed companies, and because they can provide appropriate advice and opinions, they have been elected as external directors and/or independent officers. Akira Murakami - Regarding these external directors and/or independent officers relationships with our company, no standards of independence or weighted disclosure conditions are applicable, and since they hold no special interests vis a vis our company, there is no risk of a conflict of interest with general stockholders occurring. Since they are able to conduct auditing from a fair and neutral position, have good ethical perspectives as specialists due to being SME management consultants/administrative scriveners, and can provide appropriate advice and opinions, they have been elected as external directors and independent officers. Voluntary Committee corresponding to Nomination Committee or Remuneration Committee : No Board of Statutory Auditors established: Number of statutory auditors specified in the Articles of Incorporation : Number of statutory auditors: Yes Five Three Status of Collaborative Work Among Statutory Auditors, Accounting Auditors, and Internal Audit Department Statutory auditors receive audit plans, as well as periodic reports on audit results financial statements from the accounting auditor. By taking this measure that each enforcement team exchange of opinions each other, it can enhance mutual cooperation and raise effect of the inspection Outside statutory auditor appointed: Number of outside statutory auditors: Number of outside statutory auditors designated as independent directors: Yes Two Two

5 Outside Statutory Auditors Relationship with the Company (1) Name Attribute Relationship with the Company(*) a b c d e f g h i j k Hideo Nakoshi From other company Nobuhiro Harada From other company * Categories for Relationship with the Company * when the director presently falls or has recently fallen under the category; when the director fell under the category in the past * when a close relative of the director presently falls or has recently fallen under the category; when a close relative of the director fell under the category in the past a Executive of the Company or its subsidiary b Non-executive director or executive of a parent company of the Company c Executive of a fellow subsidiary company of the Company d A party whose major client or supplier is the Company or an executive thereof e Major client or supplier of the listed company or an executive thereof f Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as a director/statutory auditor g Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a legal entity) h Executive of a client or supplier company of the Company (which does not correspond to any of d, e, or f) (the director himself/herself only) i Executive of a company, between which and the Company outside directors/statutory auditor are mutually appointed (the director himself/herself only) j Executive of a company or organization that receives a donation from the Company (the director himself/herself only) k Others Outside Statutory Auditors Relationship with the Company (2) Full name Independent officer Footnote The reason of election Hideo Nakoshi - There is not the fear that profit reciprocity produces with a general stockholder between us because there is not the special interest without corresponding to an independency standard and disclosure weighting requirements in the relations with us. He is fair, and inspection is possible by a neutral viewpoint. And, He is a lawyer. So, we elected him as external inspector and an independence auditor is able to have appropriate advice, proposal having outlook on high ethic as the occupation expert. Nobuhiro Harada - There is not the fear that profit reciprocity produces with a general stockholder between us because there is not the special interest without corresponding to an independency standard and disclosure weighting requirements in the relations with us. He is fair, and inspection is possible by a neutral viewpoint. And, He is CPA and tax counselor. So, we elected him as external inspector and an independence auditor be able to have appropriate advice, proposal having outlook on high ethic as the occupation expert. Independent Director Number of independent officers: Four Other matters concerning independent directors:-

6 Incentives Measures granting incentives to directors: We introduced Achievements interlocking movement reward. We disclosed 24 th financial statement report as follows. C. Determination of achievements interlocking movement reward standard 1.Achievements interlocking movement reward will provides that the profit before income taxes in this fiscal year with a frame calculated by the following calculation methods after current annual general meeting of shareholders (1)Achievements interlocking movement reward on this fiscal year is that assumes it the sum that multiplied Achievement degree coefficient of the earning forecast formulated in the beginning of the fiscal year by the profit before income taxes in this fiscal year. But if these amounts of money exceed amount of money that subtracted the amount of basic reward from the amount of reward upper limit, amount of money that subtracted the amount of basic reward from the amount of reward upper limit is achievements interlocking movement reward. In addition, about some items of expenditure to calculate after a profit and loss decision including public imposts, we reflect the result that I calculated reasonably in.the profit before income taxes. 1) The amount of interlocking movement with the profit before income taxes It is the following net totals. The profit before income taxes(consolidated basis) More than 0 yen, less than 800 million yen :For 3% of amount that listed in the left. Above 800 million yen, less than 1.6 billion yen: For 5% of amount that listed in the left. Above 1.6 billion yen:for 7% of amount that listed in the left 2) Achievement degree coefficient of the earning forecast formulated in the beginning of the fiscal year It is the numerical value that divided current consolidated net income in it forecast formulated in the beginning of the fiscal year. It calculates it as follows. Current net income net income formulated in the beginning of the fiscal year less than 0.7:0 Above 0.7, less than 0.8:0.5 Above 0.8, less than 0.9:0.75 Above 0.9:1 (2)We provide with achievements interlocking movement reward to internal directors on this fiscal year according to the following calculation methods. In addition, less than 1,000 yen shall cut it off. It is provided within one month later of the annual general meeting of shareholders. President & CEO is decided at the concrete supply time. Achievements interlocking movement reward to internal directors =( Total Achievements interlocking movement reward Ratio for the total sum (3)Ratio for the total sum This ratio is determined by President & CEO before submitting financial statement report. President & CEO determine this ratio in consideration of the responsibilities of the director, the contribution degree for achievements, circumstances of other diversity

7 (4) Internal directors must donate the 20% share of this reward to directors stock sharing company. Furthermore, this ratio in FY2017 was follows President & CEO Hirofumi Toyoda:34% Director & CFO Teppei Kinoshita:18% Director & COO/CMO Junzo Osada:18% Director & CTO Akira Kato:18% Director Mizuaki Ohashi : 12% Note:The reward assumes it an amount of money that does not become less than 0 yen. Recipients of Stock Options Supplementary Explanation:- Director Remuneration Disclosure of Individual Directors Remuneration The Company does not disclose remuneration data of individuals. Supplementary Explanation:We don t disclose about individual directors remuneration. Policies to determine remuneration and calculation method: Yes Supplementary Explanation: We disclosed 24 th financial statement report as follows. A. The policy of director s compensation 1.The purposes are follow. We want to find an excellent talented person as our director. It possible to improve the management will as the director and to show the maximum management skills. The responsibility for the management of the director clear. 2.As a general rule, the compensation of the director assumes it follows. 1) Basic compensation of the fixed amount 2) Achievements interlocking movement compensation of the fiscal year concerned paid depending on achievements But this rule intends for a director corresponding to duties operating officer fixed for Corporate Tax Law Article 34 Clause 1 third, and the external director shall not intend. In addition, a director may be given share acquisition compensation as incentive for the improvement of our corporate value appropriately. B. Basic determination policy of compensation 1.As for the executive compensation, the board of directors decides the following for the cause. As for the total sum of the basic reward of all directors, 80% of the amount of reward total sum upper limit of all directors determined by a general meeting of stockholders (I say "the amount of this reward total sum upper limit" as follows) considerably do a sum with the upper limit. Based on the policy of the preceding article, I consider the business results of us of the pre-fiscal year and our connection group (I say our subsidiary where our and is targeted for consolidated accounts and affiliates and agree as follows). 2.Within the amount of 80% equivalency of the amount of this reward total sum upper limit, the representative director who received commission in view of the contribution degree to the achievements of the number of the director, presence, job specifications of the power of representation, post to take charge of, us for the former fiscal year and we connection group,

8 personal ability, experience from the board of directors or the board of directors decides the amount of basic reward of each director. 3. As for this reward total sum upper limit frame and basic reward of each director, by a one-twelfth shall be provided with fate, the basic reward of each director every month in one year of the next ordinary general meeting of stockholders holding month from the next month of the ordinary general meeting of stockholders holding month. 4.When a review of the amount of basic reward of each director is necessary(ex. the number of the director has changed, various elements of each director has changed), by a resolution of the Board of Directors, I confirm that I can review the amount of basic reward of each director within the basic reward total sum. C. Determination of achievements interlocking movement reward standard 1.Achievements interlocking movement reward will provides that the profit before income taxes in this fiscal year with a frame calculated by the following calculation methods after current annual general meeting of shareholders (1)Achievements interlocking movement reward on this fiscal year is that assumes it the sum that multiplied Achievement degree coefficient of the earning forecast formulated in the beginning of the fiscal year by the profit before income taxes in this fiscal year. But if these amounts of money exceed amount of money that subtracted the amount of basic reward from the amount of reward upper limit, amount of money that subtracted the amount of basic reward from the amount of reward upper limit is achievements interlocking movement reward. In addition, about some items of expenditure to calculate after a profit and loss decision including public imposts, we reflect the result that I calculated reasonably in.the profit before income taxes. 1) The amount of interlocking movement with the profit before income taxes It is the following net totals. The profit before income taxes(consolidated basis) More than 0 yen, less than 800 million yen :For 3% of amount that listed in the left. Above 800 million yen, less than 1.6 billion yen: For 5% of amount that listed in the left. Above 1.6 billion yen:for 7% of amount that listed in the left 2) Achievement degree coefficient of the earning forecast formulated in the beginning of the fiscal year It is the numerical value that divided current consolidated net income in it forecast formulated in the beginning of the fiscal year. It calculates it as follows. Current net income net income formulated in the beginning of the fiscal year less than 0.7:0 Above 0.7, less than 0.8:0.5 Above 0.8, less than 0.9:0.75 Above 0.9:1 (2)We provide with achievements interlocking movement reward to internal directors on this fiscal year according to the following calculation methods. In addition, less than 1,000 yen shall cut it off. It is provided within one month later of the annual general meeting of shareholders. President & CEO is decided at the concrete supply time. Achievements interlocking movement reward to internal directors =( Total Achievements interlocking movement reward Ratio for the total sum (3)Ratio for the total sum This ratio is determined by President & CEO before submitting financial statement report.

9 President & CEO determine this ratio in consideration of the responsibilities of the director, the contribution degree for achievements, circumstances of other diversity (4) Internal directors must donate the 20% share of this reward to derectors stock sharing company. Furthermore, this ratio in FY2015 was follows President & CEO Hirofumi Toyoda:34% Director & CFO Teppei Kinoshita:18% Director & COO/CMO Junzo Osada:18% Director & CTO Akira Kato:18% Director Mizuaki Ohashi : 12% Note:The reward assumes it an amount of money that does not become less than 0 yen. Support System for Outside Directors (Outside Statutory Auditors) In the board of directors, He receives the report that it is as a result of inspector inspection and audit, and the external director proposes advice to secure the decision-making appropriate nature of the board of directors as needed. External auditor, He cooperates with a regular inspector closely and shares information necessary for monitoring of the management. In addition, through supervisory board, I take accounts inspector and domestic inspection room and the close cooperation and act for the appropriateness-related security of duties. 2. Functions Including Business Execution, Audit, Supervision, Appointments, and Determining Remuneration (Outline of Current Corporate Governance Systems) We proclaim the following systems. 4.The system to secure effectiveness As a general rule, we hold the board of directors once a month and we plan the mutual understanding between directors and supervise the duties execution mutually to confirm that the officiation of the director is performed effectively We introduce an operating officer system to plan management and separation of the duties execution. And we plan efficiency of the management by that each operating officer share the duties execution with a decision from the Board of Directors policy, supervision. About the duties execution of the operating officer, we perform confirmation, a report of the duties execution situation in the board of directors, a business meeting and make decision by consultation about the important matter. We promote rationalization and the introduction of IT of the duties system to secure that the execution of the duties of the director is carried out effectively. 5.The system to secure the laws and ordinances conformity of our employee We establish compliance official regulations. We publicize that We meet laws and ordinances and articles of association when a servant carries out duties and I achieve the social responsibility as the company if the most relevant and am thorough and establish a basic operation posture through a compliance manual or the training, We confirm whether an internal control system functions effectively by Internal inspection office and watch the execution situation of the duties of the servant. Internal inspection office report to business section about an inspection result and instruct it. Internal inspection office also report to President & CEO. 6.The system to secure the duties adequacy of the subsidiary (1)The report system We dispatch our director and inspector in all subsidiaries as a director and an inspector, and the important matter of our each subsidiary builds the system reported to us through a director dispatched by us and an inspector. From the subsidiary, We receive the presentation of the periodical document to keep the board of directors minutes, the management contents of the

10 monthly financial statements and others subsidiary under control precisely continuously and report us to the board of directors as needed. If a timely disclosure matter occurs in a subsidiary, we let them report it to the board of directors, a business meeting. (2)The system about the management of the subsidiary s danger of the loss a president-director and a charge director of the risk management perform scrubbed finish of the risk information, which the information that is necessary on development and the decision making of the corporate strategy and management plan of subsidiary companies. If they grasp outbreak of the danger of the loss in the subsidiary, the section in charge of our subsidiary reports the influence on contents and us in the board of directors, a business meeting immediately. (3)The system to secure effectiveness of the duties of subsidiary s director We and our subsidiary discusses it about the matter which is important to management such as the management plan in the subsidiary, the important investment beforehand with a company and keeps close cooperation and aims at the improvement of achievements of the whole industrial group, the prosperity of the business. We introduced a common accounting system in our group, and we use common network and file server between a subsidiary and maintain the system that information circulates smoothly between our groups. (4)The system to secure the laws and ordinances conformity of our subsidiary director s duties We apply compliance official regulations to a member of our subsidiary. We establish Compliance report and consultation line, that is officers and employee of us and our subsidiary who can do a report, consultation. When they knew compliance violation and the act that it might violate. Compliance report and consultation line is that consulters can directly talk to director management division who is chief compliance officer. We dispatch Internal inspection office to the subsidiary regularly to prevent the inappropriate business, accounts processing in the subsidiary, and we dispatch a management section to the subsidiary as needed and inspect it. 3. Reason to adopt this structure of cooperate governance By the board of directors having a function to manage a decision making function of the management and the duties execution by the operating officer, and to supervise, we take the management system which is available for improvement of the management efficiency and precise and strategic managerial decisions. Furthermore, We assume two of three inspectors external to show enough monitoring functions for the board of directors. The two external inspectors carries out precise management monitoring having high specialty each from the specialized standpoint. By these systems, We build enough corporate governance as an inspector setting company. III. Measures Relating to Shareholders and Other Stakeholders 1. Efforts to Invigorate General Shareholders Meetings and Facilitate the Exercising of Voting Rights Early shipment of the notice of annual general meeting of shareholders The use of the voting right by the electromagnetic means Others We send the notice of 24th annual general meeting of shareholders at March 9, We started the use of the voting right by the electromagnetic means in 16th annual general meeting of shareholders held March 26, We run a notice of shareholders meeting on this Web page. 2. Activities Relating to IR Footnote Explanation by the representative Making and announcement of IR policy We run IR Policy on this Web page.

11 Periodical briefing for an analyst, institutional investors Website disclosure of the IR document Setting of the post (the person in charge) about the IR We hold briefing for an analyst, institutional investors once in a half year. The document of Financial results briefing discloses on this website. Finance and administrative division administrative department We carried out 3. Efforts to Ensure Due Respect for Stakeholders Footnote Rule in our company about the action about position respect for stakeholder In our corporate principle, we specify the SOFTBRAIN group is a possession of shareholders. Furthermore, we are conscious of a shareholder in management. IV. Matters Related to Internal Control System We maintain an internal control system to secure the appropriateness of our duties and duties of the industrial group consisting of our and subsidiaries as follows based on company law and the company law enforcement regulations. 1.The system to secure the laws and ordinances conformity of our director s duties When our director carries out duties, we indicate that compliance and corporate social responsibility are most important degree. Through the discussion in the board of directors and the business meeting, we raise awareness for the compliance of all directors and carry out the execution of duties thoroughly based on it. We run our board of directors based on board of directors official regulations and, as a general rule, hold it once a month. We plan the mutual understanding between directors and supervise the duties execution mutually and the inspector attends, too and inspects legality of the execution of the duties of the director. 2.The system about preservation and management of the information About the document or other information, we carry out the use such as document management official regulations, insider trading management official regulations and perform the reviews such as inspection of the operational situation, each official regulations as needed. About these office works, management headquarters management director has jurisdiction over it; including the progress of inspection, the review of the operational situation report it to the board of directors regularly. 3.The official regulations and system about the management of the danger of loss We decide the basic policy of the countermeasure that or evasion will minimize various company risks that outbreak is predicted in future and prepare appropriately beforehand. Specifically, a president-director and a charge director of the risk management perform scrubbed finish of the risk information, which the information that is necessary on development and the decision making of our corporate strategy and management plan. We maintain evasion or the system to minimize it with a risk to give the serious damage to our management by outbreak or the officer of other disasters conducting non-appropriate affairs. The internal inspection office assumes it an organization of the president-director direct control. They examines an inspection enforcement item and a method based on domestic inspection official regulations and draws up an inspection plan and carries out the inspection based on the plan. When laws and ordinances articles of association violation is discovered by them or when the duties execution act at risk for the loss is discovered based on other reasons, they report to a president-director promptly. 4.The system to secure effectiveness As a general rule, we hold the board of directors once a month and we plan the mutual understanding between directors and supervise the duties execution mutually to confirm that the officiation of the director is performed effectively We introduce an operating officer system to plan management and separation of the duties execution. And we plan efficiency of the management by that each operating officer share the duties execution with a decision from the Board of Directors policy, supervision. About the duties execution of the operating officer, we perform confirmation, a report of the duties execution situation in the board of directors, a business meeting and make decision by consultation about the important matter.

12 We promote rationalization and the introduction of IT of the duties system to secure that the execution of the duties of the director is carried out effectively. 5.The system to secure the laws and ordinances conformity of our employee We establish compliance official regulations. We publicize that We meet laws and ordinances and articles of association when a servant carries out duties and I achieve the social responsibility as the company if the most relevant and am thorough and establish a basic operation posture through a compliance manual or the training, We confirm whether an internal control system functions effectively by Internal inspection office and watch the execution situation of the duties of the servant. Internal inspection office report to business section about an inspection result and instruct it. Internal inspection office also report to President & CEO. 6.The system to secure the duties adequacy of the subsidiary (1)The report system We dispatch our director and inspector in all subsidiaries as a director and an inspector, and the important matter of our each subsidiary builds the system reported to us through a director dispatched by us and an inspector. From the subsidiary, We receive the presentation of the periodical document to keep the board of directors minutes, the management contents of the monthly financial statements and others subsidiary under control precisely continuously and report us to the board of directors as needed. If a timely disclosure matter occurs in a subsidiary, we let them report it to the board of directors, a business meeting. (2)The system about the management of the subsidiary s danger of the loss a president-director and a charge director of the risk management perform scrubbed finish of the risk information, which the information that is necessary on development and the decision making of the corporate strategy and management plan of subsidiary companies. If they grasp outbreak of the danger of the loss in the subsidiary, the section in charge of our subsidiary reports the influence on contents and us in the board of directors, a business meeting immediately. (3)The system to secure effectiveness of the duties of subsidiary s director We and our subsidiary discusses it about the matter which is important to management such as the management plan in the subsidiary, the important investment beforehand with a company and keeps close cooperation and aims at the improvement of achievements of the whole industrial group, the prosperity of the business. We introduced a common accounting system in our group, and we use common network and file server between a subsidiary and maintain the system that information circulates smoothly between our groups. (4)The system to secure the laws and ordinances conformity of our subsidiary director s duties We apply compliance official regulations to a member of our subsidiary. We establish Compliance report and consultation line, that is officers and employee of us and our subsidiary who can do a report, consultation. when they knew compliance violation and the act that it might violate. Compliance report and consultation line is that consulters can directly talk to director management division who is chief compliance officer. We dispatch Internal inspection office to the subsidiary regularly to prevent the inappropriate business, accounts processing in the subsidiary, and we dispatch a management section to the subsidiary as needed and inspect it. 7.The system to elect of the adjunct of our inspector If our inspector demand to employ the servant who should assist duties, President & CEO elects a well-qualified person it immediately into consideration about the number of people, requirements, period and a reason. 8.The system to secure of independency for the adjunct of the inspector The adjunct of our inspector supports inspection duties of the inspector under the conduct supervision of the inspector. About personnel changes, the evaluation of the adjunct, a prior agreement of the supervisory board is necessary. 9.The system for the thing which received a report to an inspector not to achieve a disadvantage In case our director and servant discover the fact that might give the remarkable damage to our and subsidiary, they report it to an inspector promptly. In addition, the standing inspector attends at the important meetings such as the board of directors and the business meeting to grasp the execution situation of an important decision-making process and duties and reads an important document about the duties execution such as requests for decision making and decides to demand the explanation from a director and a servant as needed.

13 A director and the servant report the matter that an inspector called for a report immediately. The inspector receives the explanation about audit contents from accounts auditor and duties inspection contents from a domestic inspection room. In addition, The inspector plans cooperation for them such as changing the information. If reported a problem about the compliance of us and our subsidiary from Compliance report and consultation line, our CCO report about to an inspector as needed. For the person who reported it for the inspector, we prohibit that we perform the disadvantageous handling by the reason of the thing that we reported concerned, and we publicize so in us and a subsidiary, and we shall be thorough. 10.Policy about the handling of expense and debt that occurred in the duties execution of the inspector When, in us, an inspector demanded the payment in advance of the expense based on company law Article 388 from us about the execution of the duties, We process the immediately expense concerned or a debt unless it was admitted that an expense to affect the request concerned or a debt is not necessary for the execution of the duties of the inspector concerned after the deliberation in a charge post. 11.The system to secure that the inspection of our inspector is carried out effectively (Other contents) Our director and servant deepen understanding for the inspection of the inspector and try to maintain environment of the inspector inspection. Our President & CEO gives a periodical exchange of opinions with an inspector and builds the system for an inspector to carry out appropriate mutual understanding with the domestic inspection room and effective inspection duties. 2. Basic View for Eliminating Antisocial Forces and Progress of Preparedness for Such Elimination We think that basic way of thinking for the antisocial power exclusion and maintenance situation we must cope in a determined manner for the antisocial power. The thing which we must correspond to in a determined manner for the antisocial power is a basic way of thinking for our antisocial power exclusion. For the demand from racketeers in particular, we go in a resolute manner, and there must not be things giving profit in the property about the use of stockholder's rights and removes all relations that may be said to be the opaque adhesion. If our officer and employee have some kind of relations with such a group and individual without intending, they report the fact to the relations post quickly and receive appropriate instructions about a subsequent action. V Others 1. Introduction of Takeover Defense Measures Introduction of takeover defense measures: None Supplementary explanations on applicable items:- 2. Matters Concerning Other Corporate Governance Systems, etc.

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