Corporate Governance Report
CORPORATE GOVERNANCE

Last Update:

NAKANISHI INC.

April 1, 2024

Nakanishi Inc.

Eiichi Nakanishi, President and Group CEO
Contact: (0289) 64-3380
Securities code: 7716
www.en.nakanishi-inc.jp
The corporate governance of Nakanishi Inc. (the “Company”) is described below.

I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile,and Other Basic Information
1. Basic Views

The Company aims to enhance corporate value by promoting the strengthening and improvement of
the corporate governance system. The fundamental policy of management to improve corporate value isto gain the trust of stakeholders, starting with shareholders, as a global company.

Reasons for Non-compliance with the Principles of the Corporate Governance Code(Supplementary Principle 4-1-3)
Although there is no set succession plan for the CEO and others at this time, based on management
policies as well as management strategies, considerations to formulate a plan in a reasonable timeframe
are being made.
(Principle 4-11: Prerequisites to guarantee the effectiveness of the Board of Directors and the Audit andSupervisory Board)
The Company’s Board of Directors is comprised of diverse Directors who possess expertise andexperience in their respective fields. The Audit and Supervisory Board perform pertinent, relevant
auditing activities through Outside Corporate Auditors, who possess expertise in management
experience, judicial affairs, etc., coordinating with outside specialists such as accountants and others.
Also, the Board of Directors is analyzed and evaluated on its effectiveness, aiming to improve its
functionality.

Disclosure Based on the Principles of the Corporate Governance Code(Principle 1-4: Cross-shareholdings)
The Company performs verifications of appropriateness of possession by performing verifications
related to the Board of Directors’ cross-shareholding possession purpose and economic rationality. Also,
when exercising voting rights, to properly exercise, overall judgment is made considering conformity to
the Company’s possession policy and whether it plays a part in the corporation’s mid-to-long term
corporate value enhancement.
(Principle 1-7: Transactions between related parties)
In the event of undertaking a transaction between related parties, deliberation and resolution by the
Board of Directors is required, and the Director possessing the interests may not exercise voting rights
related to the relevant agenda items. Regarding a transaction between related parties, verification of thetransaction details will be conducted to prevent loss of minority shareholder profit, and the transaction
basis will be equivalent to the transaction conditions between other corporations with no capital ties.
(Supplementary Principle 2-4-1)
To ensure diversity, the Company proactively appoints mid-career recruitments and others to corepersonnel. The proportion of mid-career hires in managerial positions is already high, so no target has
been set. As for the appointment of foreign personnel, the Company promotes the localization ofmanagement at its overseas subsidiaries and other entities, of which foreign employees hold the
majority of managerial positions. The proportion of foreign employees in managerial positions atoverseas subsidiaries and other entities is already high, so no target has been set. In addition, theCompany proactively promotes the empowerment of women, and has set a target of increasing the
proportion of female employees in managerial positions to 10% by 2025.

1

(Principle 2-6: Roles of Corporate Pension as asset owners)
The Company, on Defined-Benefit Corporate Pension asset management, implements initiatives suchas effective management based on regulations, monitoring, and other actions.
(Principle 3-1: Enhancement of information disclosure)(1) The Company’s management philosophy, management strategy, and business plan
Disclosed in the Mid Term Management Plan as well as Briefing Materials, etc.
(2) Basic views regarding corporate governance
Please refer to “Basic Views” in this document.
(3) Policies and procedures related to determining Director compensation
The amount of Director compensation and the like are within the compensation limits set at theGeneral Meeting of Shareholders. Entrusted by the Board of Directors, these amounts are determinedby the President and Group CEO after deliberation by the Nomination and Remuneration Committee,
taking into account each Director’s responsibilities and performance, as well as the company’s
performance and economic climate.
(4) Policies and procedures related to the nomination of Director and Corporate Auditor candidates
Regarding the nomination of the Company’s Director and Corporate Auditor candidates, based on
the perspective of thoroughly considering the right person for the right job, the Board of Directors
will decide on the candidate recommended by the President and Group CEO after deliberation by the
Nomination and Remuneration Committee. As for Corporate Auditor candidate nominations,approval from the Audit and Supervisory Board is obtained.
(5) Explanation concerning the election and nomination undertaken upon Director and Corporate
Auditor candidate nomination
When placing Director or Corporate Auditor candidacy on the agenda at a General Meeting of
Shareholders, the process of disclosure is to outline a brief personal record and offer evidence todetermine ability, experience, etc., together with, for Outside Directors, a proxy statement specifying
reasons for election.
(Supplementary Principle 3-1-3)
To tout the creation of the mission to “create brilliant progress” via “innovative grinding technology,”
the Company aims to solve societal issues through three areas of business- dental, surgical, andindustrial.
Please refer to the Company’s website for the Company’s views, policies, and initiatives regarding
sustainability.
(https://www.en.nakanishi-inc.jp/sustainability/report/)(Supplementary Principle 4-1-1)
Based on applicable laws, Articles of Incorporation, and regulations of the Board of Directors, concretebusiness execution is entrusted to the Executive Vice President after requiring resolution of items by the
Board of Directors. Furthermore, the Company adopts a Corporate Vice President system, and based on
the President’s direction, business can be executed by sanctioned authority as stipulated by theprofessional duty authority regulations, enabling rapid decision-making.
(Principle 4-9: Criteria for judging the independence of Independent Outside Directors and attributes ofIndependent Outside Directors)
Regarding the selection of Independent Outside Directors, based on independence standards inaccordance with the Tokyo Stock Exchange, after completing classification of each item, selection ismade after aggregating the combined decisions.
(Supplementary Principle 4-10-1)
The Company has established a Nomination and Remuneration Committee as a voluntary advisory
body, which is comprised of a majority of Independent Outside Directors, to increase the fairness,transparency, and objectivity of procedures regarding the nomination and remuneration of Directors
and Corporate Vice Presidents of the Company and its major subsidiaries and to further enhance thecorporate governance system. The Nomination and Remuneration Committee deliberates and reports
on matters regarding the appointment and dismissal of Directors and Corporate Vice Presidents, and the
remuneration of Directors and Corporate Vice Presidents, among other matters.
(Supplementary Principle 4-11-1)
The Company’s Board of Directors consists of diverse Directors with expertise and experience and who
possess excellent character and insight; to be able to perform rapid decision-making, the Articles ofIncorporation limit the acceptable number of Directors to ten people or less. The Company elects six
Directors, including three Outside Directors, which the Company feels is an appropriate arrangement2

for accurate and rapid decision-making. A skill matrix of Directors is provided in convocation notices ofAnnual General Meetings of Shareholders.
(Supplementary Principle 4-11-2)
Status of concurrent service for Directors and Corporate Auditors are disclosed through convocation
notices of General Meetings of Shareholders, annual securities reports, etc.
(Supplementary Principle 4-11-3)
Concerning the effectiveness of the Board of Directors, self-assessment is undertaken throughsurveys by Directors and Corporate Auditors. The results of the analysis and evaluation of theeffectiveness of the Board of Directors is used to confirm that the Company’s Board of Directors’
management is satisfactory, and overall effectiveness is ensured. Continuous assessment will be
performed in the future so, even more, the Board of Directors’ functionality will be enhanced as much as
possible.
(Supplementary Principle 4-14-2)
The Company offers appropriate provisions of necessary information and opportunities so that
Directors and Corporate Auditors can accomplish their duties and obligations.
(Principle 5-1: Policy related to constructive dialogue with shareholders)
The Company regards constructive dialogue with shareholders as important, and to the extent
possible, holds various opportunities to communicate, primarily with management. In addition, insider
information is properly managed in accordance with applicable laws and internal regulations whenshareholders and investors communicate.
(Action to Implement Management that is Conscious of Cost of Capital and Stock Price)(Disclosed in English)
In addition to net sales, operating profit, and the operating margin, which are sales and profit target
indicators, the Company has set an ROE target, an indicator for profitability relative to shareholders’equity, as a KPI in the Mid Term Management Plan NV2025+ to promote management emphasizing
capital efficiency. For details, please refer to the Mid Term Management Plan NV2025+.
Mid Term Management Plan "NV2025+”(https://www.en.nakanishi-inc.jp/app/wp-content/uploads/2022/08/NV2025_E.pdf)

2. Capital Structure
Foreign Shareholding Ratio

30% or more

Status of Major Shareholders Updated
Name or Company Name
Custody Bank of Japan, Ltd. (Trust Account)
Nakanishi E&N Inc.
The Master Trust Bank of Japan, Ltd. (Trust Account)
Chiyo Nakanishi
SSBTC Client Omnibus Account
THE NSK Nakanishi Foundation
Office Nakanishi Inc.
Eiichi Nakanishi
Kensuke Nakanishi
JPMorgan Chase Bank, N.A. 385632
Name of Controlling Shareholder, if
applicable (excluding Parent Company)
Name of Parent Company, if applicable

―――
None

Supplementary Explanation―――

3

Number of Shares
Owned
5,018,400
4,530,000
4,514,600
4,362,000
3,789,489
3,721,600
3,120,000
2,814,300
2,806,200
2,589,700

Percentage (%)
5.88
5.31
5.29
5.11
4.44
4.36
3.66
3.30
3.29
3.04

3. Corporate Attributes
Listed Stock Exchange and Market
Segment
Fiscal Year-End
Business Sector
Number of Employees (Consolidated) asof the End of the Previous Fiscal YearNet sales (Consolidated) as of the End of
the Previous Fiscal Year
Number of Consolidated Subsidiaries as of
the End of the Previous Fiscal YearTokyo Stock Exchange, Standard Market
DecemberPrecision Instruments
1,000 or more
10B JPY or more and less than 100B JPY
10 or more and fewer than 50

4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with
Controlling Shareholder―――

5. Other Special Circumstances which May Have Material Impact on Corporate
Governance―――4II. Business Management Organization and Other Corporate Governance
Systems regarding Decision-making, Execution of Business, and Oversight inManagement
1. Organizational Composition and Operation
Corporate Governance System

Company with Corporate Auditors

Directors
Number of Directors Stipulated in Articles
of Incorporation
Directors' Term of Office Stipulated in
Articles of Incorporation
Chairperson of the Board of Directors
Number of Directors
Election of Outside Directors
Number of Outside Directors
Number of Independent Directors

Ten
Two years
President
Six
Elected
Three
Three

Outside Directors’ Relationship with the Company (1)Name

Relationship with the Company*
c
d
e
f
g
h
i

AttributesabjkYuji Nonagase
Academic
Yukiko Araki
From another company
Chika Shiomi
From another company*Categories for “Relationship with the Company”.
(Use “○” 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; and “▲” when a close relative of the Director fell under the
category in the past.)
a. Person who executes business of the Company or a subsidiary
b. Person who executes business or a non-executive director of a parent company
c. Person who executes business of a fellow subsidiaryd. Person/entity for which the Company is a major client or a person who executes business for such
person/entity
e. Major client of the Company or a person who executes business for such clientf. Consultant, accounting expert, or legal expert who receives large amounts of cash or other assets inaddition to Director/ Corporate Auditor compensation from the Company
g. Major shareholder of the Company (in cases where the shareholder is a corporation, a person who
executes business of the corporation)h. Person who executes business for a client of the Company (excluding persons categorized as any ofd, e, or f above) (applies to self only)
i. Person who executes business for another company holding cross-directorships/cross-auditorships
with the Company (applies to self only)
j. Person who executes business for an entity receiving contributions from the Company (applies toself only)
k. Other5Outside Directors’ Relationship with the Company (2)Designationas
Independent
Director○―――

Yukiko
Araki

○

―――

Chika
Shiomi

○

―――

Name
Yuji
Nonagase

Supplementary
Explanation of the
Applicable Relationship

Reasons for Appointment
Elected as an Outside Director, theCompany expects contributions toimprove management integrity and tostrengthen corporate governance byreceivingoverallmanagement
recommendations utilizing expertise
relatedtomanagement
systemengineering. Independence has been
ensured with no concerns overconflicts of interest with generalshareholders.
Elected as an Outside Director, theCompany expects contributions toimprove the Company’s sustainability
promotion and strengthen corporate
governance with years of abundant
experiencebeing
involvedinadministration and possessing a wide
rangeofexpertiseinCSR,
environmental strategy, and healthcare.
Independence has been ensured withno concerns over conflicts of interest
with general shareholders.
Elected as an Outside Director, theCompany expects contributions tostrengthen corporate governance byreceivingoverallmanagement
recommendations utilizing her diverse
viewpoints, with extensive experienceand broad insight in the management ofa manufacturer focused on globally
expanding its business. Independence
has been ensured with no concerns
over conflicts of interest with generalshareholders.

Voluntary
Establishment of Committee(s)equivalent to Nomination Committee orRemuneration Committee

Established

Details of Establishment, Members, and Attribute of Chairperson
Name ofCommittee
Committees
Nomination andCorresponding to
Remuneration
the Nomination
Committee
Committee
Committees
Corresponding to Nomination andtheRemuneration
Remuneration
Committee
Committee

Total
Members

Full-timeMembers

InsideDirectors

OutsideDirectors

OutsideExperts

OthersChairperso
n

3

0

1

2

0

0 Director

3

0

1

2

0

0 Director

In-house

In-house

Supplementary Explanation
The Company has established a Nomination and Remuneration Committee as a voluntary advisory body to
the Board of Directors to increase the fairness, transparency, and objectivity of procedures regarding the6nomination and remuneration of Directors and Corporate Vice Presidents of the Company and its major
subsidiaries and to further enhance the corporate governance system.

Corporate Auditors
Establishment of Audit and Supervisory
Board
Maximum Number of Corporate Auditors
Stipulated in Articles of Incorporation
Number of Corporate Auditors

Established
Four
Three

Cooperation among Corporate Auditors, Accounting Auditors, and Internal Audit Departments
Corporate Auditors and the Audit and Supervisory Board receive an outline of audit plans from the
Accounting Auditor, and the Accounting Auditor receives explanations to understand the state ofinternal controls, risk assessment, and important audit items. Striving for mutual cooperation, periodic
exchange of opinions take place.
Furthermore, regarding the Corporate Auditor’s audit standards, in the event the Accounting Auditor
finds a Director’s execution of duties to be dishonest or in violation of applicable laws or Articles ofIncorporation, and a report of the grievous facts to the Audit and Supervisory Board is made, there is a
stipulation that Corporate Auditors, after deliberation, proceed with necessary audits and takenecessary corrective measures, such as advising or counseling the Director.
Corporate Auditors, receiving required reports concerning progress and results on internal audits aswell as internal controls from the Internal Audit Office, mutually cooperate to perform efficient andeffective audits.
AppointmentofOutsideCorporate
Auditors
Number of Outside Corporate Auditors
Numberof
Independent
Corporate
Auditors

Appointed
Three
Three

Outside Corporate Auditors’ Relationship with the Company (1)Name

Relationship with the Company*
d
e
f
g
h
i
j
k
l

Attributesabcm
Hideki Toyotama
From another company
Yuji Sawada
LawyerYoshihiro Maki
From another company*Categories for “Relationship with the Company”.
(Use “○” when the Corporate Auditor presently falls or has recently fallen under the category; “△” when
the Corporate Auditor fell under the category in the past; “●” when a close relative of the Corporate
Auditor presently falls or has recently fallen under the category; and “▲” when a close relative of the
Corporate Auditor fell under the category in the past.)
a. Person who executes business of the Company or a subsidiaryb. A non-executive director or an accounting advisor of the Company or its subsidiaries
c. Person who executes business or a non-executive director of a parent company
d. A Corporate Auditor of a parent company of the Company
e. Person who executes business of a fellow subsidiaryf. Person/entity for which the Company is a major client or a person who executes business for such
person/entity
g. Major client of the Company or a person who executes business for such clienth. Consultant, accounting expert, or legal expert who receives large amounts of cash or other assets inaddition to Director/ Corporate Auditor compensation from the Company
i. Major shareholder of the Company (in cases where the shareholder is a corporation, a person who
executes business of the corporation)j. Person who executes business for a client of the Company (excluding persons categorized as any of f,g, or h above) (applies to self only)
k. Person who executes business for another company holding cross-directorships/cross-auditorships
with the Company (applies to self only)
l. Person who executes business for an entity receiving contributions from the Company (applies toself only)
m. Other7

Outside Corporate Auditors’ Relationship with the Company (2)Designationas
Independent
Auditor
○

―――

Yuji
Sawada○―――Yoshihiro
Maki

○

―――

Name
HidekiToyotama

Supplementary
Explanation of the
Applicable Relationship

Reasons for Appointment
Elected as an Outside Corporate
Auditor,theCompany
expects
contributions to improve management
integrity and to strengthen corporate
governancebyreceivingoverallmanagement
recommendations
utilizing a wealth of experience andopinions
regardingbusiness
administration. Independence has been
ensured with no concerns overconflicts of interest with generalshareholders.
Elected as an Outside Corporate
Auditor,theCompany
expects
contributions to improve management
integrity and to strengthen corporate
governancebyreceivingoverallmanagement recommendations fromthe professional viewpoint of a lawyer.
Independence has been ensured withno concerns over conflicts of interest
with general shareholders.
Elected as an Outside Corporate
Auditor,theCompany
expects
contributions to improve management
integrity and to strengthen corporate
governancebyreceivingoverallmanagement
recommendations
utilizing a wealth of experience andexpertise as a public servant insuccessive
key
positions.
Independence has been ensured withno concerns over conflicts of interest
with general shareholders.

Matters Concerning Independent Directors and Independent Auditors
Number of Independent Directors andIndependent Auditors

Six

Other Matters Concerning Independent Directors and Independent Auditors―――

8

Incentives
Implementation Status of Measuresrelated to Incentives Granted to Directors

UpdatedIntroduction of Performance-linked Remuneration,
Introduction of Stock Options Scheme, Other

Supplementary Explanation for Applicable Items• Stock Options Scheme
At the 58th Annual General Meeting of Shareholders held on March 30, 2010, it was resolved to abolishthe retirement bonus system for Directors other than Outside Directors, and in line with the above, issue
stock acquisition rights as stock compensation-type stock options. For remuneration at retirement,each Director is granted a fixed number of stock acquisition rights depending on the position in which
the Director served.
• Restricted Stock Compensation
At the 71st Annual General Meeting of Shareholders held on March 30, 2023, it was resolved to provide
remuneration for granting restricted shares to Directors other than Outside Directors. The remuneration
shall be provided within the monetary remuneration limit for Directors pursuant to a resolution of theBoard of Directors.
Persons Eligible for Stock Options

Inside Directors

Supplementary Explanation for Applicable Items
The aim of this grant is to strengthen, more than ever, the link between Director remuneration and theCompany’s performance and shareholder profit.

Director Remuneration
Status of Disclosure
Directors’ Remunerationof

Individual

Disclosure for Selected Directors

Supplementary Explanation for Applicable Items
For those whose total remuneration is JPY 100M or more, individual disclosures are provided in theannual securities report. The annual securities report is published on the Company’s website and isprovided to the public for review.
Policy on Determining Remuneration
Amounts and the Calculation Methods
Thereof

Established

Disclosure of Policy on Determining Remuneration Amounts and the Calculation Methods
Remuneration for Directors (excluding Outside Directors) is based on a remuneration structure thatincorporates shareholder profits to ensure that it adequately functions as an incentive to work towardsustainable improvement in corporate value. In determining remuneration for each Director, the basic
policy is to provide an appropriate level in view of duties and responsibilities, with fixed remuneration,
performance-linked remuneration, and non-monetary remuneration. Additionally, remuneration for
Outside Directors only consists of fixed remuneration since they are at a standpoint independent frombusiness execution.
1. Policy on fixed remuneration
Fixed remuneration shall be determined in comprehensive consideration of the status of duties andexecution of each Director and the business results of the company, etc.
2. Policy on performance-linked remuneration
Performance-linked remuneration shall be determined based on the level of achievement (businessresults indices) according to the duties of each Director. Business results indices shall be net sales,
EBITDA, and ROE.
3. Policy on non-monetary remuneration
Non-monetary remuneration shall be comprised of stock options and restricted stock, with thenumber of shares allotted determined based on the position, duties, etc., of each Director.
4. Policy on ratio of remuneration, etc.
Regarding the ratio of remuneration, etc., the policy shall be to ensure that the ratio is the mostappropriate for the purpose of contributing to the sustainable improvement of corporate value.

95. Policy on allotment timing and conditions for remuneration, etc.
Based on each policy, fixed remuneration shall be provided monthly and performance-linked
remuneration shall be provided annually. Stock options and restricted stock shall be provided
annually.
6. Matters concerning delegation of determining remuneration, etc.
The content of remuneration, etc., for individual directors shall be deliberated by the Nomination andRemuneration Committee and subsequent to receiving its report, determined by the President &Group CEO.

Support System for Outside Directors and/or Outside Corporate Auditors
The management department handles support pertaining to Outside Directors and Outside Corporate
Auditors. A system is put into place whereby generally, advance notifications of Board of Director
Meetings to be held are handled, as well as smoothly executing exchanges of opinion, deliberation, andapproval with the Board of Directors.

2. Matters Concerning Functions of Business Execution, Auditing and Supervision,
Nomination, and Remuneration Decisions (Overview of Current Corporate Governance
System) Updated
1. Board of Directors
The Board of Directors, comprised of six Directors (including three Outside Directors), positioned
as the management decision-making body, carries out the Company Groups’ deliberation anddecision-making concerning important matters.
2. Audit and Supervisory Board
The Audit and Supervisory Board, comprised of three Corporate Auditors (including three Outside
Corporate Auditors), is established to perform audits on Directors’ management activities, including
responsibilities and performance.
3. Internal Audit System
The Internal Audit Office carries out internal audits and inspections of each Company accountledger. It also audits by monitoring business activity appropriateness and efficiency together withsystem effectiveness. Also, Corporate Auditors as well as the Accounting Auditor hold periodic
meetings to exchange information and opinions to strive for validity and effectiveness of audit
operations. The results of internal audits and progress with activities of the Internal Audit Office arereported to the President and Corporate Auditors as required, as well as to the Board of Directors andthe Audit and Supervisory Board on a regular basis.
4. Status of Accounting Audit
There are no special interests between the Company’s Accounting Auditor, Ernst & Young
ShinNihon LLC. and the Engagement Partners engaged in the Company’s audits.
The names of the certified public accountants engaged in said duties
Ernst & Young ShinNihon LLC.
Yuji Anzai, Designated Limited Liability Partner and Engagement Partner
Masaki Mitsuji, Designated Limited Liability Partner and Engagement Partner• The consecutive auditing years is seven years or less for all parties, so this information is omitted.
• Assistants engaged in the Company’s audit duties are six certified public accountants and twelve
others.

3. Reasons for Adoption of Current Corporate Governance System
The Company’s three Outside Directors and three Outside Corporate Auditors are independently
positioned to perform supervision and audits in terms of management, having no interests related to theCompany’s personnel, capital, business relationships, etc. Each Outside Director advises based on his or
her own views to realize the Board of Directors’ proper and efficient decision-making. Likewise, Outside
Corporate Auditors audit management’s legality and the like using their professional points of view, andare expected to perform monitoring functions in regards to management. From the above-mentioned,
we find appropriate that the Corporate Auditor system starting with the Board of Directors, Corporate
Auditors, and Audit and Supervisory Board aims to strengthen internal control functionality.

10III. Implementation of Measures for Shareholders and Other Stakeholders

1. Measures to Vitalize General Meetings of Shareholders and Facilitate Exercise of Voting
Rights
Early Posting of Convocation Noticesof General Meetings of Shareholders

Supplementary Explanation
Convocation notices of General Meetings of Shareholders areposted earlier than the designated day.

2. Status of IR-related Activities

Supplementary Explanation

Regular Investor Briefings held for
Analysts and Institutional Investors

Online Disclosure of IR Information
Establishment of Department and/or
Placement of a Manager in Charge ofIR

Based on Briefing Material for fiscal year andsecond quarter, the President and Group CEO
will explain the status of the corresponding
period and outlook for the future.
Provided on the website is an IR informationsite where annual securities reports, Briefing
Materials,
business
reports,etc.,
arepublished.

Explanation byarepresentative
director or arepresentative
executive
officerHeld

The Group CFO is the responsible party andperson in charge of disclosure of information.

3. Status of Measures to Ensure Due Respect for Stakeholders
Implementation of Environmental
Preservation Activities and CSR
Activities, etc.

Supplementary Explanation
Recognizing consideration for the environment as an important
issue for management, the Company has acquired ISO14001
and performs continuous improvement activities ofenvironmental conservation and publishes the results of said
activities on the Company's website.

11IV. Matters Concerning the Internal Control System

1. Basic Views on the Internal Control System and Status of Development
Outline of decided content relating to the system to ensure proper operation(1) System to ensure execution of duties of the Company and subsidiaries’ (referred as “theCompany Groups” below) Directors and employees conform to applicable laws as well as the
Articles of Incorporation
The Company, to improve the system created so the Company Groups’ Directors andemployees can execute their duties conforming to applicable laws as well as the Articles ofIncorporation, conducts corporate management with an emphasis on compliance. Also, for
Directors and employees, the Company Groups’ information campaigns related to compliance isprovided, aimed at creating a company culture that creates compliance awareness.
(2) System for storing and managing information related to the execution of duties by Directors
Handling of documents and other information related to Directors’ execution of duties ismanaged by conforming to the “Document Management Regulations” and proper storage.
(3) Regulations and other systems for managing the risk of loss
The entire Company Groups’ risk is comprehensively and uniformly managed based on the“Risk Management Regulations,” which aim to evaluate and thoroughly manage the Company
Groups’ risk.
(4) System to ensure that the Company Groups’ Directors execute their duties efficiently
The Board of Directors of the Company Groups perform supervision, etc., of determined
important matters as well as the status of Directors’ business executions. Also, conforming to
the “Division of Duties Regulations,” the “Business Authority Regulations,” etc., delegation of
authority is proactively conducted, and based on the rule where the person in charge can makedecisions on each matter, duties are executed.
(5) System to ensure the appropriateness of business in the corporate group consisting of theCompany Groups
Each company in the Company Group conforms to the “Affiliates Management Regulations”
and other regulations to enhance corporate value of the entire group. Closely cooperating, theCompany, regarding the subsidiaries, performs appropriate management and guidance, striving
for effective operation from the group as a whole.
(6) Matters relating to employees in the event that a Corporate Auditor requests assignment of an
employee for assistance in duties
In the event that a Corporate Auditor requests assignment of an employee for assistance induties, respecting the Corporate Auditor’s wishes, personnel are assigned as necessary.
(7) Matters related to independence from Directors of employees in the preceding clause
Regarding the transfer, evaluation, etc., of assigned personnel in the event of a Corporate
Auditor requesting assignment of an employee for assistance in duties, the opinions of the
Corporate Auditor are respected.
(8) System related to reporting to the Corporate Auditor
Facts of violations, etc., of applicable laws or concern about extreme harm to the Company by
the Company Groups’ Directors and employees must be reported to the Company’s Corporate
Auditors or Audit and Supervisory Board without delay.
(9) System to ensure a person does not receive mistreatment due to appropriate whistleblowing to
the Corporate Auditor
Concerning the Company Group Director or employee who blows the whistle to a Corporate
Auditor, carrying out mistreatment due to appropriate whistleblowing is prohibited, and thisinformation is disseminated to Company Group Directors and employees.
(10) Matters related to the procedures for prepaying or redeeming expenses arising from executionof duties by Corporate Auditors, as well as policies related to the processing of expenses or
obligations arising from the performance of such duties
When a Corporate Auditor requests advance payment, etc., of expenses for the execution ofduties per Article 388 of the Company’s the Companies Act, after the division in chargedeliberates, other than when the relevant request for expenses or liabilities is deemed notnecessary for the relevant Corporate Auditor’s execution of duties, the request shall be promptly
processed.
(11)Other systems to ensure that audits by Corporate Auditors are conducted effectively
Corporate Auditors, in order to understand the process of important decision-making, together
with attending Board of Directors Meetings, read approval documents and other documents
related to business execution, and exchange information with each Director. These systems are
established to sufficiently enable information communication.

12

2. Basic Views on Measures for Eliminating Anti-Social Forces and Status of Development
1. Basic views
Administered with a firm position, there are absolutely no relationships with Anti-Social Forcesand groups that threaten order and safety in civil society.
2. System development(1) The General Manager of General Affairs Department is the responsible party and is handled
primarily within the management department.
(2) Striving to prevent taking part in Anti-Social Forces, the Company endeavors to cooperate andcollaborate with the police with jurisdiction, lawyers, etc., to collect information.
(3) The Company publishes "Handling Anti-Social Forces" in the Compliance Behavioral Guidelinesand disseminates to employees.

V. Other

1. Adoption of Anti-Takeover Measures
Adoption of Anti-Takeover Measures

Not Adopted

Supplementary Explanation for Applicable Items
Special measures have not been introduced.

2. Other Matters Concerning the Corporate Governance System
Status of the Company’s internal system related to timely disclosure of company information is asfollows.
1. The Company’s basic stance on timely disclosure
The Company, as a listed corporation, is sufficiently aware of social responsibility and works
towards building information management systems which strive to ensure management legality andfairness, and improve transparency.
Also, in accordance with applicable laws, Tokyo Stock Exchange timely disclosure regulations, etc.,
the Company diligently works to provide prompt, pertinent disclosure of information of matters
decided at the Board of Directors Meetings and matters accepted at Management Meetings and byeach department.
2. Status of the Company’s internal system related to timely disclosure•Decisions madeRegarding important decisions made, they are decisions undertaken at Board of Directors
Meetings. In accordance with Tokyo Stock Exchange timely disclosure regulations, regarding
important decisions made, consideration on whether a disclosure is necessary is carried out mainlyby the person in charge of information management. In the event that a disclosure is necessary, it ishandled as promptly as possible.
•Events occurred
In accordance with Stock Exchange timely disclosure regulations, regarding important events
that occur, consideration on whether a disclosure is necessary is carried out mainly by the person in
charge of information management. In the event that a disclosure is necessary, it is handled as
promptly as possible.
•Information regarding financial results
Regarding information related to financial results, the Accounting Department prepares thefinancial results numbers, and together with receiving audits from the Accounting Auditor, theBoard of Directors approves, and the financial results information is disclosed that day.

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