Corporate Governance Report
Funai Soken Holdings Inc.

Last updated: April 12, 2024

Funai Soken Holdings Inc.

Takayuki Nakatani, President and Group CEO
Contact: Corporate Business Divisional Headquarters+81(0)6-6232-0130
Securities code: 9757
https://hd.funaisoken.co.jp

The corporate governance of Funai Soken Holdings Inc. is described below:

I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other
Basic Information
1. Basic Views
The company strives to strengthen its corporate governance with a focus on ensuring effective legal compliance andmaximizing shareholder returns. In order to enhance corporate governance, a majority of the directors of the company
are outside directors. The company audits the legality and validity of the Board of Directors by means of the Audit
and Supervisory Committee (comprising three members, including two outside directors) to ensure objectivity andvalidity. In addition, the company has established a Governance Committee, comprising all outside directors, toreview corporate governance on a regular basis. The company has also established a Nominating Committee and aCompensation Committee, of which more than half of the members are outside directors, as advisory bodies to theBoard of Directors to ensure transparency and objectivity with respect to the appointment of directors and directors’
remuneration. Based on these bodies’ deliberations regarding the various reports, the president makes submissions
to the Board of Directors for decisions. To ensure procedures surrounding the selection and development of futuregroup CEO and representative director candidates are fair and transparent, the Successor Nominating Committee’s
recommendations are discussed by the Board of Directors to identify those candidates with “the right stuff” to leadthe group to future prosperity. Furthermore, the company has introduced an executive officer system to ensure aseparation between the management and execution of business matters, as well as to ensure flexibility in businessexecution. In addition, we believe that a proactive approach to disclosure is an important pillar of corporate
governance and is committed to prompt and accurate disclosure of its current business activities, as well as its futurebusiness strategies, through legally required announcements as well as initiatives such as company briefings andindividual meetings with institutional investors and analysts.
Reasons for Non-Compliance with the Principles of the Corporate Governance CodeThis section shown in accordance with the revised Tokyo Stock Exchange Corporate Governance Code of June 2021.
Principle 2.6 Fulfilling the Function of Asset Owner of Corporate Pensions
The company outsources its corporate pension to an asset manager who has undertaken to observe the Stewardship
Code. As the company is aware that management of the corporate pension fund has a fundamental influence on
employees’ ability to build up assets steadily, as well as on its own financial situation, the company receives regular
operational updates from the asset manager and constantly monitors stewardship through constructive dialogue. In
this way, it strives to appropriately manage any conflicts of interest that may arise between the corporate pension andthe company. Moreover, defined contribution pensions are similar to defined benefit pensions in that employee asset
formation is dependent on the investments made. The company offers e-learning programs on asset management topension scheme members. However, the company will also consider its approach to utilization of human resources,
such as the placement and appointment of staff or the recruitment of external experts as required by company’s
principles, based on reviews of expected future trends.
Disclosure Based on the Principles of the Corporate Governance Code Updated!
This section shown in accordance with the revised Tokyo Stock Exchange Corporate Governance Code of June 2021.
Principle 1.3 Basic Approach to Capital Policy
The company recognizes that its approach to capital policy is extremely important for enhancing shareholder value
over the mid- to long-term. Its basic approach is to improve capital efficiency through profit growth driven byproactive investment in the business, while building shareholders’ equity to an appropriate level and increasing
returns to shareholders.
Principle 1.4 Cross-Shareholdings
1. Cross-Shareholding Policy
In light of changes in the environment relating to the Corporate Governance Code and the risk that thecompany’s financial situation could be significantly impacted by share price fluctuations, the company’s basic
policy is to reduce cross-holdings and to not acquire new shares unless the holding is deemed to be strategicallysignificant.
2.

Reviews
Each year, the company’s stockholdings are reviewed individually, and the economic rationale of these holdings
is assessed. The medium- to long-term objectives for the holdings are examined and returns, such as dividends,
are taken into account. As a result of this review, those stockholdings deemed to have limited strategic
significance or economic rationale are sold, while taking into account the impact of disposal on the market andother considerations. On the other hand, those stocks that are acknowledged to be of strategic significance to thecompany shall be retained.

3.

Exercise of Voting Rights
The company exercises voting rights to approve or reject proposals made by businesses in which it holds shares,
taking account of whether there is an appropriate governance system in place, and whether the stockholding
company makes appropriate decisions that will enhance corporate value over the medium- to long-term, basedon whether it enhances the corporate value of the group. If the company deems that it cannot approve a proposal,
it may consider a disposal of the stockholding concerned. In particular, with regard to proposals that could havean impact on corporate value and shareholder returns (such as takeover defense initiatives or businessrestructuring measures), the company has a dialogue with the stockholding company to assess its aims andobjectives for the improvement of corporate value. Based on this, the company evaluates the merits anddisadvantages of the proposals concerned.

Principle 1.7 Related Party Transactions
The Funai Soken Consulting Group Corporate Ethics Code of Conduct prohibits our officers and employees fromengaging in any conduct that creates or may create a conflict of interest with the group. “Directors’ transactions withcompetitors” and “directors’ transactions with the company” require advance approval by the Board of Directors andmust be reported to the Board of Directors in accordance with the Companies Act and the regulations of the company's
Board of Directors. Details of transactions with related parties, transaction conditions and the policy for determining
transaction conditions are disclosed in the Securities Report.
Principle 2.4.1
To maintain the diverse workforce needed to consistently deliver value to an increasingly diverse world, we believe
it is necessary to develop a core team of people of all nationalities, genders, and ages.
Accordingly, the group has established targets for 2030 regarding women and mid-career hires in management
positions.
Women in management positions: 30%
Mid-career hires in management positions: 50%
We have decided not to set targets for non-Japanese in management positions for the time being as our focus is on
Japan, specifically consulting services for Japanese SMEs and mid-scale companies. However, we are aware of thisas a potentially significant element, and we are committed to responding flexibly to social and other developmentsthat may cause a change in our business strategies. Moreover, to ensure consistent development and deployment of
the core talent needed to drive the innovation our times require, we are working on a variety of initiatives, including:enhancing existing development programs for management positions; following up with on-boarding of mid-careerhires to ensure they can adapt to our corporate culture and begin applying their strengths and skills as soon as possible;and continuing our mid-to-long-term investment in workforce development and environment building, combining abroad variety of training for different skills and different ranks.
Principle 3.1 (1) Full disclosure and Transparency (Company goals (Management philosophy), management
strategy and business planning)
The President’s Message, the group philosophy and the mid-range business plan are disclosed on the company’swebsite and in the Integrated Report.
Principle 3.1 (2) Full Disclosure and Transparency (Basic view and basic policy on corporate governance)
Disclosed in the Basic Views section of this report.
Principle 3.1 (3) Full Disclosure and Transparency (Policies and procedures for determining compensation for
executives and directors)
Although the company has an Audit and Supervisory Committee, it has also appointed a Compensation Committee
on a voluntary basis. The Compensation Committee ensures that executives’ and directors’ remuneration is an
incentive for the improvement of business performance over the medium- to long- term. It submits proposals forremuneration to the Board of Directors for submission to the General Meeting of Shareholders and discusses thepolicy and details of individual remuneration.
Principle 3.1 (4) Full Disclosure and Transparency (Selection and dismissal of executives; nomination policies
and procedures for candidate directors)
Although the company has an Audit and Supervisory Committee, it has also appointed a Nominating Committee on
a voluntary basis. The Nominating Committee ensures that the Board of Directors can fully exercise its function ofoverseeing the management of the company. It submits proposals regarding the appointment of directors to the Boardof Directors for submission to the General Meeting of Shareholders and discusses matters that it deems to benecessary regarding the appointment and dismissal of candidates to be a director of the company.
Moreover, proposals regarding the dismissal of directors for submission to the General Meeting of Shareholders are
examined by the Nominating Committee and reported to the Board of Directors.
Principle 3.1 (5) Full Disclosure and Transparency (Explanation of the appointment/ dismissal/nomination of
directors)
Reasons for appointment of directors are explained in shareholder meeting convocation notices.
Principle 3.1.3
The Funai Soken Consulting Group is serious about ESG management and sustainability, and initiatives to sustain
and raise performance in this area are a core part of the group’s management practices.
1. Policy on Sustainability
Since its inception the Funai Soken Consulting Group has always sought to use its comprehensive consulting
services as a way of contributing to the community and making the world a better place by providing solid
support for its core clientele—SMEs. Under its new Mid-Range Business Plan (2023-2025), the group’s basic
policy is to further strengthen its position as the foremost provider of digital and comprehensive consulting
solutions for mid-scale and SME clients, and to invest aggressively in HR and ingraining the Group Purpose.
In 2023, a new group purpose was instituted: Sustainable growth for more companies. This is a statement of thegroup’s conviction that companies that can achieve sustainable growth are those that can thrive and grow amid
tumultuous change and uncertainty, and its determination to deliver strong, sustainable growth for clients andthe group itself. Inspired by the new group purpose, and with the importance of ESG in mind, the Funai Soken
Consulting Group will work hard to ingrain that purpose throughout its whole organization. In areas relevant toefforts toward sustainability, the group has established quantitative targets for securing staff assigned to work
focused on realizing growth potential, tackling climate change, and strengthening oversight, and is working toachieve these as part of its Mid-Range Business Plan.
In 2020, the group established its Basic Policy on ESG Management and identified high-materiality issues forparticular attention. Following this, the group established a Basic Policy on the Environment, Basic Policy on
Human Rights, Basic Policy on Human Resources, Basic Policy on Information Security, and Basic Policy for
the Prevention of Bribery & Corruption. The Basic Policy on the Environment was revised in conjunction with
the institution of the Funai Soken Consulting Group Purpose in February 2023.
Basic Policy on ESG Management
https://hd.funaisoken.co.jp/en/sustainability/policy/
Basic Policy on the Environment (revised in February 2023)
https://hd.funaisoken.co.jp/en/sustainability/environment/policy/

Basic Policy on Human Rights
https://hd.funaisoken.co.jp/en/sustainability/social/humanrights-policy/
Basic Policy on Human Resources
https://hd.funaisoken.co.jp/en/sustainability/social/workforce-development/
Basic Policy on Information Security
https://hd.funaisoken.co.jp/en/ir/governance.html#governance03
Basic Policy for the Prevention of Bribery & Corruption
https://hd.funaisoken.co.jp/en/ir/governance.html#governance04
2.

A Structure to Ensure Groupwide Uptake of Sustainability in Business Management
ESG and sustainability matters have always been common topics of discussion by the Board of Directors. In
2021, though, we established a Sustainability Committee as an advisory committee to the board to ensuresustainability becomes firmly established as a core management tenet across the whole Funai Soken Consulting
Group.
The Sustainability Committee has four members and is chaired by an outside director. It typically meets threetimes a year to set sustainability targets, monitor progress, and evaluate outcomes, and prepare reports andrecommendations for the Board of Directors.
In addition, a Sustainability Office has been created within the Funai Soken Holdings organization. The officehas established four groups to oversee action across the whole Funai Soken Consulting Group in four specificareas: the environment (climate change), human capital (our people), information security, and business. The
Sustainability Office meets monthly to monitor action progress across the whole Funai Soken Consulting Groupand discuss future initiatives.
the Funai Soken Consulting Group has initiatives in place to tackle issues of keen interest to stakeholders andthe community at large, and lists those it considers as being highly material on its website. These are subject toreview as the landscape inside and outside the group evolves.
Read more about the Funai Soken Consulting Group’s high-materiality sustainability issues athttps://hd.funaisoken.co.jp/en/sustainability/materiality/

3.

Major Initiatives(1)
Human Capital: Our People and Human Rights
As a corporate group using consulting services as a means of delivering value to clients—and to society
at large—we recognize that human capital (i.e., maintaining a talented, motivated workforce) is of thehighest materiality. Investing in human capital, for instance by securing and training talented people, is
one of our highest priorities. Recently, we have been working on diversifying our teams with more
women and mid-career hires (see principle 2-4-1), and we are rebuilding our training and development
programs to better identify and nurture tomorrow’s management candidates. In addition, we areenhancing our support systems to better enable our people to pursue their work in the best physical andmental health.
a. Governance
Governance relating to human capital is monitored and discussed by the Sustainability Committee.
The relevant in-house departments pursue hiring, training, and retention policies in accordance with
the Funai Soken Consulting Group Basic Policy on Human Resources and the Mid-Range Business
Plan (2023-2025). The progress of the various group companies’ initiatives is shared at Group HR
meetings and Executive Committee meetings, and reported to the Board of Directors as necessary.
b. Strategy
Strategies relating to human capital are applied in accordance with the Funai Soken Consulting Group
Basic Policy on Human Resources through implementation of initiatives set forth in the HR strategy
section of the Mid-Range Business Plan (2023-2025).
Policy 1. Funai Soken Consulting Group Basic Policy on Human Resources
In keeping with the fundamental principles set forth in the Funai Soken Consulting Group Basic
Policy on Human Resources, we recognize the importance of people as the very means by which
we create value as part of the global effort toward sustainability. To that end, attracting andretaining talented people is a top priority in our quest to deliver real value to the world.
Themes Included in the Basic Policy on Human Resources
1. Diversity & Inclusion
2. Creating Opportunities for Growth
3. Better Employee Engagement

(2)4. Healthy Management
5. Transparency Regarding Human Resources Initiatives
6. CompliancePart of our quest for workforce development is creating opportunities for growth, and we arecommitted to maintaining an extensive, robust training regime to arm our workforce with the skills
to drive the innovation the times demand. We will expand training programs and further invest in
education, including accelerated development of young employees and the acquisition of digitalskills for better productivity. Regarding the creation and maintenance of better working
environments, we believe that diversity and inclusion—not the least of which is empowering
women to forge meaningful careers and providing employment opportunities for people withdisabilities—is the bedrock on which inclusivity, value creation, and improved productivity arefounded. We will continue to endeavor to maintain rewarding, diverse, inclusive workplaces.
Policy 2. Funai Soken Consulting Group Basic Policy on Human Rights
At the Funai Soken Consulting Group, respect for human rights is not just an obligation but afundamental precept of our consulting and other business operations. To that end, we haveestablished the Funai Soken Consulting Group Basic Policy on Human Rights to ensure thatpeople’s basic rights are protected and respected in all areas of the group’s activities.
Human Resource Strategy
At the Funai Soken Consulting Group, we believe that a diverse workforce is key to sustained
growth. To this end, aggressive investment in HR and ingraining the Group Purpose have been
established as priorities under our Mid-Range Business Plan (2023-2025), and we will endeavor
to further enhance our human capital.
Key Initiatives in HR Strategy
Hiring: Ramp up hiring: 1,800 headcount by end of 2025
Restrengthen hiring of recent graduates for consulting positions
Strengthen mid-career hiring in new and specialist fields
Hire people from more diverse backgrounds for management roles
Training & Career Development: Training & career development for consultants andbusiness staff
Expand training programs to accelerate development of new and younger employees
Improve productivity through acquisition of digital skills by consultants
Expand investment in professional development to boost staff skills and develop the pool ofmanagement candidates
Retention: Improve employee value proposition to boost retention of talent
Boost retention through sustained improvements in compensation
Boost communication by relocating Tokyo office and consolidating into a single floor
Increase employee engagement by sharing the Group Purpose
c. Risk Management
To ensure consideration and respect for human rights in an age when people and working styles arediversifying, we have established a framework of due diligence to ensure we comply with the UN’s
Guiding Principles on Business and Human Rights. If an event arises that may constitute theoccurrence of a human rights risk, the Risk Management Committee is alerted, and measures are
discussed and implemented.
d. Targets and KPIs
In keeping with our belief that our people are the true drivers of our growth, our Mid-Range Business
Plan (2023-2025) stipulates three targets: a total workforce of 1,800 (including 1,150 consultants); at
least 25% of management positions groupwide held by women; and sustaining a majority of outside
directors on the board. The Group has a 25% ratio of female managers and a continuing majority ofoutside directors. In 2023, women held 34.6% of management positions at Funai Soken Holdings, and22.6% across the whole Funai Soken Consulting Group.
Climate Change and the Environment
Environmental issues like climate change are a global challenge, and we, informed by the underlying
principles of our Basic Policy on the Environment, recognize the importance to business. Propelled byour group purpose—sustainable growth for more companies—we are eager to be a part of the effort toachieve sustainability and to use all facets of our business to reduce environmental impact. Climatechange is a major challenge and a global effort is required to overcome it. We are mindful of the impact

(3)of climate change on the group’s business activities, and are determined to adapt nimbly to socioeconomicchanges brought about by regulations and policy adjustments. For instance, in addition to measuringgreenhouse gas emissions caused by the group’s business activities and launching efforts to reduce these,
we also offer our clients and suppliers support for responding to these and other climate change issues.
We aim not only to improve our readiness for and resilience to natural disasters (which are becoming
ever more severe as a result of climate change), but we are also striving for greater adaptability to theinevitable changes in the business environment caused by new policies and restrictions implemented aspart of the global move toward decarbonization.
a. Disclosure Framework
We disclose an ever-broader range of information in line with the Task Force on Climate-Related
Financial Disclosures recommendations. Funai Soken Holdings’s Sustainability Office is the focal
point of efforts in concert with Funai Consulting’s Carbon Neutrality Consulting Unit to facilitate
efforts to reduce our footprint through dialogue with the group’s various companies. Receiving
regular data from group companies on key indicators for environmental impact, including
greenhouse gas emissions, we evaluate and analyze the effects on our business activities, and keep
abreast of environmental risks and opportunities.
b. GovernanceThe company, led by the Sustainability Office and a director in charge of sustainability affairs,
also collaborates with Funai Consulting’s Carbon Neutrality Consulting Unit to assess and manage
risks and opportunities relating to climate change, to study the group’s basic environmental policy
and targets for GHG emissions, etc., and to implement measures, manage their progress and handle
information disclosure. The company is also involved in the promotion, progress management anddisclosure of various measures. The Sustainability Office reports those studies and progress
information to the Sustainability Committee, an advisory body to the Board of Directors, forfurther discussion. The outcomes of these discussions are reported to the board as appropriate formonitoring.
c. Strategy
The group’s Basic Policy on the Environment states that we will strive to make a real reduction inenvironmental impact, not only within our business activities, but also by using out consulting andother services as a means for working together with clients to address climate change, prevent
environmental pollution, and promote recycling. To that end, we endeavor to be aware of the
impact of risks and opportunities pertaining to climate change, and will carry out the strategies
necessary to making sustainability the norm throughout society.
d. Risk Management
The Sustainability Office is responsible for analyzing climate change risks and reporting these to
the Sustainability Committee. If the Sustainability Committee determines that an environmental
risk requires action, it alerts the Risk Management Committee and reports to the Board of
Directors. The board, having considered the connection with other risks, then decides on action to
be taken.
e. Targets and KPIs
The group’s Mid-Range Business Plan (2023-2025) stipulates a sustainability goal of reducing
greenhouse gas emissions by 50% compared with 2019 levels. In June 2021, the group switched
its energy supply contract, and now Tokyo Headquarters is powered by electricity derived fromrenewable energy sources. By 2030, the group aims to achieve a 100% renewable energy
procurement rate at all its Japanese sites, thereby reducing greenhouse gas emissions to virtuallyzero and achieving Scope 2 under the GHG Protocol.
Information Security
The Funai Soken Consulting Group’s consulting business activities necessitate the handling of various
client information. As such, information security is one of our highest materiality issues. Actions aregoverned by the group’s Basic Policy on Information Security and undertaken in accordance with amanual, and employees undergo ongoing information security training. Moreover, risk management andsecurity measures are subject to constant improvements.
Studied the level of information security at group companies
Appointed information security staff at each group company
Regular meetings with group companies
The following measures were undertaken to enable people to perform their work anywhere (i.e.,at the office or remotely) and ensure solid security.

(4)Overhaul the group’s system for preserving client information assets
More stringent authorization requirements (e.g., multi-factor authentication and device
authorization)
Controlled access to systems
Migration of work systems to the cloud, email encryption and incorrect transmission prevention
measures: Funai Soken Holdings and some Funai Soken Consulting Group companies have obtained
ISO/IEC 27001 certification. As we continue to offer a broad range of solutions, including new
initiatives such as digital transformation, the Sustainability Committee and the group’s other advisorycommittees will continue to discuss all relevant issues and ensure steadfast governance. Under that
guidance, we will adhere closely to our Basic Policy on Information Security, ensure our workforce
is thoroughly aware of the rules, and strive to further enhance administration and training surrounding
information security.
Initiatives Undertaken as Part of Our Business Activities
The Funai Soken Consulting Group uses its consulting and other business activities to raise the standardof business management by helping clients improve their businesses and seek sustained growth.
Many of the group’s consulting services are geared toward promoting sustainability, including improving
working practices, boosting employees’ skills, maintaining and expanding employment, and business
continuity planning.
Sustainable Growth Company Awards
One of our initiatives that adds momentum to efforts to boost sustainability is the Sustainable Growth
Company Awards. The Sustainable Growth Company Awards function to reward companies thatcombine profitability and growth potential with social responsibility. Every year at our National
Management Strategy Seminar Conference, we acknowledge companies that have not only performed
well in terms of profits, but that have also made outstanding contributions to the community.

Principle 4.1.1 Scope of Matters Delegated to Management
The company separates the functions of the Board of Directors, which makes decisions and supervises the
management of the company, from the functions of executive officers who execute business matters. The scope of
this is defined in the official regulations of administrative authority. The Board of Directors makes decisions onimportant matters of business execution in accordance with laws and regulations and the regulations of the Board of
Directors, as well as supervising the Executive Committee and overseeing the implementation of business matters.
The Executive Committee comprises directors and executive officers and has been established under the Board of
Directors for matters regarding business execution and resolutions other than those that are decided by the Board of
Directors. In addition to considering and discussing important agenda items in advance to aid the deliberations of theBoard of Directors (excluding matters resolved at Board of Directors’ meetings) it makes decisions and sharesinformation on those agenda items that are not covered in board meetings.
In March 2016, the company transitioned to become a company with an Audit and Supervisory Committee inorder to enhance corporate governance by improving the audit and supervisory function in respect of the Board of
Directors and to improve management fairness and efficiency. As a result of this, by resolution of the Board of
Directors, the company stipulates in the Articles of Incorporation that all or some important decisions of businessexecution (excluding matters listed in Paragraph 5 of the Article) can be delegated to the directors to ensure swift andprecise decision-making in accordance with the provisions of Article 339-13, Paragraph 6 of the Companies Act.
Principle 4.3.2 Appointment of Chief Executive Officer Through Objective, Timely and Transparent
Measures
The company reviews the selection and development of the candidates to be the group’s next CEO and representative
director. The process is led by the Successor Nominating Committee (chaired by an outside director) which comprises
one director and three outside directors. The Board of Directors deliberates based on reports from the Successor
Nominating Committee to determine the appropriate candidates to be the group’s next CEO and representative
director to take on leadership and management responsibility for the company in future. The Successor Nominating
Committee is involved in the selection of Group CEO and representative director candidates to ensure that the process
remains fair and highly transparent.
Principle 4.8 Effective Use of Independent Outside Directors
Currently, five of the nine directors of the company are independent outside directors. We have a majority of outside
directors in order to strengthen the management oversight capabilities of the Board of Directors and to ensure fairness.
Candidates’ profiles are reviewed as needed (taking account of specialty fields, experience, career, etc.) and thecompany’s policy is to appoint directors who are qualified for the role taking account of the requests of stakeholders,diversity of personnel and management policies as required.
Principle 4.9 Independence Standards and Qualification for Independent Outside Directors
Outside directors are expected to supervise management from a high-level perspective based on their abundant
experience. The Nominating Committee selects outside director candidates who are comprehensively judged topossess the character, acumen and business and professional experience suited to fulfill that role, after checking theirrelationship with the company in terms of personal connections, capital and transactions based on the criteria for
independence established by the Tokyo Stock Exchange, and for whom there is no risk of conflict of interest with thegeneral shareholders of the company.
Principle 4.10.1
The Board of Directors is currently comprised of nine directors, five of whom are independent outside directors. We
know that diversifying our Board of Directors paves the way toward long-term growth; a more diverse board will
help us achieve our group purpose—“Sustainable growth for more companies”—by improving the quality of board
discussions and executive decision-making. To that end, we have set a gender diversity target that women will makeup 30% of the Board of Directors by 2030. As of March 23, 2024, two of the nine board members (22.2%) were
women.
In particular, given the importance of independence and objectivity in matters pertaining to the nomination
executives and directors and their compensation packages, we established a Nominating Committee, a Successor
Nominating Committee, and a Compensation Committee, all of which are headed by outside directors, to provide
oversight and advice on these matters. These committees have a majority of outside director to ensure independence
and objectivity. Further information on these committees is available in section II. of this report.
Principle 4.11.1
The Board of Directors consists of no more than 10 directors (excluding directors who are Audit and Supervisory
Committee members) and no more than five members of the Audit and Supervisory Committee. It is made up of
officers with diverse backgrounds in terms of expertise and experience, including directors with an in-depth
knowledge of the group's business and outside directors whose role is to audit the group from an independent andobjective standpoint. The Board of Directors draws up a matrix outlining the major skills and specialties of its
members, and the appointment of directors is deliberated on by the Nominating Committee (of which more than halfof the members are outside directors) based on a diverse and varied assessment of capabilities and performance, andis determined by the Board of Directors. Information regarding the skill matrix and other matters relating to director
selection policy is disclosed on pages 22 and 23 of the Notice of Convocation of the 2024 Annual General Meetingof Shareholders.
https://ssl4.eir-parts.net/doc/9757/announcement12/96872/00.pdf (English translation on page 14 and 15)
https://ssl4.eir-parts.net/doc/9757/announcement1/96869/00.pdf (Japanese version, original)
If we are to sustain robust growth in an age of turmoil and uncertainty, then a more diverse, more effective board of
directors is vital. We believe that directors are entrusted by shareholders to manage the company and its business ontheir behalf, and our selection policy for directorship candidates focuses on ability to carry out those duties andresponsibilities rather than on age, gender, or nationality. In terms of gender diversity, we have set a target that women
will make up 30% of the Board of Directors by 2030. At present, two of the nine board members (22.2%) are women.
The Funai Soken Holdings Board of Directors currently comprises nine directors, including five outside
directors who bring business administration experience from outside the Funai Soken Consulting Group. Since mostof the company’s sales are derived within Japan, it does not believe that it is necessary to appoint any overseas
directors at present. In terms of Audit and Supervisory Committee members who are appointed to the Board of
Directors, there is one certified public accountant, with specialized knowledge of finance and accounting, and one
lawyer, with specialized knowledge of legal affairs.
Principle 4.11.2 Other Mandates of Directors and Corporate Auditors
The status of other important mandates of directors serving concurrently as directors of the company is disclosed in
Reference Documents for General Meeting of Shareholders in the notice of convocation and in “Status of Directors”
in the Securities Report. If outside directors concurrently serve as officers of other companies, the number of
mandates they hold should remain within a reasonable range from the viewpoint of time and effort required toappropriately fulfill their roles and responsibilities as directors of the company.

Principle 4.11.3 Self-Evaluation of Effectiveness of the Board of Directors
1. Objective and Method of Evaluation of EffectivenessThe company conducts an evaluation of the effectiveness of the entire Board of Directors once a year for all
directors, including Audit and Supervisory Committee members, through a self-assessment questionnaire. The
Board of Directors deliberates the results of this evaluation to improve the effectiveness of the Board of Directors.
The evaluation of effectiveness was deliberated at the Board of Directors’ meeting held in March 2023. The
following is a summary of those deliberations.
2. Summary of Evaluation Results
2023 Action Plan in Review(1)
Re. “Ensuring appointment of directors is consistent with the skills and diversity required for the board
as a whole”: Appropriate people were appointed in accordance with Nominating Committee conclusions.
(2)
A DX Promotion Committee was created in 2023 as an advisory committee to the Board of Directors,
and undertook initiatives aimed at achieving the goal of establishing the Funai Soken Consulting Groupas the foremost provider of digital and comprehensive consulting solutions for mid-scale and SME clients,
as stated in the Mid-Range Business Plan.
(3)
Further debate by the Governance Committee and Sustainability Committee on ESG matters such as
TCFD compliance and disclosure of human capital information drove an expansion of disclosure of nonfinancial information and led to an improvement in our ESG score with rating agencies.
(4)
The Risk Management Committee reports periodically to the Board of Directors on information security
matters, but there is an ongoing need for further strengthening of risk management, e.g., identifying
underlying risks.
In addition to those, we have also seen progress in the following initiatives.
(1)
Swifter execution of business by strengthening the board’s supervisory capabilities and delegating
authority to relevant departments: Authority is being delegated appropriately.
(2)
A culture is developing that enables outside directors to speak freely and frankly as a result of measures
such as advance distribution and explanation of board meeting agendas and encouragement ofcommunication among outside directors by the Governance Committee.
Action Plan
The Board of Directors makes decisions on strategy, taking all appropriate information into account, based on
active discussion to ensure the opinions of all directors are reflected. This ensures the effectiveness of the entire
Board of Directors.
The details of the 2024 Action Plan are as follows: In future, the company will strive to further improve theeffectiveness of the Board of Directors by implementing this Action Plan.
(1)
Directors share with each other their ideas on the functions and roles that should be fulfilled by thecompany's board of directors, which has majority of outside directors, and undertake the board’s businesscarefully and deliberately.
(2)
Further bolster risk management and strengthen our structure for preventing the emergence of underlying
risks.
(3)
Continue to ingrain the Group Purpose and strive for more in-depth discussion of mid-to-long-term
management strategies including creating new businesses.
(4)
Promote more in-depth communication among outside directors; implement measures to improve thequality of board meeting deliberations.
Principle 4.14.2 Training Policy for Directors and Corporate Auditors
The company pays expenses and conducts training for inside directors/executive officers, outside directors and newly
appointed inside directors/executive officers as follows in order that directors and executive officers may fulfill theirrespective roles and responsibilities appropriately.
1. For Inside Directors and Executive Officers
The company invites outside lecturers to conduct training based on real examples, such as violations of laws
and regulations that we may be susceptible to, illegal conduct that may arise at the company, selection of M&A
targets, as well as points to consider for management decision-making and management approaches for
subsidiary companies, including overseas transactions.
2. For Outside Directors
The company improves the effectiveness of outside directors’ supervisory capabilities through better
understanding of the business, based on deepening their knowledge of the group and its business. This includes
outside directors’ participation in “group company presentations on management policy” and group company

3.

board meetings as appropriate.
For Newly Appointed Inside Directors and Executive Officers
The company offers opportunities for training at external organizations to gain the minimum knowledge requiredfor directors on matters such as laws, compliance and corporate governance.

Principle 5.1 Policy for Constructive Dialogue with Shareholders
In accordance with the policy outlined below, the company values the importance of constructive dialogue andcommunication with shareholders and investors, who are its key stakeholders. It responds as appropriate based on amutual consideration of opinions and viewpoints.
1.

2.

3.
4.

System of Implementation and Collaboration Between Departments(1)
The director in charge of investor relations (IR) is responsible for constructive dialogue andcommunication with shareholders and investors.
(2)
Staff from the Corporate Communication Office and others meet regularly and implement the businessof the company in cooperation with each other.
Dialogue with Shareholders and Investors(1)
In terms of the dialogue with shareholders and investors, the basic principle is that as much of this as
possible is done by the Director of IR or the CEO to ensure the outcomes of the dialogue is clearlyreflected in management.
(2)
In addition to one-on-one meetings, the following methods of communication are used.
Company briefings on the mid-range business plan and business strategy
Participation in IR conferences arranged by securities companies
Improved provision of information via the company website, notices of convocation of shareholders'meetings, etc.
(3)
The company views the General Meeting of Shareholders as an important forum for dialogue withshareholders and investors, and therefore endeavors to provide ample opportunity for Q&A withstakeholders.
Internal Feedback on the Views of Shareholders and Investors
The views obtained through dialogue and communication with shareholders and investors are relayed as
feedback to the management team (or, depending on the content, the Board of Directors).
Management of Insider Information
With respect to dialogue and communication with shareholders and investors, the company manages insider
information correctly in accordance with the Group Regulations on the Prevention of Insider Trading andensures that all officers and employees concerned are aware of the importance of handling insider information
correctly.

Establishing Awareness of the Importance of Cost of Capital and Share Price as a Core Part of Business
Administration; Providing Information in English
Funai Soken Holdings calculates the cost of capital annually and reports this, along with changes over time, to theBoard of Directors. The company has begun including ROE targets in its mid-range business plans, beginning withthe 2023-2025 plan. By showing return on capital in comparison with cost of capital over time, we strive to makeawareness of the importance of capital efficiency a core part of our business administration.
The current Mid-Range Business Plan can be viewed at the Funai Soken Holdings website.
https://hd.funaisoken.co.jp/en/ir/strategy.html
Principal 5.2 Business Strategies and Plans: Formulation and Publication
We recognize the vital importance of prudent capital policy for mid-to-long-term increases in shareholder value.
Our basic approach is to seek higher capital efficiency through profit growth driven by proactive investment in thebusiness, while building shareholders’ equity to an appropriate level and increasing returns to shareholders. On
February 8, 2023, we instituted our new Mid-Range Business Plan for 2023–2025. Details are available here:
https://ssl4.eir-parts.net/doc/9757/announcement16/86094/00.pdf
NB: The plan was amended on February 8, 2024.
https://ssl4.eir-parts.net/doc/9757/announcement16/96112/00.pdf

2. Capital Structure
Foreign Shareholding Ratio

From 20% to less than 30%

Major Shareholders Updated!
Name/
Company Name

Number of
Shares Owned

Percentage(%)

The Master Trust Bank of Japan, Ltd. (Trust Account)

5,752,500

12.03

Funai Honsha, K.K.

5,026,079

10.51

NORTHERN TRUST CO. (AVFC) RE FIDELITY FUNDS
Custody Bank of Japan, Ltd. (Trust account)

2,489,839
2,196,800

5.21
4.59

Sumitomo Mitsui Banking Corporation

1,952,002

4.08

SSBTC CLIENT OMNIBUS ACCOUNT
Kazuko Funai

1,357,269
1,307,501

2.84
2.73

Nippon Life Insurance Company

1,062,000

2.22

Katsuhito Funai
Takahiro Funai

1,056,960
889,560

2.21
1.86

Controlling Shareholder (except for Parent Company)---

Parent Company

None

Supplementary Explanation---

3. Corporate Attributes
Listed Stock Market and Market Section

Tokyo Stock Exchange, Prime Market

Fiscal Year-End

DecemberType of Business

Services

Number of Employees (consolidated) as of the
End of the Previous Fiscal Year

1,000 or more

Sales (consolidated) as of the End of the Previous
Fiscal YearNo less than 10 billion yen, less than 100 billion yen

Number of Consolidated Subsidiaries as of the End Less than 10of the Previous Fiscal Year

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

5. Other Special Circumstances Which May Have a Material Impact on Corporate Governance---II. Business Management Organization and Other Corporate Governance Systems regarding
Decision-making, Execution of Business, and Oversight in Management
1. Organizational Composition and Operation
Organization Form

Company with Audit and Supervisory Committee

Directors
Maximum Number of Directors Stipulated in Articles of Incorporation

Term of Office Stipulated in Articles of Incorporation15
1 yearChairperson of the Board

President

Number of Directors Updated!

9

Appointment of Outside Directors

Appointed.

Number of Outside Directors

5

Number of Independent Directors

5Outside Directors’ Relationship with the Company (1)NameAttributes

Nobuyuki Isagawa

Academic professor

Taeko Yamamoto

Joined Funai Soken Holdings from another company

Tomomi Murakami
Atsushi Nakao

Joined Funai Soken Holdings from another company
Certified public accountant

Akihiro Kobayashi

Attorney

*

a

b

c

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

Categories for “Relationship with the Company”○
When the director presently falls or has recently fallen under the category;△
If 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 subsidiaryb.
Non-executive director or executive of the parent of the companyc.
Executive of a fellow subsidiary company of the companyd.
A party whose major client or supplier is the company or an executive thereofe.
Major client or supplier of the company or an executive thereoff.
Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from thecompany
besides executive remunerationg.
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) (director himself/herself
only)i.
Executive of a company, between which and the company outside directors are mutually appointed (director himself/herself only)j.
Executive of a company or organization that receives a donation from the company (director himself/herself only)
k.
Other

Outside Directors’ Relationship with the Company (2)Name

Audit and Supervisory
Committee Member

Nobuyuki Isagawa○

Taeko Yamamoto○

Tomomi Murakami

Atsushi Nakao

Akihiro Kobayashi

Designation as
Supplementary Explanation
Independent Directorof the Relationship

○

○

○

○

○

Professor, Graduate
School ofManagement, Kyoto
University

EVP, CMO at Fujitsu
Ltd.

Reasons for Appointment

Reasons for Appointment as Outside Director
Nobuyuki Isagawa has been appointed as aprofessor with a high degree of expertise andknowledge that will enable him to fulfill an
appropriate role in his duties as an outside
director.
Reason for Designation as an Independent
Director
There is no concern that a conflict of interest willarise between him and general shareholders.
Reasons for Appointment as Outside Director
Taeko Yamamoto brings deep insight into
marketing in the technology field. She wasappointed to advise on the group’s digitaltransformation initiatives and corporate
management.
Reason for Designation as an Independent
Director
There is no concern that a conflict of interest willarise between her and general shareholders.

Reasons for Appointment as Outside Director
With long experience in supporting companies in
the process of developing environmental, CSR
and ESG management credentials—from both
corporate and policy perspectives— Tomomi
Senior Manager at
Murakami was appointed to help the group pursue
Board Advisors Japan, ESG management.
Inc.
Reason for Designation as an Independent
Director
There is no concern that a conflict of interest willarise between her and general shareholders.
Reasons for Appointment as Outside Director
Atsushi Nakao has been appointed as an outside
director in view of his professional capacity as a
President, Certified
certified public accountant and tax accountant so
Public Accountant &that he can make proposals regarding company
Tax Accountant,management and supervise the legality and
CS Accounting Co.,
validity of the Board of Directors.
Ltd.

Attorney
Partner, Kyoto Office,Chuo Sogo Law
Office, P.C

Reason for Designation as an Independent
Director
There is no concern that a conflict of interest willarise between him and general shareholders.
Reasons for Appointment as Outside Director
Akihiro Kobayashi has been appointed as an
outside director to capitalize on his extensive
experience and knowledge as an attorney so that
he can make proposals regarding company
management and supervise the legality andvalidity of the Board of Directors.
Reason for Designation as an Independent
Director
There is no concern that a conflict of interest willarise between him and general shareholders.

Audit and Supervisory Committee
Composition and Attributes of Chairperson

All Board Members
Audit and Supervisory
Committee

Committee

Inside Director

31

Directors and Employees Assigned Specifically to Aid theDuties of Audit and Supervisory Committee Members

Outside Directors

Committee
Chairperson(Chairperson)

2

Inside Director

1

Yes

Matters Concerning the Independence of the Directors and Employees from the Executive Directors

Two assistant staff members are assigned to assist the Audit and Supervisory Committee in its duties.
Cooperation among the Audit and Supervisory Committee, Accounting Auditors and Internal Audit Departments

The Internal Oversight Office draws up a plan at the beginning of each fiscal year and conducts audits on acoordinated basis throughout the year. Based on the results of internal audits, audit reports are submitted to the Boardof Directors and the Audit and Supervisory Committee. The details are reviewed, instructions are drawn up for areasof improvement, and a system to implement the proposals for this improvement is put in place. Subsidiary companies
may also be audited, and extraordinary audits are carried out as required.
Audit and Supervisory Committee members have a prompt and fair audit system in place and hold monthly
meetings in conjunction with board meetings. They discuss audit policies and schedules with the accounting auditorsand exchange information in order to improve the effectiveness of the audit function. In addition, systematic andcomprehensive audits are conducted principally by a full-time member of the Audit and Supervisory Committee (oneperson) covering the business of all departments. The results of audits by the accounting auditors are also reported to
the Audit and Supervisory Committee and the Internal Oversight Office. A system is in place to facilitate audits at
any time to review whether improvements have been made in those areas highlighted by internal controls. The
company’s Internal Oversight Office, Audit and Supervisory Committee and accounting auditors strengthen theircooperation through sharing information and exchanging views with each other as required to improve the quality ofaudits and enhance internal control functions.
Voluntary Committees
Presence of Voluntary Committees Corresponding to theNominating Committee and the Compensation Committee

Yes

Updated!

Status of Voluntary Committee, Composition and Attributes of Chairperson
Name ofCommittee

All
Committee
committee
membermembers

InsideDirector

OutsideDirector

OutsideExperts

Other

Committee
Chairperson(Chairperson)

Voluntary Committee
Corresponding to theNominating Committee

Nominating
Committee

4

0

1

3

0

0

OutsideDirector

Voluntary Committee
Corresponding to theCompensation Committee

Compensation
Committee

5

0

2

3

0

0

OutsideDirector

Supplementary Explanation Updated!

(1) Nominating Committee
PurposeThe Nominating Committee’s purpose is to improve the corporate value of Funai Soken Holdings and the Funai
Soken Consulting Group and to help ensure the transparency and objectivity of motions tabled at shareholders’meetings relating to director appointments and dismissals by nominating suitable candidates for director, auditor,and executive officer positions at group companies.
Composition
The Nominating Committee comprises members selected by the Funai Soken Holdings Board of Directors(members shall not be limited to directors of Funai Soken Holdings). The committee shall have at least threemembers, the majority of which shall be independent outside directors. The chairperson of the Nominating
Committee shall be an outside director appointed by the Funai Soken Holdings Board of Directors.
Position on Committee Name
Rank
Chairperson
Nobuyuki Isagawa
Outside director
Committee member
Tomomi Murakami
Outside director
Committee member
Akihiro Kobayashi
Outside director
Committee member
Tatsuro Ono
Director and executive vice president
Activities
The committee met seven times in 2023, and the attendance rate was 100%. Major points of discussion andreports included the following.
Meeting 1 (August):
Deliberations regarding challenges pertaining to group company executive officer structure andthe direction of actions to be taken
Meeting 2 (September):
Deliberations regarding the skill matrix and
Board of Directors composition
Deliberations regarding corporate officers in conjunction with the integration of group companies
Deliberations regarding succession
Meeting 3 (October):
Deliberations regarding candidates for group company director positions starting in March 2024.
Interviews with candidates for future director positions
Meeting 4 (November):
Deliberations regarding candidates for group company director positions starting in March 2024.
Meeting 5 (December):
Deliberations regarding candidates for group company director positions starting in March 2024.
Meeting 6 (January):
Deliberations regarding candidates for group company director positions starting in March 2024.
Meeting 7 (February):
Deliberations regarding candidates for group company director positions starting in March 2024.
(2) Successor Nominating Committee
PurposeThe Successor Nominating Committee’s purpose is to nominate a suitable candidate to serve as the next
representative director from among multiple candidates, with due reference to the company’s management
philosophy and strategies, and to make its recommendations to the Board of Directors. The committee also helps
ensure the transparency and objectivity of the processes of appointing and dismissing the president of Funai
Soken Holdings.
Composition
The Successor Nominating Committee comprises members selected by the Funai Soken Holdings Board of
Directors (members shall not be limited to directors of Funai Soken Holdings). However, the current chairman
and president and past holders of those offices may not become members of the Successor Nominating
Committee. The committee shall have at least three members, the majority of which shall be independent outside
directors. The chairperson of the Successor Nominating Committee shall be an outside director appointed by
the Funai Soken Holdings Board of Directors.
Position on Committee
Name
Rank
Chairperson
Nobuyuki Isagawa
Outside director
Committee member
Tomomi Murakami
Outside director
Committee member
Akihiro Kobayashi
Outside director
Committee member
Tatsuro Ono
Director and executive vice president
Activities
The committee met once in 2023, and the attendance rate was 100%. Major points of discussion and reports
included the following.

Meeting 1 (July):
Confirmation of the continued appointment of the president(3) Compensation Committee
PurposeThe Compensation Committee’s purpose is to is to improve the corporate value of Funai Soken Holdings andthe Funai Soken Consulting Group and to help ensure the transparency and objectivity of corporate officers’
compensation by deliberating on the individual compensation packages paid to directors (including members
and non-members of the Audit and Supervisory Committee) and executive officers of Funai Soken Holdings,
and directors, auditors, and executive officers of Funai Soken Consulting Group companies.
Composition
The Compensation Committee comprises members selected by the Funai Soken Holdings Board of Directors(members shall not be limited to directors of Funai Soken Holdings). The committee shall have at least threemembers, the majority of which shall be independent outside directors. The chairperson of the Compensation
Committee shall be an outside director appointed by the Funai Soken Holdings Board of Directors.
Position on Committee
Name
Rank
Chairperson
Atsushi Nakao
Outside director
Committee member
Nobuyuki Isagawa Outside director
Committee member
Taeko Yamamoto
Outside director
Committee member
Tatsuro Ono
Director and executive vice president
Committee member
Motoki Haruta
Director and executive officer
Activities
The committee met five times in 2023, and the attendance rate was 100%. Major points of discussion and reports
included the following.
Meeting 1 (October):
Deliberations regarding performance evaluations of group companies’ officers
Meeting 2 (November):
Deliberations regarding performance evaluations of group companies’ officers
Meeting 3 (December):
Deliberations regarding executive remuneration policy
Deliberations regarding performance evaluations of group companies’ officers
Meeting 4 (January):
Report on group companies’ business performance and degree of achievement of KPIs
Meeting 5 (February):
Performance evaluation and deliberation on compensation amount of group companies’ officers
Independent Directors
Number of Independent Directors

5

Other Matters Relating to Independent Directors

All outside directors who fulfill the qualifications and conditions of being independent directors are designated as
independent directors.
Incentives
Incentive Policies for Directors

Introduction of performance-linked floating compensation and a stock option program

Supplementary Explanation

The company has introduced a stock option program to raise employee’s motivation to achieve improved businessresults and a higher stock price.
Recipients of Stock Options

Inside directors, directors and executive officers of subsidiary companies.

Supplementary Explanation

The company has introduced a stock option program for directors and executive officers to incentivize them over themedium term through an awareness of the company’s results and stock price performance and also to increase
motivation and boost morale by enabling them to help contribute to share price outperformance and an enhancementof corporate value.
Director Remuneration
Disclosure of Individual Directors’ Remuneration

Remuneration is not disclosed for individual directors

Supplementary Explanation

The total amount of directors’ remuneration is disclosed in the Securities Report and Business Report for the year.
Policy on Determining Remuneration Amounts andCalculation Methods Updated!

Established

Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods(1) Matters Pertaining to Policy on Determining Directors’ Remuneration Amounts and Calculation
Methods
Our policy pertaining on determining directors’ remuneration amounts and calculation methods recognizes that
directors’ remuneration is a vital part of corporate governance as relates to the pursuit of sustainable growth for
the Funai Soken Consulting Group and mid-to-long-term growth in corporate value, as well as sharing value
with shareholders. The policy is configured to allow directors’ remuneration to function as a healthy incentive
for directors to strive to achieve those objectives. It is intended to help us secure, retain, educate, and reward
talented people, and holds that the process of determining remuneration should be highly transparent andobjective. The remuneration of directors who are not members of the Audit and Supervisory Committee isdiscussed by the Compensation Committee, after which the CEO submits the matter to the Board of Directors,
which makes a final decision. The remuneration of directors who are members of the Audit and Supervisory
Committee is determined through discussions by the Audit and Supervisory Committee.
As pertains the process of determining the amount of directors’ remuneration for this business year, theBoard of Directors’ and Compensation Committee’s role is to deliberate multiple times on the policy on
determining officers’ remuneration, and to deliberate multiple times on the compensation packages of each of
the company’s directors (excluding those who are members of the Audit and Supervisory Committee).
Compensation is determined based on factors such as each directors’ duties, responsibilities, performance, anddegree of contribution. We have also made improving engagement part of factors such as bottom-line
performance and degree of contribution by establishing performance evaluation indices relating to ESG (e.g.,
as relate to employee turnover). Based on the committee’s decisions, the CEO made submissions to the boardof directors, which made a decision.
Remuneration Structure and Performance-Based Remuneration
Directors are divided into two groups: those who are members of the Audit and Supervisory
Committee and those who are not. The remuneration structure of directors (excluding outside
directors) who are not members of the Audit and Supervisory Committee contains the items listed
below, and remuneration is apportioned based on rank and duties. Compensation comprises a fixed
portion as well as performance-based remuneration and performance-based stock-as-compensation.
Fixed Compensation
A fixed monthly amount comprising the following.
Basic remuneration
Monetary compensation, which is not linked to performance, and the amount of which isdetermined in accordance with rank and duties.
Performance-based remuneration
Monetary compensation linked to consolidated sales and operating income in the most recently
completed business year, as well as the previous year’s growth rate and employee turnover rate.
Between 80% and 120% of the preceding year’s compensation, determined in accordance witha personal assessment score (from best to worst: S, A, B, C, and D) based on each individual’s
degree of achievement of the criteria listed above and personal KPIs
Performance-Based Stock-as-Compensation
Stock options as compensation
Stock options are granted, as long-term incentive compensation, every year during the term ofoffice, in accordance with rank, roles, and achievements with the aim of increasing motivationand morale relating to the sharing of value with shareholders and achieving mid-to-long-term
improvements in business performance, on the condition that the options can only be exercised
upon resignation. The remuneration structure of outside directors and those directors who aremembers of the Audit and Supervisory Committee comprises only fixed compensation (i.e., thefixed monthly amount).
Remuneration Levels and Methods of Determining Remuneration Amounts
The Compensation Committee deliberates to ensure appropriate remuneration levels and structures inaccordance with each individual’s duties, and takes into consideration the compensations paid by othercompanies in our industry so as to ensure that remuneration amounts are in keeping with thecompany’s performance and scale of business. The Compensation Committee sets officers’
remuneration policy, monitors the system, and deliberates on specific calculation methods. Based on
the conclusions they reach, the compensation paid to directors who are not members of the Audit andSupervisory Committee is then determined by a Board of Directors resolution, and the compensation
paid to directors who are members of the Audit and Supervisory Committee is determined throughdiscussions by the directors who are members of the Audit and Supervisory Committee.
Policy for Determining the Ratio of Performance-Based Stock-as-Compensation toCompensation not Linked to Performance
At Funai Soken Holdings, performance-based stock-as-compensation generally makes up 20% of totalcompensation, and this ratio changes in accordance with performance outcomes.
KPIs for Performance-Based Compensation and Performance-Linked Floating Compensation;
Reasons for Choosing Those KPIs; and Methods of Calculating the Compensation
When calculating compensation, these factors are evaluated: the group’s achievement of targets (i.e.,
for consolidated net sales, operating income, and ordinary income) in the most recently completed
business year; qualitative evaluation of the individual’s progress toward achieving targets relating tohis/her duties, responsibilities, performance, and degree of contribution; and the group’s progress
toward achieving the targets of the Mid-Range Business Plan. Indicators relating to achievement of
performance targets are used to gauge earning capability. In FY2023, net sales were 25,635 million
yen (1.3% above forecast), operating income was 7,100 million yen (equal to forecast) and ordinary
income was 7,197 million yen (0.7% above forecast).
Grounds for the Board’s Finding that Individual Directors’ Compensation Packages Were inLine with Policy
The Board of Directors determined that individual directors’ compensation packages were in line with
official policy after receiving a report to that effect from the Compensation Committee, which carriedout exhaustive, multifaceted examination of the proposed packages to check their compliance with
policy.
Compensation for directors (excluding those who are members of the Audit and Supervisory
Committee) was set at a maximum of 450 million yen per year (of which, the amount for outside
directors shall be no more than 40 million yen) by a vote at the 53rd general meeting of shareholders
on March 25, 2023. Within that amount, directors (excluding outside directors) will be awarded up to
100 million yen of stock options per year as compensation. The number of directors (excluding those
who are members of the Audit and Supervisory Committee) upon closing of that meeting was five(including three outside directors).
Authority for determining the amount and calculation methods of officers’ remuneration rests
with the Board of Directors. To govern the content of that authority and the scope of discretion, wehave, in addition to our Audit and Supervisory Committee, a voluntary Compensation Committee. To
ensure objectivity and transparency, the committee is chaired by an outside director and a majority of
the committee’s members are outside directors. The committee’s role is to deliberate on thecompensation packages of each of the company’s directors (excluding those who are members of the
Audit and Supervisory Committee). Compensation is determined based on factors such as eachdirectors’ duties, responsibilities, performance, and degree of contribution, and bound by the
maximum amounts approved at a shareholders’ meeting. Based on the committee’s decisions, theCEO makes submissions to the board of directors, which deliberates on each individual case andmakes a final decision. The amount of compensation paid to directors who are members of the Audit
and Supervisory Committee is determined through discussions by the Audit and Supervisory
Committee.
Supporting System for Outside Directors

Materials for Board of Directors’ meetings are distributed in advance. Prior to Board of Directors' meetings, outside
directors are given a one-hour briefing on key matters for the meeting.
Retired Presidents Holding Advisory Positions
Information on Retired Presidents/CEOs Holding Advisory Positions
Job Title/
Position

Name
-

-

Employment Terms (Full/Part
Date when Former
Responsibilities Time, with/without Compensation, Role as President/CEO
Ended
etc.)
-

-

---

Term
-

Number of Retired Presidents/CEOs Holding Advisory Positions –Other Matters

The company has no internal regulations pertaining to retired president/CEOs holding advisory positions.
2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration
Decisions (Overview of Current Corporate Governance System) Updated!
1. Summary of Current Corporate Governance Position
The Company has established a Governance Committee to oversee the appointment of outside directors andaudits by the Audit and Supervisory Committee, and to consider appropriate matters of corporate governance.
It has established the Nominating Committee and Compensation Committee as advisory bodies to the Board of
Directors and has introduced an executive officer system.
2. Company Institutions(1) Board of Directors
The Board of Directors comprises four directors (excluding directors who are Audit and Supervisory
Committee members) including one outside director, and three directors who are Audit and Supervisory
Committee members, including two outside directors. In addition to the regular Board of Directors’
meeting once a month, extraordinary board meetings are held as required. The Board of Directors also
conducts specialist and diverse ranging reviews of the management of the company and reaches prompt
decisions on this basis.
The term of office for directors (excluding directors who are Audit and Supervisory Committee
members) is one year, and for directors who are Audit and Supervisory Committee members it is two years
in order to clarify management responsibilities for each fiscal year.
The chairman of the board is President and CEO Takayuki Nakatani; the other board members are
Tatsuro Ono, Motoki Haruta, Nobuyuki Isagawa (outside director), Taeko Yamamoto (outside director),
Tomomi Murakami (outside director), Masahiro Hyakumura, Atsushi Nakao (outside director and memberof the Audit and Supervisory Committee), and Akihiro Kobayashi (outside director and member of the
Audit and Supervisory Committee).
The Board of Directors is currently comprised of nine directors, five of whom are independent outside
directors. When appointing new directors to the board, the Nominating Committee discusses the candidates
and makes a recommendation to the Board of Directors, which then makes its decision accordingly. If weare to sustain robust growth in an age of turmoil and uncertainty, then a more diverse, more effective boardof directors is vital. We believe that directors are entrusted by shareholders to manage the company and its
business on their behalf, and our selection policy for directorship candidates focuses on ability to carry out
those duties and responsibilities rather than on age, gender, or nationality. In terms of gender diversity, we
have set a target that women will make up 30% of the Board of Directors by 2030. At present, two of thenine board members are women.
(2) Audit and Supervisory Committee
The Audit and Supervisory Committee effectively monitors and audits management decisions andexecution of business activities, and holds regular meetings every month. The full-time member of the
Audit and Supervisory Committee attends important meetings other than Board of Directors meetings, suchas Executive Committee meetings, and expresses his or her opinions accordingly. Of the outside directors
who serve on the Audit and Supervisory Committee, one is a certified public accountant with specialized
knowledge of finance and accounting, while another is a lawyer with specialized knowledge pertaining tocompliance.
The chairperson is Director Masahiro Hyakumura; the other committee members are Atsushi Nakao
and Akihiro Kobayashi.
(3) Advisory Committeesa) Nominating Committee
The Nominating Committee deliberates the selection criteria for directors and executive officers inaccordance with company regulations. Its role is to increase the transparency and objectivity ofdecisions on candidates to be directors and executive officers and to strengthen supervisory functionof the Board of Directors. Three of the four committee members are outside directors, and thechairperson is an outside director of the company.
The chairperson is Outside Director Nobuyuki Isagawa; other committee members are Tomomi
Murakami, Akihiro Kobayashi, and Tatsuro Ono.
b) Successor Nominating Committee
The Successor Nominating Committee evaluates the current Group CEO and representative director
based on business performance, etc., and discusses the succession plan in accordance with company
regulations. Its role is to increase transparency and objectivity in the selection of Group CEO andrepresentative director candidates. Three of the four members of the Successor Nominating
Committee are outside directors, and the chairperson is an outside director of the company.
The chairperson is Outside Director Nobuyuki Isagawa; other committee members are Tomomi
Murakami, Akihiro Kobayashi, and Tatsuro Ono.
c) Compensation Committee
The Compensation Committee deliberates remuneration policy for directors and executive officers inaccordance with company regulations. Its role is to increase the transparency and objectivity ofdecisions on remuneration for directors and executive officers and to strengthen supervisory functionof the Board of Directors. Three of the five committee members are outside directors, and thechairperson is an outside director of the company.
The chairperson is Outside Director and member of the Audit and Supervisory Committee
Atsushi Nakao; the other committee members are Nobuyuki Isagawa, Taeko Yamamoto, Tatsuro Ono,and Motoki Haruta.
d) Governance Committee
The Governance Committee reviews various issues related to the corporate governance of the groupfrom a medium- to long-term perspective. Its purpose is to improve management fairness andtransparency and to strengthen corporate governance. All four committee members are outside
directors, and the chairperson is an outside director of the company.
The chairperson is Outside Director and member of the Audit and Supervisory Committee
Akihiro Kobayashi; the other committee members are Nobuyuki Isagawa, Taeko Yamamoto, Tomomi
Murakami, and Atsushi Nakao.
e) Sustainability Committee
The Sustainability Committee exchanges information and fosters a shared awareness regarding
sustainability in business management, and submits recommendations to the Board of Directors
regarding the sustainability connotations of policies and plans, thereby helping to deepen the board’s
discussions in this area and overseeing the entrenchment of sustainability in business management
groupwide through the steady resolution of ESG issues, all with a view to promoting the mid-to-longterm development of Funai Soken Holdings and the greater Funai Soken Consulting Group. Two of
the five committee members are outside directors, and the chairperson is an outside director of thecompany.
The chairperson is Outside Director Tomomi Murakami; other committee members are
Nobuyuki Isagawa, Takayuki Nakatani, Tatsuro Ono, and Motoki Haruta.
f) DX Promotion Committee
The DX Promotion Committee exchanges information and fosters a shared awareness regarding
digital transformation at the Funai Soken Consulting Group, and submits recommendations to theBoard of Directors regarding the group’s DX-related policies and plans, thereby helping to deepen theboard’s discussions in this area and overseeing the entrenchment of DX in business management
groupwide, all with a view to promoting the mid-to-long-term development of Funai Soken Holdings
and the greater Funai Soken Consulting Group.
The chairperson is Outside Director Taeko Yamamoto; the other committee members are
Takayuki Nakatani, one Funai Soken Holdings executive officer, and directors and management-levelemployees from the Funai Soken Consulting Group.
Risk Management Committee
The Risk Management Committee recognizes of the importance of identifying, evaluating, andmanaging risks that have a significant impact on corporate management and business continuity, andappropriately manages the risks surrounding the group and seeks to prevent risks from arising, forinstance by identifying risks that require a priority response and implementing specific measures todeal with them.
It consists mainly of directors, executive officers and employees who manage major departments.
It collects information from both inside and outside the company, conducts risk analysis from various
perspectives and deliberates on and implements measures in response to risks.
The chairperson is Director and Executive Vice President Tatsuro Ono; the other committee
members are Masahiro Hyakumura, one Funai Soken Holdings executive officer, and directors andmanagement-level employees from the Funai Soken Consulting Group.
h) Internal Control Committee
The Internal Control Committee functions to ensure the creation and proper operation of an internal
control system overseeing Funai Soken Holdings’ and the Funai Soken Consulting Group’s financial
statements, so as to uphold the appropriateness of financial statements stipulated in the Financial
Instruments and Exchange Act and its enforcement order. The Funai Soken Consulting Group CEO
and the heads of the organizational units subject to internal oversight are serve on the committee asinternal control managers, in which capacity they build and manage internal control systems within
their day-to-day work.
The chairperson is President and CEO Takayuki Nakatani; the other committee members are
Tatsuro Ono, Motoki Haruta, and Masahiro Hyakumura.
(4) Business Execution System
The company has introduced an executive officer system in order to distinguish decision-making andsupervision of business execution by the Board of Directors from the business execution functions of thebusiness divisions. In accordance with the policies determined by the Board of Directors, the executive
officers are responsible for carrying out the daily business operations of the company. In addition to Boardof Directors’ meetings, the company holds monthly Executive Committee meetings, consisting of thedirectors, executive officers, and standing members of the Audit and Supervisory Committee to review
business execution and to build consensus among the officers.
(5) Accounting Audits
The company has an audit contract with PricewaterhouseCoopers Japan LLC, as the company’s accounting
auditors. There are no special interests between the company, its corporate auditors and the auditor’s
executive officers that should be disclosed pursuant to the provisions of the Certified Public Accountants
Law of Japan.
Name of the Certified Public Accountants Who Have Audited the Company and Name of Their
Audit Firm:
Masahisa Kinoshita, PricewaterhouseCoopers Japan LLC
Kengo Yamamoto, PricewaterhouseCoopers Japan LLC
Assistants for Audit Duties for the Fiscal Year Ending December 2023
The assistants for audit duties are determined according to the selection criteria of the audit firm, andare specifically taken from certified public accountants, auditors who have passed the CPA exams andother assistants, including accounting systems experts.
Assistants for Audit Duties
Seven Certified Public Accountants; 13 others.
g)

3. Reasons for Adoption of Current Corporate Governance System
Following a resolution at the 46th Ordinary General Meeting of Shareholders held on March 26, 2016, the company
transitioned to become “a company with an Audit and Supervisory Committee” (as per law) and appointed three
directors (including two outside directors) to serve on the committee. The company considers that by granting voting
rights to these directors on the Board of Directors its audit and supervisory functions are strengthened. In addition, it
considers that increasing the ratio of outside directors on the Board of Directors and improving the transparency andvalidity of management will further enhance corporate value.
In order to enhance corporate governance, a majority of directors of the company are outside directors. The
company audits the legality and validity of the Board of Directors by means of the Audit and Supervisory Committee(comprising three members, including two outside directors) to ensure the board’s objectivity and validity. In addition,the company has established a Corporate Governance Committee, formed exclusively of outside directors, to conduct
reviews of corporate governance on a regular basis as required.
The company has also established a Nominating Committee and Compensation Committee (of which more thanhalf of the members are outside directors) as advisory bodies to the Board of Directors to ensure transparency andobjectivity with respect to the appointment of directors and directors’ remuneration. Based on these bodies’
deliberations regarding the various reports, the president makes submissions to the Board of Directors for decisions.
To ensure procedures surrounding the selection and development of future group CEO and representative
director candidates are fair and transparent, the Successor Nominating Committee’s recommendations are discussed
by the Board of Directors to identify those candidates with “the right stuff” to lead the group to future prosperity.
Moreover, an executive officer system has been introduced to ensure a separation between the management andexecution of business matters, as well as to ensure flexibility in business execution.

III. Implementation of Measures for Shareholders and Other Stakeholders
1. Measures to Vitalize the General Shareholder Meetings and Smooth Exercise of Voting Rights Updated!
Supplementary Explanation

Early Notification of General Shareholder Meetings

The company aims to send out its meeting notifications earlier than the statutory
notification date. The General Shareholder Meeting for the year ended December
31, 2023, was held on March 23, 2024. The notice of convocation was sent out
three weeks in advance on March 1 (one week before the statutory notificationdate). In addition, the date of the meeting was also made available in advance on
the company website on February 29, prior to the date of sending out the
notification.

Scheduling AGMs to Avoid Peak Days

The closing date of the company is December 31. This ensures that the company
is able to hold its AGMs on a date that avoids coinciding with the AGMs of othercompanies.
It is also held on a Saturday to enable wider participation by the company’s
shareholders.

Allowing Electronic Exercise of Voting Rights

Shareholders have been able to exercise their voting rights using the online
voting website (computer and smartphone) operated by Mitsubishi UFJ Trustand Banking Corporation as of the fiscal year ended December 2009 onwards.

Participation in Electronic Voting Platform andOther Initiatives to Help Institutional Investors to
Exercise Their Voting Rights

As of the fiscal year ended December 2009, the electronic voting rights platform
operated by ICJ, Inc. has also been available for use by institutional investors.

Providing Convocation Notice in English

As of the fiscal year ended December 2018, the company prepares an
English language version of the Notice of Convocation for overseas
shareholders. It is also posted on the company’s website at the same timeas the Japanese version.

Other

In order to provide information to shareholders as promptly as possible, noticesof convocations and resolutions at the Ordinary General Meeting of
Shareholders have been posted on the company’s website from the fiscal year
ended December 2009 onwards.
Shareholder meetings are held at a venue in a city area with easy transport access. In
addition, business and financial reports are explained using video at the General
Meeting of Shareholders.

2. IR Activities Updated!
Supplementary Explanation

Compilation and Publication of Disclosure Policy

Regular Briefings for Analysts and Institutional
Investors

Regular Briefings for Overseas Investors

Presentations by the
Representative

The company posts its disclosure policy on the company
website.
https://hd.funaisoken.co.jp/en/ir/governance.html
The company holds financial results briefings andteleconferences, and engages in dialogue with analysts andinstitutional investors from Japan and overseas by hosting
one-on-one meetings, in-person and online. Individual
meetings with outside directors can also be arranged if
requested. The company also participates in conferences
hosted by securities companies several times a year.
The company posts on its website English-language scriptsof twice-yearly financial results briefings held in Japan. It
also engages in direct dialogue with overseas investors in
Europe, the US, Asia, and elsewhere through one-on-one
meetings, as well as conferences hosted by securities firms.

Posting of IR Materials on Website

As part of its effort to expand information disclosure, thecompany publishes its integrated report, securities
report, financial results briefing materials, operation
reports, and scripts of various briefings on its website.

Establishment of Department and/or Manager in
Charge of IR

A Corporate Strategy Department has been establishedwithin the Corporate Development Divisional
Headquarters.
Director: Eijiro Saito
Executive officer and head of the Corporate
Strategy Department

Yes

Yes

3. Measures to Ensure Due Respect for Stakeholders
Supplementary Explanation

Stipulation of Internal Rules for Respecting the
Position of Stakeholders

A new group purpose has been instituted: Sustainable growth for morecompanies. This is a statement of the group’s conviction that companies that canachieve sustainable growth are those that can thrive and grow amid tumultuouschange and uncertainty, and its determination to deliver strong, sustainablegrowth for clients and the group itself.

Implementation of Environmental Activities, CSR
Activities, etc.

The company conducts a wide range of consulting activities related to theenvironmental and revitalization of rural communities, including decarbonizationand ESG. Its aim is to make a contribution and to help bring about the successful
development of society through these activities. The group is engaged in activities
aimed at enabling more companies to achieve sustainable growth, as well as
philanthropic activities.

Established Policy Regarding Providing Information
to Stakeholders

The company compiles a disclosure policy and posts it on the company website,
not only to meet information disclosure obligations stipulated by law, but also as
part of our proactive dissemination (to the extent possible) of unbiased
information that we believe is conducive to promoting a deeper understanding of
the Funai Soken Consulting Group.

IV. Matters Related to the Internal Control System

1. Basic Views on Internal Control System and the Progress of System Development Updated!
1. Development of Internal Control System
The Funai Soken Consulting Group has established a new group purpose—“sustainable growth for morecompanies”—as an expression of its commitment to delivering strong, sustainable growth for clients and itself
in an age of tumultuous change and uncertainty. To ensure that the directors and employees embody that grouppurpose, the company has established and maintains an internal control system to build an appropriateorganization, set internal rules and regulations, communicate information and monitor business execution.
2. Basic Policy for Establishment of Internal Control System(1) Summary of Resolutions for Matters such as Systems for Ensuring Appropriateness of Operations.
(1)-1 System to Ensure that the Execution of Duties by Directors and Employees of the Company
Complies with Laws and Regulations as well as the Articles of Incorporationa) The group has established the Regulations on Group Compliance and the Group Corporate
Ethics Code of Conduct which set forth its basic stance on social responsibility. It thereby
clarifies the criteria to ensure that the directors and employees act with strong ethics and good
sense in accordance with laws and ordinances and internal rules and regulations.
b) The group has established and maintains an appropriate internal control system. It hasestablished the Internal Oversight Office as an auditory function under the direct control of
the representative director to: ensure that the business of the company and the companies in
the group is properly conducted in accordance with laws and regulations; oversee the correct
implementation of the group’s internal control system; propose improvements as required;and perform internal oversight of the company and group.
c) If a director or employee discovers any serious instances of violation of laws or ordinances,or any other infringement of laws and ordinances or internal rules and regulations, this must
be reported immediately and without delay to the Audit and Supervisory Committee and to
the Board of Directors.
d) In order to prevent and rectify illegal conduct, or acts that violate social norms and corporate
ethics, the company has established the Group Hotline Rules and strives to enhance its
compliance system through initiatives such as an internal hotline for anyone involved withthe group. The company is also committed to raising the awareness of directors andemployees of compliance matters through training, including workshops and e-learning.
e) The group takes a strong stance on anti-social individuals and organizations that have anegative impact on social order and the integrity of its corporate activities.
(1)-2 System to Ensure that the Execution of Duties by Directors of the Company Is Performed
Efficientlya) In order to ensure that directors’ decisions and their execution of duties are implemented
efficiently, the company has established rules concerning the operation of the Board of
Directors. As a general rule, the Board of Directors meets once a month, but meetings canalso be held on an ad hoc basis as required.
b) To ensure efficient, organized business execution, the company has established theRegulations of Administrative Authority and Criteria of Administrative Authority to clarify
the responsibilities and system of authority for each of the company’s organizations and eachposition therein.
c) The company promotes quick decision making and efficient business execution throughappointing executive officers to be in charge of business execution and through delegating
the company’s operations and clarifying authority and responsibility in the execution of thecompany’s business by resolution of the Board of Directors.
d) The company has established the Executive Committee as an organization to coordinate thebusiness activities of the Group, review the status of business execution and build consensus
through discussion of important matters within the group.
e) The company sets out numerical targets for the budget period based on the business plan andclarifies the objectives and responsibilities of each group company and department and aims
to achieve its planned performance targets through analyzing differences between the budget
and actual results.
(1)-3 System Concerning the Storage and Management of Information Related to the Executionof Duties by Directors of the Company

a)

(1)-4

(1)-5

(1)-6

(1)-7

The details of resolutions, approvals and reports on directors’ execution of their duties are
saved and stored as appropriate based on the Regulations of the Board of Directors,
Regulations of the Executive Committee, Regulations for Document Management, andRegulations for Confidential Document Management.
b) Regarding the protection of information, the company has established the Regulations on
Information Security and strives to clarify the levels of authority required to view different
information, and to promote awareness among directors and employees of issues such as
password management and leak prevention measures, falsification, and destruction of
information.
Regulations and Other Systems Concerning Management of Risk of Losses of the Companya) The company recognizes the importance of identifying, evaluating, and managing those risks
that have a significant impact on corporate management and business continuity. It strives toimplement a system for appropriately managing the risks surrounding the group and has
established the Risk Management Committee to take specific measures to deal with risks that
require a priority response.
b) With respect to the management of the risk of losses, the company has established theRegulations on Group Crisis Management to strengthen the management system to prevent
losses.
System to Ensure the Appropriate Operation of Group Companiesa) The group shall share the basic ideas expressed in the Group Philosophy and Group Vision
while respecting management autonomy in each of its companies.
b) The company shall dispatch directors and corporate auditors to group companies as requiredin order to improve the soundness and efficiency of management. It shall also hold Group
Presidents’ Council meetings to exchange information and to consult with its companies.
c) The group shall conduct internal audits to ensure the effectiveness and validity of internal
controls as a system for conducting surveys and audits of group companies, in addition toaudits by members of the Audit and Supervisory Committee and accounting auditors,d) The group shall have a set of Regulations for Group Company Management in place tomanage the business operations of its companies.
e) The group shall establish a system of company approval for important matters concerning thebusiness operations of group companies when it is necessary to improve soundness ofmanagement at its companies and to ensure the appropriateness of its business activities.
f) The company shall ensure the reliability of its financial reporting through appropriate andeffective management and evaluation. It shall also establish company-wide internal controls
for financial reporting across the group and control systems for individual business processes.
Matters Concerning Employees Who Assist in the Execution of Duties by Audit andSupervisory Committee Members at the Committee’s Requesta) Directors shall engage employees to assist the Audit and Supervisory Committee in carryingout its duties if requested by the Audit and Supervisory Committee.
b) Assistants to the Audit and Supervisory Committee are assigned as dedicated staff tomembers of Audit and Supervisory Committee to assist them in carrying out their duties.
Independence from the business executives on matters related to staff transfers and personnel
evaluation is ensured by obtaining the agreement of Audit and Supervisory Committee
members in advance.
System Concerning Directors’ and Employees’ Reports to the Audit and Supervisory
Committee and Other Systems Concerning Reports to the Audit and Supervisory Committeea) Members of the Audit and Supervisory Committee attend important meetings such as Boardof Directors’ meetings and Executive Committee meetings to monitor and audit the
management of the company and the decision-making process on a regular basis.
b) A system is in place that allows prompt and effective reporting by directors and employees
to Audit and Supervisory Committee members upon request for issues such as facts that may
cause significant damage to the company or information received on the in-house hotline. No
disadvantage shall accrue to anyone making reports as outlined above.
c) The Internal Oversight Office reports on the status and results of its internal audits tomembers of the Audit and Supervisory Committee. The Audit and Supervisory Committee
cooperates closely with the Internal Oversight Office—e.g., the committee requestingreviews by the Internal Oversight Office as required—and conducts efficient audits.
Policy Related to the Handling of Audit Expensesa) The Audit and Supervisory Committee is eligible to receive payment in advance orreimbursement from the company for expenses arising from the execution of its duties.
b) When the Audit and Supervisory Committee deems it necessary, it may use external experts
for the execution of its duties. Expenses accruing from this shall be treated as set forth in a)above.
(1)-9 Other Systems to Ensure that the Audit by Audit and Supervisory Committee Members is
Conducted Effectivelya) The majority of the Audit and Supervisory Committee shall be outside directors to ensure thetransparency of the audit. The Audit and Supervisory Committee meets with the president
and directors as necessary to exchange opinions on important company issues and on audit
matters and makes requests when it deems these necessary, thereby promoting mutual
understanding with the president and the directors.
b) The Audit and Supervisory Committee meets regularly with the accounting auditors and theInternal Oversight Office to actively exchange opinions and information.
(2) Overview of Implementation of System to Ensure the Appropriate Operation of Group Companies
The Board of Directors meets once a month as a decision-making body on matters related to the
management of the company and business execution. It makes decisions on important management issues,
such as items stipulated in laws and ordinances and in the Articles of Incorporation, management policy
and budget setting. It analyzes and evaluates the performance of group companies based on monthly reports.
It discusses matters from the perspective of compliance with laws and ordinances and the Articles ofIncorporation and business appropriateness. In addition, the Executive Committee, which is attended by
the company's directors, executive officers and full-time members of the Audit and Supervisory Committee,
meets once a month to deliberate on important group matters.
(2)-1 Internal Audits
Regarding the appropriateness of the operation of the company's internal control system, theInternal Oversight Office has conducted an audit of the company and the companies in the groupand has reported the results of this to the company's president and members of the Audit andSupervisory Committee.
Two of the three members of the company’s Audit and Supervisory Committee are Outside
Directors. This ensures the transparency of audits.
(2)-2 Compliance
In order to improve directors’ and employees’ awareness of compliance, the company arranges
compliance education including training through workshops and e-learning.
(2)-3 Risk Management
The company has established a Risk Management Committee and undertakes risk management
activities, including assessment of potential risks and prevention of the occurrence of risks within
the company and the group. The group has also established a Group Corporate Ethics Code of
Conduct to eliminate anti-social forces. It sets out the provisions and reviews new clients when
they apply for credit, and implements this code as required. In addition, it has established an inhouse hotline and has communicated this to the directors and employees of the company and thegroup. The company has a system in place to enable it to ascertain facts that may cause significant
damage to the company. Legal counsel and the outside directors on the Audit and Supervisory
Committee act as points of contact in this respect.
(1)-8

2. Basic Views on Eliminating Anti-Social Forces
1. Basic Approach to the Exclusion of Antisocial Forces
The group takes its social responsibilities very seriously and has a basic principle of avoiding any sort ofrelationship with anti-social forces. It has established action guidelines in this respect in the Regulations onGroup Compliance. In accordance with the code of conduct in these regulations, group employees pledge toobserve the conduct stipulated in the guidelines when joining the company.
The company has an internal process in place in accordance with its legal system to eliminate anti-social
forces and has a crisis management system for swift assessment of information. It has established a department
to take responsibility in case of emergency and ensured a system enabling companywide response including the
involvement of top management.
2. Status of Exclusion of Antisocial Forces

(1) The company has put in place a risk management system and strives to obtain information promptly throughthe establishment of a Risk Management Committee. There is also a system in place in which the Risk
Management Department is charged with ensuring prompt reporting to top management andimplementation of countermeasures based on information obtained.
(2) Based on this system, the company manages information in an integrated manner based on prompt
understanding of issues internally. It strengthens its cooperation with external professional entities such aslegal counsel and the police and ensures any relationships with antisocial forces are promptly terminated.
(3) When the company undertakes work under consignment, provisions for the exclusion of antisocial forces
are clearly set forth in writing in the contract at the time of the contract of assignment.
(4) The company's credit management rules set forth provisions for the exclusion of antisocial forces. The
credit management system is operated in accordance with these rules.

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

Not adopted

Supplementary Explanation---

2. Other Matters Concerning the Corporate Governance System Updated!
1. Status of Risk Management System
The Company has established a Risk Management Committee as a company-wide organization to manage crises
including management of the risk of losses. It consists mainly of directors, executive officers and employees
who manage major departments. It collects information from both inside and outside the company, conducts
risk analysis from various perspectives and deliberates on and implements measures in response to risks.
2. Overview of Timely Disclosure System(1) Information about Corporate Resolutions
In principle, important corporate resolutions are made at the monthly Board of Directors meeting. For
urgent matters, a system of holding extraordinary Board of Directors’ meetings facilitates quick decisionmaking when required. For important resolutions, Finance Department considers whether disclosure isnecessary in accordance with the timely disclosure rules of the Tokyo Stock Exchange. If it is deemed that
disclosure is necessary, the information is promptly disclosed through the Finance Department.
In addition, the company strives to disclose fair and accurate corporate information after taking advice
from accounting auditors and lawyers as required.
(2) Information about significant events
If a significant event occurs, information is quickly gathered from the department concerned and collatedby the Finance Department, which then reports to the Executive Committee and the Board of Directors.
The Finance Department reviews the details of the information as appropriate and strives to promptly
disclose this information if disclosure is deemed to be necessary. In addition, the company strives todisclose fair and accurate corporate information after taking advice from accounting auditors and lawyers
as required.
(3) Information about the financial accounts
With respect to the company’s financial results, the financial figures are prepared as promptly as possibleby the Finance Department. They are audited by an accounting auditor, and once the results are approvedby the Board of Directors, the financial information is released on the day of the Board of Directors’
meeting.
(4) Other
The company is proactive in disclosing its financial results once they are published, for instance throughposting them on the company website. Also, group investor relations information is drafted and publishedby the Finance Department and the Corporate Communication Office.

Schematic of the Internal Structure for Timely Disclosure of Information