Our Group aspires to be a valuable contributor to all kinds of our stakeholders in the society, including the shareholders, the employees, the business partners and others, by promptly and appropriately responding to the changes in the business environment and continuing operational activities which enable the Group to achieve a sound growth. For this purpose, the Group has placed the greatest importance on enhancement of corporate governance, and in particular, "fully cultivating compliance mind," "enhancing risk management" and "conducting timely disclosure" as three key initiatives. Furthermore, the Group is determined to make efforts in a unified manner, from the top management down to each employee of the Group companies, led by the Board of Directors, to develop an internal control system as required by the Companies Act and the Financial Instruments and Exchange Act, as well as to set up a system which is credible to investors, as a financial instruments business operator.

The Company has set up the Board of Directors and the Audit & Supervisory Board. While appointing from outside its outside directors and all of its Audit & Supervisory Board Members, it has also adopted an executive officer system, for the purpose of operating its businesses with high transparency. All of the Audit & Supervisory Board Members of the Company have been outside Audit & Supervisory Board Members since the time of listing. The Audit & Supervisory Board Members have always performed audits of the business management of the Company from the viewpoints of ensuring and increasing the Company's corporate value and the common interests of its shareholders. The Company further enhances its supervisory function over its management by inviting outside directors to the Board of Directors. On the management side, the Company has employed the executive officer system so as to achieve optimal distribution of decision-making functions and operational duties, as well as encouraging the delegation of authority in executing the businesses, in an attempt to strengthen its corporate governance.

The Board of Directors is constituted by nine directors, three of whom are outside directors. As the highest management decision-making body, the Board of Directors makes resolutions on management policies and material issues and also supervises the execution of duties by the directors. In addition, the outside directors (the independent directors), by sharing their opinions from their objective standpoint, provide advices and suggestions to ensure the adequateness and appropriateness of the decisions made by the Board of Directors.

The Company established the Nominating and Compensation Advisory Committee voluntarily as a consultative body to the Board of Directors to ensure appropriateness and transparency in such matters as the process of selecting candidates in connection with director election proposals submitted to the general meeting of shareholders and resolutions of the Board of Directors relating to allocation of remuneration, etc. to individual directors. The constituent members of the committee include a outside director(s) (independent director(s), one person or more), a full-time audit & supervisory board member (outside audit supervisory board member, one person), representative director (one person), and a full-time director (one person). The outside director who is a member of the committee is the chairperson of the committee.
To monitor the legality of each decision-making process, the Company's Basic Policy on Corporate Governance stipulates that the committee shall include an independent outside Audit & Supervisory Board Member and that independent outside directors and independent outside Audit & Supervisory Board Members shall be a majority of the committee. To ensure the independence and objectivity of the committee, four of the six committee members are independent officers, and the chairperson is an independent outside director.

The Company adopts the executive officer system in order to further segregate the monitoring / supervision of the Company's business management, which is the duty and responsibility of the directors, from the execution of the business. All executive officers are appointed by the Board of Directors and will adhere to the Company's internal rules and regulations as well as to the resolutions of the Board of Directors in executing and controlling the business operations of the Company. In addition, the representative director and president has assumed the position of the chief executive officer and holds the management meetings twice a month as a general rule, where consultation on the material issues to be decided by him are made as well as discussions on the matters to be resolved by the Board of Directors in advance.

With the aim of continuously strengthening its corporate governance, the Company holds monthly Corporate Governance Meetings constituted by full-time Directors and full-time Audit & Supervisory Board Members. At the meetings, the Directors and the Audit & Supervisory Board Members review and discuss the corporate governance concerns and the internal control matters in an effort to enhance the corporate value of the Company, and where necessary, they receive advices from the outside experts such as corporate attorneys and/or certified public accountants.

The Company has adopted the Audit & Supervisory Board Member system and has the Audit & Supervisory Board with two full-time and two part-time Audit & Supervisory Board Members, all of whom are outside Audit & Supervisory Board Members. They audit the operation of the Board of Directors and execution of duties of Directors from an independent and objective standpoint, and provide constructive advice and recommendations for the increase of corporate value with their knowledge.

(◎Chairperson, 〇Constituent Member, △Observer)

The Board of Directors places importance on diversity in terms of gender, internationality, work experience, age, etc. and is comprised of Directors who are familiar with the Group's philosophies, the details of finance and business, etc., and Independent Outside Directors having a wide range of experience and knowledge, and being independent.

When nominating candidates for the Board of Directors, those who have the necessary knowledge as Directors and are familiar with the Group's finances, business, and other aspects of the Group are nominated for Directors who execute the business. For Outside Directors, persons who can be expected to supervise management from an independent and objective standpoint and provide constructive advice and suggestions to Directors concurrently serving as Executive Officers are nominated. The candidates are determined based on the result of discussion regarding appropriateness of nomination of candidates at the Nominating and Compensation Advisory Committee.

In addition, for the nomination of candidates for the Audit & Supervisory Board Members, the Company has a basic policy to nominate persons who can audit the operation of the Board of Directors, execute duties of directors from an independent and objective standpoint, and provide constructive advice and recommendations to enhance corporate value with their knowledge. The Board of Directors determines the candidates based on the result of discussion at the Nominating and Compensation Advisory Committee with the consent of the Audit & Supervisory Board. The Audit & Supervisory Board Members of the Company are all appointed from outside since the time of listing.

Outside Directors and Outside Audit & Supervisory Board Members are elected based on the Company's "Independence Standards." With regard to the nomination of Outside Directors, the Company elects persons who has a wide range of experience and knowledge, and can provide frank, lively and constructive opinions, advice and recommendations at the meeting of the Board of Directors.

The Company has a basic policy to properly combine and determine a fixed remuneration based on job responsibility, a performance-based bonus, stock options, the rights of which may be exercised after the lapse of a certain period, and the Company's share-based compensation depending on the performance result of a certain period in order to realize the medium- to long-term growth of the Group.

Remuneration for full-time Directors consists of monetary remuneration, comprising a "fixed salary" which is scaled according to duties, "performance evaluation remuneration" which is based on the achievement of individual goals such as the performance of each full-time Director, and "directors' bonuses" which are linked to consolidated profit before tax, "share-based compensation" which are linked to consolidated profit before tax, and "stock options" which are aimed to increase the desire and motivation to contribute to the medium- to long-term enhancement of corporate value.

Due to the emphasis on their supervisory function from a standpoint independent of the execution of business, Outside Directors' remuneration is composed of a "fixed salary", "share-based compensation" which amount is fixed, and "stock options" only. No "performance evaluation remuneration" or "directors' bonuses" are paid to Outside Directors. The ratio of fixed salary to performance-linked renumeration (including share-based compensation) for full-time Directors is kept around 60:40.

The representative director and president drafts proposals for each Director's remuneration within the limit, which are discussed by the Nomination and Compensation Advisory Committee, before being decided by resolution of the Board of Directors.

The maximum amount of remuneration etc. for Directors and Audit & Supervisory Board Members per year is set as follows.
According to the Articles of Incorporation, the number of Directors shall be 12 or less, and the number of Audit & Supervisory Board Members shall be 6 or less.

On the basis of comparisons with the results of surveys of Directors' remuneration at listed companies, conducted by external specialist agencies, and surveys of the levels of Directors' remuneration at the Company's competitors, conducted by the Company, as well as comparison with the highest amounts of remuneration paid to employees of the Company, the Company has established fixed salary scaling guidelines, based on Directors' duties and posts held by Directors concurrently serving as Executive Officers. Remuneration for each individual Director is discussed by the Nomination and Compensation Advisory Committee, before being decided by the Board of Directors.

The "performance evaluation remuneration" for full-time Directors is based on their individual achievement of single-year performance targets. A "standard evaluation remuneration amount" equal to 33% of the fixed salary is paid monthly together with the fixed salary. Where there is an adjustment based on the achievement of performance targets (of between +55% and -50% of the standard evaluation remuneration), this is added to and paid together with Directors' bonuses or deducted from Directors' bonuses after the conclusion of the Ordinary General Meeting of Shareholders held during the fiscal year. Remuneration for each Director is discussed by the Nominating and Compensation Advisory Committee, where the level of contribution to the governance practices and the pursuit of sustainability of the Company as well as the Group as a whole, achievement of the department in charge, and maintenance/improvement of consolidated management indicators (ROE, stock price, etc.) are evaluated, before being decided by the Board of Directors.

Directors' bonuses are determined based on the pre-determined level of consolidated profit before tax, plus an additional amount is determined based on the fixed salary (yearly amount) if the consolidated profit before tax target for a single fiscal year is achieved and are paid after the close of the Ordinary General Meeting of Shareholders for the relevant fiscal year. As Directors of a listed company engaged in consolidated management, the Company's Directors are charged with the most important tasks of maintaining and increasing the level of consolidated profit before tax and achieving the consolidated profit before tax targes each fiscal year.

The ordinary shares granted to full-time Directors and Outside Directors are subject to certain transfer restrictions such as the restriction to transfer until the date of their resignation from the position as Directors of the Company. Furthermore, the Company may forfeit the rights to receive the delivery of shares (malus) in the event of a serious violation of laws or internal rules and regulations.

In order to practice corporate management with a focus on enhancing corporate value over the medium- to long-term, the representative director and president drafts proposals for the number of stock options to be granted to each Director, based on the Director's duties as well as posts held concurrently by the Director as Executive Officer, for each medium-term management plan. These proposals are examined by the Nomination and Compensation Advisory Committee, before being decided by the Board of Directors. A fixed number of stock options are granted to Outside Directors, considering the importance of their management monitoring and supervisory function aimed at enhancing corporate value.

Audit & Supervisory Board Members, considering their role, are remunerated with a fixed salary only. Remuneration for each Audit & Supervisory Board Member is decided through discussion of the Audit & Supervisory Board, within the limits of the maximum total amount.

The Company has established a Basic Policies of Internal Control Systems by resolution of the Board of Directors, and under this basic policies, in a continuous effort to develop the internal control system, the Company establishes plans for implementation and operation of the internal control system annually taking into consideration of revisions of relevant laws and regulations, changes in the business environment of the Group, expansion of the businesses, etc. Also, in ensuring the adequacy of financial reporting, an internal control system structure (so-called J-SOX with reference to the COSO-ERM framework (COSO Enterprise Risk Management - integrated framework)) that complies with the Financial Instruments and Exchange Act has been established and is in operation.