Corporate Governance System

Corporate governance system
Board of Directors
Nominating Committee and Remuneration Committee
Audit & Supervisory Board

Corporate governance system

The Company has established the Board of Directors as a decision-making body for basic management policies and other important matters, and as an oversight body for the status of business execution, to enable sustainable growth and improve the medium- to long-term enterprise value. At present, the Board of Directors consists of 13 directors, including seven external directors. For critical management decisions, the Board of Directors engages in decision-making, following "appropriate investigation" and "thorough consideration."

In addition, the Company has established the Audit & Supervisory Board to conduct efficient and effective audits regarding the status of execution of duties by directors. The Audit & Supervisory Board consists of four Audit & Supervisory Board Members, including two external Audit & Supervisory Board Members, and formulates the "audit policy," the "audit plan," and the "audit method." Each Audit & Supervisory Board Member carries out audit activities in accordance with this policy and plan.

Moreover, the Company has introduced the executive officer system to ensure clarification of the management supervisory function, strengthening the business execution function by the Board of Directors, and expediting decision-making and business execution.

The Company's corporate governance structure is as follows:

Overview of corporate governance system

(As of June 26, 2026)

Organization Structure	Company with an Audit & Supervisory Board
Number of Directors	13 (7 of whom are Independent Directors)
Number of Auditors	4 (2 of whom are Independent External Audit & Supervisory Board Members)
Chair of the Board of Directors	Junichi Miyakawa (Representative Director, President & CEO)
Adoption of an Executive Officer System	Yes
Advisory Committee of the Board of Directors	Nominating Committee and Remuneration Committee ESG Promotion Committee
Executive Remuneration System	(1) Basic remuneration: Annual basis by position, which shall be paid in cash in monthly installments. (2) Short-term performance-based remuneration: Paid as stock-based compensation multiplied by a payout ratio based on the degree of achievement of performance and other targets for the current fiscal year. (The form of restricted stock) (3) Medium-term performance-based remuneration: Paid as stock-based compensation every three years by multiplying the base amount determined by position by a payout ratio based on the Company's TSR (Total Shareholder Return) and relative TSR for the past three years. (In the form of restricted stock) [Note] * Independent External Directors are paid Basic remuneration (cash compensation) and stock remuneration.

Corporate governance structure

Board of Directors

The Company has established the Board of Directors as a decision-making body for basic management policies and other important matters, and as an oversight body for the status of business execution, in order to achieve sustainable growth and enhance corporate value over the medium to long term. The Company's Articles of Incorporation stipulates that the number of Board Directors must be 15 or less, and their terms of office last until the conclusion of the Ordinary General Meeting of Shareholders held with respect to the final fiscal year ending within one year after election.

The Board of Directors selects candidates for Board Director who are considered the most suitable for the position, taking into account nationality, ethnicity, gender, age, and other factors, based on discussions by the Nominating Committee.

As of June 2026, the Board of Directors consists of 13 Board Directors, including seven independent external directors, and constructive and lively discussions are held from diverse perspectives, including outside perspectives. Furthermore, the Company has introduced an executive officer system to clarify the management supervisory function of the Board of Directors, strengthen its business execution function, and expedite decision-making and business execution.

The Board of Directors convenes once a month in principle and continuously deliberates on important matters, including management strategy, including matters related to financial results and finance, corporate governance, human resources and ESG, risk management, internal control and compliance, and governance of affiliated companies. In addition, strategic discussions are regularly held after Board of Directors meetings, providing opportunities for directors to deepen their shared understanding of medium- to long-term management issues and the direction of management strategy.

Composition of Board of Directors / Number of the Board of Meetings held

Number of matters submitted to the Board of Directors by theme (FY2025)

Theme	Number of matters
Management strategy, including matters related to financial results and finance	36
Corporate governance	27
Human resources and ESG	14
Risk management, internal control and compliance	8
Governance of affiliated companies	4
Total	89

[Note]

*
The number of matters is the sum of matters resolved and matters reported.

Supporting System for External Directors
and/or External Audit & Supervisory Board Members

The Company is focusing on efforts to strengthen communication and information sharing between internal and external officers so that external officers can maximize their management oversight function, improve the effectiveness of the Board of Directors, and provide general management advice.

Briefing sessions for Board of Directors Meetings

Prior to each Board of Directors meeting, a briefing session is held for the external directors and Audit & Supervisory Board Members. With the CFO and/or other appropriate officers attending all these meetings, the departments in charge provide detailed explanations of the agenda items, followed by a question-and-answer session to ensure that the External Directors and Audit & Supervisory Board Members have a clear understanding of the matters to be submitted to the Board of Directors. In addition, in cases where issues are raised by External Directors at such briefings, the department in charge clarifies such issues before the Board of Directors meeting.

Various meetings

To make monitoring by the Board of Directors more effective, various initiatives are implemented throughout the year to enable external officers to obtain and share information necessary for monitoring outside of the Board of Directors meetings.

Number of meetings held (FY2025)

Strategic Discussions (7 times)
Briefing Sessions for Board of Directors Meetings (12 times)
Exchange of Views between Executive Directors and External Directors (1 time)
Discussions among Directors, Audit & Supervisory Board Members, and Executive Officers (8 times)
Information Exchange Meetings between External Directors and Audit & Supervisory Board Members (2 times)
Discussions between External Directors and the Independent Auditor (1 time)
Regular Meetings of External Directors (4 times)

Evaluation of the Effectiveness of the Board of Directors

In order to further ensure its effectiveness and to improve its functions, the Company's Board of Directors analyzes and evaluates the effectiveness of the Board of Directors every year.
A summary of the method and results of the evaluation of the effectiveness of the Company's Board of Directors for FY2025 is as follows:

Evaluation method

(1) Subjects of evaluation	Five Internal Directors, six External Directors, and four Audit & Supervisory Board Members
(2) Method of evaluation	Questionnaire-based survey (in a signed form) and/or interview
(3) Evaluation period	From December 2025 to June 2026

Evaluation process

The major question items in the questionnaire for FY2025 are as follows. Each question is rated on a 5-point scale, with a free comment box provided for each item.

Strategies and implementation thereof
Risk and crisis management
Corporate ethics
Business restructuring (mergers, acquisitions, divestitures or business alliances)
Group governance
Management evaluation, remuneration, and succession planning
Dialogue with stakeholders
Structure and operation of the board of directors

Status of responses in FY2025 to the issues of FY2024

	Issues	Initiatives and Results
FY 2024	Medium- to long-term strategies	The board repeatedly engaged in discussions on Groupwide growth strategies centered on AI strategies, in preparation for the formulation of the next Medium-term Management Plan. These discussions resulted in the formulation and announcement of the next Medium-term Management Plan. Furthermore, in the process of promoting these strategies, the board continued to discuss the possibility of business restructuring from the standpoint of business portfolio optimization within the Group. In the FY2025 interviews, the following opinions were voiced: Efforts are being made to deepen the discussions on strategies that anticipate growth five years and ten years from now, and the Group as a whole is making progress in its initiatives from a medium- to long-term perspective.
	Next-generation human resources strategies	To ensure the sustainable enhancement of corporate value, the board deepened and fleshed out discussions on nurturing talent for senior management and generational transition, thereby making steady progress in the transition to next-generation leaders. Additionally, to secure expert talent in line with the discussions on the next Medium-term Management Plan, the board discussed the possibility of optimizing the composition of human resources of the overall Group. It also confirmed the progress and issues faced in human resources development of each business and worked to enhance the effectiveness of initiatives to nurture next-generation talent. In the FY2025 interviews, the following opinions were voiced: The succession plan associated with next-generation talent is being fleshed out, and steady progress is being made. Through ongoing discussions on human capital, progress is becoming evident in building and nurturing a talent pipeline. To bring the strategies to life, the Group, as a whole, is working to secure expert talent, while the allocation of resources is progressing, particularly in the field of AI.
	Group governance and risk management	In terms of group governance and risk management, the board continued discussions from the standpoint of enhancing effectiveness on such matters as responses to risks based on the changes to the external environment and on ideal Groupwide collaboration in light of the increasing risk of cyberattacks. The board also shared awareness of material risks and confirmed the status of responses thereto, as necessary. In the FY2025 interviews, the following opinions were voiced: Appropriate discussions are taking place on initial responses and explanations when incidents occur, and measures to prevent their recurrences. Discussions on multilateral risks based on changes to the external environment have deepened, including discussions that reflect the perspective of economic security.

Priority issues to be addressed going forward

	Issues	Action Plans
FY 2025	Medium- to long-term strategies	Opinions of FY2025 Aiming to achieve the Medium-term Management Plan and become a leading company in the AI realm, the Group, as a whole, must delve deeper into the blueprint and conduct concrete discussions. Initiatives Continue discussions on Groupwide strategies and milestones based on the Medium-term Management Plan, and deepen discussions on the overall strategy for the AI realm and its commercial application in each business.
	Risk management	Opinions of FY2025 To expand the business domain and to respond to the changes in the external environment, including increasingly sophisticated cyberattacks and geopolitical risks, the strengthening of multilateral risk management is required. Initiatives Continue discussions on the strengthening of multilateral risk management based on reports of individual incidents.
	Human resources strategies	Opinions of FY2025 AI and highly skilled talent who are indispensable for promoting the CEO succession plan and achieving the Medium-term Management Plan must be fortified. Initiatives Continue discussions on the progress made in CEO succession planning and human resources strategies to secure and develop talent specializing in AI and sophisticated talent.

Issues identified in the past and status of responses

Transactions with controlling shareholder

The Company recognizes that related party transactions, including transactions with the parent company group, are transactions that may affect the Company's financial position or the results of operations by taking the advantage of the related party's position.

Accordingly, when conducting transactions with related parties,
the Company pays particular attention, in accordance with the Related Party Regulations and the Related Party Transactions Management Manual, to whether such transactions are reasonable from the perspective of the Group's management and whether the transaction terms are appropriate compared with those of other external transactions.
Based on this policy, the Company carries out the confirmation and approval procedures prescribed in its internal regulations, depending on the attributes of the related party and the materiality of monetary factors such as the transaction amount and outstanding balance. Related party transactions that are subject to approval by the Board of Directors are approved by the Board of Directors on a case-by-case basis.
Furthermore, among these related party transactions, if there is a risk of a conflict of interest between the controlling shareholder and minority shareholders and the Company determines that prior consideration by Independent External Directors is necessary with respect to the necessity and reasonableness of the transaction and the appropriateness and fairness of the transaction terms, such transactions are subject to prior consideration from the perspective of protecting the interests of minority shareholders at the Independent Outside Directors' Meeting, which is composed solely of Independent External Directors. No such meetings were held during the current fiscal year.
In addition, related party transactions that are not subject to individual approval by the Board of Directors are monitored once a year in principle by the Finance and Accounting Division with respect to their aggregate amount and details.
Separately, transactions involving competition by directors and conflict-of-interest transactions by directors are stipulated as matters to be resolved by the Board of Directors in the Board of Directors Rules, and are conducted with the approval of the Board of Directors for each transaction. The results of such transactions are reported to the Board of Directors.

Nominating Committee and Remuneration Committee

The Company has voluntarily established the Nominating Committee and the Remuneration Committee as advisory bodies to the Board of Directors. As of June 30, 2026, each committee is composed of the Representative Director, President & CEO and five Independent External Directors, and is chaired by an Independent External Director to ensure its independence. The Nominating committee deliberates on matters concerning proposals for the election and dismissal of Board Directors to be submitted to the General Meeting of Shareholders, as well as the nomination of Representative Directors, while the Remuneration Committee deliberates on matters concerning remuneration for Board Directors. Each committee then determines the content of recommendations to be made to the Board of Directors.

Composition of the Nominating and Remuneration Committees

Main topics discussed (June 2025 to May 2026)

Nominating Committee
Structure of the Board of Directors, election of Board Directors, nomination of Representative Directors, Board Director's skill matrix

Remuneration Committee
Remuneration by position, performance-linked indicators, disclosure documents, individual remuneration amounts

Audit & Supervisory Board

The Audit & Supervisory Board consists of four members, two of whom are external members (two full- time members and two part-time members).

The Audit & Supervisory Board Members, including the External Audit & Supervisory Board Members, attend Board of Directors meetings to monitor and verify the status of decision-making by the Board of Directors and the fulfillment of its supervisory duties over each director. They also audit the execution of duties by the directors, etc., as well as the Directors and the Audit & Supervisory Board Members of major subsidiaries, through regular interviews and other means.

The Audit & Supervisory Board establishes an audit policy, audit plan and priority audit items for each fiscal year. It meets once a month in principle, receives regular reports from each department related to the internal control system to confirm the status of the execution of duties by directors based on the priority audit items, and confirms the appropriateness of business execution. In addition, the Audit & Supervisory Board receives quarterly reports on the progress and results, etc. of audits from the Independent Auditor, and exchanges information and opinions with them. It also receives explanations of individual matters from directors, etc. as necessary.

Internal audits

The Internal Audit Department was established as an independent organization directly under the Representative Director, President & CEO. It develops a risk-based annual audit plan, conducts internal audits of the overall duties of the Company, and also conducts the Group's internal control audits of subsidiaries (mainly consolidated subsidiaries). The Internal Audit Department evaluates business compliance with laws and regulations and the effectiveness of internal control, and reports the results of internal audits as well as the follow-up status of past audit findings to the Representative Director, President & CEO of the Company, as well as to the Board of Directors, Audit & Supervisory Board Members, and the Audit & Supervisory Board.

The Company also conducts audits as the parent company on its subsidiaries and coordinates with the audit departments of the Group companies to strengthen the governance of the Group as a whole. Furthermore, in an effort to improve audit quality, the Company undergoes quality assessments by internal and external parties.

Cooperation among Audit & Supervisory Board Members,
Independent Auditors and Internal Audit Departments

Cooperation between the Audit & Supervisory Board Members and the Independent Auditor	The Audit & Supervisory Board Members receive briefings from the Independent Auditor (Deloitte Touche Tohmatsu LLC) on the audit policy and audit plan, and exchange opinions. The Audit & Supervisory Board Members receive reports on the main items to be audited and the method and results of audit, regarding the audit during and at the end of the fiscal year (including quarterly review). Full-time Audit & Supervisory Board Members cooperate with the Independent Auditor mainly by exchanging information and opinions with the Independent Auditor on a monthly basis, as well as accompanying the Independent Auditor who conducts accounting audits and attending the audits.
Cooperation between the Audit & Supervisory Board Members and the Internal Audit Department	The Audit & Supervisory Board Members regularly provide opportunities to exchange information with the Company's Internal Audit Department and Internal Control Division, cooperating organically with them including requesting them to conduct an investigation as necessary. In particular, the Audit & Supervisory Board Members confirm the progress of the internal audit plan and exchange opinions with the Internal Audit Department every month such as by holding regular meetings attended by full-time Audit & Supervisory Board Members. In addition, the general manager of the Internal Audit Department reports the internal audit plan and results, among other matters, to the Audit & Supervisory Board Members semi-annually, and provides explanation regarding the report of audit results to representative directors as appropriate, through sharing of materials each time.
Cooperation between the Independent Auditor and the Internal Audit Department	The Independent Auditor receives briefings from the Internal Audit Department on the audit plan and, when necessary, on the results of internal audits and other matters. The Internal Audit Department receives regular briefings from the Independent Auditor regarding audit results and other matters. Moreover, both parties cooperate with each other as necessary by exchanging information and opinions, among other measures.

Cooperation between the Audit & Supervisory Board Members and the Independent Auditor

The Audit & Supervisory Board Members receive briefings from the Independent Auditor (Deloitte Touche Tohmatsu LLC) on the audit policy and audit plan, and exchange opinions. The Audit & Supervisory Board Members receive reports on the main items to be audited and the method and results of audit, regarding the audit during and at the end of the fiscal year (including quarterly review).

Full-time Audit & Supervisory Board Members cooperate with the Independent Auditor mainly by exchanging information and opinions with the Independent Auditor on a monthly basis, as well as accompanying the Independent Auditor who conducts accounting audits and attending the audits.

Cooperation between the Audit & Supervisory Board Members and the Internal Audit Department

The Audit & Supervisory Board Members regularly provide opportunities to exchange information with the Company's Internal Audit Department and Internal Control Division, cooperating organically with them including requesting them to conduct an investigation as necessary.

In particular, the Audit & Supervisory Board Members confirm the progress of the internal audit plan and exchange opinions with the Internal Audit Department every month such as by holding regular meetings attended by full-time Audit & Supervisory Board Members.

In addition, the general manager of the Internal Audit Department reports the internal audit plan and results, among other matters, to the Audit & Supervisory Board Members semi-annually, and provides explanation regarding the report of audit results to representative directors as appropriate, through sharing of materials each time.

Cooperation between the Independent Auditor and the Internal Audit Department

The Independent Auditor receives briefings from the Internal Audit Department on the audit plan and, when necessary, on the results of internal audits and other matters. The Internal Audit Department receives regular briefings from the Independent Auditor regarding audit results and other matters. Moreover, both parties cooperate with each other as necessary by exchanging information and opinions, among other measures.

Corporate Governance System