Buffalo Inc. Corporate Governance Report

I. Basic Approach to Corporate Governance and Capital Structure, Corporate Attributes, and Other Basic Information

1. Basic Approach

Buffalo Inc. is committed to its management concept of "Original Value Creation," practicing four guiding principles: "Fair and Open," "Logical Thinking," "Simple and Speedy," and "Leading Edge." This approach aims to achieve sustainable growth through the creation of added value and distribution to stakeholders, contributing to society.

Based on this, the company strives to foster a corporate culture where all employees work towards maximizing corporate value by clarifying the roles of management and execution, enabling swift decision-making, and ensuring effective supervision by the Board of Directors, including outside directors.

[Reasons for Not Implementing Each Principle of the Corporate Governance Code]

[Supplementary Principle 3-1-3 Initiatives on Sustainability]

Buffalo Inc. aims to be a corporate group that is indispensable to society by addressing environmental conservation and social issues through its business activities. Information on the company's environmental activities is available on its website.

https://www.buffalo.jp/company/environment/environment.html

Regarding disclosures on investments in human capital and intellectual property, and the collection and analysis of data on the impact of climate change-related risks and business opportunities on the company's business activities and earnings, these will be considered based on their importance and necessity.

[Supplementary Principle 4-1-3 Succession Plan for CEO, etc.]

The company recognizes succession planning for management as a key issue. Currently, there is no explicit plan. For the time being, the company will focus on developing and selecting candidates centered around the Representative Director. The company will continue to consider planning and its supervision system.

[Supplementary Principle 4-2-2 Formulation of Basic Policy on Sustainability Initiatives]

Buffalo Inc. upholds the management concept of "Original Value Creation." The company aims for sustainable growth and stakeholder distribution through added value creation, contributing to society. This reflects a value system that emphasizes relationships with all stakeholders, including shareholders, business partners, and employees, and strives for perpetual development as a corporate group indispensable to society, encompassing sustainability initiatives.

Going forward, the company will consider establishing a system and formulating basic policies for addressing sustainability issues under the Board of Directors, as well as organizing and supervising related tasks.

[Supplementary Principle 4-10-1 Establishment of Independent Advisory Committees such as Nomination Committee and Compensation Committee]

Regarding director compensation, a Compensation Committee has been established as an advisory body to the Board of Directors, composed of a majority of independent outside directors and external experts. This committee reviews director compensation to ensure transparency, fairness, and objectivity, and submits its recommendations to the Board of Directors.

While there is no dedicated advisory committee for director nominations, the Board of Directors, comprising three independent outside directors and two female directors (one of whom is an independent outside director), deliberates thoroughly on candidates before making decisions (as of May 2025).

[Principle 5-2 Formulation and Disclosure of Management Strategy and Business Plan]

The company is diligently working towards the realization of a series of large-scale capital policies as announced on May 18, 2023, regarding "Policy on Corporate Group Reorganization." Regarding future capital policies (dividend policy), these are formulated in consideration of appropriate profit return to shareholders and the retention of internal reserves for future business development, as announced in the "Financial Results for the Fiscal Year Ended March 2025" on May 7, 2025, and the "Financial Results Briefing for the Fiscal Year Ended March 2025" on May 14, 2025.

Furthermore, regarding the promotion of "Value Chain Engineering," which is the company's business domain as disclosed in the "Financial Results Briefing for the Fiscal Year Ended March 2025" on May 14, 2025, the company will make investment decisions based on its capital cost awareness.

[Disclosure Based on Each Principle of the Corporate Governance Code]

[Principle 1-4 Policy-Related Shareholdings]

The company holds shares of business partners strategically to maintain and strengthen relationships essential for mid-to-long-term corporate value enhancement. Shares for which the rationale for holding or economic rationality is no longer recognized are being reduced through sales. Annually, the Board of Directors reviews the appropriateness of holding policy-related shares, considering the necessity of maintaining and strengthening business relationships and the company's business strategy.

Voting rights for policy-related shares are exercised to contribute to the mid-to-long-term corporate value enhancement of the company. In cases of significant damage to shareholder value or scandals that raise serious concerns regarding corporate governance, the company carefully considers its voting stance on proposals.

The company sold a considerable number of policy-related shares during the fiscal year ended March 2025. The latest shareholding status can be confirmed in the securities report.

[Principle 1-7 Transactions with Related Parties]

Transactions with directors and entities substantially controlled by directors that involve competition or conflicts of interest are subject to deliberation and resolution by the Board of Directors in accordance with the Regulations for Board of Directors Meetings.

Transactions with Mercu Inc., which shares the same Representative Director, and its subsidiaries are conducted based on standards established for transactions between the Buffalo Group and the Mercu Group, ensuring the necessity, rationality, and appropriateness of such transactions.

[Principle 2-4-1 Ensuring Diversity in the Appointment of Core Human Resources]

Buffalo Inc. recognizes that having diverse values within the company is crucial for sustainable growth in response to changing times. 59.8% of the company's managers are mid-career hires, and the company aims to maintain this level.

However, the proportion of female managers is currently only 6.3%, and the company intends to increase this figure. While the company has hiring experience with foreign nationals in its group companies, it has not set specific targets for appointing them to management positions due to the nature of its business and industry.

The company's human resource development and internal environment improvement policies for ensuring diversity among core human resources involve actively and continuously recruiting core human resources from various industries for important positions, and creating a work environment and providing education that maximizes their individual characteristics and abilities.

[Principle 2-6 Exercising the Function of Asset Owner for Corporate Pension]

Recognizing that the management of corporate pension assets can affect not only the stable asset formation of employees but also the company's financial condition, the company has assigned qualified personnel in its labor department. These personnel regularly receive reports on investment status from investment institutions and engage in information exchange with them.

[Principle 3-1 Enhancement of Information Disclosure]

(i) The company's management concept and basic strategy are disclosed on its website and in financial results briefing materials.

https://www.buffalo.jp/company/

(ii) The basic policy for corporate governance is disclosed on the company's website, in the "Basic Approach" section of this report, and in the "Securities Report."

https://www.buffalo.jp/ir/documents/security_reports.html

(iii) The policy for determining director compensation is disclosed in the "Director Compensation" section of this report and in the "Securities Report." Director compensation is determined based on proposals formulated by the Representative Director, authorized by the Board of Directors within the limit approved by the General Meeting of Shareholders, and deliberated and reviewed by the Compensation Committee, which advises the Board of Directors.

(iv) Directors are selected considering the balance of knowledge, experience, and abilities of the Board of Directors as a whole, as well as diversity and appropriate scale. The nomination procedure for director candidates involves the Representative Director submitting candidates to the Board of Directors, and decisions are made by the Board of Directors.

The Audit and Supervisory Committee may express its opinions on the appointment of director candidates.

Outside directors are selected with an emphasis on independence, as well as possessing high-level expertise and experience, such as management experience.

If a director is deemed not to be fulfilling their role based on performance evaluations, etc., the Board of Directors may deliberate on their dismissal.

(v) The reasons for selecting each director candidate are disclosed in the reference materials for the General Meeting of Shareholders concerning the relevant proposal.

[Supplementary Principle 4-1-1 Scope of Delegation to Management]

The "Regulations for Board of Directors Meetings," which stipulate matters requiring resolution by the Board of Directors, clearly define matters to be submitted, focusing on basic policies related to strategic direction. As a company with an Audit and Supervisory Committee, the company's Articles of Incorporation permit the delegation of decisions on important business execution to Directors in charge of execution by resolution of the Board of Directors, with the scope of delegation clearly defined at the time of such resolution.

[Principle 4-9 Standards for Independence and Qualifications of Independent Outside Directors]

The criteria for selecting independent outside directors adopt the independence standards set forth by the Tokyo Stock Exchange. Independent outside directors are selected as candidates who can provide advice and engage in discussions based on their experience and expertise from backgrounds different from the company.

[Supplementary Principle 4-11-1 Ensuring the Effectiveness of the Board of Directors]

Based on the management concept of "Original Value Creation," which is rooted in the company's founding spirit, the company aims for sustainable growth and appropriate distribution of generated profits and results to stakeholders. In line with this, the company strives to ensure a balance of knowledge, experience, and abilities for the Board of Directors, including outside directors, to effectively formulate management strategies and supervise the business execution carried out by the executive officers.

The director skill matrix is disclosed in the "Notice of Convocation of the 39th Ordinary General Meeting of Shareholders."

https://www.buffalo.jp/ir/stock/shareholders.html

[Supplementary Principle 4-11-2 Director Concurrent Positions]

Information on concurrent directorships at other listed companies is provided in the "Director Information" section of this report, the "Securities Report," and the "Notice of Convocation of General Meeting of Shareholders." Currently, the number of concurrent positions held by directors at other listed companies is within a reasonable range. Therefore, each director secures sufficient time and effort to appropriately fulfill their expected roles and responsibilities.

[Supplementary Principle 4-11-3 Analysis and Evaluation of Board of Directors' Effectiveness]

The company conducted a self-assessment of the Board of Directors' effectiveness through a questionnaire administered to all board members (directors and audit and supervisory committee members) by an external organization. The results indicated that the Board of Directors is appropriately fulfilling its expected roles, and its effectiveness is sufficiently ensured. The assessment also identified areas for improvement, and the company plans to continue evaluating the effectiveness of its Board of Directors to further enhance its functions. A summary of the evaluation results regarding the effectiveness of the company's Board of Directors is published on the company's website.

https://www.buffalo.jp/ir/

[Supplementary Principle 4-14-2 Training Policy for Directors and Audit & Supervisory Board Members]

The company provides a framework for training for directors, including outside directors, both at the time of their appointment and thereafter, to ensure they understand the necessary company information, roles, and responsibilities. New outside directors are also provided with opportunities to understand the company's business, financial status, and organizational structure.

[Principle 5-1 Policy on Constructive Dialogue with Shareholders]

The company considers promoting constructive dialogue with shareholders and thereby achieving sustainable growth and mid-to-long-term corporate value enhancement as one of its key challenges.

Based on this philosophy, the company implements the following measures:

(1) Since June 2021, the company has appointed an IR Executive Officer responsible for overseeing initiatives to promote dialogue with shareholders and investors.

(2) For dialogue with shareholders and investors, the IR Executive Officer and the President's Office serve as contact points. The company actively accepts interviews and has established a system for close cooperation with relevant departments to efficiently gather necessary information.

(3) In addition to disclosing information about the company's business at the General Meeting of Shareholders, the company holds briefing sessions on financial results and prepares and distributes business reports twice a year.

(4) Important opinions and concerns obtained through IR activities are reported to the Board of Directors in a timely manner.

(5) The company strives to ensure fairness to shareholders and investors by appropriately managing and promptly disclosing important information.

<2025 Fiscal Year Shareholder Dialogue Activities>

The company has continued dialogue with shareholders, primarily shareholders and domestic and international fund managers/analysts, through the IR Executive Officer and the President's Office. Opinions and concerns obtained through these individual meetings and direct dialogues have been shared with senior management and reported to the Board of Directors in a timely manner.

Particular interest was shown in the "Policy on Corporate Group Reorganization" announced on May 18, 2023. In light of this, the company has continued to provide appropriate information disclosure regarding progress in organizational restructuring.

The company has conducted explanations and exchanged opinions with shareholders and investors regarding the business strategy of Buffalo Inc., a core company in the IT business, focusing on "Maximizing Profitability in the PC Peripherals Market."

[Measures Taken to Achieve Management Conscious of Capital Costs and Share Prices]

Disclosure of Content: Updated

Availability of English Disclosure: Updated

None

Date of Update: Updated

April 1, 2025

Explanation of Relevant Items: Updated

The company has published "Towards Maximizing Long-Term Shareholder Value" on its website.

https://www.buffalo.jp/ir/strategy/restructuring.html

2. Capital Structure

Foreign Shareholding Ratio

10% to less than 20%

[Major Shareholders]

Presence of Controlling Shareholder (Excluding Parent Company)

None

Presence of Parent Company

None

Supplementary Notes

The information on major shareholders is based on the shareholder register as of March 31, 2025.

The percentage of shares held is relative to the total number of issued shares (excluding treasury shares).

The number of shares held by major shareholders may include shares related to trust or custody services.

In addition, there are 94,538 treasury shares.

3. Corporate Attributes

Listed Stock Exchange and Market Segment

Tokyo Standard, Nagoya Premier

Fiscal Year End

March

Industry

Electric Appliances

Number of Employees (Consolidated) at the End of the Previous Fiscal Year

1,000 or more

Net Sales (Consolidated) in the Previous Fiscal Year

100 billion yen or more, less than 1 trillion yen

Number of Consolidated Subsidiaries at the End of the Previous Fiscal Year

10 or more, less than 50

4. Policy for Protecting Minority Shareholders in Transactions with Controlling Shareholders

5. Special Circumstances Significantly Affecting Corporate Governance

Transactions with directors and entities substantially controlled by directors that involve competition or conflicts of interest are subject to deliberation and resolution by the Board of Directors in accordance with the Regulations for Board of Directors Meetings. Transactions with Mercu Inc., which shares the same Representative Director, and its subsidiaries are conducted based on standards established for transactions between the Buffalo Group and the Mercu Group, ensuring the necessity, rationality, and appropriateness of such transactions.

II. Status of Management Organization and Other Corporate Governance Systems for Management Decision-Making, Execution, and Supervision

1. Matters Related to Organization and Operation

Organizational Form

Company with an Audit and Supervisory Committee

[Regarding Directors]

Number of Directors Stipulated in Articles of Incorporation

15

Term of Office for Directors Stipulated in Articles of Incorporation

1 year

Chairperson of the Board of Directors

President

Number of Directors

7

Selection of Outside Directors

Selected

Number of Outside Directors

3

Number of Outside Directors Designated as Independent Officers

3

Relationship with the Company (1)

※ Selection criteria for company relationships:

※ "○" indicates that the person currently or recently meets the criteria, and "△" indicates that the person met the criteria in the past.

※ "●" indicates that a close relative currently or recently meets the criteria, and "▲" indicates that a close relative met the criteria in the past.

a. Executive officer of a listed company or its subsidiary

b. Executive officer or non-executive director of a listed company's parent company

c. Executive officer of a listed company's affiliated company

d. Business partner of a listed company or its executive officer

e. Major business partner of a listed company or its executive officer

f. Consultant, accounting professional, or legal professional receiving substantial financial or other property from a listed company, other than director compensation

g. Major shareholder of a listed company (if the major shareholder is a corporation, its executive officer)

h. Executive officer of a business partner of a listed company (excluding those who do not fall under d, e, or f)

i. Executive officer of an outside director's affiliated company (for the individual only)

j. Executive officer of a company to which the listed company makes donations (for the individual only)

k. Other

Company Relationship (2)

[Audit and Supervisory Committee]

Composition of the Audit and Supervisory Committee and Attributes of the Chairperson

[Supplementary Notes]

Regarding the composition of the Compensation Committee:

The committee comprises at least three members, with more than half being independent outside directors or external experts.

[Regarding Independent Officers]

Number of Independent Officers

3

Other Matters Regarding Independent Officers

All outside officers have been designated as independent officers.

[Regarding Incentives]

Implementation Status of Incentive Schemes for Directors

Introduction of performance-linked compensation, other

Supplementary Notes

Director compensation is determined based on proposals formulated by the Representative Director, authorized by the Board of Directors, and deliberated and reviewed by the Compensation Committee, which advises the Board of Directors. Furthermore, based on the resolution of the 39th Ordinary General Meeting of Shareholders held on June 25, 2025, a restricted stock compensation system has been introduced for directors (excluding non-executive audit and supervisory committee members).

Eligible Recipients for Stock Options

Supplementary Notes

[Regarding Director Compensation]

Disclosure Status of Individual Director Compensation

Partial individual disclosure

Supplementary Notes

The company discloses the total amount of compensation by director category, the total amount of compensation by type, the number of directors eligible for compensation, and the total amount of compensation for those receiving 100 million yen or more in its securities report.

Presence of Policy for Determining the Amount or Calculation Method of Compensation

Updated

Yes

Disclosure Content of Policy for Determining the Amount or Calculation Method of Compensation

The maximum compensation for directors (excluding audit and supervisory committee members) was approved at the Ordinary General Meeting of Shareholders on June 26, 2023, to be ¥300 million per year (of which ¥50 million per year is for outside directors, excluding compensation for part-time directors). The maximum compensation for audit and supervisory committee members was approved at the Ordinary General Meeting of Shareholders on June 25, 2025, to be ¥70 million per year.

The company has established a policy for determining the individual compensation for directors (excluding audit and supervisory committee members), the outline of which is as follows:

1. Basic Policy

The compensation system will be linked to shareholder interests to function effectively as an incentive for mid-to-long-term corporate value enhancement. The basic policy is to determine individual director compensation based on appropriate levels considering their respective responsibilities.

The annual compensation for executive directors will consist of fixed basic compensation, performance-linked compensation (cash), and non-cash stock compensation (RS).

The annual compensation for outside directors, who are responsible for supervision, will consist solely of basic compensation, considering their duties.

Severance pay will be paid to directors upon completion of their term of office to recognize their contributions during their tenure.

2. Basic Compensation (Cash Compensation Excluding Performance-Linked Compensation and Severance Pay)

Monthly fixed compensation will be provided.

The amount will be determined comprehensively, considering market levels for similar positions, company performance, and employee salary levels, based on the director's position, responsibilities, and years of service.

3. Policy for Determining the Calculation Method of Performance-Linked Compensation (Cash Compensation)

Cash compensation will reflect performance indicators to enhance awareness of business year-on-year performance improvement.

Bonuses will be paid annually, determined comprehensively based on the degree of achievement of targets for consolidated operating income, which reflects the results of the company's core business activities.

Performance indicators and their targets will be set at the time of strategy formulation to align with mid-to-long-term management strategies. They will be reviewed as needed in response to environmental changes, based on recommendations from the Compensation Committee.

4. Policy for Determining the Calculation Method of Stock Compensation (RS)

Restricted stock (RS) will be granted in advance.

To promote sustainable improvement in corporate value and greater value sharing with shareholders, restricted stock with transfer restrictions for a period determined by the Board of Directors (typically 3 to 5 years) will generally be granted annually after the Ordinary General Meeting of Shareholders.

5. Policy for Determining the Ratio of Basic Cash Compensation, Performance-Linked Compensation, and Stock Compensation for Individual Directors

The ratio of compensation for each type of executive director will be determined by the Compensation Committee, benchmarking against compensation levels of companies with similar business scales and industries.

The Board of Directors (the Representative Director, President and CEO, to whom this authority is delegated) will respect the recommendations of the Compensation Committee and determine the individual compensation for directors within the range of compensation ratios indicated in the recommendations.

6. Policy for Determining Severance Pay

Severance pay will be paid within a reasonable amount calculated according to standards stipulated in the company's regulations, after obtaining approval at the General Meeting of Shareholders, and will be paid at a certain time after retirement.

7. Matters Concerning the Determination of Individual Director Compensation

The Representative Director will formulate compensation proposals for individual directors.

The authority delegated to the Representative Director includes determining the amount of basic compensation for each director, the amount of bonuses based on individual director performance, the number of shares granted based on the benchmark amount for stock compensation (RS), and the amount of severance pay calculated according to standards stipulated in the company's regulations.

The compensation proposals formulated by the Representative Director will be deliberated and reviewed by the Compensation Committee, which will then submit its recommendations. The Representative Director will determine the individual compensation for directors based on these recommendations.

[Support System for Outside Directors]

While there are no dedicated staff for outside directors, they are provided with information as needed through attendance at Board of Directors and Audit and Supervisory Committee meetings, as well as from the President's Office and the Audit Department.

2. Matters Concerning Execution, Audit, Supervision, Nomination, and Compensation Functions (Overview of Current Corporate Governance System)

Updated

The company has introduced an executive officer system to enhance corporate governance by clearly separating the decision-making functions of the Board of Directors from the business execution functions of executive officers. The Board of Directors consists of seven directors (including three outside directors). In addition to monthly regular board meetings, extraordinary board meetings are held as needed to make decisions on important management matters. The Board of Directors also supervises the execution of duties by executive directors and executive officers, receiving reports on business status and deliberating on responses to reflect them in management decisions. To facilitate agile decision-making, the company may pass resolutions by written consent in accordance with laws and regulations.

The company has established an Audit and Supervisory Committee, which consists of four directors (including three outside directors). Audit and supervisory committee members attend Board of Directors meetings and, as necessary, important committee meetings to gather broad information and share it with other audit and supervisory committee members. Regular meetings of the Audit and Supervisory Committee are held once a month, with extraordinary meetings convened as needed. The Audit and Supervisory Committee maintains close communication and exchanges information and opinions with the internal audit department regularly and as necessary, thereby improving the effectiveness and efficiency of audits.

Regarding the company's accounting audit, the company has entered into an audit agreement with Tokai Audit Corporation. The names of certified public accountants who performed the audit for the fiscal year ended March 2025 and the composition of their supporting staff are as follows:

・Names of Certified Public Accountants Performing the Audit:

Audit Execution Partner: Kenji Tsukamoto, Yasushi Yamaguchi

・Composition of Supporting Staff for Audit Services:

9 Certified Public Accountants, 2 Others

Regarding the compensation of directors and executive officers, a Compensation Committee has been established as an advisory body to the Board of Directors, composed of a majority of independent outside directors and external experts. This committee reviews director compensation to ensure transparency, fairness, and objectivity, and submits its recommendations to the Board of Directors. While there is no dedicated advisory committee for director nominations, the Board of Directors, comprising three independent outside directors and two female directors (one of whom is an independent outside director), deliberates thoroughly on candidates before making decisions (as of May 2025).

3. Reason for Selecting the Current Corporate Governance System

The company has chosen to be a company with an Audit and Supervisory Committee to ensure prompt decision-making and strengthen audit and supervisory functions.

III. Measures Regarding Shareholders and Other Stakeholders

1. Initiatives to Vitalize the General Meeting of Shareholders and Facilitate Voting Rights Exercise

Early Dispatch of Convocation Notice for General Meeting of Shareholders

Supplementary Notes

The company dispatches the convocation notice for the General Meeting of Shareholders earlier than the legal deadline to ensure shareholders have sufficient time to review the agenda items. Furthermore, the notice is made available electronically on TDnet and the company's website before the legal deadline for electronic provision.

Setting of General Meeting of Shareholders Date to Avoid Peak Periods

Supplementary Notes

The company endeavors to set the date of the General Meeting of Shareholders to avoid peak periods, allowing more shareholders to attend.

[Measures Regarding Use of Electromagnetic Method for Exercising Voting Rights]

The company has been implementing the use of electromagnetic methods for exercising voting rights since the fiscal year ended March 2004.

[Initiatives to Improve the Voting Environment for Institutional Investors, such as Participation in the Electronic Voting Platform]

Since the fiscal year ended March 2022, the company has been participating in the electronic voting platform operated by ICJ, Inc. for institutional investors.

[Provision of English Summary of Convocation Notice]

The company has been providing English summaries of convocation notices since the fiscal year ended March 2022.

2. IR Activities

Holding Regular Briefings for Individual Investors

Updated

Supplementary Notes

While regular briefings for individual investors are not held, videos of briefings for institutional investors and analysts are made available to individual investors on the company's website.

https://www.buffalo.jp/ir/documents/financial_reports.html

Holding Regular Briefings for Analysts and Institutional Investors

Briefings are held twice a year, covering financial results and second-quarter financial results.

Holding Regular Briefings for Overseas Investors

While briefings are not held, an English version of the business report is posted on the company's website for overseas investors.

https://www.buffalo.jp/ir/documents/annual_reports.html

Posting of IR Information on the Website

The website includes various materials such as financial results summaries, financial results briefing materials, financial results briefing videos, business reports, securities reports, and historical stock price trends.

https://www.buffalo.jp/ir/

Establishment of Department (Person in Charge) for IR

The President's Office is responsible for IR. An IR Executive Officer has been appointed to oversee initiatives aimed at promoting dialogue with shareholders and investors.

3. Initiatives to Respect the Positions of Stakeholders

Updated

Supplementary Notes

The company's Compliance Handbook, which establishes the Code of Conduct for Employees, stipulates the respect for the positions of customers, shareholders, business partners, and the local community, and declares a commitment to respecting the fundamental human rights of all individuals encountered in any situation.

Environmental Conservation Activities, CSR Activities, etc.

The company strives to be a corporate group indispensable to society by engaging in environmental conservation and addressing social issues through its business activities. The company's "Environmental Activity Guidelines" and other related information are available on its website.

https://www.buffalo.jp/company/environment/environment.html

Formulation of Policies Regarding Information Disclosure to Stakeholders

The company's Code of Conduct includes "Fair and Open" (Fairness and Open Attitude), promoting proactive information disclosure.

IV. Internal Control Systems and Other Matters

1. Basic Approach to Internal Control System and Status of its Development

Updated

The company's Board of Directors determines the basic policy for establishing an internal control system. In accordance with this basic policy, the company implements specific systems and business execution from the perspectives of compliance, risk management, and ensuring business efficiency.

Basic Policy for Establishing Internal Control System

1. System to Ensure Compliance of Duties of Directors and Employees with Laws and Regulations and Articles of Incorporation (Compliance System)

(1) The company and its subsidiaries (hereinafter referred to as "the Group") will ensure fair and sincere management based on compliance, adhering to laws, social norms, and ethics. To this end, the company designates a Compliance Officer from among its directors who are not audit and supervisory committee members. The status of compliance within the Group is reported to the Board of Directors by the Compliance Officer.

(2) Directors and employees of the Group will constantly refer to the "Compliance Card" and "Compliance Handbook," which define the Group's Code of Conduct, and ensure their actions are in compliance.

(3) The Group has established a whistleblowing system for direct reporting of illegal activities or violations of internal regulations, thereby promoting early detection and correction of such activities and strengthening compliance. The Group will not take any disadvantageous action against individuals who report such activities.

(4) The company has an internal audit department to conduct audits of business execution and compliance status within the Group.

2. System for Preservation and Management of Information Related to the Execution of Duties by Directors and Executive Officers (Information Management System)

(1) Information related to the execution of duties by directors and executive officers will be recorded in documents or electronic media in accordance with "Information Asset Management Regulations" and other internal regulations, and will be properly preserved and managed.

(2) Directors and executive officers may view the information referred to in the preceding paragraph in a timely manner.

3. Regulations and Other Systems for Managing Risks Posed by the Group (Risk Management System)

(1) The Group has established "Risk Management Regulations" to appropriately identify and manage risks across the entire Group. All factors that hinder the achievement of management objectives are identified and assessed as risks, and necessary measures are taken.

(2) When risks materialize, the Group has a system in place to respond promptly and appropriately to minimize damage and impact.

4. System to Ensure Efficient Execution of Duties by Directors and Executive Officers

(1) The company holds regular Board of Directors meetings once a month, and extraordinary meetings as needed.

(2) The company strives for the proper and smooth operation of the Board of Directors through the "Regulations for Board of Directors Meetings" and endeavors to maintain transparency and soundness of management by involving outside directors.

(3) The company has adopted an executive officer system to promote the separation of management decision-making and supervisory functions from business execution functions, enabling more flexible and prompt business execution.

(4) The Group executes its duties appropriately and efficiently in accordance with the rules for job authority and decision-making stipulated in the "Organizational Management Regulations."

5. System to Ensure the Appropriateness of Business Operations within the Group (Group Internal Control System)

(1) An Internal Control Committee has been established to supervise the development and operation of the internal control system within the Group. The Internal Control Committee confirms and evaluates the status of internal control development and operation across the Group and reports regularly to the Board of Directors. The chairperson of the Internal Control Committee is a director of the company who is not an audit and supervisory committee member.

(2) Representative Directors of each company in the Group, Directors in charge of business operations, and Executive Officers serve as Internal Control Officers. They ensure the development and operation of appropriate internal control systems within their respective companies and organizations and report the status to the Internal Control Committee.

(3) The company's internal audit department conducts internal audits of the Group to ensure the effectiveness and appropriateness of the internal control system across all Group operations.

(4) The company has established "Affiliated Company Management Regulations" that stipulate matters for which subsidiaries must obtain prior approval from or report to the company. In conjunction with the criteria for matters requiring submission to the Board of Directors, the company requires prior approval from or reporting to the Board of Directors or management meetings of the company, or the relevant director or executive officer in charge of the subsidiary, for important management matters of each subsidiary.

6. System to Ensure the Effectiveness of Audit by the Audit and Supervisory Committee (Effective Audit System)

(1) Upon request from the company's Audit and Supervisory Committee, the Group will assign necessary audit staff to assist the committee in its duties.

(2) Audit staff will follow the instructions of the Audit and Supervisory Committee in assisting its duties. Their appointment, transfer, and performance evaluations will be conducted with the opinion of the Audit and Supervisory Committee being heard and respected.

(3) Audit and Supervisory Committee members attend management meetings and other important meetings as necessary to receive reports.

(4) Directors and employees of the Group will report important matters affecting management and performance to the Audit and Supervisory Committee. Furthermore, audit and supervisory committee members selected by the Audit and Supervisory Committee may request reports from directors and employees of the Group at any time. The Group will not take any disadvantageous action against individuals who provide such reports.

(5) When the Audit and Supervisory Committee requests expenses necessary for the execution of its duties, the company will promptly provide advance payment or reimbursement.

(6) The Audit and Supervisory Committee exchanges information and opinions regularly and as needed with audit and supervisory committee members, audit & supervisory board members, accounting auditors, and the internal audit department of the Group to improve the effectiveness and efficiency of audits.

2. Basic Approach to Eliminating Anti-Social Forces and Status of its Development

Updated

(1) Basic Approach to Eliminating Anti-Social Forces

The company will take a firm stance against anti-social forces that threaten the order and safety of civil society. It will not provide any benefits to anti-social forces and will resolutely reject any undue demands.

(2) Status of Development for Eliminating Anti-Social Forces

The General Affairs Department is responsible for measures to eliminate anti-social forces. In the event of an incident, the department reports to the relevant executive officer and collaborates closely with external expert organizations such as the police and legal counsel to establish a system for organizational response.

V. Other

1. Presence of Policy for Responding to Tender Offers

Presence of Policy for Responding to Tender Offers

None

Supplementary Notes

2. Other Matters Related to Corporate Governance Systems

Corporate Governance Structure Diagram

Shareholders' Meeting

Report

Appointment/Dismissal

Board of Directors

Audit

Audit and Supervisory Committee

Appointment/Dismissal

Directors (excluding Audit and Supervisory Committee members)

Directors (Audit and Supervisory Committee members)

Collaboration

Accounting Auditor

Inquiry/Response

Submission/Supervision

Selection/Dismissal

Nomination Committee

Appointment/Dismissal

Report

Representative Director

Supervision

Report

Instruction

Report

Report

Executive Officers' Meeting

Executive Officers

Report

Report

Participation

Internal Control Committee

Participation

Report

Audit Office

Audit

Report

Convocation

Group Audit Officer Liaison Committee

Control

Audit

Report

Group Companies

Accounting Audit

Timely Disclosure System Diagram

Internal Departments

Decision Facts

Occurrence Facts

Financial Information

Submission/Report

Board of Directors

Approval

Timely Disclosure Department (President's Office)

Timely Disclosure

Tokyo Stock Exchange / Nagoya Stock Exchange / Company Website

Accounting Audit

Collaboration