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Reasons for Appointment of Outside Directors and Audit & Supervisory Board Members

Directors

Maximum Number of Directors Stipulated in Articles of Incorporation 7
Term of Office Stipulated in Articles of Incorporation 2 years
Chairperson of the Board President
Number of Directors 4
Appointment of Outside Directors Appointed
Number of Outside Directors 2
Number of Independent Directors Designated from among Outside Directors 2

Reasons for appointment of Outside Director

Name Reason for Appointment
Masashi Nitta Mr. Masashi Nitta has been involved in the planning and management of one of Japan’s leading cultural and artistic sectors for many years. Based on his extensive experience and achievements, he has provided appropriate opinions from an objective standpoint independent of the Company’s management. Accordingly, the Company nominates him as a candidate for Outside Director because it has expected that he will continue to contribute to the sustained growth and the medium- to long-term enhancement of the corporate value of the Company.
Mr. Masashi Nitta is not an executive or an officer of a specified associated service provider of the Company and he has not been such in the past ten years.
Mamoru Inoue Mr. Mamoru Inoue has broad insight and abundant experience as a corporate manager in the housing-related field, and as an Outside Director of the Company, he has been appropriately fulfilling his role in the supervision of business execution, etc. Accordingly, the Company nominates him as a candidate for Outside Director because it has expected that he will continue to contribute to the sustained growth and the medium- to long-term enhancement of the corporate value of the Company.
Mr. Mamoru Inoue is not an executive or an officer of a specified associated service provider of the Company and he has not been such in the past ten years.

Audit & Supervisory Board Members

Audit & Supervisory Board Members, Accounting Auditors, and Internal Audit Office take part in the three-pillar audits and cooperate with each other closely in the performance of operations in efforts to improve the efficiency and quality of audits.

The Audit & Supervisory Board of the Company consists of one Full-time Audit & Supervisory Board Member and 2 Independent Outside Audit & Supervisory Board Members. The Board meets about once a month to determine important matters, such as audit policy and plans, and hold discussions, make reports, and share information. The Articles of Incorporation stipulate that the number of Audit & Supervisory Board Members shall be no more than three.

Audits undertaken by the Audit & Supervisory Board are conducted under the leadership of the Full-time Audit & Supervisory Board Member with active involvement of the two Independent Outside Audit & Supervisory Board Members based on division of duties. The three Audit & Supervisory Board Members attend meetings of the Board of Directors and other important meetings, express opinions as necessary, and receive reports on business execution from the Directors, etc. The Full-time Audit & Supervisory Board Member inspects important documents, among other operations, and shares information with the two Independent Outside Audit & Supervisory Board Members. The Audit & Supervisory Board has a system to ensure constant supervision of the execution of duties by the Directors. In addition, the three Audit & Supervisory Board Members have expertise in their respective areas of strength and conduct effective audits based on appropriate division of duties.

The Company has executed an audit contract with Ernst & Young ShinNihon LLC (the “Accounting Audit Firm”). The Company undergoes periodic audits of its financial statements, etc. carried out by the Accounting Audit Firm and accepts inspection of the status of the establishment and operation of systems and procedures for internal control and systems relating to accounting records, including accounting systems, to an extent deemed necessary for auditing purposes. It receives feedback on results of such audits and inspection. The three Audit & Supervisory Board Members receive feedback quarterly on audits and inspection from the Accounting Audit Firm and periodically exchange opinions with the firm.

The Company has established internal audit systems for the improvement of internal control systems, the rationalization of management and the safeguarding of assets. Internal Audit Office takes charge of internal audit operations. It develops audit plans according to the internal audit rules and conducts internal audits in accordance with plans approved by the President. The internal audits cover all the departments of the Company, including its subsidiaries, and contribute to ensuring the appropriateness and efficiency of the business activities of the Group.

The Full-time Audit & Supervisory Board Member and personnel in charge of internal audits carry out interviews before conducting audits and cooperate with each other to ensure efficient and effective audits. Moreover, the three Audit & Supervisory Board Members and personnel in charge of internal audits cooperate with Accounting Auditors, to ensure the efficiency and rationalization of audit operations and strengthen audit functions. Internal audit results are mutually and appropriately reported based on a cooperative relationship developed among the interested parties.

Establishment of Audit & Supervisory Board Established
Maximum number of Audit & Supervisory Board Members stipulated in the Articles of Incorporation 3
Number of Audit & Supervisory Board Members 3
Appointment of Outside Audit & Supervisory Board Members Appointed
Number of Outside Audit & Supervisory Board Members 2
Number of Independent Audit & Supervisory Board Members among Outside Audit & Supervisory Board Members 2

Reasons for appointment of Outside Audit & Supervisory Board Members

Name Reason for Appointment
Yoshihiro Okada Mr. Yoshihiro Okada has expert knowledge, a wealth of experience and a deep insight in finance and accounting as a certified tax accountant. The Company elected him as a candidate for Outside Audit & Supervisory Board Member as it has judged that he would continue to provide useful advice and suggestions for the strengthening of its audit systems based on his knowledge and experience. Although Mr. Okada has never been directly involved in corporate management, other than as Outside Audit & Supervisory Board Member, the Company has judged that he would appropriately perform duties as Outside Audit & Supervisory Board Member for the above reasons.
Junji Tomita Mr. Junji Tomita has expert knowledge, a wealth of experience and a deep insight in corporate legal affairs and compliance as an attorney. The Company elected him as a candidate for Outside Audit & Supervisory Board Member as it has judged that he would continue to provide useful advice and suggestions for the strengthening of its audit systems based on his knowledge and experience. Although Mr. Tomita has never been directly involved in corporate management, other than as Outside Audit & Supervisory Board Member, the Company has judged that he would appropriately perform duties as Outside Audit & Supervisory Board Member for the above reasons.

Independent Directors/Audit & Supervisory Board Members

Number of Independent Directors/Audit & Supervisory Board Members 4

The Company has designated all Outside Directors and Audit & Supervisory Board Members who fulfill the requirements for Independent Directors/Audit & Supervisory Board Members, as Independent Directors/Audit & Supervisory Board Members.
The Company has established “Criteria for Independence of Outside Directors/Audit & Supervisory Board Members” as described below.

  • The subject person does not fall and has not fallen in the past three years under those listed below.
    • (1)Group affiliate:
    • Person who satisfies the following requirements shall be a Group affiliate.
    • ①A business executor of a company where a business administrator of the Group (Note 1) concurrently serves as officer;
    • ②Accounting Auditor of the Group and a partner of the Group’s lead managing underwriter or an employee engaging in audits of the Group.
    • (2)A business executor who executes business at a principal lender (Note 2) to the Group
    • (3)A business executor of the Group’s major business partners (Note 3)
    • (4)Person who receives annual remuneration of over 10 million yen from the Group in addition to executive remuneration
    • (5)A business executor of an organization that receives donations exceeding a certain amount (Note 4) from the Group
  • The spouse and relative within the second degree of kinship of the subject person who do not fall under those listed below (excluding those who are not important).
    • (1)A person from the Group who executes its business
    • (2)Person listed under Items 1 (1) to (5) above

If a person is judged to have independence, although the requirements above are not met, the person may be recognized as having independence on the premise that reasons for such judgment are disclosed.

Note 1:
A business executor shall mean an important employee.
Note 2:
Main lender shall mean a lender of an amount exceeding 2% of consolidated total assets of the Company.
Note 3:
A major business partner shall mean a client whose transactions with the Group amount to more than 2% of consolidated annual sales of the said client for the last fiscal year.
Note 4:
Donation exceeding a certain amount shall mean donation exceeding 10 million yen a year given to an organization.