Principles for Responding to the Corporate Governance Code

General Principle 1

Companies should take appropriate measures to fully secure shareholder rights and develop an environment in which shareholders can exercise their rights appropriately and effectively.

In addition, companies should secure effective equal treatment of shareholders.

Given their particular sensitivities, adequate consideration should be given to the issues and concerns of minority shareholders and foreign shareholders for the effective exercise of shareholder rights and effective equal treatment of shareholders.

1. When the board recognizes that a considerable number of votes have been cast against a proposal by the company and the proposal was approved, it should analyze the reasons behind opposing votes and why many shareholders opposed, and should consider the need for shareholder dialogue and other measures.

   The Company will appropriately incorporate shareholders' opinions into its management. Therefore, when the ratio of vote against for a company proposal submitted to the General Shareholders Meeting is high, the Board of Directors will analyze the reasons and consider the need for a response, including dialogue with shareholders.

2. When proposing to shareholders that certain powers of the general shareholder meeting be delegated to the board, companies should consider whether the board is adequately constituted to fulfill its corporate governance roles and responsibilities. If a company determines that the board is indeed adequately constituted, then it should recognize that such delegation may be desirable from the perspectives of agile decision-making and expertise in business judgment.

   With regard to the delegation of the matters requiring resolutions of the Shareholders Meeting to the Board of Directors, the Company considers it a necessary condition that the Board of Directors be a structure that can bear the responsibilities to decide such matters. The Company has elected seven outside directors who oversee the appropriateness of decision-making by the Board of Directors. As we consider it desirable to delegate authority within a confined scope even though permitted under laws and regulations, the matters requiring resolutions of the Shareholders Meeting delegated to the Board of Directors under the provisions of the Articles of Incorporation at this point are issuance of shares within the authorized number of shares to be issued, implementation of interim dividends, and acquisition of treasury stock.

3. Given the importance of shareholder rights, companies should ensure that the exercise of shareholder rights is not impeded. In particular, adequate consideration should be given to the special rights that are recognized for minority shareholders with respect to companies and their officers, including the right to seek an injunction against illegal activities or the right to file a shareholder lawsuit, since the exercise of these rights tend to be prone to issues and concerns.

1. Companies should provide accurate information to shareholders as necessary in order to facilitate appropriate decision-making at general shareholder meetings.

   The Company considers that it should promptly disclose information which would facilitate appropriate decision-making by shareholders at the Shareholders Meeting. In addition, the Company posts the Notice of the Shareholders Meeting on the Company's website to broadly provide information.

2. While ensuring the accuracy of content, companies should strive to send convening notices for general shareholder meetings early enough to give shareholders sufficient time to consider the agenda. During the period between the board approval of convening the general shareholder meeting and sending the convening notice, information included in the convening notice should be disclosed by electronic means such as through TDnet or on the company's website.

   Currently, the notice for shareholders to access the electronic provision of information is to be sent out approximately three weeks prior to the date of the General Shareholders Meeting, respecting the purpose of the electronic provision system, the introduction of which has been mandatory since March 2023. To ensure that shareholders have sufficient time to consider the agenda items, regardless of the start date of the electronic provision measure stipulated in the Companies Act, the notice of the General Shareholders Meeting is published electronically on Japan Exchange Group's website and the Company's website as soon as possible after the resolution to convene the General Shareholders Meeting.

3. The determination of the date of the general shareholder meeting and any associated dates should be made in consideration of facilitating sufficient constructive dialogue with shareholders and ensuring the accuracy of information necessary for such dialogue.

   The date of the General Shareholders Meeting of the Company is scheduled in late June, the third month after the fiscal year end, which is the time limit for extensions of final returns under the Corporation Tax Act. The Company selects this schedule to ensure itself the time required for account settlement and other procedures necessary for holding the General Shareholders Meeting after the fiscal year end, with no intention to prevent shareholders from attending the meeting.

   We traditionally used to hold our General Shareholders Meeting on the day when the general shareholders meetings are concentrated. However, starting from the 71st Ordinary General Shareholders Meeting, we have moved the meeting date forward to avoid the concentrated meeting day. We will continue to provide shareholders in Japan and overseas with sufficient time to consider the exercise of their voting rights by disclosing convocation notices as soon as possible. At the same time, we will flexibly set the date of the General Shareholders Meeting, while ensuring an appropriate time period for preparation.

4. Bearing in mind the number of institutional and foreign shareholders, companies should take steps for the creation of an infrastructure allowing electronic voting, including the use of the Electronic Voting Platform, and the provision of English translations of the convening notices of general shareholder meeting. In particular, companies listed on the Prime Market should make the Electronic Voting Platform available, at least to institutional investors.

   As mentioned above, the Company has created an infrastructure for the exercise of voting rights that allows shareholders to use a voting site operated by Sumitomo Mitsui Trust Bank, Limited and the Electronic Voting Platform operated by ICJ, Inc. (Investor Communications Japan), in addition to voting in writing, to ensure that institutional and foreign shareholders have opportunities to exercise voting rights. In addition, with regard to the Notice of the Shareholders Meeting, the essentials of the agenda are translated into English and posted on the Company's website, etc.

5. In order to prepare for cases where institutional investors who hold shares in street name express an interest in advance of the general shareholder meeting in attending the general shareholder meeting or exercising voting rights, companies should work with the trust bank (shintaku ginko) and/or custodial institutions to consider such possibility.

   The Company permits shareholders recorded on the shareholder register to attend the General

   Shareholders Meeting. The Company does not permit beneficial shareholders to attend the Meeting because there are no means by which to confirm the credibility of shareholding by substantial shareholders. However, if such a request is made in advance and it can be confirmed with appropriate evidence that the requester is a beneficial shareholder, the Company will consider allowing attendance at the General Shareholders Meeting and the exercise of voting rights, etc., in consultation with the trust bank and/or custodial institutions.

   Principle 1.3 Basic Strategy for Capital Policy Because capital policy may have a significant effect on shareholder returns, companies should explain their basic strategy with respect to their capital policy.

   The Company aims at comprehensively increasing corporate value and sustainable corporate growth and believes that the most important management responsibilities is to enable sustainable returns of earnings to shareholders while building sufficient internal reserves for the reinforcement of management base and investment in future growth.

   If the Company intends to raise funds by means that dilute existing shares, the Company will implement the fundraising after the Board of Directors sufficiently examines the purpose and effect of the funds and upon careful explanations are provided to shareholders.

   With regard to shareholder returns, the Company's basic policy is to continuously pay stable dividends, while striving to sustainably enhance corporate value and aiming to increase the amount of dividends over the medium to long term.

   In addition, the Company strives to improve capital efficiency and maintain financial soundness, taking into account capital structure and the levels of various management indicators.

   Principle 1.4 Cross-Shareholdings When companies hold shares of other listed companies as cross-shareholdings, they should disclose their policy with respect to doing so, including their policies regarding the reduction of cross-shareholdings. In addition, the board should annually assess whether or not to hold each individual cross-shareholding, specifically examining whether the purpose is appropriate and whether the benefits and risks from each holding cover the company's cost of capital. The results of this assessment should be disclosed. Companies should establish and disclose specific standards with respect to the voting rights as to their cross-shareholdings, and vote in accordance with the standards.

   1. Holding Policy

      From the perspective of business partnerships, creating business opportunities, maintaining and strengthening business relationships, etc., the Company holds shares of business partners, etc., when it is considered to contribute to enhancing corporate value over the medium to long term.

   2. Verification and Reduction Policy

      Each year, the Board of Directors and the Management Committee regularly and comprehensively examine the appropriateness of the holding of individual shares, taking into account factors such as investment returns from transactions and dividends, capital efficiency, and the purpose of holding. The Company promotes the sale of shares that are deemed to be inconsistent with the purpose of the holding.

   3. Criteria for Exercising Voting Rights

      The Company has established the following screening criteria for exercising voting rights. For the stock issues that meet the criteria, the Company will scrutinize the details of the proposals and determine whether to vote for or against them.

      1. a company whose value of shares are judged to be significantly impaired according to its stock price level and financial conditions

      2. a company whose operating income, ordinary income, or net income was recorded as negative in its business results for the previous fiscal year

      3. a company that caused a scandal with significant social impact, including violations of laws and regulations or anti-social acts

      4. a company that submits a proposal that is likely to hinder the purpose of shareholding and significantly impair the value of shares, including any proposal on changes of control or substantial revisions of corporate organization

   4. Reduction Status for the Year Ended March 2025

1. When cross-shareholders (i.e., shareholders who hold a company's shares for the purpose of cross-shareholding) indicate their intention to sell their shares, companies should not hinder the sale of the cross-held shares by, for instance, implying a possible reduction of business transactions.

   If a cross-shareholder indicates an intention to sell the Company's shares, the Company will confirm the background of the intention to sell the shares. However, in principle, the Company will respect the intention of the other party and will not hinder the sale.

2. Companies should not engage in transactions with cross-shareholders which may harm the interests of the companies or the common interests of their shareholders by, for instance, continuing the transaction without carefully examining the underlying economic rationale.

1. In case of a tender offer, companies should clearly explain the position of the board, including any counteroffers, and should not take measures that would frustrate shareholder rights to sell their shares in response to the tender offer.