Directors

Appointment policy for Outside Directors

The Company has not clearly prescribed standards or a policy concerning independence for the appointment of Outside Directors, however, at the time of selection, candidates for which independence can be secured in consideration of the independence standards of a financial instruments exchange are selected.
As a basic policy for selecting candidates for Outside Directors, decisions are made based on the assumption that the candidates possess the extensive experience and deep knowledge required of Outside Directors or exceptional knowledge in the fields of law and corporate accounting as well as the ability to express fair and objective opinions from an independent standpoint in order to improve the corporate governance of the Group.

Reasons for election of Outside Directors

Outside Directors

We have established a structure so that, without exception, Outside Directors are invited to meetings of the Board of Directors, receive materials, etc., and are offered the same explanations from the departments submitting proposals as the other Directors. The notices, materials, and other information sent to Outside Directors is the same as what is sent to the other Directors.
In addition, the board is set up so that Outside Directors are given access to important management information and are able to express their opinions. Furthermore, they attend meetings of the Board of Directors from an independent standpoint and leverage their expert knowledge as they actively offer their opinions.

Evaluation of effectiveness of Board of Directors

The Secretariat of the Board of Directors periodically conducts written questionnaires on the effectiveness of the Board of Directors, which are reported to the Board of Directors and improvements are made as necessary.
Based on survey results, we will continue to promote proper operations of the Board of Directors and implement improvement measures to address the issues to enable the Board of Directors to further contribute to improvement of corporate value.

Evaluation Process

FY2023				FY2024
Recognition of Major Issues		Evaluation Summary	Compared to Previous Period	Improvement Measures
Operation of the Board of Directors	Providing relevant materials well in advance of board meetings	Insufficient enforcement of early submission rule for materials	No change	In principle, postpone agenda item to the next meeting if unable to meet the submission deadline
	Ensuring Board of Directors meeting materials are easy to understand (reducing the use of technical and industry jargon)	Need for supplementary explanations of formal terms when first introduced	Improvement	Use easy-to-understand notation when using technical or industry-specific terms
	Scrutinizing individual cross-held shares by the Board of Directors	Insufficient capital policy Inadequate scrutiny of report contents	Deterioration	Clearly state the purpose of holding cross-held shares
Support for directors	Preparing an orientation program for new directors	Explanations of business content exist but are not systematized	Deterioration	Implement an orientation program hosted by the Human Resources and General Affairs Department
	Providing opportunities for directors to acquire the knowledge and awareness they need, and coverage of expenses, etc.	Some in-house training was carried out, but it was insufficient	Deterioration	Human Resources Department to study the implementation of external training
Internal control	Ensuring proper internal controls and company-wide risk management systems, fully utilizing internal audit departments, and overseeing the status of their operation	Need to unify understanding and awareness of corporate governance itself	Deterioration	Enhance reporting on internal control and risk management systems
Feedback to senior management	Providing appropriate feedback to the Board of Directors regarding opinions expressed at financial results briefings, etc.	Shareholders' and investors' opinions should be shared with the Board of Directors in a timely manner	No change	Continue IR reports Consider sharing feedback after each financial results briefing, which is currently not being done

Director training

For director training, we have established an environment that allows active participation in external seminars and training to promote acquisition of the necessary knowledge and understanding of roles and responsibilities.
In addition, for newly elected Directors who are not members of the Audit/Supervisory Committee, we carry out training utilizing internal and external training programs.

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Audit Committee

We are a company with an audit/supervisory committee. The committee is comprised of six members: one full-time and five part-time (all Outside Directors).

Main activities of members of Audit/Supervisory Committee

The member of Audit/Supervisory Committee audited the execution of duties of Directors through attendance at important decision making-related meetings such as of the Board of Directors, the Management Meeting, and the Nominating and Compensation Committee (voluntary), received regular reports from the Internal Control Department, made requests for audits and reports to the Internal Control Department, examined the internal control systems of key operating companies, and viewed important documents such as approval forms. Moreover, they receive reports from Directors and persons in charge and shared opinions with them as necessary.
The member of Audit/Supervisory Committee attends meetings of the Board of Directors and the Nominating and Compensation Committee (voluntary), Business Executive Manager Meetings (held twice per year), and receives reports on activities of the full-time Audit/Supervisory Committee members to share opinions.
In addition, the Audit/Supervisory Committee interviews the President and CCO, and in addition, receives monthly reports on important matters relating to management status from Business Executive Directors, to provide their opinions on Group strategies and offer suggestions on how to improve the risk management system. In addition, they provided a report to the Board of Directors on the status of audit activities once every quarter.

Internal Audits

The Company has prescribed the mission of internal audits as being "to enhance and preserve the value of the Group by providing risk-based and objective assurance, advice, and insight" and the definition of internal audits as being "to evaluate and improve the effectiveness of each risk management, control and governance process with a disciplined attitude and systematic methodology as internal audit specialists," and conducting internal audits of the entire group.

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Outline of the details of the decision policy

Details of Executive Compensation (fiscal 2023)

(Notes)

1. The total amount of compensation, etc., for Directors does not include the employee salary for Directors who concurrently serve asemployees.

2. Non-monetary compensation in the form of restricted stock compensation is recorded as an expense for the fiscal year under review.

Incentives

The Company has introduced the following compensation system for Directors other than Audit/Supervisory Committee Members.

Performance-linked compensation system

In order to raise awareness of the need to improve the Company's performance in each fiscal year, the Company has set consolidated ordinary income as the target performance indicator for a single fiscal year, and the amount calculated in accordance with the degree of achievement of the target value is multiplied by the coefficient that corresponds to the contribution to medium- to long-term performance and then paid every month as performance-linked compensation in addition to the fixed compensation. The reason for selecting consolidated ordinary income as the performance indicator is that the Company believes it is important to improve overall profitability, including not only operating activities but also financial activities.

Stock based compensation (post-delivery performance-linked share-based compensation) system

The Company has introduced this system to provide incentives for the sustainable enhancement of the Group's corporate value and to promote further value sharing with our shareholders.

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The Company and its Group companies have established a system to ensure that its Directors and employees perform their duties efficiently and in compliance with laws and regulations while conducting business activities, and to manage any inevitable risks that may occur. Furthermore, our basic approach for an internal control system is to build a strict audit and monitoring system to ensure that these tasks are performed appropriately. See the Report on Corporate Governance submitted to the Tokyo Stock Exchange for details on our internal control system.

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The Company recognizes that having a relationship with antisocial forces is a violation of compliance, and has placed an ongoing priority on implementing measures to prevent any relationship with antisocial forces.

1. The basic matters concerning the response to antisocial forces are stipulated in the Sinanen Holdings Group's Charter of Corporate Conduct and the Regulations for Handling Antisocial Forces, which clearly stipulate the severance of relations with antisocial forces and establish a system to respond as an organization to unreasonable demands by antisocial forces.
2. We have placed the Legal Affairs Office in charge of our response to unreasonable demands by antisocial forces, etc., and shall endeavor to build cooperative relationships with specialist external organizations such as the police, Tokyo Center for Removal of Criminal Organizations, and attorneys.
3. We have joined a specialized external group and work to gather information about antisocial forces while putting together a system for taking inquiries and receiving guidance in the event of an incident.
4. Contracts and other agreements entered into by the Group shall stipulate clauses that exclude antisocial forces.

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The Company holds cross-shareholdings for the purpose of strengthening and facilitating business relationships and alliances. Every year, the Board of Directors reviews the economic rationale of major cross-shareholdings of this type from a medium- to long-term perspective to determine whether or not to keep them.
Additionally, exercising of voting rights with respect to cross-shareholdings is carried out based on a comprehensive consideration of whether the matter will contribute to improving our corporate value and the common benefit of the investee's shareholders.

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The Company believes that constructive dialog with its shareholders and investors contributes to its sustainable growth and improves its corporate value in the medium to long term.

1. To facilitate constructive dialog with all shareholders and investors, the officer in charge of the Finance and IR Department, the Finance and IR Department have formed a point of contact under the supervision of the President and CEO to respond appropriately to inquiries. The Finance and IR Department is in charge of the planning and execution of specific matters related to dialog with shareholders and investors and works closely with each division of the Company, including the Corporate Planning Department, the Growth Strategy Department, and operating companies.
2. In regard to dialog and interviews with shareholders and investors, basically either the President and CEO or members of senior management (primarily the officer in charge of Finance and IR Department) participate in interviews directly. This is to fulfill our accountability as a listed company and to faithfully reflect the knowledge and ideas gained through constructive dialog with shareholders and investors in future management decisions. When engaging in such dialog with shareholders and investors, we do not communicate insider information (material facts that have not been made public) to specific individual on a selective basis.
3. We actively disclose IR information on our website to shareholders and investors to promote a deeper understanding of the Group's management policies, basic strategies, financial situation, etc. and will continue working on enhancing that information.

Efforts to promote meaningful General Meetings of Shareholders and facilitate the exercise of voting rights

IR activities

Efforts related to respect for the stakeholder's perspective

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