The Company has established the “Nomination Committee” and the “Compensation Committee” (in this paragraph, “the Committees”) as advisory committees to the Board of Directors. The Committees' chair and the majority of their members are Independent Outside Directors. It has been utilizing the more diverse range of knowledge and advice of Outside Directors and Outside Audit & Supervisory Board Members to ensure further objectivity and transparency in procedures for deciding the nomination of and compensation for Representative Directors, Directors, Audit & Supervisory Board Members, and executive officers (in this paragraph, “Officers, etc.”), thereby enhancing the supervisory functions of the Board of Directors and further substantiating corporate governance functions.

The Committees deliberate on the nomination and compensation of not only the Company’s Officers, etc., but also Representative Directors of the core domestic operating companies and President and CEO of the core overseas operating companies (in this paragraph, “Representative Directors, etc.”).
　The Representative Directors, etc., of the core operating companies occupy an important position for the Group's management and are included within the purview of deliberations by the Committees from the perspective of emphasizing the objectivity and transparency of the principal nomination and compensation procedures for the management of not only the Company but also the Group.
　The Company will also appropriately determine the companies to be "core operating companies" with an emphasis on the objectivity and transparency of the Group management procedures, in accordance with the Group's business portfolio strategy and governance system.

Internal and outside Audit & Supervisory Board members act as observers on the Committees.
 They monitor the appropriateness of deliberation procedures and the reasonableness of considerations related to each agenda item discussed by the two committees, which serve as advisory bodies to the Board of Directors, from an objective standpoint. They also provide opinions from an impartial and objective perspective to contribute to the Company’s sustainable growth and the enhancement of its medium- to long-term corporate value.

The Company's Audit & Supervisory Board develops audit plans with the basic audit policies of ensuring sound and sustainable growth of the Company and its Group companies and establishing high-quality corporate governance systems to respond to public trust. The Audit & Supervisory Board sets the establishment of internal control systems, and the system to promote legal compliance and risk management, as key audit items.
　The Audit & Supervisory Board Members attend the Board of Directors meetings and other important meetings. They conduct audits in the following manner: exchanging opinions with the Representative Directors and periodically interviewing Directors and others on the status of business execution; viewing important documents for approval such as request forms; and surveying the status of operations and assets at the Head Office and others. For subsidiaries, they communicate and share information with the Directors and Audit & Supervisory Board Members of subsidiaries, visit the subsidiaries' Head Offices and stores to survey the actual status of operations in accordance with the audit plans, and receive reports.

We have established an Auditing Office as an independent internal audit department to evaluate the internal controls related to financial reporting for the entire Group.
　In addition to auditing our own holding company, we conduct a confirmation of internal audits or direct audits of major operating companies, including the establishment and operation of compliance　systems, in order to enhance and strengthen the audit functions of the entire group.
　(As of April 30, 2025, there are 28 full-time internal audit staffs.)
　Furthermore, the results of evaluations of internal controls related to financial reporting and the results of internal audits are reported to the Representative Director, relevant Officers, and the Board of Directors, and also reported to the Audit & Supervisory Board.　We collaborate and consult with the Audit & Supervisory Board member audits to enhance the effectiveness of audits.

(a) Coordination between the Audit & Supervisory Board members, the Auditing Office, and the accounting auditor

To improve the quality of audits across the Group, the Company ensures that the Audit & Supervisory Board members, the Auditing Office, and the accounting auditor proactively exchange information and opinions, and engage in discussions to maintain close ties with each other, by such means as periodically holding tri-partite meetings.

(b) Coordination between the Audit & Supervisory Board members and the accounting auditor

The Audit & Supervisory Board members receive reports from the accounting auditor at the beginning of the fiscal year on the annual audit plan, and on the procedures and results of accounting audits and internal control audits on a quarterly basis, and exchange opinions to coordinate with them..

(c) Coordination between the Audit & Supervisory Board Members and the Auditing Office

The Audit & Supervisory Board Members and the Auditing Office ensure comprehensive sharing of audit information between each other in order to improve the quality of audits.

(d) At each audit, the Audit & Supervisory Board Members, the Auditing Office, and the accounting auditor receive reports and materials, etc. from the internal control divisions, and request explanations as deemed necessary, and the internal control divisions cooperate in the appropriate performance of these audits.

The Company is taking steps to appropriately manage various risks based on effective methods with practical application in order to increase corporate value while ensuring the continuous development of the Group. In managing the Group's risks, the Company employs an integrated approach that quantitatively and qualitatively evaluates the risks in every business domain faced by each Group company, and implements measures that avoid, transfer, mitigate, and retain risks.

The Company and its Group companies have established governing bodies such as the Risk Management Committee, with the departments that oversee the overall risk management of the respective companies as the secretariat.
　As a general rule, the Risk Management Committee meets once every six months to receive reports on the risk management status of the respective companies from the departments responsible for the management of risks, to comprehensively determine, assess, and analyze risks and discuss measures, and to determine the future direction going forward.
　In addition, various risks are comprehensively assessed primarily from the perspectives of significance, commonality, visibility, and efficiency, and are classified into four risk categories. Based on these risk categories, the roles and responsibilities of the Company and each of its group companies are clarified, and the entities responsible for each risk implement improvement activities to enhance the effectiveness of risk management across the entire group. For details on the PDCA and evaluation processes for risk management, please refer to the “Risk Factors” link below.

In FY2020, the Company introduced shared Group risk indicators (Key Risk Indicators, “KRIs”) to enhance the effectiveness of the Group’s risk management.
　KRIs are quantitative monitoring indicators that facilitate the early detection of the materialization or potential materialization of risks, as well as the reduction and minimization of any possible damage and its impact. A total of 90 KRIs have been set.
　In operations, priority risks and their KRIs are identified from the perspectives of the Company and its Group companies. The Company coordinates with its Group companies to take measures before any major incidents occur, conducting assessments from a Groupwide cross-organizational perspective alongside respective self-assessments.

As the business environment changes drastically, recognizing that prevention and early detection of incidents are crucial, the Company is promoting company-wide initiatives that require each line, i.e., the operating division-the first line, the administrative divisions- the second line, and the internal auditing division-the third line, to function properly.
　 In the first line, the operating division strengthens communication in the regular business line to ensure the early detection and reporting of/responses to risks onsite.
　 In the second line, the internal control promotion division, which is independent from the regular business lines (e.g., the administrative divisions and monitoring divisions), has established a system to give feedback, advice and support to the operating division, the first line, regarding the information gathered daily, while engaging in mutual coordination, as necessary.
　 In the third line, the internal auditing divisions of the Company and its Group companies conduct the risk management audits that analyze and evaluate whether the first and second lines of each company are functioning properly.
　 In addition to the above, given the lightning speed of changes in today's business environment, the Company is strengthening analysis of information on social media as well as the content of opinions from its customers and other parties, as part of its efforts to strengthen early understanding of the warning signs of risk.

Toward further strengthening of risk management: detecting the warning signs of risk

Toward further strengthening of risk management: detecting the warning signs of risk

Overall, the Group's cross-shareholdings as of the end of February 2025 comprise 42 stocks, with a market value of ¥95.4 billion accounting for 2.3% of consolidated net assets.
　In principle, the Group does not hold cross-shareholdings except where there is an accepted rational for doing so, such as maintaining or strengthening business alliances or business relationships, in order to maintain and strengthen business competitiveness.
　Stocks held are reviewed annually and shares with less rationale or less effectiveness for holding are to be sold in view of the circumstances of the investee companies.

When exercising voting rights as to listed cross-shareholdings, based on the following Detailed Rules regarding Standards for Exercising Voting Rights, the Company decides whether to vote for or against proposals from the perspective of increasing the medium- to long-term corporate value of the Company and the investee companies, and engages in dialogue with the investee companies about the proposals before exercising its voting rights if necessary.

At the Board of Directors held on April 17, 2025, we reviewed the appropriateness of holding individual stocks based on quantitative criteria and the rationale of holding them in light of our relationships with business partners.
　As a result, we will consider selling stocks for which the rationale for holding them has weakened, taking into account the impact on the stock market and other factors.
　In addition, the Board of Directors has confirmed that group operating companies, excluding listed subsidiary, are also conducting reviews of listed cross-shareholdings in accordance with the same holding policy as the Company.