[Updated] Corporate Governance

Basic Views on Corporate Governance

JAFCO's basic views on corporate governance are as outlined below. With an eye to increasing corporate value over the medium to long term, JAFCO will make continuous efforts for its enhancement.

• Build respectful relationships with stakeholders
• Maintain transparency and fairness in decision making
• Establish an appropriate supervising structure
• Establish an operating structure that ensures effective and swift business execution

Corporate Governance Policy

Based on the above basic views, JAFCO has established the 'Corporate Governance Policy' that outlines our concrete corporate governance measures.

Corporate Governance Structure

Board of Directors/ Board-Audit Committee

JAFCO has adopted the 'company with board-audit committee' structure for its corporate governance system.
JAFCO has established the Board of Directors and the Board-Audit Committee, through which it makes important management decisions and audits/ supervises business execution by directors.

Independent directors

In principle, a majority of the Board of Directors of JAFCO consists of independent directors to enhance the effectiveness of corporate governance. As members of the Board of Directors and/or the Board-Audit Committee, independent directors supervise management from a neutral and objective standpoint.
JAFCO shall select independent director candidates who have abundant experience and deep insight into corporate management or specialist fields, and can be expected to fulfill the roles and responsibilities of an independent director. The selection is in accordance with the 'Standards for Independence of Independent Directors' of JAFCO.

Nomination and Remuneration Committee

In deciding important matters related to the nomination and remuneration of directors, corporate officers and partners, the Nomination and Remuneration Committee carries out prior deliberations to ensure transparency and objectivity of such nomination and remuneration. Based on the contents of deliberations, the Board of Directors carries out discussions and makes final decisions.

The Evaluation of the Effectiveness of the Board of Directors

The Board of Directors analyzes and evaluates its effectiveness every year and discloses the summary of the result. The summary of the results of the evaluation of the effectiveness of the Board of Directors for the fiscal year ended March 31, 2021 is as follows:

The Board of Directors ('BOD') evaluates the effectiveness of the BOD on an annual basis. In the fiscal year ended March 31, 2021, BOD deliberations over items such as composition, operation, role, duties, etc. of the BOD were held as in previous years based on questionnaires and interviews administered to all directors.
As the majority of the BOD consisted of independent directors, it was confirmed that the BOD composition was appropriate in terms of internal-external balance and size to fulfill its function to supervise business executions.
Also, the following point was addressed in the period under review in light of the evaluation results for the fiscal year ended March 31, 2020.
In the previous fiscal year, it was confirmed that the BOD needs to further enhance discussions on the Company's business direction. In response, directors carried out active mutual discussions and exchanged opinions, not only at the BOD meetings but also by providing dedicated opportunities.
As a result of these discussions, the BOD determined the policy on future shareholder returns and carried out partial sale of the Company's holdings in Nomura Research Institute, Inc. and a share buyback. It was evaluated that the BOD demonstrated its function and progress has been made. It was also confirmed that the BOD needs to deepen mutual discussions further from the medium- to long-term point of view.

Based on the above results, it is evaluated that the effectiveness of the BOD increased in general compared to the previous year. We will continue to address areas of improvement that have been identified, while regularly conducting effectiveness evaluations to further increase the effectiveness of the BOD.
(updated as of Mar. 10, 2021)

Investment Committee

The Investment Committee composed of the President and partners has an authority to make investment decisions to allow quick decision-making. Directors serving as Board-Audit Committee members also participate in the Investment Committee on an as-needed basis.

External Auditor

JAFCO has appointed Ernst & Young ShinNihon LLC as its external auditor.

Internal Audit

The Internal Audit Division, independent from other business operations, audits overall business activities. The Internal Audit Division reports internal audit results to the President and the Board-Audit Committee.

Cooperation among Board-Audit Committee, External Auditor and Internal Audit Division

The Board-Audit Committee holds regular discussions with the Internal Audit Division and External Auditor to exchange information and opinions.

The Board-Audit Committee conducts audits based on internal audit results when available. The Internal Audit Division conducts internal audits at the request of the Board-Audit Committee and reports the result to the Committee.

Nomination and Remuneration of Directors, etc.

Nomination of Directors, etc.

• Directors, including CEO, and corporate officers are appointed by the Board of Directors after deliberations by the Nomination and Remuneration Committee.
• All directors (excluding directors serving as Board-Audit Committee members) are subject to election/re-election every year at the General Meeting of Shareholders. The Board-Audit Committee expresses its opinion on directors' election/ dismissal at the General Meeting of Shareholders when it deems it necessary.
• JAFCO shall select director candidates who have business skills, insight, experience, and expertise to serve as a director to allow the Board of Directors to fully exercise its operational and supervisory functions. JAFCO proactively selects suitable candidates from diverse background regardless of gender and nationality.
• In a case where a director has caused JAFCO to incur a tremendous loss or operational problems by committing a wrongful act, or violating laws, regulations, the Articles of Incorporation or JAFCO's internal rules, or has become difficult to execute duties by other reasons, such director shall be subject to dismissal proposal.
• A Partner is nominated with consensus of all partners and appointed upon the approval of the Board of Directors after deliberations by the Nomination and Remuneration Committee.

Reasons for the appointment and nomination regarding each director are described in the Notice of Convocation of the Annual General Meeting of Shareholders.
General Meeting of Shareholders

Remuneration of Directors, etc.

• The Board of Directors decides the remuneration of directors (excluding directors serving as Board-Audit Committee members), corporate officers and partners after deliberations by the Nomination and Remuneration Committee. The decision on remuneration adequately reflects evaluation of JAFCO's business results, fund performance, and the degree of individual contribution.

• The remuneration of directors (excluding directors serving as Board-Audit Committee members), corporate officers and partners comprises a basic salary and an extraordinary compensation. Part of the basic salary corresponds to JAFCO's ordinary income and other business results, while the extraordinary compensation additionally takes into account fund performance.

• The Board-Audit Committee expresses its opinion on directors' remuneration at the General Meeting of Shareholders when it deems it necessary.

Disclosure and Constructive Dialogue with Shareholders

Information Disclosure

JAFCO shall make timely and appropriate information disclosures in compliance with laws and regulations, including the Companies Act, Financial Instruments and Exchange Act, and Timely Disclosure Rule of the Tokyo Stock Exchange.
In addition to the above, JAFCO shall actively provide information that is deemed essential or useful to understand about JAFCO (except for personal information, customer information and information that may violate the rights of others).
JAFCO ensures fair disclosure of information.

Constructive Dialogue with Shareholders

JAFCO has established the policy for constructive dialogue with shareholders as shown below.

Initiatives for Preventing Misconduct

Initiatives to Prevent Bribery

In response to the global trend in the establishment and strengthening of bribery prevention systems, we have established the Basic Policy on Bribery Prevention to address prevention of unauthorized transactions. We ask our business partners for their understanding and cooperation.

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