SPARX Group Co., Ltd. has a guideline for corporate governance to conduct our business properly and efficiently as stated below:

1. Corporate governance to meet the requirements of the laws and regulations in handling duties of directors

1. The board of directors has external independent directors to enhance the monitoring system to check for the lawfulness and appropriateness in making decisions and operating the business. And external independent auditors monitor the appropriateness in operating the business.
2. The board of directors obeys the laws, contract articles, and company rules, which are explained in the compliance manual, SPARX VISION STATEMENT, and SPARX Group Code of Ethics to achieve a goal to become the most trusted and respected investment company in the world. In addition, the directors are required to attend a compliance training class at least once a year to better understand the laws and regulations to manage the company.
3. In order to obey the laws and regulations in Japan and the overseas, there is Legal & Compliance Department, which is responsible for conducting a compliance committee and reporting to the board of directors monthly about the status of the compliance-related issues.
4. The head of Legal & Compliance Department, internal auditors, and the outside law office receive information from employees about unlawful acts of the directors based upon the internal compliance reporting system.
5. We have independent advisors who suggest the business advice from their profound knowledge or useful experience for our business.

2. Rules for creating and keeping reports in the company

1. In accordance with internal document control rule, the following documents, including the electronically saved documents in the company, are handled and stored.
   1. Resolution of the Shareholders
   2. Resolution of the Directors
   3. Resolution of the Auditors
   4. Other documents required by the documentation requirement
2. In the case that directors or auditors ask for any of the documents mentioned above, a responsible department is supposed to show the proper document or provide a copy of it anytime.

3. Rules for risk management

1. SPARX Group Co., Ltd. and its subsidiaries are responsible for risk management and risk control. We have and follow the general rules of group risk management based upon the SPARX VISION STATEMENT 2006, which is emphasizing that "SPARX Group Co., Ltd. and its subsidiaries must always be prepared for the worst situation or damage.
2. As our behavior of risk control, we have a group risk management section and assign a responsible person for group risk management. Also, this risk management section and its head have to create an annual plan for the group risk management, and they have to evaluate and understand potential risk. In addition, they have to suggest the detailed risk control system for the company. Moreover, the board of directors must regularly evaluate the effectiveness of the risk management system and process in the company.
3. In order to manage potential damage that may be caused by such disaster as an earthquake, a fire, a power outage, or a terrorist attack, we must create a policy to manage risk in the company.

4. Corporate governance to maintain efficiency in handling duties of directors

1. Directors must be aware that they are fully responsible for making right decisions, keeping efficiency in operations and maintaining financial stability in the company. The term of directors is one year to efficiently manage the company's business.
2. Directors attend a monthly board meeting to review the monthly performance and discuss other important issues. Also, directors review the status of projects and make business decisions for the company. In addition, directors review and update provisions in the company guideline as necessary.
3. Senior managers have a management committee at least once a month. Senior managers make business decisions for the issues for which they are given authority by the board of director. Also, senior managers discuss issues which need to be brought to the board of directors. In addition, the board of directors and a management committee set up a corporate governance committee and a compliance committee as advisory members.

5. Corporate governance for employees' activities to meet the requirements of the laws and regulations

1. Employees must follow the laws, regulations and company guideline. Also, employees must follow the company policies stated in the compliance manual, SPARX VISION STATEMENT and SPARX Group Code of Ethics "to become the most trusted and respected company in the world."
2. The company advises all the employees of new changes in the company guideline, which had to be made to reflect the new changes in the laws and regulations. All the new employees of the company have to attend a compliance training class when they are hired. Employees have to continue to attend a compliance training class every year to better understand the laws and regulations.
3. As mentioned above, Legal and Compliance Department is directly reporting to the board of directors. In order to obey the Japanese and overseas laws, Legal and Compliance Department conducts a compliance committee to evaluate the compliance system and examine compliance issues. After this committee, the board of directors discusses how to take the action to these Legal & Compliance issues.
4. A department or a subsidiary reports a compliance-related problem to Legal & Compliance Department through the "Incident/Near Incident Report", then a compliance committee will examine the issue. And then, the result of discussion at Legal & Compliance committee is brought to the board of directors. In the case of breech of rules, if necessary, a punishment committee will take place to further examine the issue and may give a punishment in accordance with the employee handbook.
5. According to the compliance reporting system, the head of Legal & Compliance Department and auditor are internal contact points, and the law firm is an outside contact point to report an unlawful conduct of an employee or a director.
6. Internal Audit Department directly reports to the board of directors. Internal Audit Department is responsible for monitoring whether employees are handling their jobs in accordance with the laws, regulations and the company guideline. Internal Audit Department is also responsible for reporting the results of their audit examinations to the board of directors.
7. In order to make the corporate governance system work effectively for financial reporting, we have the manual covering the IT structure and data processing. We evaluate the effectiveness of corporate governance and continue to improve the corporate governance system. In addition, the board of directors monitors the status of projects along with corporate governance.

6. System to enhance corporate governance for the company as a whole, including SPARX Group Co., Ltd. and its subsidiaries.

1. Directors of SPARX Group Co., Ltd. hold a monthly global strategy meeting to discuss business strategies for SPARX Group Co., Ltd. as a whole.
2. Subsidiaries of SPARX Group Co., Ltd. regularly report important business issues to the board of directors of SPARX Group Co., Ltd.
3. Auditors of subsidiaries of SPARX Group Co., Ltd. in Japan organize a group audit committee to share information and exchange opinions about the audit-related issues.
4. Compliance managers of the subsidiaries hold a committee to obey the laws and regulations, rules of subsidiaries, and SPARX Group Code of Ethics. They discuss compliance issues and consider risk management from a global perspective at the committee.

7. Auditors hiring an employee for support

In accordance with the request from auditors, an assistant of auditor is hired.

8. Independence of the assistant

An assistant of auditors has to be independent of directors and is fully committed to an audit committee. In addition, an audit committee has to approve the assistant's performance evaluation, job transfer or any other HR-related issues.

9. The reporting system of the directors and audit assistant

1. When a director finds some conduct that will severely damage the company, the director will have to follow the corporate governance system to immediately report to an auditor.
2. Directors and senior operation staffs have regular meetings with auditors to report any problems, check the status of the projects and exchange management ideas.
3. Auditors have to attend the board meeting, a management committee and other important meetings. Also, auditors have to review resolutions of those meetings that are submitted by directors and senior operative staffs.

10. Other corporate governance issues for auditors to practically handle their audit examinations

1. Auditors have regular meetings with the representative director to check the current status of audit examinations, exchange business opinions and discuss problems.
2. Auditors have regular reports from Internal Audit Department for the internal audit examination results and have regular meeting with an external accounting auditor for the accounting audit examination.
   In addition, they have to communicate well internally, so that they can efficiently handle audit examinations results. Moreover, auditors read resolutions of the important meetings, and they may ask for more detailed explanation if necessary.