We aim to fulfill our social responsibilities as a good corporate citizen so that we can gain and retain the respect from stakeholders and be recognized as a valuable enterprise. We work to establish a high degree of transparency in management systems to ensure full legal and regulatory compliance and respect for social norms.
In addition, to coexist with the Earth and society and to develop sustainably, we have established the Sustainability Promotion Committee and promoted management initiatives with a focus on sustainability.

We adopt the governance system of a company with audit and supervisory board. The Board of Auditors consists of five corporate auditors (three of whom are outside corporate auditors) that are appointed at the General Shareholders Meeting. They oversee and verify the Board of Directors, which makes decisions on management and supervises business, and the business execution of company organizations at and below the level of the Management Committee, which are operational organizations. The results are approved by the Board of Auditors and reported to the General Shareholders Meeting.
Since April 2012, We have introduced an executive officer system to establish a system that enables more detail-oriented business operations and to promote quicker and more efficient decision-making.
The Board of Directors has 11 directors (four of whom are outside directors) appointed by the General Shareholders Meeting. It meets once a month, in principle, to make decisions on matters stipulated by laws and regulations and in the Articles of Incorporation, draft plans for important management for the Group, and supervise business execution.
The Management Committee mainly consists of officers at the level of managing executive officer or above and full-time corporate auditors. It meets twice a month, in principle, to submit important issues related to the management decisions of the Group to the Board of Directors as agenda items, and to promptly execute business in accordance with the management policy determined by the Board of Directors, as the highest body for business execution.
Regarding personnel matters and treatment for officers, We have introduced a three-committee system that consists of the Officers Evaluation Committee, Nomination Advisory Committee, and Remuneration Advisory Committee, and the following procedures have been adopted.
Regarding evaluations of officers, We have introduced mechanisms whereby decisions are made by the Officers Evaluation Committee, which is chaired by the president and composed of members that also include outside directors and outside corporate auditors. The committee meets at least twice a year to evaluate the commitments set by each officer at the beginning of the fiscal year and to perform overall evaluations of each officer based on the results of qualitative reviews, and provides the evaluation results to the Nomination Advisory Committee and the Remuneration Advisory Committee.
Regarding the appointment of officers, the Nomination Advisory Committee, which is chaired by an outside director and whose majority members consist of outside directors and outside corporate auditors, reviews the composition of officers for the following fiscal year based on the evaluation of officers and the results of performance evaluations of employees. A draft is then submitted to the Board of Directors where a proposal of the list of candidates is then forwarded to the Ordinary General Shareholders Meeting.
Regarding executive remuneration, the Remuneration Advisory Committee, which is chaired by the president and whose majority members consist of outside directors and outside corporate auditors, prepares a draft of the basic remuneration for the next fiscal year, after reviews based on the results of officer evaluation, and the Board of Directors makes the final decision. In terms of executive bonuses, we use a system of performance-linked salary which specifically reflects the achievements and responsibilities of each executive. After the Remuneration Advisory Committee reviews a draft of calculation rules for the performance-linked salary for each fiscal year, the Board of Directors makes the final decision. In addition, restricted stock remuneration is positioned as remuneration for the responsibility that each management team has to shareholders for enhancing corporate value. The Remuneration Advisory Committee reviews the appropriate level for each position, and the specific number of shares to be paid (the amount of monetary compensation claims to be applied to pay the acquisition price of the shares) is determined by the Board of Directors.
Regarding the evaluation of the effectiveness of the Board of Directors, we have introduced a system in which the Board of Directors Evaluation Committee, chaired by one of the outside directors and composed of outside directors and all corporate auditors, plays a central role. The committee reports the results of its evaluation and makes proposals for improvement to the Board of Directors.

Since FY2019, we have been analyzing and evaluating the effectiveness of its Board of Directors to further improve its functions. The summary and results of the effectiveness evaluation of the Board of Directors recently performed are disclosed as follows.

Evaluation method

For FY2023, a third-party assessment was made to evaluate the effectiveness of the Board of Directors in a neutral and objective manner.
• An anonymous questionnaire survey of all directors and corporate auditors
• A third-party interview of all directors and corporate auditors
• Discussions at meetings of the Board of Directors Evaluation Committee
• Discussions at Board of Directors meetings

Questionnaire contents

• Questions about the ideals, composition and operation of the Board of Directors
• Questions about discussions held at Board of Directors meetings
• Questions about the monitoring functions of the Board of Directors
• Questions about the performance and training of inside/outside directors
• Questions about dialogue with shareholders (investors)

Summary of evaluation result

It was confirmed that the Board of Directors appropriately discusses factors and viewpoints that directors and corporate auditors should emphasize in decision-making and supervision concerning basic management policy, business strategy and important business execution. And the Board of Directors Evaluation Committee evaluated that the effectiveness of the Board of Directors is ensured.
In addition, as an approach to the issues recognized in the previous effectiveness evaluation, improvements were made to the operation of the Board of Directors, such as setting time limits for explaining meeting materials and making the materials more concise.
On the other hand, several mid- to long-term issues were identified to further enhance effectiveness including the following:

Mid- to Long-term Issues
• Strengthening the supervisory function of the Board of Directors, including delegating authority to the Management Committee and reviewing the organizational structure
• Examining the diversity needed on the Board of Directors
• Operating the Board of Directors in a way that further facilitates smooth discussions at its meetings
• Further enriching discussions at the Board of Directors on important matters such as mid- to long-term business strategies and succession planning

We will continue to strive to improve the effectiveness of the Board of Directors, strengthen its functions, and continuously improve corporate value.

[The Corporate Governance Structures]

Hanwa is committed to using an effective corporate governance system to achieve sustained growth and other progress while reducing exposure to risks associated with achieving business goals. To accomplish this, we need to work on the establishment and operation of a system of internal controls for performing business activities properly and efficiently.
Our goal of internal control systems is to achieve (1) operational effectiveness and efficiency; (2) reliability in financial reporting; (3) strict compliance with laws and regulations in operating activities; and (4) appropriate preservation of assets.

[Flowchart (Design, Operation and Assessment of Internal Control)]

We define "risk" as "uncertainty that may affect the achievement of the Company's business strategy and business objectives" in the Company's “Basic Policy on Risk Management”. And we implement specific measures to control various risks that may arise from business operations within our company group. It is basic concept of the risk management that we contribute to achieving dramatic business growth through proactive investments and business expansion with these measures.

Risk Management Framework

We recognize the strategic importance of risk management as a material issue, and we have established a framework under the basic policy determined by the board of directors. We have appointed the head of risk management within the management section as the overall responsible person for risk management. Additionally, we have implemented necessary risk management structures and specific management methods. Furthermore, we are actively promoting initiatives to enhance the overall risk management awareness among top management. To prevent the occurrence of risks and mitigate those that do arise, we definitize the departments to address each risk. Additionally, we develop various regulations and response manuals.
Specifically, within the various risks surrounding our company—including credit risks (including credit risks related to creditworthiness and country risks), business investment risks, market risks (such as commodity price fluctuations), and compliance risks (including adherence to security trade management and various economic sanctions)—we identify significant risks that could significantly impact our company’s management. We establish a Risk Management Department as a specialized unit to manage these risks effectively. This department collaborates with relevant divisions to develop necessary policies and regulations, ensuring an integrated risk management system on a consolidated basis.
Among these significant risks, for those that can be quantitatively assessed, we calculate risk assets based on the maximum potential loss that could occur in the future on a consolidated basis. Regularly, we assess the overall risk exposure across the entire organization. With this information, we practice management that controls risks within the scope of shareholder capital (risk buffer). To achieve ambitious business growth through proactive investments and expansion, we strategically take risks within the risk buffer, aiming to enhance profitability while considering risk factors. Our goal is to balance improved corporate value with securing of soundness of the management.

The publication of this strategy statement is regarded as satisfying the duty under Paragraph 16(2),Schedule 19, Finance Act 2016 in UK.