1．Directors and Board of Directors

　Our company has seven directors. Amongst these seven, one is a part-time director from one of our affiliate companies, whose job is to offer valuable advice to our group companies on management policy and business operations.

　The Board of Directors is comprised of all of our directors. In addition to making decisions on important business matters, the Board also has the authority to supervise directors’ duties. In principle, the Board convenes for regular monthly board of directors’ meetings as well as extraordinary meetings as necessary.

2．The Management Council

　The Management Council convenes in order to deliberate on which matters should be presented to the Board, as well as to discuss important proposals and decisions. It consists of the Chairman & CEO, President & CEO, full-time directors, and the Chief Financial Officer. The Management Council meetings are held on an ad hoc basis, as necessary.

3．Auditors and Board of Auditors

　GungHo has three auditors (one is full-time and two are part-time, but all three are external auditors). The auditors audit our company’s business operations as an independent body at the mandate of our shareholders In addition to having the right to attend general shareholders’ meetings and board of directors meetings, hearing of reports from board members, employees, and accounting auditors, as well as legal authority, the full-time auditors in particular attend Management Council and other important meetings, reviews board? decision documents, conducts visiting audits at our places of business and subsidiaries, and so on. The auditors work together with our internal auditing division, exchanging information and opinions with the division manager as necessary.

　The Board of Auditors is comprised of all of our company’s auditors. They determine auditing policy, based on reports from each of the auditors on the state of the company’s business. The Board of Auditors in principle convenes once a month, as well as for extraordinary meetings as necessary.

4．Accounting Auditors

　GungHo contracts with PricewaterhouseCoopers Arata, an auditing company, to conduct our accounting auditing. PricewaterhouseCoopers Aarata provides us with opinions on financial statements etc. from the perspective of an independent auditor. At the conclusion of the accounting audit, PricewaterhouseCoopers Aarata reports to our accountants on the details of the audit, working closely with us to provide us with information and to share opinions with us.

5．Internal Auditing

　GungHo’s internal auditing system is overseen by the Management Planning Headquarters (Internal Auditing Department). The Internal Auditing Department reports to the president and the auditors on the fiscal year plans and the result of audits. GungHo employs a system of self-evaluation. To enable our non-auditing departments to evaluate the level of internal control, we check implementation and evaluation with a view to bolstering internal auditing.

6．Compliance Committee

　GungHo has a Compliance Committee to ensure that our business activities meet compliance standards. The committee consists of the Chief Compliance Officer (CCO) and each of the individuals responsible for compliance in the various departments.

　The CCO devises and proposes policy on compliance and is in charge of maintaining the organization for compliance. It is also responsible for education related to compliance and checking on the current status of compliance implementation. Each of the committee members conducts training on compliance at their individual divisions, examines work procedures from the perspective of compliance and reports to the CCO on any violations or suspicious activities along with carrying out strategies designed to prevent reoccurrence.

7． Information Security Committee

　GungHo engages in a variety of information security measures, and we employ an Information Security Committee to oversee these activities. The information Security Committee is headed by a Chief Information Security Officer (CISO), and we are consistently working to enhance security.

Our information management system protects against the theft, falsification, destruction, illicit access and leaking of information. In addition to devising countermeasures on organizational, human resources, technical and physical aspects, GungHo pays special attention to protecting personal information in particular. Aware of social demands on the need to protect such information, we strictly observe the legal regulations, while at the same time respecting individual human rights and striving to devise even more sophisticated management systems.

8．Risk Management Committee

　At GungHo, we have established a Crisis Management Committee headed by a Chief Crisis Management Officer (CCMO) in order to effectively manage any crises that may arise. The Committee oversees preventive measures as well as damage control when a problem does occur. The Committee continues to develop crisis management strategies and systems at all times, and in the event that a crisis does arise, it takes on a key role in damage control strategy.。

Governance System and Internal Control System

　The company decided upon a fundamental strategy for internal control systems at the GungHo Board of Directors Meeting of May 17th, 2006.