ANNUAL REPORT 2013 for the year ended March 31, 2013

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CORPORATE GOVERNANCE

The Credit Saison Group is expanding and strengthening its business infrastructure to support its role as a leading-edge service company. We recognize that, along with the achievement of business objectives, the reinforcement of corporate governance is vital for obtaining the understanding and support of all our stakeholders—our customers, business partners, employees and society. To increase management transparency and strengthen management supervisory functions, the Company is developing internal control systems and strengthening compliance.

Corporate Governance System

The Board of Directors consists of 15 directors, including one outside director. It decides important management matters and supervises the directors’ performance. The Company aims to maintain and improve the efficiency of management by having the outside director attend Board of Directors meetings and other important meetings and offer advice and proposals to ensure that decision making in management is appropriate and correct.

To ensure that business is conducted properly and soundly and to strengthen corporate governance, the Board has developed effective internal control systems and established and maintained a framework to ensure Group-wide compliance with laws, regulations and the Articles of Incorporation. To ensure that directors perform their duties appropriately, the Board operates in accordance with the Board of Directors Regulations. Moreover, each director performs his or her duties in accordance with the Corporate Law, and properly manages the divisions under his or her control in accordance with the Organizational and Segregation of Duties Regulations to ensure that business activities are executed appropriately and efficiently.

Directors serve a one-year term of office. This policy allows us to build a flexible management structure capable of adapting to a changing business environment, while also requiring management to earn the confidence of shareholders every year.

The Company has introduced a statutory auditor system. The Audit & Supervisory Board consists of four statutory Audit & Supervisory Board Members, three being independent executives from outside the Company who are not likely to have a conflict of interest with general shareholders. The statutory Audit & Supervisory Board Members conduct rigorous audits by attending Board of Directors meetings and other important meetings, reading important resolution documents, and examining the conduct of business and the state of the Company’s assets.

The Audit & Supervisory Board also audits the effectiveness and functioning of internal control systems and strives to ensure the early detection of problems and improvement of accuracy.

To assist the statutory Audit & Supervisory Board Members in their duties, the Company has established the Audit & Supervisory Board Members’ Secretariat, which retains independence from the operating divisions (members serve concurrently in the Internal Control Division).

The Company plans and implements compliance measures including education and awareness-raising activities, and engages in risk management. To that end, the Company has established the Compliance Department as a dedicated department to ensure the observance of laws, regulations and corporate ethics; the Corporate Risk Management Office of the Corporate Planning Department as the dedicated risk management department; and the Compliance Committee and Risk Management Committee as dedicated organizations to ensure compliance and risk management.

The Internal Audit Office audits compliance, risk management, internal control systems and corporate governance in the organizational operations and business activities of Credit Saison and its affiliates, and makes evaluations and recommendations based on the results.

We will continue to expand information sharing among Group Companies and strengthen our Group management systems, and study approaches to management that meet the needs of the Credit Saison Group and contribute to the improvement of consolidated value.

Corporate Governance Structure

Corporate Governance Structure

Personal and Other Relationships Between the Company and the Company’s Outside Directors and Outside Statutory Audit & Supervisory Board Members

The Company has one outside director and three outside statutory Audit & Supervisory Board Members.

The outside director provides advice and proposals to ensure that decision-making in management is appropriate and correct, enabling directors, who are well versed in business operations, to maintain and improve management efficiency. In addition, the Company has strengthened management supervisory functions by appointing independent executives (three individuals)* from outside the Company, who are not likely to have a conflict of interest with general shareholders, as outside statutory Audit & Supervisory Board Members.

∗All outside executives who meet the qualifications for an independent executive are designated as independent executives.

Selection Criteria for Outside Executives

For the selection of outside directors, the Company has adopted selection criteria in order to ensure appropriate and correct decision-making through management supervisory functions. Accordingly, the selection criteria for outside directors require candidates to possess either practical experience as a corporate manager, or a record of achievement and expansive knowledge in a specific specialized field. Furthermore, for the selection of outside statutory Audit & Supervisory Board Members, the Company has adopted selection criteria to ensure sound and transparent management through audits carried out from an impartial and objective perspective. Accordingly, the selection criteria for outside statutory Audit & Supervisory Board Members require candidates to possess abundant knowledge and experience in a variety of fields.

The Company has not established any specific criteria and policies regarding independence from the Company for the purpose of appointing outside directors or outside statutory Audit & Supervisory Board Members. However, in the course of making new appointments, the Company gives due consideration to ensuring the independence of these executives by referring to the requirements for independent executives stipulated by the Guidelines Concerning Listing Control, etc. and the Securities Listing Regulations of the Tokyo Stock Exchange.

The outside director is briefed on the audit results of the statutory Audit & Supervisory Board Members’ audits and accounting audits at meetings of the Board of Directors. The outside director cooperates with the Internal Audit Office, which is an internal audit division, and the Corporate Planning Department, which is an internal control division, by receiving briefings on the status of business execution from each division, and other means.

The outside statutory Audit & Supervisory Board Members strive to strengthen cooperation with the accounting auditors and the Internal Audit Office, while working to enhance the effectiveness of audits by seeking briefings from the internal control divisions as necessary.

Business Management Organization for Management Decision-Making, Execution and Supervision Other Conditions

Organization format Company with statutory Audit &
Supervisory Board Members
Number of directors stipulated by
the Articles of Incorporation
Up to 25
Term of office for directors stipulated
by the Articles of Incorporation
1 year
Chairman of the Board of Directors President
Number of directors 15
Appointment of outside directors Appointed
Number of outside directors 1
Number of outside directors designated as
independent executives
0
Appointment of outside statutory
Audit & Supervisory Board Members
Appointed
Number of outside statutory
Audit & Supervisory Board Members
3
Number of outside statutory
Audit & Supervisory Board Members
designated as independent executives
3

Remuneration for Directors and Statutory Audit & Supervisory Board Members

To clarify their responsibility for business execution and results and increase the independence of statutory Audit & Supervisory Board Members, the Company has eliminated the previous retirement bonus system and unified compensation for the performance of duties, including directors’ bonuses, and worked to increase awareness of the importance of business performance.

Remuneration, etc., paid to directors and statutory Audit & Supervisory Board Members in fiscal 2012 was as follows:

Details of Remuneration for Directors and Statutory Audit & Supervisory Board Members

position Total
remuneration
amount
(Millions of yen)
Total amount of
remuneration by type
(Millions of yen)
Number
of persons
Basic
remuneration
Bonuses
Directors
(Excluding outside directors)
495 375 120 14
Statutory Audit & Supervisory Board Members
(Excluding outside statutory Audit & Supervisory Board Members)
8 8 1
Outside executives 39 39 4

Notes

1. The total amount of remuneration paid to directors does not include the employee salary amount in the case of employees who serve
       concurrently as directors.

2. As of March 31, 2013, the Company had 15 directors and 4 statutory Audit & Supervisory Board Members.

Remuneration for Independent Auditors

Remuneration based on duties performed pursuant to Article 2, Paragraph 1 of the Certified Public Accountants Law: ¥97 million
Remuneration based on non-audit duties: ¥1 million

Overview of Internal Control Systems

As per the Corporate Law, the Board of Directors has set basic policies for directors to build a system that ensures adequacy and efficiency of the Company’s business and compliance with laws, regulations and the Articles of Incorporation.

These policies are based on the philosophy to "always realize profitable growth and maximize the satisfaction of customers and other stakeholders by pursuing innovative ideas and strategies."

With regard to internal control over financial reporting, (known as "J-SOX"), our efforts center around the Corporate Risk Management Office, through which we coordinate the development of internal control systems by the Company and companies included in the scope of consolidation. Independent monitoring is carried out by specialist staff from the Internal Audit Office. On this basis, we are able to report to the authorities that our internal control systems are working effectively.

In building our internal control systems, we aim to build highly efficient and effective systems that will help to maximize the benefits for our stakeholders by maintaining appropriate business processes while increasing business results and strengthening earnings.

Rigorous Implementation and Enhancement of Compliance

Based on this reinforcement of corporate governance and internal controls, the Compliance Committee and Compliance Department are taking the lead in ensuring compliance with laws and regulations, and fairness and morality in business activities.

The director who serves as Head of the Compliance Dept. chairs the Compliance Committee, which reports to the Board of Directors. To discuss compliance-related matters, the Committee convenes several times a year.

To ensure familiarity and observance with Company rules, regulations and ethics, we have published these standards and guidelines in Our Compliance, a pamphlet distributed to regular and contract employees.

The Company is working to prevent misconduct and scandals by publicizing its compliance consultation desk. The consultation desk strives to create a user-friendly environment by maintaining systems inside and outside the Company for accepting inquiries, including dedicated addresses on the Company intranet and the Internet. When a report is received, the Compliance Department cooperates closely with an attorney and aims to quickly resolve the matter, reports to the Compliance Committee, and then takes action to prevent reoccurrence.

In addition, the Compliance Department invites outside lecturers to conduct compliance training for executives and training for senior management including division managers. The Company appoints compliance officers and compliance coordinators in each division, and the divisions take the initiative in conducting compliance training in cooperation with the Compliance Department.

In addition, our compliance officers and compliance coordinators also play a role in controlling the Company’s administrative risks.

Security and Reliability of Information Systems

As the use of IT grows, maintaining the security and stability of information systems is becoming increasingly important to ensure that customers can rely on the Company’s credit cards.

We have implemented countermeasures against system disruptions, which may be caused by a wide variety of factors, including natural disasters, accidents or computer viruses, and higher system efficiency was achieved by centralizing clerical work. Credit Saison will continue efforts to keep its systems secure, reliable and efficient.

Risk Management

To prevent and appropriately respond to risk, the Company has formulated Risk Management Regulations and Regulations Concerning Management of Risk of Loss and, through the Risk Management Committee and the Corporate Risk Management Office of the Corporate Planning Department, works to prevent risks from materializing and minimize the effect on the Company when risks become apparent. To this end, the Company conducts periodic internal education and training for people working with the Risk Management Regulations, Regulations Concerning Management of Risk of Loss and Crisis Management Regulations, and the Board of Directors periodically examines the regulations and issues revisions and improvements. In this way, the Company strives to maintain its risk management systems.

We strive to ensure the stability of our management base in the event of a large-scale disaster or other emergency. To this end, we have prepared countermeasures to ensure the continuity of critical operations and reduce the risk of operational interruption as much as possible. We maintain control over factors within the Credit Saison Group that have the potential to create serious risks by monitoring the operations of Group companies under the Affiliated Company Regulations, which are administered primarily by the Group Strategy Office of the Corporate Planning Department. Our risk management systems are further enhanced through information-sharing with the management organizations of Group companies.

Moreover, in the event that a risk occurs, the Company works to respond swiftly based on the Crisis Management Regulations, mainly administered through the Crisis Management Committee.

Proactive Disclosure of Information

The Company proactively discloses financial information through management reports, investment conferences, IR meetings and other events, and strives to ensure highly transparent management by posting financial result summaries, IR activities and other information on its website.

URL for corporate and IR information:
http://corporate.saisoncard.co.jp/en

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