In light of this situation, we have made it our policy to set an ROE target as one of our KPIs. Assuming the absence of inorganic growth through M&A or other measures, we aim for a must-achieve target level of 17% ROE by the final year of the MTBP 2027 period, in addition to a long-term target of 20% ROE, a globally-recognized level.With regard to dividends, we have adopted a strategy of stable and sustainable increases in dividend per share through profit growth, and in March 2024, we changed our policy to raise the baseline dividend payout ratio from 30% to 40%. In addition, in line with our desire to have a shareholder return policy that contributes to improving capital efficiency, we intend to flexibly implement share buybacks, taking into account market conditions, including stock prices, on top of the aforementioned considerations regarding dividend decisions.Recognition of goodwillDue to our MBO in 2013, our paid-in capital is larger than that of a typical company of its size. Our cost of capital is therefore less likely to reflect what the company requires. The funds for the MBO were mainly provided by debt financing and equity investments from the Carlyle Group's investment fund, (a private equity fund), on top of cash on hand and investments by our founding members. For this reason, our largest shareholder post-MBO was the Carlyle Group. Subsequently, in 2016, an absorption-type merger was carried out by a special purpose company with the Development Bank of Japan as the main investor. This was for the purpose of acquiring the company‘s shares held by the Carlyle Group's investment fund, resulting in the recognition of 36.4 billion yen of goodwill. All of the shares held by Development Bank of Japan were sold at our re-listing in 2021.ROE targets and shareholder returnsAs we are committed to capital efficiency-conscious management, we recognize that shareholder returns, which contribute to improving capital efficiency, are also an important measure in capital allocation. Specifically, we will strive to enhance shareholder returns through dividends, considering business performance trends, ROE levels, growth investment opportunities, and other factors.In our sustainability initiatives, we place particular emphasis on maximizing human capital. Our Sustainability Council was established in 2023 and is chaired by our Representative Director, President and CEO. In that forum, we discuss and make decisions on the Simplex Group's overall approach to sustainability, including the maximization of human capital.In FY3/2024, as CFO and a process owner, I focused on identifying materiality issues and enhancing the information provided in our Annual Securities Report and corporate website. The creation of this Integrated Report is a further measure aimed at enhancing our disclosure. Although we still have a long way to go, we would greatly appreciate any feedback from our shareholders and investors on the Integrated Report, which we will use as valuable inspiration for future activities.These efforts have also led to improvements in external third-party evaluations. For example, our latest MSCI (Morgan Stanley Capital International) ESG rating improved from BB to BBB. On the other hand, while our governance scores improved, our social and (in particular) human capital ratings remain low. We take the results of these evaluations very seriously and will continue to strengthen our information disclosure to ensure that our efforts are appropriately recognized.External ESG ratingMSCI BBBAs of 2024, Simplex Holdings, Inc. received an MSCI ESG Rating of BBB.Sustainability initiativesFor us to continue growing sustainably in a changing business environment, we must look to the future of society as a whole (the source of our growth), and contribute to solving the issues we feel we can address. With this in mind, we intend to fulfill our social responsibilities and give back to society by continuously innovating and enhancing our competitiveness.In line with this aim, after the annual shareholders' meeting in June 2024, we held a shareholders' reception. This was the first reception of its kind since our re-listing (and the first in 11 years). The reception was attended by more than 200 of our shareholders and provided a wonderful opportunity for our management team, including outside directors, to engage in dialogue with them. We intend to reward our shareholders by returning profits through dividends from retained earnings and other means, as well as by increasing our corporate value. We will continue to devote ourselves to building a relationship of trust with our shareholders and investors through sincere IR activities.Challenges and commitments as CFOI joined Simplex as a new graduate in 2007. As an engineer, I fully dedicated myself to improving the profitability of our client companies. Later, after working in the corporate planning department, I was appointed CFO at our re-listing in 2021. Since then, I have been working closely alongside President and CEO Kaneko to implement IR activities. I recognize that one of our current challenges is to improve the liquidity of our shares in the stock market. To address this issue, we intend to broaden our investor base by holding discussions with shareholders and investors and implementing measures to increase awareness of Simplex Group. 26
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