These documents have been translated from Japanese originals for reference purposes only.
In the event of any discrepancy between these translated documents and the Japanese originals, the originals shall prevail. The
Company assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from thetranslations.

Corporate Governance Report
SHO-BOND Holdings Co., Ltd.
Last Update: September 27, 2024

SHO-BOND Holdings Co., Ltd.
Tatsuya Kishimoto, President and Representative Director
Contact: Tel: +81-(0) 3- 6892-7101
Securities Code: 1414
https://www.sho-bondhd.jp/english/
This report explains the corporate governance of SHO-BOND Holdings Co., Ltd. (“SHO-BOND”).

I.

Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other
Basic Information

1. Basic Views
The SHO-BOND Group (the “Group”) is engaged in comprehensive maintenance of infrastructure under its
corporate philosophy of “With a sense of mission of ‘inheriting and passing on social infrastructure to thenext generation in good condition’ we will contribute to the realization of a safe and affluent society by
utilizing our advanced technological development capability as a leading company in the structure
maintenance business.”
As a leader in the maintenance industry, corporate governance is one of the most important management
issues to earn the trust of stakeholders, including shareholders, investors, and employees, and to achievesustainable growth and increase corporate value over the medium to long term. We will continue soundmanagement by enhancing corporate governance that enables transparent, fair, prompt, and decisive decisionmaking.
[Reasons for Non-compliance with the Principles of the Corporate Governance Code]SHO-BOND has complied with all principles of the Corporate Governance Code revised in June 2021.
[Disclosure Based on the Principles of the Corporate Governance Code][Principle 1.4 Cross-shareholdings]
As a rule, SHO-BOND does not purchase or hold the stock of suppliers and other business partners with the
exception of cases where purchasing and holding stock helps conduct business operations efficiently andmaintain and strengthen business relationships, thereby contributing to the medium to long-term growth of its
corporate value. Stock holdings of other companies are examined individually by taking into consideration
qualitative and quantitative benefits and risk factors, including holding purposes, the number of transactions
with these companies, their operating environment, results of operations and financial position, dividend
yields as a return of investments and stock price fluctuation risks. Stock holdings are reduced when there islittle need to continue owning the stock. SHO-BOND will reduce the ratio of cross-shareholdings to net assets
by selling about 30% of its stock holdings, worth approximately 3 billion yen based on the market value atthe end of June 2024, as part of the Medium-term Business Plan 2027 (FY2025–FY2027). Voting decisions
concerning the stock of other companies are based on the goals of increasing shareholder value for SHOBOND and contributing to the medium to long-term growth of the corporate value of the other companies.
[Principle 1.7 Related Party Transactions]
Directors must not neglect the interests of shareholders by taking actions aimed at earning profits forthemselves or third parties. Even when there is no intent to take such actions, the consent of the Board of
Directors is required for transactions involving a conflict of interest or transactions involving competitive
information. When determining whether or not to grant this consent, the highest priority is the interests of-1-

SHO-BOND and the common interest of shareholders. A decision is made only after a thorough discussion.
SHO-BOND examines related party transactions involving directors once every year. The results of thesetransactions are disclosed in a timely and proper manner in accordance with associated laws and regulations.
[Supplementary Principle 2.4.1 Ensuring Diversity in the Promotion of Human Resources](1) Approach to ensure diversity
To maintain diversity in our workforce, SHO-BOND makes efforts to recruit diverse new employees as wellas conduct the selection process in a fair and non-discriminatory manner. In addition, SHO-BOND selects
management personnel based solely on each individual’s capabilities and performance.
(2) Status of ensuring diversity and its voluntary and measurable goals
1) Promoting female employees into management
As of the end of June 2024, the ratio of female managers to all managers is 2.0%. In order to increase theratio of female managers over the medium to long term, we consider it important to increase the number offemale employees and have set the ratio of female employees in regular recruiting as a KPI, with a target of
15% every year.
2) Promoting foreign employees into management
As of the end of June 2024, the ratio of foreign managers to all managers is 0.7%. As we expand ouroverseas business, we will aim to achieve a higher ratio of foreign managers than at present.
3) Promoting mid-career employees into management
As of the end of June 2024, the ratio of managers who were mid-career recruits to all managers is 31.8%.
We have long been selected management personnel based on each individual’s capabilities and performance
regardless of graduate/mid-career recruits.
(3) Policies of human resource development and workplace environmental improvement
1) Human resource development policy
Employees are the most valuable asset of the Group. To play a role in the creation of a sustainable society,we must have a workforce with highly advanced skills along with environments that allow these people tofully utilize this knowledge.
Experience is a critical component of repair and reinforcement construction activities. For this reason, onthe-job training is a key element of measures to develop employees’ skills. Young people are assigned
responsible tasks. This process gives these people the ability to solve problems on their own in businessactivities.
Employees are given the opportunity to acquire know-how and technologies that match each stage of theiradvancement in the Group. People progress to the next level in a well-planned and effective manner. We
develop the skills of everyone in the Group from a long-term perspective.
We also believe that making the most of our diverse human resources by providing opportunities for them todemonstrate their abilities is important for improving our corporate value over the medium to long term. To
maintain diversity in our workforce, we make efforts to recruit diverse new employees as well as conduct
the selection process in a fair and non-discriminatory manner. In addition, we select management personnel
based solely on each individual’s capabilities and performance.
2) Workplace environmental improvement policyGroup companies exercise care to ensure that their people can stay in the company for a long time, doing
their jobs with confidence and good health. Workplaces are structured to enable people todevelop and take full advantage of their skills.
We started to maintain proper working hours earlier than most companies. Thanks to this effort, ouremployees’ awareness has improved significantly and their working hours have accordingly become properaround the time when work style reforms have progressed at other companies. Our turnover remains low atpresent.

-2-

We keep a high employee retention rate by continuing to improve workplace environments based on
employees’ needs regarding child-rearing, nursing care, transfers to different locations, and other
employment matters.
SHO-BOND discloses our approach to human resource development and workplace environmental
improvement on its website and the integrated report. In addition, SHO-BOND conducts the incorporationof HR management into business strategy and retention management through the new personnel system
while investing more in human capital, under our Medium-term Business Plan 2027.
<Medium-term Business Plan>(https://www.sho-bondhd.jp/english/ir/library/plan/)<Website>(https://www.sho-bondhd.jp/english/csr/environment/)<Integrated Report>(https://www.sho-bondhd.jp/english/ir/library/integrated-report/)[Principle 2.6 Roles of Corporate Pension Funds as Asset Owners]
SHO-BOND understands that the management of assets in the corporate pension fund is important for theconsistent accumulation of wealth for employees and that the management of these assets also has an effecton SHO-BOND’s financial condition. SHO-BOND is dedicated to managing these assets properly, such as byreexamining the weighting of pension fund assets using medium to long-term perspectives. The AssetManagement Committee holds regular meetings for the purpose of monitoring the performance (including
stewardship activities) of the company(ies) that manage the pension fund assets. SHO-BOND assigns to the
Asset Management Committee individuals who have expertise involving human resources, accounting,finance, or other fields and has programs to give these people further training.
[Principle 3.1 Full Disclosure]
The Board of Directors properly discloses information in accordance with laws and regulations. In addition,
the directors provide information about the corporate philosophy and other important policies. The purpose
is to ensure the transparency and fairness of decisions made by the directors and maintain the effectivenessof corporate governance. Information is disclosed on the SHO-BOND website, in the notice of the general
meeting of shareholders, and in other ways. Additionally, SHO-BOND discloses materials required to be
explained in English.
(1) Corporate Goals (Corporate Philosophy, Etc.), Business Strategies, and Business Plans<Corporate Philosophy> (https://www.sho-bondhd.jp/english/company/philosophy/)<Medium-term Business Plan>(https://www.sho-bondhd.jp/english/ir/library/plan/)(2) Basic View and Basic Policy on Corporate GovernanceThe basic view is explained in “I. 1. Basic Views” of this report. The basic policy regarding items that are
disclosed is explained in this report.
(3) Policies and Procedures in Determining the Remuneration of the Senior Management and Directors by the
Board of Directors
These policies and procedures are explained in “II. 1. Organizational Composition and Operation [Director
Remuneration]” in this report.
(4) Policies and Procedures in Appointing and Dismissing the Senior Management and Nominating
Candidates for Directors by the Board of Directors-3-These policies and procedures are explained in “II. 2. Matters on Functions of Business Execution, Auditing,Oversight, Nomination and Remuneration Decisions (Overview of Current Corporate Governance System)”in this report.
(5) Explanations of Individual Appointments and Dismissal and Nominations with Respect to Appointments
and Dismissal of Senior Management and Nominations of Candidates for Directors by the Board of
Directors
The reasons for nominating candidates for directors, along with personal histories and other information, areprovided in the notice of the general meeting of shareholders.
(https://ssl4.eir-parts.net/doc/1414/ir_material3/236231/00.pdf)[Supplementary Principle 3.1.3 Sustainability Initiatives]
With its Corporate Philosophy at the core of management, the Group has designated material issues(Materialities) to get close to its vision. Four designated Materialities involve internal activities and how
business activities affect society. We believe that all of these activities are sustainability management that
contributes to accomplishing the SDGs and achieving our Corporate Philosophy. We have established a
Sustainability Policy and ESG-related policies to provide guidelines for constant activities in accordance withmateriality priorities. In August 2022, we set KPIs for each of the priorities to measure their progress anddisclosed targets and results.
We will enhance our corporate value over the medium to long term and contribute to creating a sustainable
society by continuing to upgrade sustainability initiatives with the input of our internal and external
stakeholders. Specifically, we will improve our promotion framework, consider measures, and regularly
review them to upgrade the initiatives.
For the main items of the Sustainability Policy, we have set up action plans and KPIs (key performanceindicators), and disclose their progress and results on our website.
(https://www.sho-bondhd.jp/english/csr/materiality/)
Investment in human resources and intellectual property is described in the Medium-term Business Plan 2027.
(https://www.sho-bondhd.jp/english/ir/library/plan/)
SHO-BOND expressed its support for the TCFD recommendations in July 2022 and discloses the risks andopportunities related to climate change and its financial/non-financial impact on business activities on our
website.
(https://www.sho-bondhd.jp/english/csr/tcfd/)
Please refer to our Annual Securities Report, Integrated Report, and Medium-term Business Plan for otherinformation on our sustainability initiatives.
<Annual Securities Report> (Japanese version only)(https://www.sho-bondhd.jp/ir/library/security/)<Integrated Report>(https://www.sho-bondhd.jp/english/ir/library/integrated-report/)<Medium-term Business Plan>(https://www.sho-bondhd.jp/english/ir/library/plan/)[Supplementary Principle 4.1.1 Roles and Responsibilities of the Board of Directors]
The regulations of the Board of Directors, in compliance with laws and regulations, clearly define matters thatmust be approved by the directors. Also, the authority that is granted to Presidents, Regional Officers, General
Managers, and other managers of important subsidiaries is clearly defined by the SHO-BOND Group’s
standards for delegating authority for making decisions. The goals of these measures are to ensure thatdecisions are made with no problems and that business operations are conducted efficiently.
[Principle 4.9 Independence Standards and Qualifications for Independent Outside Directors]-4-These independence standards and qualifications are explained in “II. 1. Organizational Composition andOperation [Independent Directors]” in this report.
[Supplementary Principle 4.10.1 Use of Optional Approach]
These approaches are explained in “II. 1. Organizational Composition and Operation [Voluntary
Establishment of Committee]” in this report.
[Supplementary Principle 4.11.1 Preconditions to Ensure the Effectiveness of the Board of Directors]
These preconditions are explained in “II. 2. Matters on Functions of Business Execution, Auditing, Oversight,
Nomination and Remuneration Decisions (Overview of Current Corporate Governance System)” in thisreport.
[Supplementary Principle 4.11.2 Preconditions to Ensure the Effectiveness of the Board of Directors]
Directors must have sufficient time to prepare for Board of Directors meetings. As a result, SHO-BOND
prefers individuals who are not concurrently a director, audit and supervisory board member, or executive
officer of another listed company. The chairperson of the Board of Directors is notified promptly when a SHOBOND director receives the request to become a director of another listed company. Information aboutsignificant concurrent positions of directors is provided in the notice of the general meeting of shareholders.
(https://ssl4.eir-parts.net/doc/1414/ir_material3/236231/00.pdf)[Supplementary Principle 4.11.3 Preconditions to Ensure the Effectiveness of the Board of Directors]
This section is a summary of the analysis and evaluation of the effectiveness of the Board of Directors thatwas conducted in June 2024.
(1) Method of evaluating effectivenessTo evaluate the effectiveness of the Board of Directors, a third-party external adviser is invited every otheryear for objectivity considerations. The evaluation is performed by asking all directors, including members of
the Audit and Supervisory Committee, to complete questionnaires, which will be analyzed and reviewed by
the Board of Directors. The issues recognized here will be approached and reviewed with self-analysis andevaluation in the next year.
(2) Summary of evaluation results
For the fiscal year ended June 2024, a third-party external advisor was appointed to conduct a questionnaire
survey of all directors (including Audit and Supervisory Committee Members). The Board of Directors
analyzed and evaluated the responses and confirmed that the Company’s Board of Directors is properly
operated and generally secures its effectiveness. In the fiscal year ending June 2025, we will strive toimprove the effectiveness of the Board of Directors by continuously conducting executive seminars andlunch meetings, as well as reviewing the criteria for submitting proposals in the Board of Directors
Regulations to develop human resources for executive management and strengthen their business promotion
capabilities.
[Supplementary Principle 4.14.2 Training Policy for Directors including members of the Audit andSupervisory Committee]
When individuals first become a director and afterward, they receive opportunities for training and other formsof education that match each person’s knowledge, experience, capabilities, and other characteristics.
[Principle 5.1 Policy for Constructive Dialogue with Shareholders](1) Action to implement management that is conscious of cost of capital and stock price
The Group conducts management with PBR in mind as an indicator of corporate value. To maintain PBR, it
is important to secure an equity spread by keeping ROE exceeding the cost of equity. In terms of ROE, we-5-achieved the target of "12% or more" set in the Medium-term Business Plan 2024 over the three years of theplan. In the following Medium-term Business Plan 2027, we have set a target of "around 14.5% for the finalyear" after examining various factors, including the return to shareholders, investment for growth, the equity
ratio, and the operating profit margin, an indicator of earning power.
In addition to maintaining a high level of ROE, we aim to reduce the cost of equity and thereby enhance
corporate value by improving management foreseeability and conveying the social nature of our business,such as the effect of reducing the environmental impact of maintenance work, through enhanced information
disclosure and communication with shareholders and investors.
For details, please refer to our Integrated Report and Medium-term Business Plan.
<Integrated Report>(https://www.sho-bondhd.jp/english/ir/library/integrated-report/)<Medium-term Business Plan>(https://www.sho-bondhd.jp/english/ir/library/plan/)(2) Dialogue with shareholders
The Corporate Planning Department and General Affairs Department are primarily responsible for dialogues
with shareholders and other investors. As a rule, the Chief Financial Officer and the Corporate Planning
Department handle dialogues with institutional investors. Directors and executives with knowledge about
specific business activities also provide assistance as needed in order to ensure that investors receive adequate
explanations.
The Group places importance on information disclosure and dialogue with shareholders, institutional
investors, analysts, and other interested parties. For institutional investors, we hold an information meeting
about financial results twice a year as well as one-to-one meetings held every quarter. In addition to such oneto-one meetings, we hold a small meeting attended by the President after announcing the full-year financial
results. For individual shareholders, we hold information meetings in Tokyo and Osaka in March every year
after transitioning to the holding company system in 2008.
Dialogues are consistent with the spirit of fair disclosure and care is exercised to prevent the disclosure of
insider information. The Executive Committee and Board of Directors receive feedback periodicallyconcerning the opinions and concerns of shareholders, which help achieve sustainable growth.
[Frequency (FY2024)]
Information meetings for individual shareholders 2 times
Information meeting for institutional investors (attended by President and Chief Financial Officer) 2 times
One-to-one meetings 96 times

2. Capital Structure
Foreign Shareholding Ratio

From 20% to less than 30%[Status of Major Shareholders]Name / Company Name

Number of Shares Owned

The Master Trust Bank of Japan, Ltd. (Trust account)
General Incorporated Foundation Ueda Memorial
Foundation
SSBTC CLIENT OMNIBUS ACCOUNT
Custody Bank of Japan, Ltd. (Trust account)
MUFG Bank, Ltd.
The Dai-ichi Life Insurance Company, Limited-6-

Percentage(%)

5,947,200

11.43

5,408,000

10.40

5,057,294

9.72

4,235,100

8.14

2,592,000

4.98

2,420,000

4.65

NORTHERN TRUST CO. (AVFC) RE FIDELITY
FUNDS
Meiji Yasuda Life Insurance Company
Custody Bank of Japan, Ltd. (Trust account 4)
JP MORGAN CHASE BANK 385781
Controlling Shareholder (except for Parent Company)
Parent Company

1,874,100

3.60

1,425,800

2.74

885,000

1.70

627,895

1.20

None

Supplementary Explanation
1. The above major shareholders are as of June 30, 2024.
2. The percentages in the table above are based on the total number of issued shares after deducting treasury
stock.

3. Corporate Attributes
Listed Stock Market and Market Section
Fiscal Year-End
Business Sector
Number of Employees (consolidated) as of the End of thePrevious Fiscal YearSales (consolidated) as of the End of the Previous Fiscal Year
Number of Consolidated Subsidiaries as of the End of thePrevious Fiscal YearTokyo Stock Exchange Prime
June
ConstructionMore than 1,000
From ¥10 billion to less than ¥100 billion
From 10 to less than 50

4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with a Controlling
Shareholder
5. Other Special Circumstances which May Have Material Impact on Corporate Governance-

II. Business Management Organization and Other Corporate Governance Systems regarding
Decision-making, Execution of Business, and Oversight of Management
1. Organizational Composition and Operation
Corporate Governance System[Directors]
Number of Directors Stipulated in Articles ofIncorporation
Directors' Term of Office Stipulated in Articles
of Incorporation
Chairperson of the Board
Number of Directors
Election of Outside Directors
Number of Outside Directors
Number of Independent Directors

Company with Audit and Supervisory Committee

11
1 yearPresident
8Elected3
3-7-

Outside Directors’ Relationship with the Company (1)NameAttributeab

Relationship with the Company*
c
d
e
f
g
h
i

j

k

Certified Public
Accountant
Akira Hongo
Attorney
Reiko Kuwano
Academic* Categories for “Relationship with the Company”* “○” when the director presently falls or has recently fallen under the category;“△” when the director fell under the category in the past
* “●” when a close relative of the director presently falls or has recently fallen under the category;“▲” when a close relative of the director fell under the category in the past
Satoru Miuraa. Person who executes business of the Company or a subsidiary
b. Person who executes business or a non-executive director of a parent company
c. Person who executes business of a fellow subsidiaryd. Person/entity for which the Company is a major client or a person who executes business for such
person/entity
e. Major client of the Company or a person who executes business for such clientf. Consultant, accounting expert, or legal expert who receives large amounts of cash or other assets inaddition to director/Audit and Supervisory Board Member compensation from the Company
g. Major shareholder of the Company (in cases where the shareholder is a corporation, a person who
executes business of the corporation)h. Person who executes business for a client of the Company (excluding persons categorized as any of d, e,or f above) (applies to self only)
i. Person who executes business for another company holding cross-directorships/cross-auditorships with
the Company (applies to self only)
j. Person who executes business for an entity receiving contributions from the Company (applies to self
only)
k. OtherOutside Directors’ Relationship with the Company (2)Name

Designation Supplementary
Audit andas
Explanation ofSupervisory
Independent the Applicable
Committee
Director
Relationship-8-

Reasons of Appointment

Satoru Miura

○

○

-

Akira Hongo

○

○

-

Reiko
Kuwano○○-Mr. Miura has knowledge and experience as acertified public accountant as well as
considerable experience as a corporate
accounting advisor. He was selected as adirector who is an Audit and Supervisory
Committee member (Outside Director) because
he meets the independence standards stipulated
by SHO-BOND, and SHO-BOND believes that
he will help strengthen the management
oversight functions from a fair and objective
standpoint.
Mr. Hongo has knowledge and experience as an
attorney as well as considerable experience as acorporate consulting attorney. He was selected
as a director who is an Audit and Supervisory
Committee member (Outside Director) because
he meets the independence standards stipulated
by SHO-BOND, and SHO-BOND believes that
he will help strengthen the management
oversight functions from a fair and objective
standpoint.
Ms. Kuwano has considerable academic
expertise and experience in the field of civilengineering as a professor at the University ofTokyo. She was selected as a director who is an
Audit and Supervisory Committee member(Outside Director) because she meets theindependence standards stipulated by SHOBOND, and SHO-BOND believes that she will
help strengthen the management oversightfunctions from a fair and objective standpoint.

[Audit and Supervisory Committee]
Committee’s Composition and Attributes of Chairperson
Audit and Supervisory Committee
All Committee Members
Full-time Members
Inside Directors
Outside Directors
Committee Chair4113Inside Director

Appointment of Directors and Employees Who Assist the Audit
and Supervisory Committee’s Duties

Appointed

Matters Relating to Ensuring the Independence from Executives of the Directors and Employees Who
Assist the Audit and Supervisory Committee’s Duties-9-

One employee is assigned to assist the Audit and Supervisory Committee. This employee’s independence
from executives is ensured by requiring that the opinion of this committee is respected with regard to
personnel and organizational changes and other matters. In addition, this employee must be given a sufficientamount of time to perform the duties needed to provide this assistance.
Cooperation among Audit and Supervisory Committee, Accounting Auditor and Internal Audit
Department(Cooperation between the Audit and Supervisory Committee and Accounting Auditor)
Members of the Audit and Supervisory Committee hold meetings on a regular basis with the accounting
auditor. An accounting auditor may be asked to attend committee meetings as needed and the committee
receives reports whenever necessary in a timely manner regarding audits by this auditor. These activities
facilitate the extensive exchange of opinions and information.
(Cooperation between the Audit and Supervisory Committee and Internal Audit Department)
The Audit and Supervisory Committee receives reports about audits performed by the Internal Audit
Department and other related sections. In addition, committee members can ask for examinations of specificitems as needed, submit specific instructions to internal auditing sections, and take other actions. This ensuresthe existence of a framework for continuous and speedy communications with departments and personnel
engaged in internal audits. Furthermore, as needed, the Audit and Supervisory Committee receives reports
about the internal control system from the Risk Management Committee and Internal Control Committee andcan ask for examinations of specific items.
[Voluntary Establishment of Committee]
Voluntary Establishment of Committee(s) equivalent to Nomination Committee
or Remuneration Committee

Established

Status of Voluntarily Established Committee(s), Attributes of Members Constituting the Committee
and the Committee Chair (Chairperson)

Committee’s Name

Committee Corresponding toNomination Committee
Nomination and Remuneration
Advisory Committee

All Committee Members 4
Full-time Members
0
Inside Directors
1
Outside Directors
3Outside Experts
0
Other
0
Chairperson
Outside Director
Supplementary Explanation

Committee Corresponding to
Remuneration Committee
Nomination and Remuneration
Advisory Committee
4
0
1
3
0
0
Outside Director

The Nomination and Remuneration Advisory Committee has four members: three Outside Directors and thePresident and Representative Director. This committee is actively involved in the formation and execution of
the succession plan for the President, has adequate discussions about matters on directors’ nomination andremuneration, and gives opinions and advice to the Board of Directors.

- 10 -

[Matters Concerning Independent Directors]
Number of Independent Directors

3

Other Matters Concerning Independent Directors
The standards for confirming the independence of Independent Outside Directors comply with theindependence standards of financial instruments exchanges. An Independent Outside Director shall be an
attorney, consultant, or other professional who has not received an annual average of ¥5 million or moreduring the past three years in compensation in the form of cash or other financial benefits, other than
remuneration as a director or executive officer, from the SHO-BOND Group. An Independent Outside
Director must have the following qualifications that are suitable for this position.
1) The ability to contribute to frank, vigorous and constructive discussions at meetings of the Board of
Directors
2) Extensive experience and knowledge involving management, legal affairs, accounting or some otherprofessional field
SHO-BOND believes that all Outside Directors meet the requirements for independence from SHO-BOND
and has submitted notices to the Tokyo Stock Exchange that all of these directors are independent.
[Incentives]
Implementation Status of Measures related toIncentives Granted to Directors

Other

Supplementary Explanation for Applicable Items
All Directors (excluding Directors serving as Audit and Supervisory Committee Members) are member of theofficers' stockholding association. Monthly compensation for directors is paid in cash after purchasing acertain amount of treasury stock. This compensation system gives directors an incentive for medium- to longterm performance. Directors are required to hold their own shares purchased at the officers' stockholding
association until their retirement.
Persons Eligible for Stock Options
Supplementary Explanation for Applicable Items[Director Remuneration]
Status of Disclosure of Individual Directors’
Remuneration

The remuneration of individual directors is notdisclosed

Supplementary Explanation for Applicable Items
Remuneration is disclosed separately for directors (except those who are not Audit and Supervisory
Committee members) and directors who are Audit and Supervisory Committee members.
Policy on Determining Remuneration Amounts
and the Calculation Methods Thereof

Established- 11 -

Disclosure of Policy on Determining Remuneration Amounts and the Calculation Methods Thereof
The upper limit of remuneration for directors is approved at the general meeting of shareholders. At the general
meeting of shareholders held on September 25, 2015, the upper limit for annual remuneration for all directors(excluding Directors serving as Audit and Supervisory Committee Members; hereinafter “Directors”) was set
at ¥350 million and the upper limit for all directors who are Audit and Supervisory Committee members was
set at ¥50 million.
At the Board of Directors, the Company resolved the policy regarding the details of the compensation, etc.
for each Director, and the details of such are as follows:
As the Company is a holding company that is in charge of supervising Group companies, the compensation
for the Company’s Directors comprises basic compensation only. Furthermore, the payment of basic
compensation shall be monthly fixed compensation in cash.
The Company’s Directors concurrently serve as Directors of subsidiaries. Compensation is determined byproportionately taking into consideration the weight of the business of both the Company and its subsidiaries,
and multiplying it by the monthly compensation of subsidiaries.
Furthermore, bonuses, which are paid depending on financial results, are paid by the subsidiaries to which the
Directors belong.
In determining compensation, etc., the President and Representative Director prepares a compensation
proposal, including the portion to be paid by subsidiaries, that is determined at a Board of Directors meeting
after consulting the Nomination and Remuneration Advisory Committee, which comprises the Company’s
Outside Directors and the President and Representative Director.
In determining the details of individual compensation, etc. for Directors pertaining to the fiscal year ended
June 30, 2024, the Company judged that it is in line with this policy as the Nomination and Remuneration
Advisory Committee carried out a multifaceted investigation of the original proposal, and the Board of
Directors made the determination after taking into consideration the report from the Nomination andRemuneration Advisory Committee.
[Support System for Outside Directors]
One employee is assigned to assist the Outside Directors who are members of the Audit and Supervisory
Committee. The opinion of the members of this committee is respected regarding any reassignment,
organizational change, or other action that affects this employee. In addition, this employee must be given a
sufficient amount of time to perform the duties needed to provide this assistance.
Outside Directors receive materials and explanations before meetings of the Board of Directors. In addition,
there is a system in place for Outside Directors to receive other applicable information as needed.
[Statuses of Persons who have Retired as Representative Director and President, Etc.]
Information on Persons Holding Advisory Positions (Sodanyaku, Komon, etc.) after Retiring as
Representative Director and President, etc.

Name

Job title/
Position

Terms andConditions of
Employment(Full/part time,
with/without
remuneration, etc.)

Responsibilities- 12 -

Date whenformer role
as president/
CEO ended

Term

-

-

-

-

Number of Persons Holding Advisory Positions(Sodanyaku, Komon, etc.) After Retiring as Representative
Director and President, etc.

Other Related Matters-- 13 --

0-2. Matters Concerning Functions of Business Execution, Auditing and Supervision Nomination andRemuneration Decisions (Overview of Current Corporate Governance System)(1) Organizational structure and business execution system
SHO-BOND is a company with an Audit and Supervisory Committee. This system is used to strengthen the
supervisory function of the Board of Directors and strengthen corporate governance. SHO-BOND aims toaccomplish this by using the Audit and Supervisory Committee with Outside Directors accounting for the
majority of members and giving the directors who are also members of this committee the right to vote on
resolutions at the Board of Directors. In addition, SHO-BOND has established the Nomination andRemuneration Advisory Committee as a voluntary advisory body in order to strengthen the independence,
objectivity, and accountability of the Board of Directors.
The Executive Committee meets twice every month as a rule to assist decision-making by the President andRepresentative Director and discusses and reaches decisions about important matters involving management.
The Risk Management Committee and other internal committees are established as an advisory body for the
President and Representative Director. Important matters are discussed at these committees, and submitted
and reported to the Executive Committee.
(2) Board of Directors
The Board of Directors has eight members including four directors who are members of the Audit andSupervisory Committee. The directors discuss and reach decisions about important matters involving
management as prescribed by laws and regulations and the rules for the Board of Directors. As a rule, theboard meets once every month and meets at other times as needed in order to reach decisions quickly.
1) Appointment and dismissal of the President and Representative Director and succession plan
SHO-BOND believes that the appointment and dismissal of the President and Representative Director is the
single most important strategic decision. This decision is made by the Board of Directors following
discussions by the Nomination and Remuneration Advisory Committee, where Outside Directors account forthe majority of the members. In addition, SHO-BOND believes that the establishment of a succession planfor the President and Representative Director is the most important issue in order to achieve sustained growth.
With the Nomination and Remuneration Advisory Committee playing a significant role, the Board of
Directors properly performs supervision to be certain that sufficient time and resources are being used inaccordance with a plan for giving selected people the training and experience needed to be candidates tosucceed the current President.
2) Director nominations and remuneration
SHO-BOND selects candidates for election as directors who have the knowledge and high ethical standards
necessary for the growth of corporate value and the broad perspectives and experience needed to contributeto the company’s growth. There are a suitable number of directors in order to provide balance and diversity
regarding specialties and other characteristics as well as to enable the board to function effectively andefficiently. (See the skill matrix on the last page of this report) For a supervisory function with a high degreeof transparency and objectivity, there are three Outside Directors. Personnel affairs and remuneration of
directors are determined by the Board of Directors following discussions by the Nomination andRemuneration Advisory Committee. SHO-BOND has contracts with all Outside Directors that limit their
liability prescribed in Article 423-1 of the Companies Act in accordance with Article 427-1 of this act. The
contractual upper limit on liability is the smallest amount stipulated in Article 425-1 of the act.
(3) Audit and Supervisory Committee
The Audit and Supervisory Committee has four members, of whom three are Outside Directors. As a rule, thecommittee meets once every month and meets at other times as needed. The Audit and Supervisory
Committee, as an independent body, audits and supervises the performance of directors who are not membersof the Audit and Supervisory Committee. The committee also prepares audit reports and makes decisions on- 14 -

other stipulated matters based on laws and regulations, the Articles of Incorporation, and Audit andSupervisory Committee rules and audit standards. The Audit and Supervisory Committee works with theaccounting auditor and the Audit Office to perform audits efficiently.
(4) Nomination and Remuneration Advisory Committee
The Nomination and Remuneration Advisory Committee has four members: three Outside Directors and thePresident and Representative Director. This committee is actively involved in the formation and execution of
the succession plan for the President and has adequate discussions on directors’ nomination and remuneration
while giving opinions and advice to the Board of Directors.
(5) Executive Committee
The President and Representative Director presides over the Executive Committee as a body to assist his
decision-making in management. This committee consists of directors outside the Audit and Supervisory
Committee and senior executives nominated by the President, including the executives of SHO-BOND
subsidiaries. As a rule, the committee meets twice every month and meets at other times as needed in order toreach decisions quickly.
(6) Internal Committees
Major committees related to business execution include the Risk Management Committee, Sustainability
Committee, Internal Control Committee, and Asset Management Committee. Important management issues
are continuously discussed by theme at these committees and submitted and reported to the Executive
Committee as needed.

3. Reasons for Adoption of Current Corporate Governance System
SHO-BOND positions corporate governance as one of the highest management priorities. The company with
an Audit and Supervisory Committee structure is used by SHO-BOND for the purposes of making
management more efficient and transparent and strengthening the business execution oversight function. In
addition, SHO-BOND has established the Nomination and Remuneration Advisory Committee as a voluntary
advisory body in order to strengthen the independence, objectivity, and accountability of the Board of
Directors.

- 15 -

III. Implementation of Measures for Shareholders and Other Stakeholders
1. Measures to Vitalize the General Shareholder Meetings and Facilitate Exercise of Voting Rights
Supplementary Explanations
The convocation notice for the general meeting of shareholders held on
Early Posting of Notice of theSeptember 26, 2024, was sent on September 4, 2024. SHO-BOND posted
General Shareholders Meeting
this convocation notice on its website on September 2, 2024.
Scheduling of the General
Shareholders Meeting During
The general meeting of shareholders was held on September 26, 2024.
Non-Peak Days
Shareholders can use the voting website of Mitsubishi UFJ Trust andElectronic Exercise of Voting
Banking Corporation, SHO-BOND’s transfer agent, to submit votes
Rightselectronically after shareholder meeting notices are sent and up to andincluding the day before the meeting.
Participation in a Platform for
the Electronic Exercise of
Voting Rights and Other
Initiatives to Enhance
SHO-BOND uses the Electronic Voting Platform operated by ICJ, Inc.
Environment for Institutional
Investors to Exercise Voting
RightsProvision of Notice (orSummary of Notice) of the
An English-language translation of the notice of the general meeting ofGeneral Shareholders Meetingshareholders is posted on the SHO-BOND website.
in English

2. Status of IR Activities
Supplementary Explanations

Formulation and Publication ofDisclosure Policies

Presentation
by President

SHO-BOND is dedicated to disclosing informationin an accurate, fair, and timely manner. In addition,
SHO-BOND posts its disclosure policy (IR policy)
on its website. The purpose is to use a variety ofcommunication activities for building long-term
relationships rooted in trust with all stakeholders andearning a proper evaluation from stakeholders.
(https://www.sho-bondhd.jp/english/ir/policy/)

Regular Investor Briefings held
for Individual Investors
Regular Investor Briefings held
for Analysts and Institutional
Investors
Online Disclosure of IR
Information

Briefings for individual shareholders are held in Tokyo
and Osaka every March.
Briefings are held in August for fiscal year performanceand in February for first half performance. There are also
one-to-one meetings with analysts and institutional
investors in response to requests.
SHO-BOND uses a kessan tanshin and other methods
to disclose financial information for every quarter andfiscal year. Disclosure activities also include
information that must be announced based on thetimely disclosure rules.
- 16 -Held

Held

Establishment of Department
and/or Placement of a Manager
in Charge of IR

The Corporate Planning Department is responsible forIR.

3. Status of Measures to Ensure Due Respect for Stakeholders
Supplementary Explanations
Internal rules for respecting the position of stakeholders are incorporated in
Establishment of Internal
the Corporate Credo and the SHO-BOND Group Code of Conduct. SHORules Stipulating Respect for
BOND uses its entire organization to collect information about the needs
the Position of Stakeholders
and expectations of stakeholders and is dedicated to meeting these needs
and expectations.
Implementation ofEnvironmental Preservation
Information about the SHO-BOND Group’s initiatives for sustainability
Activities and CSR Activities, management is on the SHO-BOND website.
etc.
(https://www.sho-bondhd.jp/english/materiality/)

Formulation of Policies, etc.
on Provision of Information to
Stakeholders

The basic policy for investor relations is to provide accurate, fair and timely
information about the Group’s management strategies, business activities,
financial conditions, and other items. The purpose is to build long-term
relationships rooted in trust and receive a proper evaluation fromshareholders, investors, and all other stakeholders by giving thesestakeholders an understanding of SHO-BOND’s corporate activities. This
policy is posted on the SHO-BOND website.
(https://www.sho-bondhd.jp/english/)- 17 -

IV. Matters Concerning the Internal Control System
1. Basic Views on Internal Control System and Status of System Development
The Group has the following framework, which complies with the Companies Act and Companies Act
Enforcement Regulations, to ensure that business operations are performed properly. The aim of thisframework is to ensure the efficiency of business activities, the reliability of reports, and strict compliancewith laws and regulations.
(1) System for ensuring that the performance of duties by directors and employees is in compliance withapplicable laws, regulations, and the Articles of Incorporation
1) The Board of Directors makes decisions about important matters stipulated in applicable laws, regulations,and the Articles of Incorporation. In addition, the Board of Directors receives reports on the directors’
business execution, and monitors and oversees their execution of business to ensure that they are incompliance with applicable laws, regulations, and the Articles of Incorporation.
2) The Board of Directors stipulates the Compliance Policy and ensures a thorough understanding thereofby all employees of the Group. The Compliance Office provides and updates rules and a handbook oncompliance, arranges regular training, and ensures a thorough understanding of the Compliance Policy by
all employees of the Group.
3) An internal whistle-blowing contact point serving as a venue for direct reporting/consultation by theofficers and employees of the Group is set up regarding unlawful behavior or illegal acts, etc. If the
responsible person of the whistle-blowing contact point believes that the case violates laws, regulations,or the Articles of Incorporation, he/she reports it to the Audit and Supervisory Committee immediately.
4) As an internal audit department, the Company has established the Audit Office, which audits the overall
operations of the Group. The Audit Office conducts audits under internal audit rules and reports the results
to the President and Representative Director, Audit and Supervisory Committee, etc.
5) To ensure the reliability of financial reporting, the Company develops and operates internal controls overfinancial reporting following the Financial Instruments and Exchange Act, etc.
6) The Group shall resolutely resist, on a cross-organizational basis, unlawful demands made by antisocial
forces, and has internal systems in place ensuring that it has no business or other relations of any kindwith such antisocial forces.
(2) System for storage and management of information relating to performance of duties by directors
SHO-BOND shall ensure appropriate and effective storage and management of information relating to theperformance of duties by directors based on document management rules and information security
management rules.
(3) Rules and other systems for managing the risk of losses
Regarding events that may cause significant losses to management, the Group establishes and operates a risk
management framework and performs risk management education and guidance activities for all employeesof the Group under risk management rules. As a rule, the Risk Management Committee meets once every
quarter in order to confirm the status of responses for every risk category and discuss the Group’s risk
management policies. In the event of the manifestation of risks as provided in the risk management rules, theheads of all departments and subsidiaries shall promptly report to the officer in charge of risk management
and the Risk Management Committee secretariat. The officer in charge of risk management shall relay thereported details of the risk event to the Board of Directors and the Audit and Supervisory Committee.
(4) System for ensuring efficient performance of duties by Directors
As a rule, the Board of Directors meets once every month and at other times as needed in order to reachdecisions quickly. Business operations are executed properly in accordance with decisions made by the Boardof Directors by clearly defining responsibilities and authority through organizational rules, rules for division- 18 -

of responsibilities, rules for delegation of authority, and other rules. The Executive Committee meets twice
every month as a rule to assist decision-making by the President and Representative Director. This provides aframework for efficient discussions and decisions concerning important matters involving management.
(5) System for ensuring the appropriateness of business operations in the corporate group comprising SHOBOND and its subsidiaries
SHO-BOND has rules for supervising subsidiaries to make them stronger and perform administrative tasks
efficiently. While respecting the autonomy of these companies, SHO-BOND asks for periodic reports on
business activities and preliminary consultations regarding significant matters. Subsidiaries use the SHOBOND risk management rules and compliance policy and every company has its administrative framework.
(6) Matters regarding directors and employees serving as assistants to the Audit and Supervisory Committee
in the performance of its duties, the independence of such directors and employees from other directors(excluding directors serving as Audit and Supervisory Committee members), and ensuring theeffectiveness of the instructions by the Audit and Supervisory Committee to such directors and employees
One employee is assigned to assist the Audit and Supervisory Committee. This employee’s independence
from executives is ensured by requiring that the opinion of this committee is respected with regard to
personnel and organizational changes and other matters. In addition, this employee must be given a sufficientamount of time to perform the duties needed to provide this assistance.
(7) Systems for reporting by directors (excluding directors serving as Audit and Supervisory Committee
members) and employees of SHO-BOND and its subsidiaries to the Audit and Supervisory Committee,
other systems for reporting to the Audit and Supervisory Committee, and systems for ensuring that thepersons who made such reports do not receive disadvantageous treatment on the grounds that they havemade such report
1) In cases of incidence or suspected incidence of any event that causes significant harm to the Group, or on
discovery of violation of applicable laws and regulations or unlawful behavior by officers or employeesof the Group, or any other event that is deemed reportable to the Audit and Supervisory Committee, thedirectors and employees shall duly report such event to the Audit and Supervisory Committee. Regardlessof the above, the Audit and Supervisory Committee members may at any time request a report from thedirectors or employees when necessary.
2) Procedures shall be created for information to be provided to the Audit and Supervisory Committee
members in a timely manner as required, from directors, auditors, and employees of subsidiaries.
3) The Group prohibits disadvantageous treatment of officers and employees of the Group who have reported
to the Audit and Supervisory Committee on the grounds that they have made such report and shall ensure
thorough understanding thereof among all directors and employees of the Group.
(8) Matters regarding the policies for processing advance payment or reimbursement of expenses or handlingother expenses or debts arising from the performance of duties by Audit and Supervisory Committee
members (limited to those arising from the performance of duties by Audit and Supervisory Committee)
When demands are made by the Audit and Supervisory Committee members for advance payment,
reimbursement of expenses, or other payments arising from the performance of their duties, the Audit andSupervisory Committee members shall have their expenses or debts owing to them processed promptly, except
in cases where such payment is deemed to have been unnecessary for the execution of duties by the Audit andSupervisory Committee members.
(9) Systems for ensuring the effectiveness of audits by the Audit and Supervisory Committee
Audit and Supervisory Committee members shall attend the Executive Committee, Internal Control
Committee, and other important meetings to fully understand the status of the execution of business
operations. They shall also examine major approval documents (“ringisho”) and other important documents- 19 -

regarding business execution, and, where necessary, may seek explanations from directors or employees. In
addition, they shall regularly exchange information with the Audit Office and the Accounting Auditor to
discuss issues concerning business execution and financial affairs.

2. Basic Views on Measures for Eliminating Antisocial Forces and Status of Development
The Group has established "Eliminate antisocial forces" in the SHO-BOND Group Code of Conduct andstipulated that all unlawful demands by antisocial forces shall be eradicated and relationships shall be
cut off.
We recognize that any relationship with antisocial forces, including unlawful demands from them, is aserious compliance risk. We manage risks following the policies and systems set forth in the risk
management rules and strive to prevent damage by regular communication with the local police andcompanies to collect information on antisocial forces.
As compliance practices, we have prepared a compliance handbook and disseminated it throughout theGroup. We also provide education on compliance through company-wide e-learning and rank-specifictraining to enhance knowledge and awareness.

- 20 -

V. Other
1. Adoption of Anti-Takeover Measures
Adoption of Anti-Takeover Measures

Not Adopted

Supplementary Explanation for Applicable Items-

2. Other Matters Concerning Corporate Governance System-【Corporate Governance Structure】- 21 -

【Overview of Timely Disclosure System】
Audit and Supervisory

Board of Directors

Committee

President and Representative Director/Executive Committee

Chief Information Officer
Accounting Auditor

Disclose

Corporate Lawyer

Tokyo Stock
Exchange

General Affairs Department/Corporate Planning Department/Accounting Department

Other section & Group company

Occurrence of material facts,
earnings results(1) Information on facts of regarding decisions shall be disclosed after each department prepares materials and receives approval from the Board of
Directors via the department in charge of disclosure.
(2) Information on facts regarding events shall be disclosed after the department in charge of disclosure reports to and receives approval from theofficer in charge and the representative director.
(3) Earnings results shall be disclosed after the Corporate Planning Department and the Accounting Department prepares materials and receives
approval from the Board of Directors via the department in charge of disclosure.

- 22 -

【Knowledge, experience, capability, and other skills of directors (Skill Matrix)】

No.

Name

insideCorporate

Finance/

Human

OutsideManagement

Accounting

Resources1

Tatsuya Kishimoto

inside〇2

Yasuhiro Sekiguchi

inside〇3

Takayasu Shimada

inside〇4

Setsu Arai

inside〇5

Noriyuki Hosaka

inside〇6

Satoru Miura

Outside〇7

Akira Hongo

Outside8

Reiko Kuwano

Outside〇〇Legal affairs/
Compliance,
Risk management

Research andDevelopment〇〇〇

Technology/
Global

〇
〇

〇

〇

〇
〇

〇

〇

〇

〇
〇

〇
〇

〇

Note: The above list does not represent all the expertise and experience possessed by directors.

SkillsCorporate Management

Finance/Accounting

Human Resources

Legal affairs/Compliance, Risk management

GlobalTechnology/ Research and Development

Details
Contribution to management based on experience in corporate management and important
corporate decision-making.
Contribution to management based on experience and expertise of finance and accounting.
Contribution to management based on knowledge and experience in formulation of humanresource strategy, human resource development and training, diversity, and work style reform.
Contribution to management based on knowledge and experience in legal, compliance, and risk
management.
Contribution to management based on knowledge and experience in overseas businessdevelopment.
Contribution to management based on knowledge and experience in technology and research anddevelopment.

- 23 -