Corporate Governance Policy
Onward Holdings Co., Ltd. (the Company) works to establish strong bonds of trust with customers andshareholders as well as with society on the whole by improving its corporate governance structure,strengthening its management efficiency, and enhancing its management soundness in an aim tocontinuously increase the corporate value of the Onward Group.
This Corporate Governance Policy is established, and updated continuously and periodically, by the
Board of Directors, with the purpose of reinforcing corporate governance of the Group.

Chapter 1 General Provisions
Article 1 (Basic philosophy on corporate governance)
The Onward Group understands that responding promptly to changes in the management environment
and establishing corporate governance systems that enhance soundness, fairness, transparency, andcompliance are important management issues for increasing corporate value, or, in other words,
shareholder value.
The Company has defined its business domain as “creating a world of fashion that gives refreshment
and beauty to people’s lives.” It operates based on its basic management policy of creating new lifestyles
and values that contribute to the enrichment of life for all people by offering fashion as lifestyle culture. The
Company recognizes that in order to materialize and achieve this basic management policy, it is importantto build and maintain favorable networks and relationships with all stakeholders, especially its customers,
with whom it interacts in conducting its business activities.
Based on the above recognition, the Company works to strengthen corporate governance in accordancewith the following basic principles of the corporate governance code.
(1) Secure the rights and equal treatment of shareholders.
(2) Appropriately cooperate with stakeholders by taking into account their interests.
(3) Ensure appropriate disclosure of corporate information and transparency.
(4) Improve the effectiveness of the board of directors’ supervision function over business execution.
(5) Engage in constructive dialogue with shareholders having an investment policy that matches themid- to long-term interests of shareholders.
Chapter 2 Securing the Rights and Equal Treatment of Shareholders
Article 2 (General meeting of shareholders)
1.

The Company positions the general meeting of shareholders as the highest decision-making body and1operates the general meeting of shareholders so as to make it a place to engage in constructive
dialogue with shareholders.
2.

The Company electronically discloses its convocation notices in Japanese and English after the board
decides to convene a general meeting of shareholders, and by the time the convocation notice is sentout, no later than three weeks prior to the date of the general meeting of shareholders. Furthermore,
the Company offers an online voting system and participates in the electronic voting platform to put inplace an environment in which all shareholders, including those who are unable to attend the general
meeting of shareholders, can properly exercise their voting rights.

3.

The Company secures the substantial rights of all shareholders, including minority shareholders andforeign shareholders, to see that shareholders may make appropriate decisions. At the same time, it
discloses information on its management strategy, financial conditions, business performance, andsuch like to shareholders and investors in a timely and appropriate manner through conducting IR
activities and promotes dialogue with shareholders and investors.

4.

The responsible department of the Company analyzes the results of voting rights exercised at thegeneral meeting of shareholders each year after the meeting. The results of the analysis are shared
between related departments including IR and responsible corporate executives and are also reported
at the meeting of the Board of Directors.

5.

The Board of Directors of the Company deliberates any proposal that received a considerable numberof votes against, by taking into account factors, and studying solutions.

Article 3 (Basic strategy for capital policy)
The Company recognizes capital policy as one of the most important issues for management andmanages business based on the following basic strategies.
(1) The Company does not implement any strategy for capital policy that is unlikely to contribute tocreating sustainable shareholder value on a long-term basis.
(2) When intending to implement a capital strategy that may cause a change in management control ora significant share dilution, the Board of Directors will deliberate the purpose, necessity andreasonableness of the strategy and the Company will secure a proper procedure and provide
explanations to shareholders.
(3) The basic dividend policy of the Company is to set a target dividend payout ratio of 40% or more
and strive to make stable distributions from profits that are appropriate considering the trends in the
Company’s operating performance.
(4) The Company discloses Return on Equity and other capital productivity indicators in its mediumterm management plan.
Article 4 (Cross-shareholdings)
1.

The Company may, on top of making portfolio investments, hold listed stocks of business partners bymaintaining and reinforcing business relationships with business partners, with the purpose of2

improving corporate value on a mid- to long-term basis.
2.

As regards cross-shareholdings, the Company verifies the significance and economic rationale behindcross-shareholdings at a meeting of the Board of Directors each year. It does so by taking into accountgrowth potential, profitability, reinforcement of business relationships from the perspective of mitigating
risks associated with shareholdings and promoting capital efficiency. If the Company cannot recognize
the reasonableness of holding, its basic policy is to sell the shares upon receiving adequate
understanding from the respective business partner.

3.

Even when the Company recognizes the reasonableness of cross-shareholdings, it may sell theshares in consideration of the market environment, management and financial strategies.

4.

In exercising voting rights pertaining to cross-held shares, the Company ensures proper exercise by
conducting deliberations on each proposal in accordance with the following criteria, based on the
viewpoints of increasing corporate value of the investee company on a mid- to long-term basis andexpanding the economic benefits of the Company and the Onward Group over the medium to longterm, and makes a comprehensive judgment as to the approval or disapproval thereof at a meeting of
the Board of Directors each year:(1) Whether business performance has continued to deteriorate significantly;(2) Whether antisocial conduct has been engaged in or social credibility has been damaged; or(3) Whether any proposal that may harm the interests of shareholders has been made.

Article 5 (Related-party transactions)
1.

The Company sets forth in its rules on corporate officers that when intending to execute a transaction
involving conflicts of interest and competition provided in the Companies Act with a Director of theCompany, the content and such like of the transaction must be explained to the Board of Directors
and the approval of the Board of Directors must be obtained. The Company also stipulates that thestatus of such transaction is to be reported also after receiving approval and that the use of suchtransaction must be strictly controlled and properly monitored.

2.

Even when a transaction does not correspond to the above, the Company, with regard to a transaction
with a Director of the Company or its consolidated subsidiary or with the next of kin thereof, individuallydistributes, once a year, a survey form to the Director to confirm whether or not the transaction took
place.

3.

The Company properly discloses transactions with major shareholders and other related-party
transactions in accordance with the provisions of the Companies Act, the Financial Instruments andExchange Act, and other relevant laws and regulations and with the regulations of the Tokyo Stock
Exchange.
Chapter 3 Appropriate Cooperation with Stakeholders Other Than Shareholders

Article 6 (Formulation and implementation of code of conduct)
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1.

The Company recognizes that execution of corporate social responsibility entails proactively dealing
with social issues on top of pursuing activities for ensuring legal compliance, industrial safety andhealth, protection of human rights, social contribution, and environmental conservation.

2.

Specifically, the Company has developed a Compliance Manual that specifies ways of conducting
compliance activities and ethical standards to be followed, and the Onward Group Compliance
Committee takes the lead in conducting educational activities, including in-house training andenlightenment activities, to ensure widespread awareness and understanding.

Article 7 (Addressing sustainability issues)
1.

In order to keep the Company in existence being recognized as a “good company,” the Company
believes that each and every member of the Onward Group must work to ensure not only compliancewith laws, regulations, and internal rules but also socially sensible behaviors.

2.

In order to see that each and every employee of the Onward Group carries out his or her social
responsibilities in their own community, the Company has in place a Compliance Manual that takes
the Onward Group Compliance Regulations as the basis and engages in business activities with thefocus on compliance.

Article 8 (Ensuring diversity, including women’s active roles)
1.

With the purpose of putting in place an environment in which women can continue to be highly
motivated and demonstrate strong performance, the Company supports female workers in developing
specific career plans by organizing occasions in which actively performing female employees can
exchange opinions and taking other measures.

2.

The Company has in place the Diversity Promotion Department and operates a support system inwhich dedicated staff members receive opinions from and are consulted by employees.

Article 9 (Whistleblowing)
The Company establishes a framework for whistleblowing referred to as the Onward Group Whistle Line
with an internal department and an external law firm as contact points. To support this framework, theCompany sets forth the Onward Group Whistleblowing Rules that provide for the department responsible
for operating the framework, consultation and reporting procedures, response to requests for consultation
and reporting made, protection of the whistleblower seeking consultation or making the report.
Chapter 4 Ensuring Appropriate Disclosure and Transparency
Article 10 (Ensuring appropriate disclosure and transparency)
1.

The Company appropriately makes disclosure in compliance with the Companies Act, the Financial
Instruments and Exchange Act, other relevant laws and regulations, and rules of the Tokyo Stock
Exchange. The disclosure includes both financial information, such as operating results and financial
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standing, and non-financial information, such as business strategies, business issues, risks andgovernance.
2.

The Company places strict control over important pieces of information, such as insider information,in accordance with the Onward Group Insider Trading Prevention Rules.

Article 11 (Nomination and Compensation Committee)
1. The Company has in place the Nomination and Compensation Committee as an advisory body to theBoard of Directors.
2. The Nomination and Compensation Committee shall deliberate on matters related to the nominationand compensation, etc. of Directors and report to the Board of Directors in response to inquiries fromthe Board of Directors.
3. The Nomination and Compensation Committee shall consist of three or more Directors selected by the
Board of Directors, the majority of whom shall be Independent Outside Directors.
Article 12 (Policy and procedures for nominating director candidates)
1.

Candidates for Directors (excluding Outside Directors) of the Company shall satisfy the following
conditions.
(1) The candidate is capable of making judgment from a company-wide perspective.
(2) The candidate has special knowledge concerning business operations of the Company.
(3) The candidate has outstanding ability to make business decisions and execute business activities.
(4) The candidate has excellent supervisory skills, decision-making skills, and foreseeability andplanning skills.
(5) The candidate has personal traits and expertise that are suitable for a Director.

2.

Candidates for Outside Directors of the Company shall satisfy the following conditions.
(1) The candidate has abundant experience in management or is a professional specialist in law,accounting, or finance.
(2) The candidate can maintain independence from the Representative Director of the Company.
(3) The candidate has personal traits and expertise that are suitable for an Outside Director.

3.

Independence standards for Outside Directors and Outside Audit & Supervisory Board Members set
forth by the Company are as provided in the (Attachment) “Independence Standards for Outside
Directors and Outside Audit & Supervisory Board Members.”

4.

Based on the procedure for nominating Directors (including Outside Directors) of the Company set
forth by the Company, the Board of Directors consults the Nomination and Compensation Committee
regarding matters related to the appointment of Directors from the perspective of securingtransparency and objectivity in the evaluation and decision-making process, and decides on thecandidates based on the said Committee's report.

5.

Reasons for nominating each of the candidates for Directors of the Company are indicated in the
Reference Materials for the General Meeting of Shareholders.
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6.

The Company recognizes the selection and dismissal of the Representative Director as theCompany's most important strategic decision-making, and the Board of Directors will consult theNomination and Compensation Committee regarding matters related to the selection and dismissal of
the Representative Director and the Company will allocate ample time and resources to such selection
or dismissal based on the said Committee's report.

7.

As part of the Company's policy of dismissing or not reappointing Directors (including Outside
Directors), the Board of Directors shall consult the Nomination and Compensation Committee
regarding the dismissal of a Director when he or she is determined not to sufficiently demonstrate hisor her functions based on an appropriate evaluation of the Company's performance and other factors
as well as the policy for nomination. The Company shall deliberate the dismissal of such Director
based on the said Committee's report.

Article 13 (Policy and procedures for nominating candidates for Audit & Supervisory Board Members)
1. Candidates for Audit & Supervisory Board Members of the Company shall satisfy the following
conditions.
(1) The candidate has abundant experience in each business of the Onward Group while having
knowledge and skills for demonstrating appropriate supervisory and auditing functions.
(2) The candidate has traits to secure independence from persons engaged in business execution.
(3) The candidate has personal traits and expertise that are suitable for an Audit & Supervisory Board
Member.
2. Candidates for Outside Audit & Supervisory Board Members of the Company shall satisfy the following
conditions.
(1) The candidate has abundant experience in various sectors or has abundant experience andappropriate insights into the area of law, accounting or any other special field so that the candidate
may contribute to enhancing the supervisory and auditing functions.
(2) The candidate can be expected to proactively and aggressively provide advice andrecommendations to the Board of Directors.
(3) The candidate has personal traits and expertise that are suitable for an Outside Audit &Supervisory Board Member.
3.

Standards for independence of Outside Audit & Supervisory Board Members set forth by the Company
are as provided in the (Attachment) “Independence Standards for Outside Directors and Outside Audit& Supervisory Board Members.”

4.

According to the procedure for nominating Audit & Supervisory Board Members (including Outside
Audit & Supervisory Board Members) of the Company, the Board of Directors decides on thecandidates upon receiving concurrence of the Audit & Supervisory Board.

5.

Reasons for nominating each of the candidates for Audit & Supervisory Board Members of theCompany are indicated in the Reference Materials for the General Meeting of Shareholders.

6Article 14 (External accounting auditors)
With respect to decisions on selecting, dismissing, reappointing and not reappointing external
accounting auditors, the Audit & Supervisory Board of the Company performs evaluation based on theevaluation standards set out under the Guidelines on Standards for Evaluation of Accounting Auditors
prepared by the Audit & Supervisory Board, has discussions and makes the decision. In regard to audits
performed, the Company secures the reliability of disclosure and the responsibility toward shareholders
and investors by making sure to allocate adequate time for conducting audits, coordinating with Audit &Supervisory Board Members and the Internal Control Department, and allocating time for interviews withthe management team.
Chapter 5 Responsibilities of the Board of Directors
Article 15 (Roles and responsibilities of the Board of Directors)
1.

The Company recognizes that one of the major roles and responsibilities of the Board of Directors lies
in setting the strategic direction based on the corporate philosophy. Therefore, the Company
delegates the authority over business executions except for matters set forth in laws and regulations
and the Articles of Incorporation and important management matters of the Onward Group to theRepresentative Director and others in the management team to encourage prompt and active
management decisions for business execution. At the same time, the Company recognizes its
fiduciary responsibility and accountability to shareholders and secures the diversity, as well as
demonstrates appropriately its supervisory function over business strategies, medium-term
management plans, and other management matters on the whole to increase corporate value.

2.

The Representative Director of the Company, in recognition that the planning and development of hisor her successor is one of his or her important responsibilities, pursues development of successor
candidates by requiring executive officers to set not only operating targets but also missions in linewith the responsibility of each officer, participate in management through attending management
meetings and other important meetings and take other steps. The Board of Directors is involved in theformulation and operation of such successor plans, while appropriately exercising oversight to ensurethat the development of successor candidates is carried out systematically.

Article 16 (Roles and responsibilities of Outside Directors)
1.

Trying to contribute to enhancement of corporate governance, Outside Directors of the Company areadequately aware that they are expected to promote appropriate decision-making in the Board of
Directors through asking questions and stating opinions to activate discussions at meetings of theBoard of Directors and stating comments from the perspective of each of their specialized fields.

2.

Outside Directors of the Company recognize that one of their major roles and responsibilities is totake their independent and objective positions in verifying the outcome of management of theCompany and the performance of the management team of the Company at any time, making
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judgment on the appropriateness of delegating management to the incumbent management team,and actively stating opinions.
3.

In order to fulfill the roles set forth in the preceding paragraph, Independent Outside Directors shallactively exchange opinions and provide advice from an independent and objective standpoint atmeetings of the Board of Directors. In addition, if they are appointed as members of the Nomination
and Compensation Committee as Independent Outside Directors, they shall be actively involved inconsidering matters related to the nomination and compensation, etc. of Directors by deliberating andreporting on these matters at meetings of the said Committee.

Article 17 (Roles and responsibilities of Audit & Supervisory Board Members and the Audit & Supervisory
Board)
Audit & Supervisory Board Members (including Outside Audit & Supervisory Board Members) and the
Audit & Supervisory Board of the Company recognize their roles and responsibilities to be not limited tocarrying out the so-called defensive functions, such as operation audits and accounting audits, and makeefforts to also proactively and aggressively exercising their authority by appropriately stating opinions at
meetings of the Board of Directors or to the management team. In addition, they make appropriate
judgment from their independent and objective standpoints by taking into account their fiduciary
responsibility to shareholders in carrying out their roles and responsibilities.
Article 18 (Remuneration of corporate officers)
Remuneration of corporate officers of the Company is comprised of a base compensation, bonus andremuneration for purchasing treasury stock. The base compensation for Directors and Audit & Supervisory
Board Members is determined by taking into account factors, such as whether they are full-time or nonfull-time, roles assigned, title, number of years in role, and personal evaluation. For the remuneration for
Directors, the Board of Directors consults the Nomination and Compensation Committee regarding
remuneration proposals from the viewpoint of securing transparency and objectivity in the evaluation anddecision-making process, and based on the said Committee's report, makes a decision on the
remuneration, and for the remuneration for Audit & Supervisory Board Members, it is determined basedon discussions by the Audit & Supervisory Board. Bonuses are paid to Directors (excluding Outside
Directors) based on the consolidated operating results of the previous fiscal year. Remuneration forpurchasing treasury stock is paid to Directors (excluding Outside Directors) with the purpose of increasing
the motivation and morale of Directors toward raising the stock price and improving operating performance.
Article 19 (Establishment of risk management system and supervision of operating condition)
With the aim of ensuring timely business execution under an appropriately controlled environment, theBoard of Directors of the Company sets forth the Basic Policy on the Establishment of Internal Control
System, promotes establishment of systems, including the compliance system, system to promote
efficiency of business execution, risk management system, and system to ensure appropriateness of8

financial reporting, and oversees the status of operation of these systems.
Article 20 (Concurrent positions as corporate officers of other listed companies)
1.

When a Director of the Company is to concurrently hold an executive position at another listedcompany, the Board of Directors approves the concurrent holding of position only when the holding iswithin a reasonable range of being able to secure the time and labor necessary for appropriately
carrying out the roles and responsibilities as Director of the Company.

2.

The status of holding important concurrent positions by Directors of the Company is indicated in the
Reference Material for the General Meeting of Shareholders and the Business Report in accordancewith relevant laws and regulations.

Article 21 (Ensuring the effectiveness of the Board of Directors)
1.

Directors of the Company conduct self-assessments each year with regard to the effectiveness andappropriateness of oversight of management by the Board of Directors and the status of executing
their duties as Directors, and report the results to the Board of Directors.

2.

The Board of Directors of the Company analyzes and evaluates the effectiveness of the Board of
Directors as a whole based on the self-assessment of each Director and discloses a summary of
results of the analysis and evaluation.

Article 22 (Training for Directors and Audit & Supervisory Board Members)
1.

The Company provides and arranges training opportunities for Directors, Audit & Supervisory Board
Members, and executive officers to acquire and update the knowledge and skills required forexecuting duties so that they may appropriately carry out their roles and responsibilities.

2.

The Company organizes meetings with Directors, Audit & Supervisory Board Members or executive
officers when they assume their positions to hold discussions on the Company’s management,
business and financial strategies and related matters, relevant laws and regulations, and issues of the
Onward Group and solutions thereof.

3.

When an Outside Director/Outside Audit & Supervisory Board Member newly assumes his or her
position, the Company provides explanations on the Company’s business activities, organizational
structure and other matters, and also provides the officer with necessary information regarding
business issues on a periodical basis.
Chapter 6 Dialogue with Shareholders

Article 23 (Policy on constructive dialogue with shareholders)
1.

At the Company, the officer responsible for IR information disclosure takes the lead in holding
periodical briefing sessions for analysts and institutional investors and offering adequate information
disclosure on the Company’s website. In order to have these activities function effectively, the IR
9Department is established and the department promotes close coordination with the Corporate
Planning Department, Accounting Department, Legal Department and other relevant departments.
Comments and requests received through IR activities are reported to the Executive Management
Council and the Board of Directors and are used in discussions for increasing corporate value.
2.

In order to appropriately manage insider information, the Company establishes a silent period during
which the Company withholds from having dialogue concerning financial information.

3.

The Company prepares a shareholder register on a quarterly basis, periodically conducts research toidentify substantial shareholders, and works to identify the shareholder structure.

Enforced: April 8, 2016
Revised: December 7, 2018
Revised: May 28, 2020
Revised: February 26, 2021

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(Attachment) Independence Standards for Outside Directors and Outside Audit &Supervisory Board Members
When a candidate for Outside Director or Outside Audit & Supervisory Board Member applies to any of
the following, the Company considers that the candidate does not have the independence as Outside
Director/Outside Audit & Supervisory Board Member.
1.

Company at which a person engaged in business execution of the Company1 assumes a corporate
executive position

Any person engaged in business execution of a company at which a person engaged in businessexecution of the Company assumes a corporate executive position.
2.

Major business partner

Any party that considers the Company as a major business partner2 or a person engaged in businessexecution of the party, or any major business partner of the Company3 or a person engaged in businessexecution of the business partner.
3.

Accounting corporation of the Company

Any person belonging to an accounting corporation that performs audits concerning the Company basedon the Companies Act or the Financial Instruments and Exchange Act.
4.

Independent specialist

Any specialist who receives a considerable amount4 of money or other assets in addition to remuneration
for corporate officers (such specialist refers to an attorney-at-law, accountant, tax accountant, patent
attorney, judicial scrivener, consultant, etc.; if the party receiving the aforesaid assets is a corporation,
union, or entity, the person belonging to such entity).
5.

Recipient of contribution

Any party receiving a considerable amount5 of contribution from the Company (if the party receiving the
aforesaid contribution is a corporation, union, or entity, the person engaged in business execution at such
entity).
6.

Major shareholder

Any party who substantially holds 10% or more of the Company’s voting rights or a person engaged inbusiness execution of such party.
7.

Past applicable person
Any party that was applicable to any of 1 through 5 above in the past five years.
118.

Next of kin
Next of kin of person applicable to any of 1 through 7 above (excluding person of no importance).

Notes:
1“A person engaged in business execution” refers to a business-executing Director and managing
executive, executive officer, manager, or employee (including adviser).

2“Any party that considers the Company as a major business partner” refers to a party that hasreceived from the Company an amount of payment equivalent to over 2% of the annual net sales
in the most recent business year.

3“Major business partner of the Company” refers to a party that has paid the Company an amountequivalent to over 2% of the annual net sales of the Company or a party whose outstanding loan to
the Company exceeds 2% of the total assets of the Company, in the most recent business year.

4“A considerable amount” with respect to assets received in the most recent business year refers to,in case the party that has received the assets concerned is an individual, an annual amount of ¥10
million, and in case the party is a corporation, union, or entity, an amount over 2% of consolidated
net sales or total revenue of the entity.

5“A considerable amount” with respect to contribution received in the most recent business year
refers to, an annual amount of ¥10 million or 2% of the total revenue, whichever is higher.

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