[Translation]

Corporate Governance Report
Scroll Corporation

Last Updated: May 31, 2024
Tomohisa Tsurumi
Representative Director and President

Scroll Corporation
Contact: Corporate Planning Division, Corporate Management Department +81-53-464-1114
Securities Code: 8005
https://www.scroll.jp/
The status of Scroll Corporation’s (hereinafter referred to as the “Company”) corporate governance is as described
below.

I.

Basic View on Corporate Governance, Capital Structure, Corporate Attributes and Other
Basic Information

1. Basic View
The Company’s basic view on corporate governance is to maximize corporate value through safe and soundbusiness activities, by increasing management efficiency and transparency.
Based on this view, the Company constantly pursues the best possible corporate governance and works to enhance
corporate governance in accordance with its Corporate Motto and Management Philosophy.
The Company has formulated the “Scroll Corporation’s Corporate Governance Guidelines,” which constitute its
basic view and basic policy on corporate governance.
[Reasons for Non-compliance with the Principles of the Corporate Governance Code]
The Company has implemented all of the principles of the Corporate Governance Code (revised on June 11, 2021).
[Disclosure Based on the Principles of the Corporate Governance Code][Principle 1.4 Cross-Shareholdings]
The Company holds shares of companies determined to be necessary for the achievement of sustainable growth
and the enhancement of social value and economic value, as part of management strategies regarding the stableprocurement of products and business alliances and so forth, as well as to build good relationships with business
partners and local communities in order to promote a smooth business operation.
The Company's basic policy is to reduce cross-shareholdings. Every fiscal year, the Board of Directors meetings
verifies the individual policy shareholdings, appropriateness of the purpose of holding shares, profitability incomparison to the cost of capital, share price, and the maintenance and strengthening of relationships withportfolio companies through holding the shares, and the details of such examinations are disclosed. With regard
to exercising the voting rights of cross-shareholdings, the Company makes decisions from the perspective of
medium- to long-term economic rationality based on the results of the verification and takes appropriate actions.
If there are any shares that are not deemed to contribute to the achievement of sustainable growth and theenhancement of medium- to long-term corporate value of the Company Group, the Company will have necessary
and sufficient dialogue with the investees in its capacity as a shareholder.
The Company does not engage in transactions with companies that hold the Company’s shares for the purpose ofcross-shareholding (i.e., cross-shareholders) that may harm the interests of the relevant companies or the common
interests of their shareholders. In addition, the Company respects the cross-shareholders’ policies for holding theCompany’s shares and does not hinder their sale, etc.
[Principle 1.7 Related Party Transactions]
The Company has established procedures that require the prior approval of the Board of Directors for the terms
and conditions of transactions between it and its Directors or between it and its affiliates where the interests of it
and its Directors conflict.

-1-

[Translation][Supplementary Principle 2.4.1 Ensuring Diversity]
The Company believes that human resources are of utmost importance as the foundation supporting a company’ssustainable growth. It promotes task diversity management to ensure that the achievement of goals by individuals
and the organization leads to business development, keeping in mind that each of employees contributes to various
career development and the improvement of organizational capabilities.
The Company also promotes the active participation of women within the company and sets goals concerning thepromotion of women to managerial positions.
<Policy related to human resource development and the establishment of the internal environment>
The Group shall appropriately allocate employees in order to enhance organizational capabilities in addition todeveloping and supporting human resources, who desire proactive and autonomous career development as
individuals and contribute to not only results, but also the enhancement of organizational capabilities. The
Group believes that its efforts to create an environment where diversity is mutually accepted and each andevery individual can display their capabilities to the maximum extent while working to respond to the various
types of career development desired by employees will lead to the sustainable growth of the Group.
<Goals for the promotion of the active participation of women>
Ratio of women in managerial positions
at the Company
The Company
Consolidated
As of April 1, 2024
31.8%
28.6%
FY2025 (2 years later)
30.0% or higher
30.0% or higher[Principle 2.6 Roles of Corporate Pension Funds as Asset Owners]
The Company has completed the shift to the defined contribution pension plan, and employees eligible for the
corporate pension plan shall carry out asset management by themselves.
The Company seeks to reduce future risks under corporate accounting, and selects and provides products in
consultation with plan administrators in order for each employee to manage their assets in line with his/her lifeplan.
[Principle 3.1 Full Disclosure](i) Company objectives (e.g., Management Philosophy), management strategies and management plans
The Company discloses the details of the Company’s aims, medium-term management plans and others in
integrated reports, business strategies and management plans contained in IR information for shareholders
and investors, annual securities reports, quarterly securities reports and financial results materials.
- Corporate philosophy
https://www.scroll.jp/corporate/philosophy/- Business strategies and management plans
https://www.scroll.jp/ir/strategy/- IR information
https://www.scroll.jp/ir/(ii) Basic View and Basic Policy on Corporate Governance in view of Each Principle in the Code
The Company has formulated the “Scroll Corporation’s Corporate Governance Guidelines,” which constituteits basic view and basic policy on corporate governance, and discloses them on its website.
https://www.scroll.jp/sustainability/governance/(iii) Policies and procedures in determining compensation for senior management and Directors by the Board of
Directors
The policies and procedures in determining compensation for Directors are stated in “Disclosure of the Policy
for Determining the Amount of Compensation or the Calculation Method thereof” under II. 1. [Directors’Compensation] in this report.
(iv) Policies and procedures in appointing/dismissing senior management and nominating candidates for Directors
and Audit and Supervisory Committee Members by the Board of Directors
In nominating candidates for Directors (excluding Directors who are Audit and Supervisory Committee
Members), from the perspective of ensuring objectivity and transparency, the Board of Directors first consults
the Nomination and Compensation Committee regarding a proposal of candidates for Directors. The
Committee then submits its report to the Board of Directors after deliberation, and the Board of Directors
nominates candidates for Directors based on the details of the report.
-2-

[Translation]
In nominating candidates for Directors who are an Audit and Supervisory Committee Members, the Board of
Directors first consults the Nomination and Compensation Committee regarding a proposal of candidates for
Directors. The Committee then submits its report to the Board of Directors after deliberation, and the Boardof Directors nominates candidates for Directors based on the details of the report with the consent of the Audit
and Supervisory Committee.
The Nomination and Compensation Committee prepares a proposal of candidates using the following criteria
and skill matrix.
1. A person who contributes to the achievement of the Group’s sustainable growth and the enhancement of
medium- to long-term corporate value;
2. A person who contributes to the achievement of effective corporate governance; and3. A person who brings balance and diversity to the Board of Directors as a whole and contributes toachieving effective risk management across the Group.
For the skill matrix used by the Nomination and Compensation Committee, please refer to the reference
documents for the Ordinary General Meeting of Shareholders.
In appointing a Representative Director (or CEO), from the perspective of ensuring objectivity andtransparency, the Board of Directors first consults the Nomination and Compensation Committee regarding
the appointment of the Representative Director. The Committee then submits its report to the Board of
Directors after deliberation, and the Board of Directors appoints the Representative Director based on thedetails of the report.
The Nomination and Compensation Committee prepares a proposal of a candidate for the Representative
Director based on the following criteria.
1. Criteria for appointment
A person who can exercise strong leadership in overseeing across the Group in addition to who satisfies
the criteria for appointing as Directors.
2. Criteria for dismissal (resignation notice)(a) If he/she falls under any of the criteria for receiving a notice to resign from the Director position;i) If he/she has committed suspected fraud or malfeasance; orii) If he/she is found to lack qualifications.
(b) If events or conditions that may cast significant doubt on the Company’s ability to continue as a going
concern have occurred, and they are unlikely to be resolved or remedied;(c) If he/she has long been unable to fulfill his/her role and obligations as a Director due to significant
damage to his/her physical or mental health; or(d) If he/she causes a corporate scandal that becomes a social problem and he/she was deeply involved in
the execution of business related to the said scandal.
(v) Explanation of each appointment/dismissal whereby appointment/dismissal of senior management andnomination for candidates for Directors and Audit and Supervisory Committee Members are conducted by
the Board of Directors based on (iv) above
The reasons for the nomination of each person as a candidate for a Director or Directors who are Audit andSupervisory Committee Member are stated in the reference documents attached to the Notice of theConvocation of the Ordinary General Meeting of Shareholders.
[Supplementary Principle 3.1.3 Initiatives for Sustainability, etc.]
The Group will continue to support the emergence of the people’s affluent lifestyles based on the Corporate Mottoof “We shall earn the trust of the public by doing business in an honest, ethical, and enriching manner.”
The Company will work for the Group’s sustainable growth by creating better products and services and providing
never-before-available added value while maintaining the spirit of taking on challenges.
A sustainable society is the major premise for this. We will contribute to the realization of a sustainable society
by working to solve environmental and social issues through our business activities.
For the details of the initiatives for sustainability and TCFD disclosure, please refer to the Company website andintegrated reports.
- The Company website
https://www.scroll.jp/- Integrated reports
https://www.scroll.jp/ir/annual/-3-

[Translation][Supplementary Principle 4.1.1 Scope of Matters Delegated to the Management]
The Company has established the Board of Directors Rules and specifies matters to be deliberated at the Boardof Directors meetings.
The Company also has established the Authority Rules and clearly specifies the scope of business operations thatcan be executed by management without requiring individual and specific resolutions by the Board of Directors.
[Principle 4.9 Independence Standards and Qualification for Independent Outside Directors]
In light of the requirements for Outside Directors set forth in the Companies Act and the independence standards
provided for by the Tokyo Stock Exchange, based on the “Criteria for Judging the Independence of Outside
Directors” established separately, the Company has appointed Six Independent Outside Directors who are all
Audit and Supervisory Committee Members.
[Supplementary Principle 4.10.1 Involvement of and Advice from the Nomination and Compensation Committee]
The Company has established, as an advisory body to the Board of Directors, the Nomination and Compensation
Committee, which provides appropriate involvement and advice in the consideration of important matters such as
the nomination of and compensation for Directors. The Nomination and Compensation Committee is chaired byan Outside Director and the majority of the members are Independent Outside Directors.
[Supplementary Principle 4.11.1 Views on the Total Balance between Knowledge, Experience and Skills, and theDiversity and Appropriate Size of the Board of Directors]
The Company has nominated persons with abundant experience in various fields as candidates for Directors,
keeping in mind the balance between knowledge, experience and capabilities, and the diversity of the Board of
Directors as a whole.
The policies and procedures for appointing Directors are stated in “(iv) Policies and procedures inappointing/dismissing senior management and nominating candidates for Directors and Audit and Supervisory
Committee Members by the Board of Directors” under [Principle 3.1 Full Disclosure] in this report. For the skill
matrix for Directors, please refer to the reference documents for the Ordinary General Meeting of Shareholders.
[Supplementary Principle 4.11.2 Status of Officers Who Concurrently Serve as Officers at Other Listed
Companies]
The status of Directors (including Directors who are Audit and Supervisory Committee Members) who
concurrently serve as officers at other listed companies is disclosed in annual securities reports.
https://www.scroll.jp/ir/irlibrary/securities/[Supplementary Principle 4.11.3 Analysis and Evaluation of the Effectiveness of the Board of Directors as a
Whole]
With the aim of improving the functions of the Board of Directors, the Company analyzes and evaluates theeffectiveness of the Board of Directors. In cooperation with a third-party organization, the Company conducted aself-assessment through questionnaires for each Director regarding “overall operation of the Board of Directors,”“innovations in the operation of the Board of Directors, enhancement of deliberations,” “agenda of the Board of
Directors,” “composition of the Board of Directors,” “structure supporting the Board of Directors,” “roles andresponsibilities of the Board of Directors” and other matters, and evaluated and analyzed the results. As a result,it has determined that the effectiveness of its Board of Directors has been ensured.
The Company will continue to evaluate the effectiveness of the Board of Directors and make improvements basedon the results to further improve the functions and ensure the effectiveness of the Board of Directors on a regularbasis.
[Supplementary Principle 4.14.2 Training for Directors and Corporate Auditors]
The Company provides opportunities for Directors to acquire necessary knowledge and skills and appropriately
develop them so that they can deepen their understanding of their roles and responsibilities. In addition, when a
new Outside Director assumes his/her position, the Company takes appropriate actions, such as providing an
explanation of its business environment and other matters and an opportunity to visit its facilities.

-4-[Translation][Principle 5.1 Policy for Constructive Dialogue with Shareholders]
The Company aims for IR activities that help the Company to be understood and properly evaluated by all
stakeholders, such as shareholders and investors.
For this, the Company’s basic policy is to make timely, accurate, fair and continuous disclosures of significant
information related to the Company.
[Response to realize management with an awareness of capital costs and share price]
In formulating medium-term management plans, the Company identifies its capital cost using the weighted
average capital cost (WACC). In addition, together with the earnings plan and basic capital policies such as theshareholder return policy, the Company has set a target of ROE higher than the cost of capital and discloses it.
With regard to capital costs and return on capital of the Group, the Company was able to achieve return on capitalthat exceeded capital costs due to stay-at-home demand during the novel coronavirus disease (COVID-19)
pandemic in FY2020, to the effect of business structural reforms promoted mainly in the mail-order business, andmaintained return on capital at a high level.
As a result, although PBR (Price-to-Book Ratio) reached a level that recovered to 1 time, the Company recognizes
that valuation from the stock market continues to be low.
With regard to the stock market's assessment, the analysis suggests that the company has been unable to break outof the gradual downward trend since the record-high financial results, which were boosted by the special demand
related to COVID-19 in FY2020, and is seen as having "no potential for future growth (continuity)".
FY2024, under the title “Marketing Solution 2026', the Group will evolve and expand its business domain beyond
EC and mail-order businesses by adding further functions and technologies, with a focus on providing other EC
and mail-order businesses with the knowledge and know-how it has developed in direct marketing. The Groupwill evolve and expand its business domain beyond EC and mail-order businesses by adding further functions andtechnologies, and return to a growth trajectory to realise the Group's continued growth.
Under the main theme of “promoting effective responsibility management”, the Group's sustainability efforts aredesigned to meet the social demands of its stakeholders, thereby enhancing corporate value and building a
structure that enables sustainable growth. In addition, by disclosing this progress in a manner that is easy tounderstand, the valuation from the stock market will increase.
[Implementation, etc. of dialogue with shareholders]Briefing meetings are held for analysts and institutional investors by the Representative Director so thatshareholders and investors can understand the Company on a deeper level. In FY2023, 19 the company held twicea year after the interim settlement and the year-end settlement, and individual meetings were held to respond torequests from securities analysts and investors.
Furthermore, in June 2023, the Company issued the “integrated report 2023,” which explained the Company’s
way of thinking, as a tool for dialogue with investors.
In addition, the Company has set up dedicated IR pages on its website, and works for the proper disclosure of
information by posting financial results materials on a quarterly basis in accordance with fair disclosure rules.

2. Capital Structure
Foreign Shareholding Ratio

Less than 10%-5-[Translation][Status of Major Shareholders]Number of Shares Held(shares)Name

Ratio (%)

The Master Trust Bank of Japan, Ltd. (trust
account)

3,724,200

10.87

Marubeni Corporation

2,841,600

8.30

Scroll Customer’s Shareholding Association

2,201,641

6.43

Custody Bank of Japan, Ltd. (trust account)

1,264,100

3.69

The Shizuoka Bank, Ltd.

1,261,917

3.68

Scroll Employees’ Shareholding Association

745,640

2.18

Nippon Life Insurance Company

543,229

1.59

STATE STREET BANK AND TRUSTCOMPANY 505223

459,300

1.34

Moririn Co., Ltd.

434,554

1.27

YAGI & CO.,LTD.

270,918

0.79

Controlling Shareholder (Excluding Parent
Company)–

Parent Company

None

Supplementary Explanation
The status of major shareholders is as of March 31, 2024.

3. Corporate Attributes
Listed Exchange and Market
Segment

TSE Prime Market

Fiscal Year End

March

Industry Type

Retailing

Number of Employees (Consolidated) as of
the End of the Previous Fiscal Year

500 to less than 1,000

Net Sales (Consolidated) in the Previous
Fiscal Year

10 billion yen to less than 100 billion yen

Number of Consolidated Subsidiaries as of the
End of the Previous Fiscal Year

10 to less than 50

4. Guidelines on Measures for Protection of Minority Shareholders in Conducting Transactions, etc. with
Controlling Shareholder–

5. Other Special Circumstances Which May Have a Material Impact on Corporate Governance–-6-

[Translation]

II. Business Management Organization and Other Corporate Governance Systems regarding
Decision-making, Execution of Business, and Oversight in Management
1. Organizational Composition and Operation
Corporate Governance System

Company with Audit and Supervisory Committee[Directors]
Number of Directors Stipulated in the Articles ofIncorporation

14

Directors’ Term of Office Stipulated in Articles
of Incorporation

1 yearChair of the Board of Directors

President

Number of Directors

10

Appointment Status of Outside Directors

Appointed

Number of Outside Directors

6

Number of Outside Directors Designated as
Independent Officers

6

Relationship with the Company (1)NameAttribute

Tsukasa Murase

From another company

Takayuki Miyabe

From another company

Masanori Miyagi

From another company

Itsuro Hitosugi

From another company

Akiko Ono

From another company

Chiseko Baba

From another company

Relationship with the Company (*)
a

b

c

d

e

f

g

h

i

j

k

○
△

* Categories for relationship with the Company* “○” indicates that the person currently falls or has recently fallen under the relevant category; and “△”indicates that the person fell under the relevant category in the past.
* “●” indicates that the person’s close relative currently falls or has recently fallen under the relevant category;and “▲” indicates that the person’s close relative fell under the relevant category in the past.
abcdPerson who executes business of the listed company (the Company) or its subsidiary
Person who executes business or a non-executive director of a parent company of the Company
Person who executes business of a fellow subsidiary of the Company
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 in addition
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)-7-

[Translation]i

Person who executes business for another company holding cross-directorships/cross-auditorships with theCompany (applies to self only)
j Person who executes business for an entity receiving contributions from the Company (applies to self only)
k Others
Relationship with the Company (2)Name

Tsukasa Murase

Takayuki Miyabe

Masanori Miyagi

Audit andSupervisory
Committee
Member○○○Independent
Officer

Supplementary Explanationof the Applicable
Relationship

Reasons for Appointment–

Tsukasa Murase runs a consulting
company focusing on information
systems, and has experience in
consulting work for a number ofcompanies as well as sufficient insightto oversee corporate management.
Taking advantage of such an insight,
he is especially expected to provide
supervision and advice on theinitiatives, etc. for the utilization andstrengthening of the foundation of ICT
in the Group.
As there is no special interest between
him and the Company, the Company
has judged that there will be no risk of
a conflict of interest with the generalshareholders. Accordingly, it has
designated him as an Independent
Officer.

○–

Takayuki Miyabe has long been
involved in the management of nonstore operations and store operationsof clothing, general merchandise,furniture, etc., and has experience inoverseas production and importpractices as well as sufficient insight
into the supervision of corporate
management. Taking advantage ofsuch insight, he is expected to provide
supervision and advice on theinitiatives, etc. for the businessexecution system and management
issues of the Company.
As there is no special interest between
him and the Company, the Company
has judged that there will be no risk of
a conflict of interest with the generalshareholders. Accordingly, it has
designated him as an Independent
Officer.

○

Masanori Miyagi has been
the Representative of HRTF
since September 2021. The
Company had transactions
with HRTF and him basedon outsourcing contracts to
support personnel measures,etc.. However, the Company
has judged that they will notaffect the decisions ofshareholders and investors inlight of their circumstancesand nature.

Masanori Miyagi has sufficient insight
into the supervision of corporate
management focused on humanresources, labor, and corporate
governance-related matters in a wide
range of industries based on his work
experience at a major manufacturer
and several management consulting
firms. Taking advantage of such an
insight, he is expected to provide
supervision and advice on thereinforcement, enhancement, etc. ofthe governance system in accordancewith amendments to laws and○-8-[Translation]

Name

Audit andSupervisory
Committee
MemberIndependent
Officer

Supplementary Explanationof the Applicable
Relationship

Reasons for Appointment
regulations and the Corporate
Governance Code.
The Company has judged that there
will be no risk of a conflict of interest
with the general shareholders in lightof the independence criteria stipulatedby the Tokyo Stock Exchange, Inc.
Accordingly, it has designated him as
an Independent Officer.

Itsuro Hitosugi

Akiko Ono

Chiseko Baba

○

○

○

○

○

○

Itsuro Hitosugi was an
executive of The Shizuoka
Bank, Ltd. from June 2008
to June 2017, but retired
from the Bank. The
Company has banking
transactions and transactions
relating to long-termborrowings with the Bank on
a continuous basis. However,
the Company has judged thatthey will not affect thedecisions of shareholders
and investors in light of theirsize and nature.

Itsuro Hitosugi has experience at afinancial institution and a think tank aswell as sufficient insight into thesupervision of finance, accounting, andoverall corporate management. Taking
advantage of such an insight, he isexpected to provide supervision andadvice on the supervision of corporate
business management, especially
focusing on finance and accounting.
The Company has judged that there
will be no risk of a conflict of interest
with the general shareholders in lightof the independence criteria stipulatedby the Tokyo Stock Exchange, Inc.
Accordingly, it has designated him as
an Independent Officer.

–

Akiko Ono has experience working at
an audit firm, certified public
accountant offices, and privatecompanies, and she has insight into
corporate evaluation, etc. in M&As,
etc., and by drawing on such insight,
she is expected to provide supervision
and advice, especially on finance,
taxation, and corporate business
management.
As there is no special interest between
her and the Company, the Company
has judged that there will be no risk of
a conflict of interest with the generalshareholders. Accordingly, it has
designated her as an Independent
Officer.

–

Chiseko Baba possesses a broad
understanding of retail and marketing,and of human resource development
through her experience working in theoperations and management ofclothing, general goods, and cosmetics
stores, and taking advantage of such
insight, is expected to provide
supervision and advice on the generalmanagement of the Company and theimplementation of human resource
policies.
As there is no special interest between
her and the Company, the Company
has judged that there will be no risk of
a conflict of interest with the generalshareholders. Accordingly, it has-9-[Translation]

Name

Audit andSupervisory
Committee
Member

Supplementary Explanationof the Applicable
RelationshipIndependent
Officer

Reasons for Appointment
designated her as an Independent
Officer.

[Audit and Supervisory Committee]
Committee Member Composition and Attributes of Chair

Audit andSupervisory
Committee

All Members

Full-Time
Members

Inside Directors

OutsideDirectors

Chair(Chairperson)

6

0

0

6

Outside Director

Whether there are Directors and Employees to Assist with
the Duties of the Audit and Supervisory Committee

Yes

Matters Regarding Independence of Such Directors and Employees from Executive Directors
The matters are as stated in “(g) Matters regarding the independence of the employees in the preceding paragraphfrom Directors (excluding Directors who are Audit and Supervisory Committee Members), and mattersregarding ensuring the effectiveness of instructions given to the employees in the preceding paragraph by the
Audit and Supervisory Committee” under IV. 1. “Basic View on the Internal Control System and Status of theDevelopment of the System” in this report.
Status of Coordination Among Audit and Supervisory Committee, Accounting Auditors and Internal Audit
Department-

The Internal Audit Department reports to the Audit and Supervisory Committee on a quarterly basis the audit
results based on the internal audit’s audit policy and plans in respect to the operational status of the internal
control system, such as risk management and compliance conducted by the Corporate Management
Department. In addition, the Audit and Supervisory Committee examines the details of the report andprovides instructions and advice to the Internal Audit Department.

-

In order to ensure mutual coordination, the Audit and Supervisory Committee and the Internal Audit
Department regularly hold information exchange meetings for confirmation and coordination regarding theaudit policy and plans of the Audit and Supervisory Committee, as well as the audit policy and plans, as wellas the audit results of the Internal Audit Department. The audit results of the Internal Audit Department ensure
the effectiveness of internal control as they are reported at the Board of Directors meetings, the Internal
Control Committee meetings, which are chaired by the Representative Director, and the Audit andSupervisory Committee meetings.

-

The Internal Audit Department has periodic meetings with Accounting Auditors each quarter where theyexchange opinions in addition to exchanging opinions at meetings held when necessary.

[Voluntarily Established Committee(s)]Voluntary Establishment of Committee(s)equivalent to Nomination Committee orRemuneration Committee

Established- 10 -

[Translation]
Status of Voluntarily Established Committee(s), Attributes of Members Constituting the Committee and theCommittee Chair (Chairperson)
Voluntarily Established Committee
Equivalent to Nomination
Committee

Voluntarily Established Committee
Equivalent to Remuneration
Committee

Committee’s Name

Nomination and Compensation
Committee

Nomination and Compensation
Committee

All Members

88

Full-Time Members

00Inside Directors

22

Outside Directors

66Outside Experts

00

Others00Chair (Chairperson)

Outside Director

Outside Director

Supplementary Explanation
The Company has established the Nomination and Compensation Committee as an advisory body to the Boardof Directors for the purpose of enhancing corporate governance and the composition of the Board of Directors,
fairly operating the nomination and compensation systems for Directors, etc. and increasing the transparency
thereof. The Nomination and Compensation Committee is chaired by an Outside Director and consists of at least
three members, a majority of whom are stipulated as Independent Outside Directors, and the selection ofmembers is made by the Board of Directors.
The Nomination and Compensation Committee serves as both a Nomination Committee and a Remuneration
Committee.
The members of the Nomination and Compensation Committee for FY2024 are as follows.
Chair:
Tsukasa Murase (Outside Director)
Members:
Takayuki Miyabe (Outside Director)
Masanori Miyagi (Outside Director)
Itsuro Hitosugi (Outside Director)
Akiko Ono (Outside Director)
Chiseko Baba (Outside Director)
Tomohisa Tsurumi (Representative Director and President)
Yasunori Sugimoto (Director)[Independent Officers]
Number of Independent Officers

6

Other Matters Regarding Independent Officers
Under the understanding that advice and management supervision based on the insights of Independent Outside
Directors appointed by the Company will contribute to making sound management decisions by the Board of
Directors, the Company has established the “Criteria for Judging the Independence of Outside Directors” below.
All Six Outside Directors who are Audit and Supervisory Committee Members are Independent Outside
Directors.
“Criteria for Judging Independence of Outside Directors”- 11 -

[Translation]
The independence of Outside Directors designated by the Company complies with the independence criteria
stipulated by Tokyo Stock Exchange, and a person is deemed to have independence if he/she does not fall under
any of the following:i) A person who executes or has executed the business of the Company and its affiliates (the Group);ii) A person who, in the past three fiscal years, has executed the business of a major business partner of theCompany;iii) A major shareholder of the Company(*) or a person who executes the business thereof;* It refers to a person who holds more than 10% of the voting rights of the Company.
iv) The Accounting Auditors of the Company or its subsidiary, or a person in charge of the auditing operationof the Group as its employee, etc.;v) An attorney-at-law, certified public accountant or consultant, etc. who receives a large amount of monetaryconsideration or other financial benefits(*) from the Company other than executive compensation;* It refers to a case where the average amount of the past three fiscal years exceeds 10 million yen per year.
vi) A director, corporate auditor or a person who executes the business of an entity or organization, etc., thatreceives donations or subsidies(*) from the Company;* It refers to a case where the average amount in the past three fiscal years is 10 million yen or more per
year or 30% of the total cost of such an entity or organization, etc.
vii) A person whose close relative (a spouse and relatives within second degreey) falls under any of i) to vi) above; orviii) Notwithstanding the preceding items, a person for whom it is deemed that there are special circumstances
causing a conflict of interest with the general shareholders.
[Incentives]
Implementation Status of Measures related toIncentives Granted to Directors

Introduction of the performance-linked remuneration
plan, others

Supplementary Explanation for Applicable Items
The Company has introduced the share-based remuneration with transfer restrictions system for the Company’s
Directors (excluding Directors who are Audit and Supervisory Committee Members and Outside Directors;
hereinafter referred to as the “Eligible Directors”) since FY2022 with the aim of providing an incentive to strive
for the sustainable enhancement of the Company’s corporate value and further sharing value with shareholders.
Furthermore, the Company introduced a performance-linked remuneration plan for Executive Directors in
addition to the usual basic remuneration and non-monetary remuneration through share-based remuneration withtransfer restrictions from FY2023.
The policy on determining the ratio of performance-linked remuneration to non-performance-linked
remuneration and other remuneration in “Disclosure of the Policy for Determining the Amount of Compensationor the Calculation Method thereof” under II. 1. [Directors’ Compensation] in this report.
Persons Eligible for Stock Options
Supplementary Explanation for Applicable Items[Directors’ Compensation]
Status of Disclosure of Individual Directors’
Remuneration

No Disclosure for any Directors- 12 -

[Translation]
Supplementary Explanation of the Relevant Item
In annual securities reports, the total amount is presented for each of compensation for Directors (excluding
Directors who are Audit and Supervisory Committee Members) and compensation for Directors who are Audit
and Supervisory Committee Members.
Policy on Determining Remuneration Amounts
and the Calculation Methods Thereof

Yes

Disclosure of Policy on Determining Remuneration Amounts and the Calculation Methods Thereof
1. Matters Regarding Resolutions of General Meetings of Shareholders on Compensation, etc. for Directors
Regarding the amount of monetary compensation for Directors (excluding Audit and Supervisory Committee
Members), the 82nd Ordinary General Meeting of Shareholders held on May 31, 2023 approved the annual
amount of up to 240 million yen (excluding the employee portion of the salary). There were Four Directors(excluding Audit and Supervisory Committee Members) as of the conclusion of said Ordinary General Meetingof Shareholders (including 0 outside directors).
Regarding the amount of monetary compensation for Directors who are Audit and Supervisory Committee
Members, the 75th Ordinary General Meeting of Shareholders held on May 27, 2016 approved the monthly
amount of 8 million yen or less. There were four Directors who are Audit and Supervisory Committee Members
as of the conclusion of said Ordinary General Meeting of Shareholders.
Separately from monetary compensation, regarding the amount of share-based remuneration with transfer
restrictions to be 50 million yen or less per year (excluding Directors who are Audit and Supervisory Committee
Members and Outside Directors), the 81st Ordinary General Meeting of Shareholders held on May 31, 2022.
There were Four Directors (excluding Audit and Supervisory Committee Members) as of the conclusion of said
Ordinary General Meeting of Shareholders (including 0 outside directors).
2. Policy on Determining the Details of Compensation, etc. for Individual Directorsi) the Company resolved to revise the Policy on Determining the Details of Compensation, etc. for Individual
Directors at the Board of Directors meeting held on May 31, 2023 due to the introduction of the performancelinked remuneration plan.When passing resolutions at such Board of Directors meetings, the details to beresolved are consulted in advance to the Nomination and Remuneration Committee, which receives a report.
ii) Summary of the Determination Policy(a) Basic policy
Regarding compensation, etc. for the Directors of the Company, the Company has a basic policy of
establishing a compensation system that aims to increase the motivation of management for the sustainableenhancement of corporate value and share value with stakeholders, and of determining a level ofcompensation, etc. for individual Directors that is appropriate in light of their roles and responsibilities.
Compensation for Executive Directors is composed of basic remuneration, monetary compensation
comprising performance-linked remuneration, which depends on the achievement level of the performancetargets, and non-monetary compensation comprising share-based remuneration with transfer restrictions.
The compensation for Directors excluding Executive Directors shall be only basic remuneration in light of
their duties. Compensation for each Director who is an Audit and Supervisory Committee Member isdetermined through discussions by Directors who are Audit and Supervisory Committee Members pursuant
to the provision of the Companies Act.
(b) Policy for determining the details and amount of basic remuneration or the calculation methods thereof(including the policy on determining the timing and conditions of providing compensation, etc.)
Basic remuneration for the Company’s Directors shall be monthly fixed compensation paid in cash. The
amount is determined by comprehensively considering each person’s position, responsibilities and tenure,industry standards, the Group’s consolidated business performance, achievements regarding performance inthe division for which the person was responsible, the level of employee salaries and other factors.
The amount of individual basic remuneration for Directors (excluding Audit and Supervisory Committee
Members) is decided by the Representative Director, who is entrusted with the specific details of such
remuneration, in accordance with the resolution of the Board of Directors and based on the report of theNomination and Compensation Committee.
- 13 -

[Translation](c) Policy on determining the details of performance-linked remuneration, etc. and the calculation method of
the amount or number thereof (including the policy on determining the timing and conditions of providing
compensation, etc.)
Performance-linked remuneration is awarded in cash at a certain timing every fiscal year so that it may act
as a strong incentive to achieve consolidated performance goals and segment performance goals of theCompany in the fiscal year. The consolidated profit and the ordinary profit, etc. of the segment each
Executive Director is in charge are used as indicators according to the position of Executive Directors, andthe amount of compensation is calculated based on the degree of achievement of the goals.
The specific indicators and calculation method for performance-linked remuneration are as follows:[Target indicators for each position and percentage in the total amount of performance-linked remuneration]
Positions, etc.
Representative Director and directors incharge of administrative divisions
Other Executive Directors

Target Indicators

Percentage

Consolidated profit

100%

Consolidated profit

80%

Ordinary profit of the segment in charge

20%[Calculation method of the amount of performance-linked remuneration]
Rate of achievement of target indicators

Calculation method

If the annual target is not achieved

0% of the base amountIf 100% to 120% of the annual target is achieved

Multiply the base amount by the target achievement
percentage of 50% to 100%

If over 120% of the annual target is achieved

100% of the base amountNotes: 1.The base amount shall be set at 20% of the maximum amount of total remuneration that may be awarded to each
Executive Director in the fiscal year (2/7 of basic remuneration).
2.The target achievement percentage shall be 50% if the annual target achievement rate is 100%, and the target
achievement percentage shall fluctuate by 2.5% for every 1% fluctuation in the annual target achievement rate.
3.Other Executive Directors shall be awarded performance-linked remuneration determined by the calculation method
as stated in the above table according to their annual target achievement rate for the consolidated profit and theordinary profit of the segment in charge, respectively. However, if the annual target achievement rate of theconsolidated profit is less than 100%, performance-linked remuneration shall not be awarded even if the ordinary
profit of the segment in charge is 100% or more.

(d) Policy on determining the details and amount or number of non-monetary compensation, etc., or the
calculation method thereof (including the policy on determining the timing and conditions of providing
compensation, etc.)
Non-monetary compensation shall be share-based remuneration with transfer restrictions that is granted at a
certain timing every fiscal year, excluding cases in which the level of achievement of consolidated
performance in the previous fiscal year was considerably poor. The decision of the number of shares to be
allotted to individual Executive Directors for share-based remuneration with transfer restrictions shall bemade by the Board of Directors based on the report of the Nomination and Compensation Committee.
(e) Policy on determining the ratio of the amount of monetary compensation, the amount of performance-linked
remuneration, etc. or the amount of non-monetary compensation, etc. to the amount of compensation, etc.
for individual Directors
The compensation ratio for Executive Directors shall be as follows, based on the level of compensation ofcompanies of a similar size or in a related industry of the Company. The compensation ratio for Directors
other than Executive Directors shall be basic remuneration only.
[Percentage of the remuneration of Executive Directors]

Type

Basic remuneration

Description

Monthly fixed
remuneration

Percentage against the maximum amount of total remuneration that may beawardedShort term /Monetary / nonmedium to long
Fixed / variable
monetaryterm
70%- 14 -

Monetary 90%

Short term 90%

Fixed 70%

[Translation]
Performancelinked
remuneration

Performance-linked
remuneration

20%

Variable 30%
Share-basedNon-monetaryMedium to long
remuneration with
10%
10%
term 10%transfer restrictions
Notes: 1.The percentage of performance-linked remuneration shall be calculated by dividing the base amount (the maximum
amount of performance-linked remuneration that may be awarded to the applicable Director in the fiscal year) by the
maximum amount of total remuneration that may be awarded.
2.The percentage of share-based remuneration with transfer restrictions, 10%, is a rough figure. The amount of
remuneration shall be calculated by multiplying the number of shares allocated in units of 100 shares by the closing
price of the Company’s shares in the Tokyo Stock Exchange, Inc. on the day prior to the date of the resolution of theBoard of Directors.
Non-monetary
remunerationiii) Reasons why the Board of Directors has determined that the individual remuneration of the executive
directors for the current financial year is in line with the decision-making policy.
The Board of Directors has confirmed that the method of determining the details of remuneration and thedetails of the remuneration determined for each individual director for the current financial year are
consistent with the decision policy resolved by the Board of Directors and that the report from theNomination and Remuneration Committee has been respected and is in line with such decision policy. The
Company has confirmed that the content of the decision method and decision remuneration is consistent
with the decision policy resolved by the Board of Directors and that the report from the Nomination andRemuneration Committee is respected.
[Support System for Outside Directors]
The Secretariat of the Audit and Supervisory Committee provides information on the details of deliberations at
the Group Management Meetings. Upon request from an Outside Director, persons in charge of operational
divisions and others provide explanations and information as appropriate.

2. Matters Regarding Functions such as Business Execution, Auditing/Supervision, Nomination andCompensation Determination (Overview of the Current Corporate Governance System)-

The Company has adopted an Audit and Supervisory Committee system, and the Board of Directors, the Audit
and Supervisory Committee and the Accounting Auditors have been established as the main bodies of thecorporate governance system, while the Nomination and Compensation Committee, the Group Management
Meetings, Sustainability Committee and the Internal Control Committee have been established ascomplementary bodies. With the aim of strengthening the supervisory function of the Board of Directors,
expediting management decision-making, clarifying authority and responsibility through the separation of thebusiness execution, and strengthening business execution response capabilities, the Company has introduced
the Group Officer system and the Segment Officer system.

-

The Board of Directors consists of four Inside Directors and Six Independent Outside Directors who are Audit
and Supervisory Committee Members, and strives to strengthen its supervisory over business execution. The
Board of Directors holds regular meetings once a month in principle. In addition to monthly business reports,
the Board of Directors deliberates on matters stipulated in laws and regulations, the Articles of Incorporationand others, and monitors and supervises the status of business execution by Directors through the exchange ofquestions, proposals and opinions among Directors. The Articles of Incorporation of the Company stipulatethat resolutions may be passed in writing with the unanimous consent of Directors and that part of the important
decision-making concerning business execution may be delegated to Directors.

-

The Audit and Supervisory Committee consists of all Six Outside Directors, and it audits business execution
by Directors mainly through audit assistants belonging the Secretariat of the Audit and Supervisory Committee(two persons). The audit policy formulated by the Audit and Supervisory Committee is as follows.

Audit policy
As an independent body with a mandate from shareholders, with the aim of ensuring good corporate
governance that enables the Group’s sound and sustainable growth and enhancement of social trust, the Audit
and Supervisory Committee and its members participate in resolutions at the Board of Directors meetings, and- 15 -

[Translation]
conduct audits of the status of the execution of duties by Directors based on the internal control systemestablished by the Board of Directors and its operational status.
To that end, being sufficiently aware of their responsibilities, the members will constantly make efforts toenhance their qualifications, maintain a fair and unbiased attitude, and promote communication with officers
and employees and close coordination with the Internal Audit Department and the Accounting Auditors.
-

The attendance by each Director at the Board of Directors meetings, etc. held for FY2023 (from April 1, 2023
to March 31, 2024) is as follows.
(Directors)- Tomohisa Tsurumi attended 15 of the 15 Board of Directors meetings.
- Hiroaki Sato attended 15 of the 15 Board of Directors meetings.
-

Masayuki Yamazaki attended 15 of the 15 Board of Directors meetings.
Yasunori Sugimoto attended 15 of the 15 Board of Directors meetings.

(Outside Directors (Audit and Supervisory Committee Members))- Tsukasa Murase attended 15 of the 15 Board of Directors meetings and 14 of the 14 Audit and Supervisory
Committee meetings.
- Takayuki Miyabe attended 14 of the 15 Board of Directors meetings and 13 of the 14 Audit and Supervisory
Committee meetings.
-

Masanori Miyagi attended 15 of the 15 Board of Directors meetings and 14 of the 14 Audit and Supervisory
Committee meetings.
Itsuro Hitosugi attended 15 of the 15 Board of Directors meetings and 14 of the 14 Audit and Supervisory
Committee meetings.
Akiko Ono attended 15 of the 15 Board of Directors meetings and 14 of the 14 Audit and Supervisory
Committee meetings.

-

The Company has an auditing contract with Ernst & Young ShinNihon LLC as its Accounting Auditor andoutsources its accounting audits to them. The Accounting Auditor formulates an audit plan that includes theaudit items, audit system and audit schedule, hold a quarterly review report meeting each quarter from the firstquarter to the third quarter, and at the end of the fiscal year, an accounting audit report meeting related to theyear-end settlement, and reports to the Audit and Supervisory Committee. The above report meetings areattended by the General Manager of the Corporate Management Department, who is in charge of accounting.
The consecutive audit period and the certified public accountants who have executed services are as follows,
and they have been assisted in accounting auditing by three certified public accountants and 16 other persons.
(Consecutive audit period)
October 1969 and thereafter(Certified public accountants who have executed business)
Yoshimitsu Yuine
Katsuya Tanaka-

The Nomination and Compensation Committee has been established as an advisory body to the Board of
Directors for the purpose of enhancing corporate governance, having the appropriate composition of the Boardof Directors, fairly operating the nomination and compensation systems for Directors, etc., and increasing thetransparency thereof. The committee consists of at least three members, a majority of whom are stipulated as
Independent Outside Directors, chaired by an external director, and the selection of members is made by the
Board of Directors.

-

The Group Management Meetings are held at least once a month in principle, with Executive Directors andGroup Officers in attendance, to make decisions on matters entrusted by the Board of Directors, as well as todeliberate, manage and decide on policies and plans for the overall management of the Group and its businesssegments.

-

The Internal Control Committee, which is a body that builds and operates the internal control system based on
the Companies Act and the Financial Instruments and Exchange Act, is chaired by the Representative Director
and President, and is responsible for the compliance, risk management, information management and- 16 -

[Translation]
operational efficiency of the entire Group. In order to support the control activities of the Internal Control
Committee, the Company has established internal rules and is providing training to its Directors, Group
Officers, Segment Officers and employees.
-

The Internal Audit Department conducts monitoring through the internal control system that includes
subsidiaries for accounting matters, conducts audits independently through the internal control system requiredby the Companies Act for matters other than accounting, and reports the audit results to the Audit andSupervisory Committee.

-

The Sustainability Committee comprises the persons responsible for each business segment (PRS), is chairedby the Representative Director and President and meets about twice per year. The Sustainability Committee
cooperates with business divisions to set goals, monitors the progress of plans and evaluates the details of
measures. The content of this committee makes a structure that can appropriately supervise the Board of
Directors by reporting to the Board of Directors.

-

The policies and procedures in nominating candidates for Directors and Audit and Supervisory Committee
Members and determining compensation for senior management are as stated in [Principle 3.1 Full Disclosure]under I. 1. “Disclosure Based on the Principles of the Corporate Governance Code” in this report.

3. Reasons for Adoption of Current Corporate Governance System
The system has been adopted with the aim of enhancing the supervisory function of the Company’s Board of
Directors, increasing management efficiency and further enhancing the Group’s corporate value.

- 17 -

[Translation]

III. Implementation of Measures for Shareholders and Other Stakeholders
1. Measures to Vitalize the General Shareholder Meetings and Facilitate Exercise of Voting Rights
Supplementary Explanation
Scheduling of the General
Meeting of Shareholders to
Avoid the Peak Period

The Company avoids the peak period to hold the General Meeting of
Shareholders so as to invite many shareholders as possible.

Exercise of Voting Rights via
Electromagnetic Means

Starting from the 76th Ordinary General Meeting of Shareholders held on
May 30, 2017, the Company has adopted a system for the exercise of voting
rights via electromagnetic means.

Participation in the Electronic
Voting Platform and Other
Efforts toward Improving theEnvironment for Institutional
Investors to Exercise their
Voting Rights

Starting from the 80th Ordinary General Meeting of Shareholders held on
May 28, 2021, the Company has participated in the electronic voting
platform operated by ICJ, Inc.

Provision of the Notices of theGeneral Meetings ofShareholders (Summary) in
EnglishOthersStarting from the 81st Ordinary General Meeting of Shareholders held on
May 31, 2022, the English version of the summary and the reference
documents of the Notices of the Convocation of the General Meetings ofShareholders are posted on the Tokyo Stock Exchange website, theCompany website and the electronic voting platform operated by ICJ, Inc.
prior to the mailing of the notice of convocation.
The Notices of the General Meetings of Shareholders are posted on theTokyo Stock Exchange website, the Company website and the electronic
voting platform operated by ICJ, Inc. prior to the mailing of the Notice.
In addition, the Company works to provide explanations that are easy tounderstand at the General Meeting of Shareholders by presenting reports
visually and using video and narration.

- 18 -

[Translation]

2. Status of IR-Related Activities

Supplementary Explanation

Preparation and Publication ofDisclosure Policy

The aim of the Company’s IR activities is to have all
stakeholders, including shareholders and investors,
understand and appropriately evaluate the Company.
To that end, the Company has a basic policy ofmaking timely, accurate and fair and consistent
disclosure of important information on the Company.
The Company makes timely disclosure pursuant to
the timely disclosure rules stipulated by the Tokyo
Stock Exchange. In addition, the Company also
discloses information deemed beneficial toshareholders and investors, including information
not subject to the timely disclosure rules.

Regular Investor Briefings
held for Analysts andInstitutional Investors

Briefing meetings are held for analysts andinstitutional investors by the Representative Director
twice a year after the interim settlement and theyear-end settlement in principle.

Posting of IR Materials on
WebsiteThe Company posts integrated reports, financial
results, annual securities reports, quarterly securities
reports, results summaries, financial results materials
and others on the Company website(https://www.scroll.jp/ir/).

Establishment of Department
and/or Placement of aManager in Charge of IR

The Company’s department in charge of IR is the
Corporate Planning Division, Corporate
Management Department.

Explanation by arepresentative
director or arepresentative
executive officer

Yes

3. Status of Measures to Ensure Due Respect for Stakeholders
Supplementary Explanation

Implementation ofEnvironmental Preservation
Activities and CSR Activities,
etc.

The initiatives for sustainability, etc. are as described in Supplementary
Principle 3.1.3 under [Disclosure Based on the Principles of the Corporate
Governance Code] of this corporate governance report.
The details are posted on the Company website.
The Company website: https://www.scroll.jp/
Integrated reports: https://www.scroll.jp/ir/annual/

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

Pursuant to the information disclosure standard, the Company strives tocommunicate information fairly and promptly to more shareholders andinvestors by using various means such as registering information with theTimely Disclosure Network (TDnet) provided by the Tokyo Stock
Exchange, distributing press releases and posting on the Company website.
In addition, notices regarding the overall business, IR news, ESG-related
news and other information are posted on the Company website.

- 19 -

[Translation]

IV. Matters Concerning the Internal Control System
1. Basic View on the Internal Control System and Status of the Development of the System
The Company has established as follows a basic policy regarding the internal control system, that is, systems for
ensuring that the execution of duties by Directors complies with laws and regulations and the Articles ofIncorporation, as well as other systems for ensuring the appropriateness of business operations of the Company
and the corporate group consisting of the Company and its subsidiaries.
(a) System for ensuring that the execution of duties by Directors and employees of the Company and its
subsidiaries complies with laws and regulations and the Articles of Incorporation
The Company has established the Internal Control Committee, which oversees the compliance and risk
management system of the entire Group. It strives to strengthen internal controls based on the decisions of thecommittee, and provides necessary training and education to Directors and employees based on the instructionsof the Internal Audit Department. In addition, the Company has established and operates an internal reporting
system (the Scroll Group Corporate Ethics Hotline) in which the Director responsible for compliance or an
external lawyer is the recipient of information, as a means for Directors and employees to directly provide
information on legal violations and other facts related to compliance. The Internal Audit Department evaluates
the internal control system and its operation for the entire Group, and reports the results to the Internal Control
Committee.
(b) System for retaining and managing information relating to the execution of duties by the Company’s Directors
The Company retains information and documents relating to the execution of duties by Directors pursuant to its
internal rules, and centrally manages such documents in paper form (including electromagnetic records) so that
Directors may access such documents at any time.
(c) Rules and other systems for managing the risk of incurring losses of the GroupThe Company specifies basic matters and systems related to the risk management of the entire Group in the Risk
Management Rules, and the Internal Audit Department identifies the status of risks across the organization andtakes appropriate measures. The Internal Audit Department conducts audits of the appropriateness of the risk
management system from an independent standpoint, and reports the results to the Internal Control Committee.
(d) System for ensuring the efficient execution of duties by the Group’s Directors
The Board of Directors holds regular meetings once a month and extraordinary meetings as necessary to determine
important matters and supervise the status of business execution by Directors. The details of matters relating tobusiness execution are carefully discussed at the Group Management Meetings consisting of Directors and Group
Officers. Directors execute their duties in accordance with the rules clarifying the authority to make decisions
relating to the execution of duties by Directors. Audits of the execution of duties by Directors are conducted by
the Audit and Supervisory Committee.
(e) System for ensuring the appropriateness of business operations in the corporate group consisting of theCompany and its subsidiaries
a. Pursuant to the Subsidiary Management Rules, the Company develops a system for ensuring theappropriateness of business operations of the Group as a whole.
b. Presidents of subsidiaries participate in the Company’s Internal Control Committee, and the Company ensuresappropriate supervisory and reporting systems by implementing the internal control system for the entire
Group based on the decisions by the Internal Control Committee.
(f) Matters regarding employees to assist with the duties of the Company’s Audit and Supervisory Committee
upon the request by the committee
Upon the request by the Audit and Supervisory Committee, the Company will assign dedicated employees not
subject to orders and instructions of Directors (excluding Directors who are Audit and Supervisory Committee
Members) to the Audit and Supervisory Committee to assist with audit work.
(g) Matters regarding the independence of the employees in the preceding paragraph from Directors (excluding
Directors who are Audit and Supervisory Committee Members), and matters regarding ensuring theeffectiveness of instructions given to the employees in the preceding paragraph by the Audit and Supervisory
Committee
The appointment, transfer, evaluation and other matters of employees who assist with the duties of the Audit andSupervisory Committee shall require the prior consent of the Audit and Supervisory Committee, and their
independence from Directors (excluding Directors who are Audit and Supervisory Committee Members) shall beensured.
(h) Systems for Directors and employees of the Company, and Directors, Corporate Auditors and employees of
its subsidiaries to report to the Company’s Audit and Supervisory Committee and other systems related toreporting to the Audit and Supervisory Committee- 20 -

[Translation]
a. Directors and employees of the Company, and Directors, Corporate Auditors and employees of its subsidiaries
shall report important matters that affect the Company’s operations and performance to the Company’s Audit
and Supervisory Committee. Also, the Audit and Supervisory Committee may request reports from Directors
and employees, and Directors, Corporate Auditors and employees of its subsidiaries, whenever necessary.
b. The Company shall take necessary measures to ensure that any person who reports pursuant to the preceding
paragraph will not receive any disadvantageous treatment because of the reason of filing such a report.
(i) Other systems for ensuring the effective performance of audit by the Company’s Audit and Supervisory
Committee
a. The Audit and Supervisory Committee audits the status of the execution of duties by Directors by inspecting
decision-making documents and attending important meetings such as the Board of Directors meetings andthe Group Management Meetings. In addition, the Audit and Supervisory Committee receives explanationsof the details of accounting audits from the Company’s Accounting Auditor and ensures coordination withthem such as by exchanging information.
b. When Audit and Supervisory Committee Members request the prepayment or reimbursement, etc. of expenses
incurred in executing their duties (limited to those related to the execution of duties of Audit and Supervisory
Committee Members), except when they are clearly recognized to be unnecessary for the execution of suchduties, the Company will appropriately process such expenses or obligations in a prompt manner.
(j) System for eliminating anti-social forces
The Company will be resolutely against anti-social forces and such organizations that threaten the order and safetyof society and sever any relations with them, and will not engage in any activities that foster their activities nor
use the power of anti-social forces. If any problem should occur with such anti-social forces, the Company will
respond to them firmly by coordinating with legal experts, the police and others.

2. Basic Views on Measures for Eliminating Anti-Social Forces and Status of Development
These matters are as described in “IV. Matters Concerning the Internal Control System 1. Basic View on theInternal Control System and Status of the Development of the System” (j).

- 21 -

[Translation]

V. Others
1. Adoption of Anti-Takeover Measures
Whether Anti-Takeover Measures are
Introduced

None

Supplementary Explanation of the Relevant Item
The effective period of the anti-takeover measures approved at the 76th Ordinary General Meeting of
Shareholders held on May 30, 2017 expired as of the conclusion of the 79th Ordinary General Meeting of
Shareholders held on May 29, 2020. However, the Company has established a basic policy regarding the way a
party is to control the determination of the company’s business policies, etc. as follows:i) In the event that a party intends to carry out a large-scale purchase of the Company’s shares, the Company
shall work to secure time and gather sufficient information necessary for shareholders to make an appropriate
judgment in addition to taking appropriate measures based on the opinions of the Board of Directors and laws
and regulations. The Company shall give sufficient explanations regarding these efforts to shareholders.
ii) The Board of Directors shall not take any measures to unreasonably interfere with shareholders’ right torespond to the tender offer.
iii) The Company shall investigate the necessity and reasonableness of capital policies that impose significant
changes to existing shareholders’ rights, and provide sufficient explanations to shareholders.

- 22 -

[Translation]

2. Other Matters Concerning the Corporate Governance System

System Diagram of the Corporate Governance System
General Meeting of Shareholders
Appointment/
Dismissal

Appointment/
Dismissal

Appointment/
Dismissal

Report

6 Directors who are Audit andSupervisory Committee Members

4 Directors (excluding Directors
who are Audit and Supervisory
Committee Members)

Nomination andCompensation
Committee

Consultation

Coordination

Audit andSupervision

Board of Directors

ReportAudit and Supervisory
Committee

Report Back
Supervision/
Appointment

ReportInstruction/
ReportInstruction/
ReportCoordination

Coordination

Instruction/Report

Representative Director
Instruction/
ReportGroup Management
Meetings

Audit

Accounting
Auditors

Sustainability
Committee

Instruction/
ReportInstruction/
ReportInternal Audit
Department

Internal Control Committee

Instruction/
ReportRisk Management
Compliance
Instruction and Training
ReportBusiness and Administrative Departments(Including Subsidiaries)

Coordination

Internal Audit- 23 -

Accounting
Audit

[Translation]

Overview of Timely Disclosure System (System Diagram)

Fact of an
occurrence

Financialresults

Decisions

Department in charge of information of businessexecution departments and administrative department(including operating companies)

Department in charge of information of administrative
department (including operating companies)

ReportReportSubmit(Determining Matters to be Disclosed)
Information Handling Manager

Board of Directors

Contact(Timely Disclosure)
Information Handling Manager

Disclosure

Disclosure

Tokyo Stock Exchange

The Company website

Investors- 24 -