Corporate Governance Report

July 3, 2024
SHIP HEALTHCARE HOLDINGS, INC.
Futoshi Ohashi, President
Contact：+81-6-6369-0130

The corporate governance of SHIP HEALTHCARE HOLDINGS, INC. (the “Company” or “we”
or “us”) is described below.

Ⅰ．Basic Views on Corporate Governance, Capital Structure, Corporate Profile andOther Basic Information
1. Basic Views
The Company will always pursue the best corporate governance and will continuously work on its
enhancement.
The Company is dedicated to the transparency and fairness of decision-making from thestandpoint of achieving sustainable growth and medium- to long-term growth of corporate value.
In addition, the Company believes that increasing the vitality of management by efficient use ofmanagement resources and quick and decisive decision-making is a key component of corporate
governance. Numerous actions will be taken to enhance our corporate governance based on thefollowing basic views.
1.

To respect the shareholders’ rights and secure the equality.

2.

To consider the interest of stakeholders including shareholders, and cooperate with suchstakeholders in proper manner.

3.

To disclose the Company’s information in appropriate manner, and secure transparency.

4.

To establish the structure that the outside directors take material roles (composition of theBoard of Directors, establishment of nomination advisory committee and remuneration
advisory committee), and secure the efficient supervision function of business execution by the
Board of Directors.

5.

To conduct constructive dialogue with shareholders who have an investment policy consistentcorresponding with the interests of medium- to long-term shareholders.

【Reasons for Non-compliance with the Principles of the Corporate Governance Code】[Supplementary Principle 2.4.1] Ensuring Diversity in the Promotion of Core Human Resources＜Approach to securing diversity＞
Diversity is essential for the sustainable realization of the group mission of “Creating environment
for medical professionals.” In order to respond to the rapidly changing market environment andconvert the diversity of human resources into the capabilities of an organization that canconstantly create businesses with speed, the Group has adopted a diverse workforce, including
mid-career hires, regardless of gender, nationality, or various work experience. While actively andcontinuously recruiting and appointing diverse human resources, we are promoting initiatives
such as improving a work environment and education for management which maximizes eachindividual's characteristics and abilities.
＜Voluntary and measurable targets for ensuring diversity＞
In order to ensure diversity, although we are promoting managerial positions by comprehensively

considering their abilities and aptitudes, we have not yet set measurable goals at this time.
However, there are

8 female officers (including executive officers) and 3 non-Japanese officers(including executive officers) in the group, especially in the Lifecare and Dispensing Pharmacy
business, where women are more promoted. We will continue to work on this as a medium- tolong-term issue, recognizing the importance of taking measures to the declining working
population and reflecting diverse values.
[Supplementary Principle 3.1.3] Initiatives on Sustainability
With the group mission of "Creating environment for medical professionals" , we are working
toward the realization of a sustainable society where people can live better lives (Well-being). We
identified material issues (materialities) and published the Sustainability Report 2023.
Please refer to our website and Sustainability Report for our initiatives for sustainability.
・Sustainability report from our corporate website: https://www.shiphd.co.jp/en/sdgs/index.html
・Sustainability report 2023 (Japanese only):https://www.shiphd.co.jp/sdgs/pdf/sustainability_report_2023.pdf
As TCFD requires disclosure of information of climate change-related risks and impacts on the
Company, we also aim to enhance disclosure by collecting and analyzing necessary data on risks
and impacts related to climate change.
[Supplementary Principle 4.2.1] The Resolution of Remuneration System Design andRemuneration Amount through Objective and Transparent Procedure
With respect to directors’ remuneration, the contents of the agendas and the individual
remuneration amount submitted to shareholders meeting from the Board of Directors shall be
determined after fair examination and counsel by remuneration advisory committee. Since thecompensation linked to the Company’s medium- to long-term performance functions as a solid
incentive towards sustainable growth, it will be considered as needed in the future.
[Supplementary Principle 4.10.1] Establishment of Optional Independent Advisory Committee
Though the company has established nomination advisory committee and remuneration advisorycommittee, they are not the structure consisting of independent directors as main members (asystem in which the majority of the members are independent directors). The committees advise
the Board of Directors after asking for the opinion from independent directors. While fullyrecognizing the importance of evaluation that incorporates the opinions of independent directors ineach committee, for the Group which has a high degree of expertise and complexity in its business,
we believe that the qualitative as well as quantitative judgments considering business progress,
results, and future growth strategies in each business area from a long-term and professional
perspective are the most rational. Also, we will further deepen discussions from point of view about
diversity of gender and skills, etc.

【Disclosure Based on the Principles of the Corporate Governance Code】
SHIP HEALTHCARE HOLDINGS resolved the constitution of “Basic Policy of Corporate
Governance” in the Board of Directors held in December 2015, and it is disclosed on the following
website. Disclosures required by Corporate Governance Code are disclosed in the basic policy.
Please refer to the website (https://www.shiphd.co.jp/en/) for details.

2

[Principle 1.4] Cross-Shareholdings
The company may hold shares of listed companies that are our business partners, etc., for the
purpose of enhancing our medium- to long-term corporate value by maintaining and strengthening
business relationships with them. However, our basic policy is to reduce cross-shareholdings if therationality of the holdings is not recognized after the Board of Directors held on regular basis,taking into consideration economic rationality and prospects including (1)risks associated withholding cross-shareholdings, including the risk of failing stock prices (2)expected returns frommaintaining and strengthening business relationships (3)consistency with the Company’s basic
capital policy.
In addition, if a company that holds our shares as cross-shareholdings (cross-shareholders)
expresses an intention to sell the shares, we will, in principle, respect that intention.
Regarding the exercise of voting rights, based on contributing to the sustainable growth and theimprovement of corporate value over the medium to long term for both the Company and thebusiness partners, we will comprehensively judge whether the agenda conforms to our holding
policy and at the same time contributes to the efficient and solid management of our business
partners and can be expected to improve corporate value for both sides.
[Principle 1.7] Related Party Transactions
The Company discloses Ethical Standards constituted in the Board of Directors so as to secure
ethical behaviors of the directors, executive officers and employees at all times.
Any transactions between the Company and officers, major shareholders or others (Related Party
Transactions), and also the transactions that cause any conflict of interest Corporation Law
determines, shall be conducted with the explanation of its contents etc. and approval by the Boardof Directors. The status of such transactions shall be regularly reported to the Board of Directors
even after the approval.
In case that the directors incur the issues that relate to conflict of interest about themselves(including potential issues), they shall report the issues promptly to the Board of Directors andreceive the approval.
[Principle 2.6] Roles of Corporate Pension Funds as Asset Owners
The Company adopts defined benefit and defined contribution corporate pension plans.
Regarding the defined benefit type corporate pension system, given that the management ofcorporate pension funds impacts stable asset formation for the employees and the Company’s own
financial standing, the department in charge will work with the outsourced investment institution
and regularly monitor the investment status and stewardship activities, and report to the Board of
Directors on a regular basis in order to realize proper management of conflict of interest between
the corporate pension and the Company. Also, the Company provides ongoing support to employees
in managing their pensions by, for example, explaining the defined contribution pension plan tothem when they join the Company.
[Principle 3.1] Full Disclosure(1) Group Philosophy, Strategies, Management Plan
The Company discloses financial information such as management performance of the Company
timely and in appropriate manner together with Group philosophy, management strategies,
management plan and other principles for the purpose of securing transparency and fairness of the3management.
(2) Corporate Governance Policy and Basic Policy
We consider enhancing management capability by prompt and decisive decision-making
sufficiently utilizing our management resources, and also securing transparency and fairness ofdecision-making so as to promote the Company’s sustainable growth and medium- to long-term
corporate value to be a material point of Corporate Governance. We will work on enhancement of
information disclosure in accordance with the following basic policy.
(i)

To respect the shareholders’ rights and secure the equality.

(ii)

To consider the interest of stakeholders including shareholders, and cooperate with suchstakeholders in proper manner.

(iii) To disclose the Company’s information in appropriate manner, and secure transparency.
(iv) To establish the structure that the outside directors take material roles (composition of theBoard of Directors, establishment of nomination advisory committee and remuneration
advisory committee), and secure the efficient supervision function of business execution by
the Board of Directors.
(v)

To conduct constructive dialogue with shareholders who have an investment policy consistent
with the interests of medium- to long-term shareholders.

(3) Policy and Procedures about the Resolution of Executive Remuneration
Executive remuneration shall be appropriate, fair and balanced that motivate the executives tomaximize the long-term interest for shareholders and also the Company’s corporate value.
The Company discloses timely and in appropriate manner the policy of executive remuneration(including the policy on the setting of share-related remuneration and other performance-linked
remuneration percentages) decided by the Board of Directors based on the counsel from
remuneration advisory committee. Remuneration for independent directors shall reflect
the time and responsibility for their involvement in our business, and it excludes the element ofshare-related remuneration and other performance-linked remuneration.
In relation to the amount of directors’ remuneration, the Board of Directors shall determine thecontents of the agendas submitted to shareholders meeting and the individual remuneration
amount through fair examination and counsel by remuneration advisory committee.
In case that remuneration advisory committee counsel on the directors’ individual remuneration
amount, appropriateness of the remuneration amount shall be judged by considering the industry
and with the reference of remuneration standard of other companies to be properly compared to
the Company. Remuneration advisory committee, in this case, consider the remuneration standard
for other executive officers both of the Company and of the other companies within the corporategroup we belong to.
(4) Appointment and Dismissal policy of the Officers and the Management Team, the Procedures,and the Reasons for the Individual Appointment and Dismissal
The number of board members of the Company shall not exceed 15 and more than two of themshall be independent directors. The number of auditors shall not exceed 5 and over half of themshall be outside auditors. The term of office of all of the Company's directors shall be 1 year andshall not prevent reappointment.
The officer of the Company shall have high sense of ethics together with upstanding personality,
knowledge, ability, and rich experience. A person with appropriate experience, ability and required
knowledge of finance, accounting, and legislation shall be elected to the auditors of the Company,
and at least one of the auditors shall be the person with sufficient knowledge of finance andaccounting.

4The candidates for new officers (including alternate directors and auditors) shall be recommended
and determined by the Board of Directors after the fair, transparent, and rigid audit in nomination
advisory committee and consulting with independent directors. In regard to the appointment ofauditors, agreement from supervisory board shall be required.
The reasons for the appointment of each director and auditor is disclosed in “NOTICE OF THE
32ND ANNUAL GENERAL MEETING OF SHAREHOLDERS” which is on our website.
https://www.shiphd.co.jp/common/img/ir/event/meeting_shd/20240605.pdf[Supplementary Principle 4.1.1] Board Decisions and Scope of Delegation
The Board of Directors make material business decisions and supervise the directors’ execution ofduties. The Company delegate the right of decision-making in relation to the Company’s businessexecution save for the matters defined as resolution matters in the Board of Directors tomanagement members including the CEO in accordance with the Board of Directors Regulationsand Laws.
[Principle 4.9] Independence Standards and Qualification for Independent Directors
The Board of Directors shall formulate and disclose the standards of the independency for theCompany, based on requirements of the Outside Board of Directors as stipulated in Corporation
Law and the independency standard Financial Instrument Exchange prescribes. Please refer tothe Company’s Corporate Governance Basic Policy(https://www.shiphd.co.jp/en/about/governance01.html) for more details of the independency
standards.
[Supplementary Principle 4.11.1]
The expertise of directors and corporate auditors (skill matrix) is described on the last page of thereport.
[Supplementary Principle 4.11.2] Concurrent Status of Officers in Other Listed Companies
The Company shall not permit outside directors and outside auditors to concurrently serve as adirector or an auditor in more than 3 listed companies other than the Company, and the concurrent
positions held by officers shall be disclosed in Notice of General Meeting of Shareholders based on
the Law.
[Supplementary Principle 4.11.3] Analysis and Evaluation in relation to Effectiveness of the Boardof Directors
The Company conducts and discloses analysis and evaluation based on self-assessment ofrespective directors in relation to effectiveness of the entire the Board of Directors regarding
matters that we consider to be important for the Board of Directors to fulfill its role andresponsibilities. The evaluation of effectiveness of the Board of Directors in FY2023 was conducted
and resulted as below.
1, Method for the Analysis and Evaluation
The Company evaluated how effectively the Board of Directors functioned based on “questionnaire(Effectiveness evaluation of the Board of Directors)” for all directors and auditors including outside
ones, after explaining the purpose of the evaluation.
The main items for which the evaluation was conducted are as follows. (i) Composition and5frequency of the Board of Directors, the number of outside directors, etc. (ii) Operation method of
the Board of Directors (iii) Securing shareholders’ rights and equality (iv) Appropriate cooperation
with stakeholders other than shareholders (vii) Communication and education for the directors
and auditors.
2, Details of Analysis and Evaluation
We analyzed and evaluated that the board is effectively functioning on the whole as the Company’s
Board of Directors according to the results of the questionnaire by each director and auditor. The
Board of Directors also is composed of the directors who have diverse knowledge and experiences,and the board has constructive discussion and opinion exchange without any disturbance.
However, we found that the board should be improved the following area, and we will work to
improve the items as we are aware that there seem to be scope for improvement and ingenuity.
<The points to be improved that we recognized>
・The timing of the notification of agenda and distribution of Board of the meeting material
・Providing training opportunities for the directors and auditors, etc.
[Supplementary Principle 4.14.2] Principle of Training for the Directors and Auditors
The Company may provide the opportunity to acquire knowledge regarding the business, finance,
organization, etc. of the Company as needed so that the directors and auditors can properly fulfill
each of their roles and responsibilities required at the timing of and after their assumption. Also,
the directors and auditors of the Company shall voluntarily gather information and research inrelation to the Company’s financial situation, compliance, corporate governance and other subjects
at all times in order to fulfill their roles.
[Principle 5.1] Principles regarding the Constructive Dialogue with Shareholders
The Company endeavors to improve the structure and work on initiatives so as to promote
constructive dialogue with shareholders by following policies.
[Basic policy](i)

The Company place a director managing overall activities for the dialogue withshareholders and a department (IR department) to operate it.

(ii)

The Company establish a structure that enable IR department to cooperate othersubsidiaries’ relevant departments so as to promote the dialogue with shareholders suchas financial results briefing and corporate briefing for investors, and provide correct
information to them.

(iii)

The Company endeavors to realize close communication with shareholders on the basis ofstock holding status and opinions of shareholders by means of financial results briefing,IR events, seminars, own showrooms, and facility tours(iv)

IR department orders and analyzes the opinions and concerns we had from the dialogue
with shareholders, and report them to the Board of Directors depending on theirimportance and nature.

(v)

The Company shall be careful enough not to create a substantial information gap between
shareholders. In terms of material information to be disclosed, we disclose it at the righttime and fairly, and we will strive to ensure information management so that we do notprovide information to only some of our shareholders.

[Implementation status of dialogue with shareholders, etc. (FY2023)]
・Regular briefings for institutional investors: 2 times( May, November)・Domestic conference: 2 times

6・One on one meeting: 105 times ( including communication with sale-side investors: 17 times)
・Main themes and matters of interest to shareholders: Changes in hospitals investment

willingness, fair stock price level and capital efficiency, etc. following the downgrade of the
COVID-19 to category 5 infection disease.
[Actions to Achieve Management with Emphasis on Cost of Capital and Stock Price]
The company's average Return on Equity (ROE) over the past five years has been 10.8% (with ahigh of 12.0% and a low of 9.8%), consistently surpassing the shareholders’ equity cost. we believe
we have been achieving capital profitability that exceeds the shareholders’ equity cost. Moving
forward, we remain committed to enhancing capital profitability and increasing shareholder value
over the medium to long term.

２．Capital Structure
Foreign Shareholding Ratio

More than 30％【Status of Major Shareholders】

Number of Shares
Owned

Name / Company Name%

Master Trust Bank of Japan, T.

11,927,800

12.64%CUSTODY BANK OF JAPAN, T.

8,844,000

9.37%

Kokko Co.

7,977,800

8.46%

JP MORGAN CHASE BANK 380055

3,693,300

3.91%

GOVERNMENT OF NORWAY

2,912,101

3.09%

Kasuga Kosan LLC

2,800,000

2.97%

Zenkyoren

2,534,000

2.69%

Koichiro Furukawa

2,460,000

2.61%

STATE STREET BANK AND TRUST

2,290,151

2.43%

2,095,500

2.22%

COMPANY 505001
STATE STREET BANK AND TRUSTCOMPANY 505025

Controlling Shareholder(Except for Parent Company)
Parent Company

None

Supplementary Explanation
The above major shareholders are as of March31, 2024.
The ratio is calculated based on the number of issued shares excluding treasury stock (7,319,175
shares).

7

３．Corporate Attributes
Listed Stock Market and Market Section

Tokyo, Prime

Fiscal Year-end

MarchType of Business

Wholesale Trade

Number of Employees (Consolidated) as of theMore than 1000

End of the Previous Fiscal YearSales (Consolidated) as of the End of the¥100 billion to ¥1 trillion

Previous Fiscal Year
Number of Consolidated Subsidiaries as of the

50 to 100 companies

End of the Previous Fiscal Year

4.

Policy on Measures to Protect Minority Shareholders in Conducting Transactions with
Controlling Shareholder-

5.

Other Special Circumstances which May Have a Material Impact on Corporate
Governance-

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

Company with Audit & Supervisory Board【Directors】
Maximum Number of Directors Stipulated in

15

Articles of Incorporation
Terms of Office Stipulated in Articles of

1 year

Incorporation
Chairperson of the Board

Chairman (Except in the case of concurrently
serving as president)

Number of Directors

12

The State of Appointment of Outside Directors

Appointed

Number of Outside Directors

4

Number of Independent Directors

4Outside Directors’ Relationship with the Company (１)NameAttribute

Relationship with the Company*1aSeiichiro Sano

From another company

Toshio Imabeppu

From another company

Fumiyo Ito

From another company

Shinya Nishio

From another companyb*1 Categories for “Relationship with the Company”
a. A management executive officer of the listed company or its subsidiary

8

c

d

e

f

g

h

i

j

k

b. A management executive officer or non-management executive director of a parent company of the listed company
c. A management executive officer of a subsidiary of a parent company of the listed company
d. A person who has a significant business relationship with the listed company or who is a management executive officerof entity which has such significant business relationshipe. A person with whom the listed company has a significant business relationship or who is a management executive officerof entity with whom the listed company has a significant business relationshipf. A consultant, accounting expert or legal expert who receives significant remuneration or other assets from the listedcompany other than remuneration as a director or executive officer
g. A principal shareholder of the listed company (if a principal shareholder is a legal entity, a management executive officerof such legal entity)h. A management executive officer of entity with whom the listed company has a business relationship (does not fall underd, e, and f) (only with respect to the person)
i. A management executive officer of a company whose outside director assumes the post on a reciprocal basis with thelisted company (only with respect to the person)
j. A management executive officer of an entity to whom the listed company makes a donation (only with respect to theperson)k. Others*2 ○ indicates the relevant item that the person falls under as of “today or recently”. △ indicates the relevant item that theperson falls under as of “previously.”● indicates the relevant item that the person’s close family member falls under as of “today or recently”. ▲ indicates therelevant item that the person’s close family member falls under as of “previously”.

Outside Directors’ Relationship with the Company (2)Designation

SupplementaryasExplanation of

Independent

the

Name

Director
Seiichiro〇

Sano

Reasons for Appointment

RelationshipIndependent
director of theCompany

Seiichiro Sano has served in various positions
including President of SANYO Electric Co., Ltd., aswell as Senior Managing Executive Officer, Senior
Audit & Supervisory Board Member, and Advisor ofPanasonic Corporation, and possesses profound insightand extensive experience in corporate management.
The Company reappoints Mr. Sano as Outside
Director, expecting him to utilize his knowledge andexperience for the Company’s management andparticipate in its management from a fair and neutral
standpoint.

ToshioImabeppu〇

Independent

Although Toshio Imabeppu has no experience of

director of thebeing directly involved in corporate management, heCompany

has served in various positions including
Director-General, Pharmaceutical and Food Safety
Bureau, and Director-General, Statistics andInformation Policy of Ministry of Health, Labour andWelfare, and possesses expertise and experience insocial welfare, etc. The Company reappoints Mr.

9Imabeppu as Outside Director, expecting him toutilize his knowledge and experience for theCompany’s management and participate in its
management from a fair and neutral standpoint.
Fumiyo〇Ito

Independent
director of theCompany

Although Fumiyo Ito has no experience of being
directly involved in corporate management, she hasserved in various positions including Senior Nursing
Specialist, National Hospitals Division, Health Policy
Bureau of Ministry of Health, Labour and Welfare;
General Manager, Nursing Department of National
Cerebral and Cardiovascular Center; and General
Manager, Nursing Department, Osaka Medical Centerof National Hospital Organization, and possesses
profound insight and extensive experience as a nursing
manager. The Company reappoints Ms. Ito as Outside
Director, expecting her to utilize her knowledge andexperience for the Company’s management andparticipate in its management from a fair and neutral
standpoint.

Shinya〇NishioIndependent
director of theCompany

Shinya Nishio has served in various positions
including Representative Director and Deputy
President of Daiwa Securities Co Ltd., and possesses
expertise and ample experience in the finance andsecurities industry. The Company reappoints Mr.
Nishio as Outside Director, expecting him to utilize hisknowledge and experience for the Company’s
management and participate in its management from afair and neutral standpoint.

【Committee】
Voluntary Establishment of Committee(s)Established

Corresponding to Nomination Committee andRemuneration Committee

10

Committee’s Name, Composition, and Attributes of Chairperson
Committee Corresponding to Nomination Committee
The name of the committee

Nomination Committee

All

Full-time

InsideOutsideOutsideCommittee

Members

Directors

Directors

Experts

Other

Chairperson

Members
6

5

5

1

0

0

InsideDirector

Committee Corresponding to Remuneration Committee
The name of the committee

Nomination Committee

All

Full-time

InsideOutsideOutsideCommittee

Members

Directors

Directors

Experts

Other

Chairperson

Members
6

5

5

1

0

0

InsideDirector

Supplementary Explanation
Both of Nomination Committee and Remuneration Committee are composed of 6 members,
Chairman Kunihisa Furukawa as Chairperson, Vice Chairman Hirotaka Ogawa, Vice Chairman
Kenzo Konishi, President Futoshi Ohashi, Executive Director Hiroshi Yokoyama, and Outside
Director Seiichiro Sano as committeemen. With regard to the proposals resolved by eachcommittees, after the independent directors are asked for their opinions, counsel are made to theBoard of Directors, and deliberation and resolution are concluded.
【Audit & Supervisory Board Members】
Establishment of Audit & Supervisory Board

Established

Members
Maximum Number of Audit & Supervisory

5

Board Members Stipulated in Articles ofIncorporation
Number of Audit & Supervisory Board Members

4

Cooperation among Audit & Supervisory Board Members, Accounting Auditors and Internal Audit
Departments
Outside Auditors, Internal Audit Departments, and Full-time Auditors share information andconduct audit works. In addition, liaison meetings with accounting auditors are held as needed tograsp the status of audit work of accounting auditors and exchange information, as well as discuss
effective execution of accounting audits.
Appointment of Outside Audit & Supervisory

Appointed

Board Members
Number of Outside Audit & Supervisory

3

Board Members

11Number of Independent Audit & Supervisory

3

Board Members
Outside Audit & Supervisory Board Members’ Relationship with the Company (1)NameAttribute

Relationship with the Company*1
a

b

c

d

e

f

g

Nobuyuki Sano

From another company

Koichi Minami

From another company△

Toichiro Mizushima

From another company

△

h

i

j

k

l

m

*1Categories for “Relationship with the Company”
a. A management executive officer of the listed company or its subsidiaryb. A non-management executive director or accounting advisor of the listed company or its subsidiaryc. A management executive officer or non-management executive director of a parent company of the listed company
d. An Audit & Supervisory Board Member of a parent company of the listed company
e. A management executive officer of a subsidiary of a parent of the listed company
f. A person who has a significant business relationship with the listed company or who is a management executive officer ofentity which has such significant business relationshipg. A person with whom the listed company has a significant business relationship or who is a management executive officerof entity with whom the listed company has a significant business relationshiph. A consultant, accounting expert or legal expert who receives significant remuneration or other assets from the listedcompany other than remuneration as a director or executive officer
i. A principal shareholder of the listed company (if a principal shareholder is a legal entity, a management executive officerof such legal entity)
j. A management executive officer of entity with whom the listed company has a business relationship (does not fall under f,
g, and h) (only with respect to the person)
k. A management executive officer of a company whose outside director assumes the post on a reciprocal basis with thelisted company (only with respect to the person)
l. A management executive officer of an entity to whom the listed company makes a donation
m. Others*2○ indicates the relevant item that the person falls under as of “today or recently”. △ indicates the relevant item that theperson falls under as of “previously.”● indicates the relevant item that the person’s close family member falls under as of “today or recently”. ▲ indicates therelevant item that the person’s close family member falls under as of “previously”.

12Outside Audit & Supervisory Board Members’ Relationship with the Company (2)Independent
Audit &Name

Supervisory
Board

Supplementary

Reason for Appointment

Information

MemberNobuyuki Sano〇

Independent Officer of

As a Certified Public Accountant and Tax

the Company

Accountant, Nobuyuki Sano possesses ample
knowledge about finance and accounting.
The Company has appointed Mr. Sano as
Outside Corporate Auditor, expecting him toutilize his professional expertise andexperience for the Company’s management
and to audit its management from a fair andneutral standpoint.

Koichi Minami〇

Independent Officer ofKoichi Minami has served in various

the Company

positions including Director and Senior
Managing Executive Officer of Sumitomo

He used to serve as

Mitsui Banking Corporation and Standing

Senior Managing

Corporate Auditor of Sumitomo Mitsui

Director of a financial

Financial Group, Inc., and possesses

institution (Sumitomo

expertise and experience in finance. The

Mitsui Banking

Company has appointed Mr. Minami as an

Corporation), a major

Outside Corporate Auditor, expecting him tobusiness partner of theutilize his knowledge and experience for theCompany, but he retired

Company’s management and audit its

from this position in

management from a fair and neutral

June 2013. At present,

standpoint.

we concluded that there
is no risk of a conflict ofinterest between him
and the shareholders
and that he is considered
independent.

Toichiro
Mizushima〇

Independent Officer ofToichiro Mizushima has served in various

the Company

positions including Deputy President andHe used to serve as

Executive Deputy President of Sumitomo
Mitsui Banking Corporation and presidentof Japan Pension Service, and possesses

Deputy President andExecutive Deputy
President of a financial

expertise and experience in finance. The
Company has appointed Mr. Mizushima as

institution (Sumitomo

an Outside Corporate Auditor, expecting him

Mitsui Banking

to utilize his knowledge and experience for

Corporation), a major

the Company’s management and audit its

business partner of the

management from a fair and neutral

13Company, but he retired

standpoint.

from this position inJune 2005. At present,
we concluded that there
is no risk of a conflict ofinterest between him
and the shareholders
and that he is considered
independent.
【Independent Directors/Audit & Supervisory Board Members】
Number of Independent Directors/Audit &Supervisory Board Members

7

Matters relating to Independent Directors/Audit & Supervisory Board Members【Incentives】
Incentive Policies for Directors

Not applicable

Supplementary Explanation

Recipients of Stock Options
Supplementary Explanation【Director Remuneration】
Disclosure of Individual Directors’

Individual directors’ remuneration is not

Remuneration

disclosed.

Supplementary Explanation

Policy on Determining Remuneration

Established

Amounts and Calculation Methods
Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods➀ Matters concerning the decision policy regarding the content of individual remunerationfor

directors etc.
Remuneration amounts for the directors of the Company shall be appropriate, impartial, andbalanced that secure upstanding human resources, encourage the recipients to maximize thecorporate value as well as linking to long-term interest for our shareholders. Specifically, theremuneration for executive directors consists of basic remuneration (monetary remuneration) as
fixed remuneration, performance-linked remuneration, and non-monetary remuneration etc., foroutside directors and corporate auditors, only basic remuneration will be paid for their duties.
In addition, the basic remuneration for directors of the Company shall be a fixed monthly
remuneration decided comprehensively taking into consideration the level of other companies, theperformance of the Company, and the level of employee salary according to their position,
responsibilities, and years of office.

14➁ Matters concerning delegation related to the determination of individual remuneration for
directors etc.
After deliberation by the Remuneration Advisory Committee, Kunihisa Furukawa, Chairman,
decides on the specific amount of remuneration for each individual director considering theopinions of outside directors based on a resolution delegated by the Board of Directors.

The

chairman decides the amount of remuneration for each individual based on the deliberation of theRemuneration Advisory Committee and the opinions of outside directors. Since the amount of
remuneration for each individual director has been determined through this procedure, the Boardof Directors has determined that the substances are in line with the decision policy. The reason fordelegating to the Chairman is that he is most familiar with the environment surrounding theGroup and the management situation of the Group, etc., so that the Company has decided that hecan comprehensively determine the amount of remuneration for directors.
【Supporting System for Outside Directors and/or Audit & Supervisory Board Members】
The Company has no special support system for Outside Directors and Outside Auditors.

２．Matters on Functions of Business Execution, Auditing, Oversight, Nomination andRemuneration Decisions (Overview of Current Corporate Governance System)< Board of Directors meeting >The Board of Directors consists of 12 members, including 4 outside directors. In addition to theregular meetings of the Board of Directors held once a month, extraordinary meetings are held asnecessary. Directors are appointed for each segment and for each region in the Kansai and Tokyo
metropolitan areas. We have built a management system that enables directors with specialized
knowledge of each business field and local conditions participate in management decision-making
to ensure accurate management decision-making. Moreover, we have built a flat management
system and have a dedicated team system organized for each project. As a result, we have clarified
the division of duties and the locus of responsibility, and have realized faster decision-making andcommunication, and more efficient management. In addition, 4 outside directors are appointed
among the 12 directors, and we are building a management system that appropriately supervise
and monitor the decision-making of the board of directors by participating in management
decision-making from a standpoint that has no conflict of interest with the Company.
Furthermore, corporate auditors also participate in the Board of Directors and audit thedecision-making and business execution status of the Board of Directors.
<Board of Auditors>
It consists of 4 members, including 3 outside auditors. As an independent organization entrustedby shareholders, it cooperates with the Internal Audit Office and the Accounting Auditor to audit
the execution of duties by directors, aiming to contribute to the sound and fair management of theCompany and to respond to the social credibility.
< Nomination Advisory Committee >It consists of 6 directors, including 1 outside director, and examines the content of proposals
regarding the appointment and dismissal of directors and executive officers before it is finalized,
and make recommendation to the Board of Directors after seeking the opinions of independent
outside directors. In addition, the committee make recommendations to the Board of Directors

15

regarding the content of independence standards.
< Compensation Advisory Committee >It consists of 6 directors, including 1 outside director. Policies regarding director remuneration(including selection of performance indicators for performance-linked remuneration and criteria
for granting stock-related remuneration, etc.), the details of remuneration, etc. for each director,
and after soliciting the opinions of independent outside directors, recommendations are made to
the Board of Directors.
In addition, we have established the Management Committee, Internal Audit Office, and Internal
Control/Compliance Committee as other organizations.
Based on the basic management policy decided by the Board of Directors, the Management
Committee formulates specific policies and plans for business execution, and deliberates on otherimportant matters related to consolidated accounting. The Internal Audit Office has been
established as an organization under the direct control of the president to prevent risks such as
scandals in the company, to conduct internal audits of all business activities, including theoperational status of business sites, the effectiveness and accuracy of business operations andstatus of compliance with laws and regulations. It conducts internal audits on the status ofcompliance, etc., and provide specific advice and recommendations for improving operations. The
Internal Control/Compliance Committee regularly holds internal control/compliance committee
meetings to improve and maintain the compliance system.
<Accounting Auditor>
For accounting audits, we have appointed KPMG AZSA LLC as our accounting auditor. The namesof the certified public accountants who performed the accounting audit and the composition of theassistants involved in the accounting audit are as follows.
・ Name of the certified public accountant who performed the accounting audit Designated limited
liability partner Engagement partner: Hiroyuki Matano, Norio Hanatani
・Composition of the main assistants involved in the accounting audit: 11 certified public
accountants, 9 people who have passed the CPA exam, and 7 other people< Limited Liability Agreement >The Company has entered into agreements with Outside Directors and Outside Audit that limit
liability for damages under Article 423, Paragraph 1 of the Companies Act to a certain extent. The
liability limit based on the contract shall be the minimum liability limit stipulated in Article 425
Paragraph 1 of the Companies Act.

３．Reason for Adoption of the Current Corporate Governance System
The Company establishes a structure that integrates swift and appropriate business operation anddiscussion, recommendation, Internal Audit, and monitoring toward the former business operationby the directors who are familiar with respective business fields, outside directors with richexperiences, and auditors and outside auditors with expertise so that we realize fair and efficient
corporate management.

16

Ⅲ．Implementation of Measures for Shareholders and other Stakeholders
１．Measures to Vitalize the General Shareholders Meetings and Smooth Exercise of Voting
RightsSupplementary Explanation
Early Notification of

Dispatching 5 days before the legal due date

General Shareholders

Disclosing 7 days before the legal due date on the website

Meeting
Allowing Electronic

Website for the exercise of electronic voting rights

Exercise of Voting Rights(https://evote.tr.mufg.jp/)

Participation in Electronic

Participation in ICJ Platform

Voting Platform
Providing Convocation

Providing the Convocation Notices in English for foreign investors

Notice in English

on the Company’s website and ICJ Platform (Electronic medium
only)

Other

Posting Notice of the General Meeting of Shareholders on the
Company’s website
Web disclosure of Note List on Convocation Notices
Adoption of Universal Font, an easily recognizable font for the
Convocation Notices
Visualization of index and cover of the Convocation Notices
Adoption of bigger font for the Convocation Notices
Colorization of convocation notices, use of photographs and charts

２．IR Activities
Explanation

Supplementary Explanation

from
Representative

Periodic Briefing for

Holding Company briefing and IR seminar

Yes

Periodic Briefing forConvening briefing (approximately twice a year) and small

Yes

Analysts andmeeting (as demand) for institutional investors in Tokyo andInstitutional

Osaka by mainly the Chairman, Vice Chairman, President,

Investors

and Executive Director

Periodic Briefing for

Holding Company briefing approximately once or twice a year

Individual Investors

Analysts andForeign Investors
Disclosure of IR

Disclosing Financial Briefing, other timely disclosed

Documents on thematerials, Notice and Resolution Notices of the General

WebsiteMeeting of Shareholders, Investors’ Note, Securities Report,
and Quarterly Report(https://www.shiphd.co.jp/en/)

IR Related Divisions

Secretary Office and Corporate Planning Department(Personnel)(2 Officers and 4 staffs)

17

Yes

３．Measures to Ensure Due Respect for Stakeholders
Supplementary Explanation
Volunteer activities (twice a year), Adopt Road Momoyamadai,
Environmental Activities,

Adopt Forest, Adopt light,

CSR Activities etc.

Establishment of Medical technician training school in Asian
countries (Bangladesh and Myanmar)
Membership of Kansai SDGs Platform,
Membership of OSAKA Zero Carbon Foundation
Disclosure of SDGs activities on the Company’s website

Ⅳ．Matters Related to the Internal Control System
１．Basic Views on Internal Control System and the Progress of system Development
1) Structure for securing compliance of execution of the business by Directors with laws,
regulations and the Articles of Incorporation
1. The Company shall, in order to realize fair and proper management in accordance to Corporate
Ethics Compliance Code of Conduct, enact regulations for structure of compliance including
compliance rule; and, seeking the opinions of outside experts as needed, shall prevent breach oflaws, regulations and the Articles of Incorporation beforehand.
2. Directors of the Company shall lead compliance of Corporate Ethics all over the Company Groupin accordance with laws, regulations, the Articles of Incorporation, the Regulation of the Board of
Directors as well as Corporate Ethics. With regard to the state of execution of business byDirectors, the Company shall strengthen the Governance Structure receiving audit of Corporate
Auditors.
2) Structure for storage and control of the information relating to execution of business byDirectors
Regarding information relating to execution of business by Directors, the Company shall endeavor
to store and control in a proper state with high search ability. With regard to storage period andother control structure of documents, the Company shall store them for a necessary period of timein a state of available for viewing in accordance with the Regulation on Document Control.
3) Regulation on management of risk of loss and other structure
1. In order to prevent incurrence of risk as much as possible, the Company shall prepare several
regulations on risk management for different types of risks. In particular, as for important items
and others, the Company shall establish a structure that allows receipt of professional advice fromcounsel law firms and audit firms, etc., and endeavor to secure compliance, public interest andethics in corporate activities.
2. The Company shall also endeavor to improve business process by perfecting education of risk
management, conduct periodical audit and guidance in order to monitor the status of
improvement, and set up a Disaster Management Committee for safety management as astructure relating to other risk management.
4) Structure for securing efficient execution of business by Directors
1. The Company shall hold a meeting of the Board of Directors periodically once a month and extra
meetings at any time whenever necessary. As for important items relating to business policy andstrategy, the Company shall discuss it at the Business Policy Committee, and determine its
execution after deliberation at the Committee.
2. In order to secure efficient execution of business by Directors, the Company shall clarify a role of
Directors by Regulation on Organizational Division of Duty, Regulation on Assignment of Duties,

18

Regulation of Official Authority, shall review continuously rationalization, digitization,
acceleration, etc. of business, and shall secure a structure to perform business properly andefficiently.
5) Structure for securing compliance of execution of the business by employees with laws,
regulations and the Articles of Incorporation
1. The Company has established administration system for compliance internally, distributes“Standards and Outline of Compliance” to all company staff and employees as a basis forcompliance system, and endeavors to perfect compliance and to disclose the information.
2. The Company has established the Internal Control and Compliance Committee undermanagement meeting and holds a meeting of the Internal Control and Compliance Committee
regularly in order to develop and maintain the compliance system.
3. When a Director finds an important fact relating to serious breach by the Company with laws
and regulation or other compliance, he/she shall immediately report the fact to Corporate Auditors,
and discuss and deal with it without delay at the Management Policy Committee.
4. A Corporate Auditor shall express his/her opinion and ask preparation of improvement plan
when he/she recognizes any problem in the structure in compliance of laws and regulations and thecompliance system of the Company.
6) Structure for securing proper business performance in the company group consisting of theCompany and its subsidiary companies
1. In order to secure proper business performance in the Company Group and to perform effective
control of corporate governance, the Company conducts business management according to its
business strategy based on the Control Procedure of Affiliated Companies. The Company, at theBoard of Directors, resolves and approves important items relating to the business of the Company
group, and further reports on business execution of the Company Group.
2. The Company periodically exchanges information with its affiliated companies, conducts audit ofaffiliated companies whenever necessary, and endeavors to grasp compliance issues and problems.
7) Structure relating employees assisting proper performance of the duty of Corporate Auditors
and Matters relating to Independence of such employees from Directors
1. When the Board of Corporate Auditors requests placement of employees assisting performanceof the duty of Corporate Auditors, the Board of Directors promptly shall respond to the request byarranging personnel, and shall have such personnel assisting Corporate Auditors take charge ofthe duty as Secretariat of the Board of Corporate Auditors. Such employees assisting the audit
shall not receive any order or instruction from Directors.
2. As for the employees assisting audit of Corporate Auditors, the Board of Directors shall resolve
its personnel change such as appointment and rotation after confirming intention of the Board of
Corporate Auditors.
8) Structure for reporting to Corporate Auditors by Directors and employees, structure forreporting to Corporate Auditors by others, and structure for securing effective performance ofaudit by Corporate Auditors
1. Directors and employees shall from time to time report to Corporate Auditors important items
influencing on the business or performance of the Company. Corporate Auditors may at any timecall for reporting from Directors and employees as needed. The Board of Corporate Auditors shallhold a meeting for exchanging opinions with Representative Director, Internal Audit Office, andAccounting Firm respectively.
2. Internal reporting terms for the facts connecting to the violation of law and other compliance areestablished and operated for the whole group as a structure of internal reporting. All the reports

19

shall be informed to the Auditors by the person who receive them. Also, the Company provides theprovisions that protect the whistleblowers from suffering a loss caused by making the report.
3. The board of Corporate Auditors may as needed utilize legal and accounting specialists in
conducting audits to make an independent statement, and the cost will be borne by the Company.
9) Structure for preventing involvement of anti-social forces in the business activities and damage
from such forces
1. The Company shall not have any relationship with anti-social forces. In order to respond tounjust requests from anti-social forces throughout the organization, the Company shall, based on
the Ethical Code and other regulations of the Company, take legal measures from both civil andcriminal sides, and refuse any unjust request. The Company shall also engage in education of its
staff and employees through internal training.
2. Any person is required to report immediately to his/her superior when he/she has contact with
anti-social forces or forces suspected to be anti-social forces; and the superior shall report it to a
Person Responsible for Prevention of Unjust Request; who shall report to the Board of Directors
about the beginning, progress, and results, etc. relating to the response to the unjust request fromanti-social forces. If there is a risk of incurring damage or if damage has been incurred, the Person
Responsible for Prevention of Unjust Request shall share the information and coordinate with
police, securities agent, legal firm and other professional agent, and shall implement legal
measures maintaining the safety of the Company and other persons concerned.
10) Structure for securing reliability of financial reporting
In order to secure reliability of financial reporting, the Company shall establish an internal control
system aiming at effective and proper submission of the Internal Control Report based on the
Financial Instruments and Exchange Act, continuously evaluate the system’s proper function andmake necessary revisions.
11) Operational Status of the System securing appropriateness of business1. The Company has a system in place to ensure the appropriateness of our business. The outline ofthe operation situation in the current fiscal year is as follows.
The Board of Directors is held 14 times, and outside directors who have no interest with theCompany attend all of the meetings so as to secure legality and enhance fairness and efficiency ofthe directors’ business execution. Other meetings, Supervisory Board is held 13 times, and Internal
Control＆Compliance Committee is held 12 times.
2. Auditors conduct auditing duties toward the Company and material subsidiaries. Also, theauditors carry out an audit in cooperation with Internal Audit Department, and regularly holdliaison meeting with accounting auditors to share information.
3. Internal Audit Department conducts business audit on business execution of the Company’s
respective departments and subsidiaries, and carries out internal control audit, based on internal
audit plan.

２．Preparation towards Elimination of Antisocial Forces
Preparation towards elimination of antisocial forces is as described above.

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

Not adopted

Supplementary Explanation20

２．Other Matters Concerning to Corporate Governance System【Outline of timely disclosure】
1.

Basic policy on timely disclosure

The Company will comply with relevant laws and regulations such as the Financial Instruments
and Exchange Act, and will timely disclose important information based on the timely disclosurerules stipulated by Tokyo Stock Exchange such as decision facts, occurrence facts, and financial
results information, which affect investors' investment decisions.
2.

The system of timely disclosure

The Company has set up the Corporate Planning Department, which is in charge of disclosure
operations, as a supervising department for collecting information related to timely disclosure. Asa general rule, the facts of decision and financial statements will be notified to the stock exchange
after the resolution of the Board of Directors, and the facts of occurrence will be notified to thestock exchange without delay.

21

【Corporate Governance Structure】

2223