[Translation]

Corporate Governance Report

Digital Garage, Inc.

Last updated on December 24, 2021
Digital Garage, Inc.
Kaoru Hayashi
Representative Director, President Executive Officer and Group CEO
Contact: 03-6367-1111
Securities Code: 4819
https://www.garage.co.jp/en/
The corporate governance of Digital Garage, Inc. (the “Company”) is as follows:

I.

Basic Views on Corporate Governance, Capital Structure, Corporate Profile andOther Basic Information

1. Basic Views

In accordance with the following "Principle" and "Credo," the Company is working to enhance and strengthen
its corporate governance to realize transparent, fair, rapid and decisive decision-making in order to live up to
the trust of its shareholders and other stakeholders, as well as to achieve sustainable growth and increase
corporate value over the medium to long term.

<Principle>
Think for yourself and question authority.
<Credo (Behavioral Philosophy) >・TENACITY
Have a strong will
・OPENNESS Question your common sense
・INTEGRITY Stay straight・AGILITY
Be agile
・COURAGE
Be brave
Based on these "Principle" and "Credo," we have created a number of first-of-its-kind Internet businesses inJapan by incubating businesses with investments, etc. by utilizing our two revenue bases, namely, marketing
technology, which anticipates the trends of the world, and the provision of highly reliable financial technology.
In particular, our mission is to create new contexts at the interface between real space and cyberspace.
The Company Group's basic approach and policy on corporate governance is described in the "Corporate
Governance Basic Policy" on the Company's website (https://www.garage.co.jp/en/company/corporategovernance/).

[Reasons for not Implementing the Principles of the Corporate Governance Code] Updated

The Company implements all of the principles of the Corporate Governance Code (including principles forcompanies that will be listed on the Prime Market from April 4, 2022, except for the disclosure based on therecommendations of TCFD, etc. written in Supplementary Principle 3-1(3).

[Disclosure in Accordance with the Principles of the Corporate Governance Code] Updated

Below descriptions are based on the Corporate Governance Code revised in June 2021 (same as above).

[Principle 1-4 : Strategic Holdings]
As a company that creates useful "contexts" for the world, we sometimes hold our shares for the purpose ofcollaborating with various companies based on long-term, stable strategic alliances. In examining ourstrategic shareholdings, we examine them in detail to determine whether or not they will contribute to theenhancement of our corporate value over the medium to long term through the strengthening of relationships
and the creation of synergies, and we consult with the Board of Directors when necessary, including the saleof shares. When exercising the voting rights of our policy-holding shares, we exercise them in an appropriatemanner after comprehensively considering whether or not they will contribute to improving the medium- tolong-term corporate value of the issuing company and the Company.

1[Translation]
The Company has sold some stocks during the fiscal year ending March 31, 2021 and has determined that it
is appropriate to hold all shares held by the Company as of the end of the fiscal year ending March 31, 2021,
based on a comprehensive judgment from the perspectives of improving corporate value and maintaining
and strengthening relationships with investees over the medium to long term.
[Principle 1-7 : Related Party Transactions]
The Company appropriately monitors transactions with related parties by approving and reporting on thetransactions at the Board of Directors' meeting to ensure that such transactions do not harm the Company or
the common interests of shareholders.
[Principle 2-4(1) : Ensuring Diversity in the Promotion to Core Human Resources]
The Company was established with a concept of creating "contexts" for the internet era. Today, we put the
purpose of ‘designing "new context" for a sustainable society with technology' and believe new ideas andinnovations are produced by the diverse human resources which bring various cultures, values, and skills.
The Company has originally been promoting human resources regardless of gender, nationality, career, etc.
but with the focus on their abilities and accomplishments. The ratios of women, midcareer hires, and foreign
nationals to middle managerial positions are now about 15% women, 95% midcareer hires, and 4% foreign
nationals. We believe the means to measure diversity is not just gender, nationality, or career, but we thinkthese ratios will rise as a result of promoting human resources with various cultures, values, and skills.
Moreover, the Company has been working on training of diverse human resources in middle managerial
positions. For example, the Company established an organization for employees in the middle managerial
positions to engage in discussions of issues and directions as the Group and execute measures from mid- tolong-term perspective. More specifically, they, from middle management point of view, identify the businessissues, plan business strategies and human resources strategies, make proposals to executive directors, andactively execute measures.
Also, at the Company Group, we promote human resources based on their abilities and accomplishments,
and the ratio of managerial positions at a subsidiary in Asia is 100% foreign nationals.
[Principle 2-6 : Exercising the Function of an Asset Owner of a Corporate Pension Plan]
We do not have a corporate pension fund system. In order to ensure stable asset formation for our
employees, we have introduced a corporate defined contribution pension plan.
[Principle 3-1 : Enhance Information Disclosure](1) Management Philosophy, Management Strategy and Management Plan

The Company's management philosophy, management strategy and management plan are available on the
Company's website (https://www.garage.co.jp/en/) and in its annual report.
The Company announced its medium-term management plan, which covers the five years from the fiscal
year ending March 31, 2021 to the fiscal year ending March 31, 2025. For the details, please refer to the
Financial Report for the fiscal year ended March 31, 2020.
Through the implementation of our medium-term management plan and the achievement of our businessgoals, we will achieve further growth and increase our corporate value.
(2) Basic Policy on Corporate Governance

Please refer to "I. 1. Basic Views" in this report.
(3) Policies and Procedures for Determining Directors' Remuneration

Please refer to “II. 1. Items Related to Organizational Structure and Management, [Directors] Disclosure of
Policy for Determining Remuneration Amounts of Calculation Methods Thereof” in this report.
(4) Policies and Procedures for Determining Candidates for Election and Dismissal as Directors

Candidates for the election of directors (excluding members of the Board of Corporate Auditors and outside
directors) should be of excellent character and insight and should have knowledge and experience that will
enable them to execute the Company's management accurately, fairly and efficiently. President Executive
Officer shall draft and submit a proposal to the Nomination and Renumeration Advisory Committee from theperspective of whether or not the candidate is capable of providing advice on all aspects of the company's
operations and appropriately reflecting the opinions of stakeholders, including minority shareholders, from an
independent standpoint at the Board of Directors, and President Executive Officer shall consult with theNomination and Remuneration Advisory Committee on the candidate's proposal based on the Committee's
report. This decision is made by a resolution of the Board of Directors. Candidates for the appointment of
directors as Audit and Supervisory Committee members shall be drafted by President Executive Officer andreferred to the Nomination and Remuneration Advisory Committee from the viewpoint of whether or not they2

[Translation]
have excellent character and insight, as well as the knowledge and experience to accurately, fairly andefficiently audit the execution of duties by directors. The Board of Directors will decide on this proposal by aresolution of the Board of Directors, after obtaining the consent of the Audit and Supervisory Committee.
In the event of a serious violation of law or the Articles of Incorporation, significant lack of eligibility, or otherreasons for dismissal under the Director's Regulations, the Board of Directors shall decide whether or not
to submit a proposal for the dismissal of a Director to the General Meeting of Shareholders.
(5) Explanation of Individual Elections, Dismissals and Nominations of Senior Management andNominations of Director Candidates
Reasons for the election and dismissal of individual director candidates will be disclosed in the notice of
the General Meeting of Shareholders.

[Supplementary Principle 3-1(3) : Disclosure of Sustainability Initiatives, etc.][Basic Policy on Sustainability]
Sustainability to the Company Group is to aim for a sustainable growth of society and the Group withstakeholders through its businesses, which is based on its purpose (designing "New Context" for asustainable society with technology).
The Company has hosted conferences on themes of cutting-edge internet technologies and new
businesses surrounding those technologies since 2005, and at the conference in 2021, initiatives toachieve sustainable society, covering the great changes in society, technology, and environment
happening on a global scale, were discussed from various angles. In addition, the Company is promoting
projects such as the establishment of "Earthshot Fund" and cooperation programs with ESG startups.
The Company will aim for its sustainable growth and mid- to long-term increase on corporate value byaddressing sustainability issues in collaborations with not only its shareholders but also various
stakeholders such as its employees, business partners, creditors, and local communities.
[Investment in Human Capital]
In order for the Company to accomplish sustainable growth in the future while external environment continues
to change, it is essential to develop a global organizational structure that is capable of change and to secureand educate talented and diverse human resources. Openly accepting and training human resources withvarious strengths allow the Company to expand the field width of its growth and to improve creativity. Basedon these ideas, the Company has promoted employees' deeper understanding of its purpose as well as thehuman resources training program "DG 25" for employees in middle managerial positions since 2021.
[Investment in Intellectual Property]
The Company recognizes intellectual properties as significant management resources that support growth
for the maximization of its corporate value. Intellectual properties include infrastructure facilities like software
for payment services, know-how of digital ads operation, the Company's own global incubation network andknow-how, algorithms developed by DG Lab, insights gained through demonstration testing, other businessmodel patents, trademark rights, and so on.
The Company believes its mission as the Context Company is to organically connect these intellectual
properties with various companies, people, information, and cutting-edge technologies through new contexts
and create new businesses that are useful to society.
[Supplementary Principle 4-1(1) : Scope of Delegation to Management]
The Board of Directors decides on matters stipulated by laws and regulations and the Articles of Incorporation,
as well as matters stipulated in the Regulations of the Board of Directors. Other decisions on businessexecution are delegated to the Management Committee and full-time directors and corporate officers,
and the details of these decisions are defined in the internal rules of the Executive Committee and theRules for Internal Approval.
[Principle 4-8 : Effective Use of Independent Outside Directors]
The Company has appointed five independent outside directors, who provide appropriate supervision
and advice to the Company's overall management based on their own knowledge and experience froman independent perspective.
[Principle 4-9 : Criteria for Judging the Independence of Independent Outside Directors and their
Qualifications]
The Company appoints the Company's independent outside directors from among those who have no conflictsof interest with the Company and who do not have any conflicts of interest with general shareholders, referringto the requirements of the Companies Act and the criteria for determining independence established by the3[Translation]
Tokyo Stock Exchange and other bodies, while noting that they are expected to play an objective andappropriate supervisory or auditing role based on their own knowledge and experience.
[Supplementary Principle 4-10(1) : Structure of Voluntary Nomination and Remuneration Advisory Committee]
Please refer to “II. 1. Items Related to Organizational Structure and Management, [Voluntary committee]
Committee’s Name, Composition, and Chairperson’s Attributes, and Supplementary Explanation.
[Supplementary Principle 4-11(1) : Views on Balance Between Knowledge, Experience, and Skills of theBoard as a Whole, Diversity and Board Size]
The number of directors (excluding directors who are Audit and Supervisory Committee members) is 10 or
less, and the number of directors who are Audit and Supervisory Committee members is 5 or less. In order
to effectively fulfill the roles and responsibilities of the Board of Directors, the Board of Directors not only has
a well-balanced level of knowledge, experience, and competence as a whole, but also recognizes that diverse
perspectives, such as those of women and foreign nationals, contribute to the promotion of business andsupervision of management, and the Board of Directors appoints women and people from companies andorganizations with international operations as directors. We strive to be composed of human resources. Skill
matrix that summarizes each board member's expertise and experiences is shown on “V. Other Matters” inthis report.
[Supplementary Principle 4-11(2) : Directors' Concurrent Positions as Officers of Other Listed
Companies]
The status of directors' concurrent positions as officers of other listed companies is disclosed in the Notice ofGeneral Meeting of Shareholders and the Annual Securities Report. Some of the Company's directors serve
concurrently as outside directors, outside auditors, and other officers of listed companies other than the
Company, but we believe that their service is limited to a reasonable degree.
[Supplementary Principle 4-11(3) : Analysis, Evaluation and Disclosure of the Effectiveness of the Boardof Directors as a Whole]
Based on each director's self-evaluation, the Board of Directors analyzes and evaluates the effectivenessof the Board of Directors as a whole, including the composition and operation of the Board of Directors, itsdeliberations, and its roles and responsibilities, as well as the roles and responsibilities of the Nominating
and Remuneration Advisory Committee and items that do not implement each principle of the Corporate
Governance Code.
As for the evaluation results for the fiscal year ending March 31, 2020, we have confirmed that theeffectiveness of the Board of Directors as a whole is fully ensured. In particular, the Board of Directors
positively assessed that they actively discussed the Company’s medium- to long-term strategies and plans
triggered by the coronavirus situation, have reinforced the risk management systems including internal control
system and internal reporting system, and proceeded initiatives, such as a program for middle-management
employees to discuss the Company’s issues and future directions, for the human resource development.
We will continue to discuss issues such as succession planning and human resource development as issues
for consideration in order to further enhance the effectiveness of the Board of Directors. In addition, we willreinforce the PDCA cycle for increasing corporate value through management that considers the cost ofcapital, and we will further enhance our time to discuss the ESG, SDGs (Sustainable Development Goals),and corresponding to Revised Japan's Corporate Governance Code.
[Supplementary Principle 4-14(2) : Training Policy for Directors]
Directors are committed to acquiring and honing the knowledge necessary to properly fulfill their expectedroles and responsibilities. To this end, the Company provides directors with training opportunities from time
to time at the Company's expense that are useful for the acquisition of necessary knowledge.
[Principle 5-1 : Policy on Constructive Dialogue with Shareholders]
In order to promote constructive dialogue with our shareholders, we are working to develop systems andinitiatives in accordance with the following basic policy.
1. The officer in charge of information disclosure shall be the officer who oversees all dialogue withshareholders and, to the extent reasonable, the directors shall handle dialogue with shareholders.
In addition, the officer in charge of information disclosure shall be in charge of the relevant
departments within the Company and shall coordinate with other departments on a daily basis.
2. We will strive to understand the structure of our shareholders and enhance the means of dialogue(e.g., holding individual interviews in Japan and abroad, holding financial results and individual
investor briefings, etc.).

4

[Translation]
3. Opinions received in dialogue with shareholders are fed back to the Board of Directors and are used
to enhance corporate value.
4. When engaging in dialogue with shareholders, the Company shall strive to prevent the leakage of
undisclosed material facts in accordance with the internal rules for preventing insider trading.

2．Capital Structure
Foreign shareholder ratio

30% or more

[Major Shareholders] Updated
Number of shares
held (shares)
6,838,300
5,299,700
3,300,000
2,364,500
1,861,300
1,544,873
1,168,700
794,908
741,382
655,200

Name
Kaoru Hayashi
The Master Trust Bank of Japan (Trust Accounts)
Dentsu Group Inc.
TIS Inc.
Custody Bank of Japan, Ltd. (Trust Accounts 9)
Custody Bank of Japan, Ltd. (Trust Accounts)
J.P. Morgan Bank Luxembourg S.A. 384513
BNYM AS AGT/CLTS 10 PERCENT
State Street Bank and Trust Company 505225
Credit Saison Co., Ltd.
Controlling shareholders (excluding parent company)-

Parent company

None

Ratio (%)
14.82
11.49
7.15
5.13
4.03
3.35
2.53
1.72
1.61
1.42

Supplementary Explanation Updated
Baillie Gifford & Co and the co-owner Baillie Gifford Overseas Limited held the following shares as of January
15, 2021 according to the large-volume holding report, which became available for public inspection on
January 21, 2021. However, since the Company cannot confirm the actual number of shares owned as of
September 30, 2021, it is not included in the above list of major shareholders. The details of the large-volume
holding report are as follows.
・Baillie Gifford & Co Number of shares held: 1,102,700 (2.32%)
・Baillie Gifford Overseas Limited Number of shares held: 378,700 (0.80%)
Lazard Asset Management LLC held the following shares as of July 15, 2021 according to the large-volume
holding report, which became available for public inspection on July 20, 2021. However, since the Company
cannot confirm the actual number of shares owned as of September 30, 2021, it is not included in the above
list of major shareholders. The details of the large-volume holding report are as follows.
・Lazard Asset Management LLC Number of shares held: 4,498,562 (9.48%)
JPMorgan Asset Management (Japan) Limited and the following three co-owners below held the following
shares as of August 31, 2021 according to the large-volume holding report, which became available for public
inspection on September 3, 2021. However, since the Company cannot confirm the actual number of shares
owned as of September 30, 2021, it is not included in the above list of major shareholders. The details of thelarge-volume holding report are as follows.
・JPMorgan Asset Management (Japan) Limited Number of shares held: 2,735,200 (5.76%)

5

[Translation]

・J.P. Morgan Securities plc Number of shares held: 154,600 (0.33%)
・J.P. Morgan Securities LLC Number of shares held: 154,422 (0.32%)
・J.P. Morgan Asset Management (Asia Pacific) Limited Number of shares held: 82,400 (0.17%)
Schroder Investment Management (Japan) Limited and the three co-owners below held the following shares
as of August 31, 2021 according to the large-volume holding report, which became available for public
inspection on September 6, 2021. However, since the Company cannot confirm the actual number of shares
owned as of September 30, 2021, it is not included in the above list of major shareholders. The details of thelarge-volume holding report are as follows.
・Schroder Investment Management (Japan) Limited Number of shares held: 1,497,400 (3.16%)
・Schroder Investment Management Limited Number of shares held: 844,528 (1.78%)
・Schroder Investment Management North America Limited Number of shares held: 461,300 (0.97%)
・Schroder Investment Management (Switzerland) AG Number of shares held: 335,837 (0.70%)
Nomura Securities Co., Ltd. and the two co-owners below held the following shares as of September 30, 2021
according to the large-volume holding report, which became available for public inspection on October 6,
2021. However, since the Company cannot confirm the actual number of shares owned as of September 30,
2021, it is not included in the above list of major shareholders. The details of the large-volume holding report
are as follows.
・Nomura Securities Co., Ltd. Number of shares held: 1,922,056 (3.89%)
・Nomura Asset Management Co., Ltd. Number of shares held: 1,523,513 (3.20%)
・Nomura International plc Number of shares held: 303,196 (0.61%)

3. Company Attributes
Listed stock market and market section

Tokyo Stock Exchange, First Section

Fiscal Year-End

March

Industry

Information & Communication

Number of employees (consolidated) as ofthe end of the previous fiscal year

More than 500 persons, less than 1000 persons(Consolidated) sales in the previous fiscal
year

More than 10 billion yen and less than 100 billion
yen

Number of consolidated subsidiaries as ofthe end of the previous fiscal year

More than 10 companies and less than 50
companies

4. Guidelines for Measures to Protect Minority Shareholders in Transactions, etc. with
Controlling Shareholders---------

5. Other Special Circumstances that Could Have a Significant Impact on Corporate
GovernanceNot applicable.

6

[Translation]

II. Status of Management Organization for Management Decision-Making, Execution
and Supervision, and Other Corporate Governance Systems
1. Items Related to Organizational Structure and Management
Organizational form

Company with Audit and Supervisory Committee[Directors]
Maximum number of directors stipulated in articles of incorporation

15

Term of office of directors in articles of incorporation

1 yearChairperson of the board of directors

President

Number of directors

13

Appointment of outside directors

Appointed

Number of outside directors

5

Number of outside directors designated as independent directors

5

Relationship with the Company (1)NameAttributeaRelationship with the company(*)
b
c
d e
f
g h

i

j

k

Emi Omura
Attorney at law
Makoto Sakai
Attorney at law
Junji Inoue
From another company
Koji Makino
Certified public accountant〇
Minoru Ohno
Other*
Selections about relationship with the company*“○” when the Director presently falls or has recently fallen under the category“△” when the Director fell under the category in the past*“●” when a close relative of the Director presently falls or has recently fallen under the
category“▲” when a close relative of the Director fell under the category in the pasta. Executive of a listed company or its subsidiaries
b. Executive or non-executive director of the parent company of a listed company
c. Executive of sibling companies of listed companies
d. A person who does business with a listed company as a principal customer or an executorof such businesse. Major clients of the listed company or its executive officers
f.
Consultants, accounting and legal professionals who have received significant money orother assets from a listed company in addition to directors' remuneration
g. Major shareholders of the listed company (or, if such major shareholder is a corporation, theperson who executes the business of such corporation)h. Executive of the listed company's counterparties (who do not fall under any of d, e and f) (inperson only)i.
Executive of companies with which outside directors and corporate auditors have a mutual
appointment relationship (for the individual only)j.
Executive of the company to which the listed company is donating (in person only)
k. Others7

[Translation]

Relationship with the Company (2)Name

Audit andSuperIndepenvisory
dent
CommitdirectorteememberEmi
Omura

Makoto
Sakai

Junji
Inoue

Koji
Makino

○

○

○

○

○

○

○

Supplementary explanation ofcompliance items

Reasons for appointment---

In addition to her extensive experience asa lawyer, he has global experience ininternational organizations and brings an
independent
perspective
tomanagement.
She is designated as an independent
director because she has no conflicts ofinterest with the Company, is highly
independent, and has been judged tohave no risk of conflict of interest withgeneral shareholders.

---

He has a wealth of experience as an
attorney at law, and we believe that he will
revitalize the Company's Board of
Directors by reflecting an independent
perspective from outside the Company'sorganization in his audits.
He is designated as an independent
director because he has no conflicts ofinterest with the Company, is highly
independent, and has been judged tohave no risk of conflict of interest withgeneral shareholders.

---

He has a wealth of experience inoverseas business, and we believe that
his knowledge as a business manager
will allow him to gain a high-level view ofour business and reflect an independent
perspective from outside the Company in
our audits, thereby revitalizing our Boardof Directors. He has no conflicts ofinterest with the Company, is highly
independent, and has been judged tohave no risk of conflict of interest withgeneral shareholders.

---

He has a wealth of experience as acertifiedpublicaccountant
andconsultant, and we believe that his
accounting and tax knowledge andindependent perspective from an outside
perspective will be reflected in the audit
and will invigorate our board of directors.
He is designated as an independent
director because he has no conflicts ofinterest with the Company, is highly
independent, and has been judged tohave no risk of conflict of interest withgeneral shareholders.

8[Translation]

MinoruOhno○

He has extensive experience andprofessional knowledge as a social
insurance and labor consultant, and in thepast, he has provided useful opinions andsuggestions
totheCompany's
management as an outside corporate
auditor and outside director of theCompany's Audit and Supervisory
Committee. We believe that this ispossible.
He is designated as an independent
director because he has no conflicts ofinterest with the Company, is highly
independent, and has been judged tohave no risk of conflict of interest withgeneral shareholders.

The Company has entered into anadvisory contract with Ohno
Office, a social insurance andlabor consultants' law firm. The
Company has an advisory
contract with Ohno's office, but theamount of advisory fees paid to
Ohno's office in the fiscal year
ended March 31, 2021 was lessthan 1 million yen (less than
0.01%
of
the
Company's
consolidated net sales) and wasinsignificant at less than 1% of theoffice's annual net sales.

○[Audit and Supervisory Committee]
Committee Composition and Attributes of Chairperson

Audit andSupervisory
Committee

Total
committee
members

Full-timemembers

Internal
directors

Outsidedirectors

The Chair

5

1

1

4

Internal
director

Existence of directors and employees to assist
the Audit and Supervisory Committee in its duties

None

Supplementary Explanation
Although the Company does not have full-time staff to assist the Audit and Supervisory Committee membersin their duties, the internal directors who are also Audit and Supervisory Committee members collaborate with
the Internal Audit Office to audit and supervise the Company, so the Company believes it is functioning wellunder its current system.

Coordination among the Audit and Supervisory Committee, Accounting Auditor and Internal
Audit Department
The Audit and Supervisory Committee and the accounting auditors aim to improve the effectiveness andefficiency of the audit by exchanging information and opinions. Specifically, the Audit and Supervisory
Committee and the accounting auditors meet regularly once a quarter to exchange opinions on whether there
are any audit-related issues or not and to discuss future issues. In addition, the Company has a system
whereby meetings are held as needed.
The Company has established an Internal Audit Office (4 people) to audit the Company and its groupcompanies. The Internal Audit Office reports the results of internal audits to the Audit and Supervisory
Committee on a regular basis and maintains a close relationship with the Audit and Supervisory Committee.
In addition, the Internal Audit Office and the accounting auditors aim to improve the effectiveness andefficiency of audits by exchanging information and opinions.

[Voluntary committee]
Establishment of a discretionary committee equivalent
to a Nomination Committee or Remuneration
Committee

9

Established[Translation]

Committee’s Name, Composition, and Chairperson’s Attributes
Name oftheCommittee
A voluntarycommittee
equivalent
to aNominating
Committee
A voluntarycommittee
equivalent
to theRemuneration
Committee

Nomination andRemuneration
Advisory
Committee
Nomination andRemuneration
Advisory
CommitteeAllcomitteemembers

Standing
committee

Internal
director

Outsidedirector

External
expert

Other

3

0

1

2

0

0

Outsidedirector

3

0

1

2

0

0

Outsidedirector

The
Chair

Supplementary Explanation Updated
For the purpose of strengthening the independence and objectivity of the Board of Directors' functions inrelation to the nomination and remuneration of directors, and to further strengthen corporate governance, theCompany has established the Nomination and Remuneration Advisory Committee, a voluntary advisorycommittee of the Board of Directors, consisting of at least three members who are directors and a majority ofwhom are independent outside directors. The Committee is composed of three members: Representative
Director Kaoru Hayashi, Independent Outside Director Makoto Sakai (Chairperson), and Independent Outside
Director Junji Inoue. The Committee deliberates and submits its report on the election of directors andthe compensation of directors (excluding Audit and Supervisory Committee members) in consultation
with President Executive Officer.
Chairperson is to be selected from the committee member who is an Independent Outside Director by
the resolution of the Nomination and Remuneration Advisory Committee.

[Independent Directors]
Number of independent directors

5

Matters Related to Independent Directors
The Company designates all outside directors who meet the qualifications of independent directors as
independent officers.

[Incentives]
Implementation of measures toprovide incentives to directors

Introduction of a stock option system, others

Supplementary Explanation
Regarding incentives for the Company's directors (excluding directors who are Audit and Supervisory
Committee members and outside directors), the 21st Annual General Meeting of Shareholders, held on
September 29, 2016, resolved to increase the linkage between director compensation and the Company's

10

[Translation]
stock price, and to share with shareholders not only the benefits of a rise in the stock price but also the risksof a decline in the stock price, thereby encouraging them to contribute to improving business performanceand corporate value over the medium to long term. The Company has received approval to allot stockacquisition rights as stock options for stock-based compensation in order to raise the total number ofstock acquisition rights to be issued within 250 million yen per year and the total number of stockacquisition rights to be issued shall not exceed 100,000.
In addition, in order to provide incentives for the sustained enhancement of the Company's corporate value
and to further promote the sharing of value between the directors and shareholders, the Company has
obtained the approval for the payment of restricted stock compensation of up to 100 million yen per fiscal
year in effect with a maximum limit of 40,000 shares per year.
Recipients of stock options

Internal directors, employees, directors of subsidiaries,
corporate officers of subsidiaries, employees ofsubsidiaries

Supplementary Explanation
The reason why directors (excluding Audit and Supervisory Committee members and outside directors) are
eligible for this grant is to increase the linkage between directors' compensation and the Company's stock
price, and to share with shareholders not only the benefits of a rise in the stock price but also the risks of adecline in the stock price, thereby further motivating directors to contribute to improving businessperformance and corporate value over the medium to long term.
The reason why corporate officers and employees of the Company, as well as directors and employees of
the Company's subsidiaries, are eligible for the grants is to increase their willingness to contribute to themedium- to long-term improvement of the Group's business performance and corporate value by linking theCompany's business performance to the benefits received by the Company's corporate officers andemployees, as well as directors and employees of the Company's subsidiaries.

[Director's Remuneration]
Disclosure of (individual directors') remuneration

Some of them are disclosed individually.

Supplementary Explanation
Remuneration to Directors (Fiscal Year Ended March 31, 2021)
Total remuneration to Directors: 544 million yen• Of the above, remuneration for Directors (excluding Audit and Supervisory Committee members andoutside directors) is 468 million yen (Number of directors: 7)• Of the above, remuneration for directors (Audit and Supervisory Committee members but excluding
outside directors) is 30 million yen (Number of directors: 1)• Of the above, remuneration for outside directors is 46 million yen (Number of directors: 6)
There were seven directors (excluding Audit and Supervisory Committee members and outside directors),
one director (Audit and Supervisory Committee members but excluding outside directors), and six outside
directors as of the end of the fiscal year ending March 31, 2020.
Those whose total amount of consolidated remuneration, etc. is 100 million yen or more are separately
disclosed in the 26th Annual Securities Report.
Policy for determining remuneration amounts or
calculation methods thereof

11

Established[Translation]

Disclosure of Policy for Determining Remuneration Amounts of Calculation Methods Thereof
The maximum amount of remuneration, etc. for the Company's directors, as resolved at the 21st Annual
General Meeting of Shareholders held on September 29, 2016, is not more than 500 million yen per year for
directors (excluding Audit and Supervisory Committee members), of which 50 million yen for outside directors,
excluding the employee salaries. Apart from this amount of remuneration, the amount of remuneration forstock acquisition rights allocated to directors (excluding Audit and Supervisory Committee members andoutside directors) as stock options for stock-linked compensation is not more than 250 million yen per year,
and the amount of remuneration for granting restricted stock allocated to directors (excluding Audit andSupervisory Committee members and outside directors) is not more than 100 million yen per fiscal year ineffect.
The maximum amount of remuneration for the Company's directors (Audit and Supervisory Committee
members), as resolved at the 21st Annual General Meeting of Shareholders held on September 29, 2016, is
not more than 100 million yen per year.
The Company’s Board of Directors resolved the Company’s determination policy for the details of
remuneration, etc. for each director (excluding Audit and Supervisory Committee members) based on the
Company’s past operation of remuneration, etc.
The amount and details of remuneration of the directors who are Audit and Supervisory Committee members
are determined by the Audit and Supervisory Committee through consultation, within the limits of the total
amount resolved at the General Meeting of Shareholders.
The following is an overview of the Company's Remuneration Regulations regarding the determination ofdetails of the amount of remuneration, etc. for each director.
i . Significant Matters Regarding the Determination of Details of Remuneration, etc. for Each Director
The basic determination policy of the remuneration, etc. for each director is to set the ratio of stock-based
compensation relatively higher in order to increase the linkage between director compensation and theCompany's stock price, and to share with shareholders not only the benefits of a rise in the stock price but
also the risks of a decline in the stock price, thereby encouraging them to contribute to improving businessperformance and corporate value over the short-, medium-, and long-term.
ii . Matters Regarding the Determination of Remuneration, etc. for Each Director
A. Base Remuneration (Remuneration, etc. Excluding Performance-linked Compensation, etc., Nonmonetary Compensation, etc.)
The following is a determination policy of the Company’s base remuneration excluding performancelinked compensation, non-monetary compensation, etc. (hereinafter referred to as "baseremuneration”).
a. The total amount of base remuneration shall be resolved at the General Meeting of Shareholders
and decided within the limits of the resolved amount.
b. The base remuneration of the Company’s directors is monetary-compensation. Ranks ofdirectors and compensation amount and its composition for each rank are established, and theamount is decided within the limits of the compensation amount and its composition establishedfor each rank of directors.
B. Performance-linked Compensation, etc.
The Company does not grant performance-linked compensation, etc.
C. Non-monetary Compensation, etc.
The following is a determination policy of the Company’s non-monetary compensation, etc.
(hereinafter referred to as "stock compensation”).
a. Stock compensation is composed of stock options (hereinafter referred to as "SO”) that are thesame value as the monetary claim of remuneration-type stock options (stock acquisition rights)
in which the exercise price per share is set at 1 yen, and restricted stock (hereinafter referred toas “RS”), that are the same value as the monetary claim of restricted stock. Directors receive

12[Translation]
the stock acquisition rights and restricted stock by compensating with the monetary claim of SO
or RO. The gross amount of each SO and RS are to be resolved at the General Meeting of
Shareholders, and decided within the limits of compensation amount and its composition
established for each rank of directors fixed by the resolution of the Company’s Board of Directors.
b. The remuneration amount of SO for each individual shall be estimated by multiplying the fairvalue of 1 stock acquisition right calculated based on stock price, exercise price on the allotment
date, and other conditions by the total number of allotted stock acquisition rights.
c. The remuneration amount of RS for each individual shall be estimated by multiplying themonetary claim for 1 stock, that is not too advantageous to a directors who receive RS, decided
by the Company’s Board of Directors, by the number of allotted RS shares. The monetary claim
for 1 stock is to be based on the closing price of the Company’s common stock on the Tokyo
Stock Exchange on the previous business day of the resolution of RS grants by the Company’s
Board of Directors (apply the last closing price if not decided on the market on the same day).
d. RS owes transfer restrictions for the fixed-period of 1 to 5 years decided by the Company’s Boardof Directors, and directors shall not transfer, set up a guarantee, or execute other dispositions of
RS during the period.
iii . Determination Policy of the Ratio of Base Remuneration, Performance-linked Remuneration, Nonmonetary Remuneration, etc.
A. Directors Expect for Outside Directors
Ratio of base remuneration and stock compensation shall be largely 60% base remuneration and
40% stock compensation (of which, 30% SO, 10% RS)
B. Outside Directors
Only base remuneration is provided.
v . If the Determination of Remuneration, etc. for Each Individual is Entrusted to a Third Party (Including Reentrusting to the Representative Director)
A. Base Remuneration
Compensation amount and number of grant stocks for each individual will be resolved at theCompany’s Board of Directors right after the resolution of election of directors at the General
Meeting of Shareholders, and remuneration amount divided the annual remuneration by 12 will be
paid on a monthly basis from the next month of installation or reappointment.
B. Stock Compensation
Compensation amount and number of grant stocks for each individual will be resolved at theCompany’s Board of Directors right after the resolution of election of directors at the General
Meeting of Shareholders.
vi . Timing to Grant Remunerations, etc. or the Determination Policy of Terms
A. Name or position entrusted to determine remuneration, etc.: President Executive Officer
B. Rights to be entrusted: For the decision of remuneration, etc. for each individual, President
Executive Officer shall draft and submit a proposal, within the limits of the total amount of
remuneration, etc. resolved at the General Meeting of Shareholders, to the Nomination and
Renumeration Advisory Committee. If it is resolved by the Company’s Board of Directors to entrust
the determination of remuneration to the President Executive Officer with the proposal based on
the advice given by the Nomination and Renumeration Advisory Committee, the President
Executive Officer will decide the remuneration, etc. for each individual.
C. If measures for the exercise of authority by the person in charge are to be taken, their contents
a. President Executive Officer shall draft and submit a proposal of remuneration, etc. for eachindividual, within the limits of the total remuneration, etc. resolved at the General Meeting of13

[Translation]
Shareholders, to the Nomination and Renumeration Advisory Committee, and theRenumeration Advisory Committee will give advice to the President Executive officer.
b. The Nomination and Renumeration Advisory Committee shall be composed of three committee
members, of which outside directors take the majority. Chairperson is decided from thoseoutside directors by the resolution of the Nomination and Renumeration Advisory Committee.
vi . Determination Method of Remuneration, etc. for Each Individual
President Executive Officer shall draft and submit a proposal of remuneration, etc. for each individual to theNomination and Renumeration Advisory Committee within the limits of the total remuneration, etc. resolved
at the General Meeting of Shareholders, utilizing the external data, etc. President Executive Officer will decide
the contents of remunerations, etc. based on the advice given by the Nomination and Renumeration Advisory
Committee.

[Support System for Outside Directors]

Support for the Company's outside directors is provided by the Corporate Strategy Division. Specifically, theCorporate Strategy Division is responsible for notifying the Board of Directors of meetings, confirming
attendance, and circulating and sealing the minutes of the meetings. In addition, as a system forcommunicating information to outside directors, in the event that an agenda item requiring a resolution or reportis to be presented to the Board of Directors, the gist of the item is individually explained to the outside directors
in advance to enable them to exchange opinions and make a resolution at a Board of Directors meeting. In
addition, when it is deemed necessary to report or discuss other matters, the Board of Directors basicallymeets with the outside directors, and when this is not possible, reports and consultations are madeindividually by e-mail or telephone.

2. Items Related to Functions of Business Execution, Auditing and Supervision, Nomination,
and Determination of Remuneration (Overview of the Current Corporate Governance System)

The Board of Directors makes important management decisions and supervises the directors in the executionof their duties, and the Audit and Supervisory Committee audits the directors' performance of their duties. In
addition, the Management Committee, consisting of full-time directors and corporate officers, meetsregularly to ensure that decisions are made quickly in the execution of operations.
The following is an overview of the Company's management decision-making, execution and supervisionsystem.

•Board of Directors
The Company's Board of Directors consists of nine directors (excluding directors who are Audit andSupervisory Committee members), two of whom are outside directors, and five directors who are Audit andSupervisory Committee members (including four outside directors). In addition to regular monthly meetings,
extraordinary meetings of the Board of Directors are held flexibly when necessary to make importantmanagement decisions and supervise the directors' execution of their duties. In addition, the outside directors
are responsible for monitoring management from an objective standpoint by utilizing their extensive
management experience and broad-based insights.

•

Audit and Supervisory Committee
The Company's Audit and Supervisory Committee consists of five directors (including four outside directors),
and in principle, the Audit and Supervisory Committee meets once a month after the regular Board of Directors
meeting, and attends meetings of the Board of Directors and other important meetings to express its
opinions in an effort to improve the effectiveness of corporate governance.

•

Management Committee
The Company's management committee, which consists of President Executive Officer, full-time directors,
and directors and corporate officers appointed by President Executive Officer, meets weekly. Through thesemeetings, the Company aims to confirm the day-to-day execution of business operations, speed up
decision-making, and improve its corporate value.

•

Accounting Auditors
The Company has entered into an audit contract with Ernst & Young ShinNihon LLC and has been audited
in accordance with the Financial Instruments and Exchange Law and the Companies Act, and appropriate
audits have been conducted as necessary. The names of the certified public accountants who performed
the audit work for the Company are as follows
Name of the certified public accountant who conducted the work

14

[Translation]
Designated and Engagement Partner Shinji Takada
Designated and Engagement Partner Junichiro Tsuruta
Designated and Engagement Partner Hayato Kobayashi•

Nomination and Remuneration Advisory Committee
For the purpose of strengthening the independence and objectivity of the Board of Directors' functions inrelation to the nomination and remuneration of directors, and to further strengthen corporate governance, theCompany has established the Nomination and Remuneration Advisory Committee, a voluntary advisorycommittee of the Board of Directors, consisting of at least three members who are directors and a majority ofwhom are independent outside directors. The Committee is composed of three members: Representative
Director Kaoru Hayashi, Independent Outside Director, Makoto Sakai, and Independent Outside Director Junji
Inoue. The Committee deliberates and submits its report on the election of directors and the compensationof directors (excluding Audit and Supervisory Committee members) in consultation with President
Executive Officer.

•

Overview of Contents of the Contract for Limited Liability
In accordance with paragraph 1, Article 427 of Companies Act, the Company has entered into a contract with
the Company’s Outside Directors for limited liability stipulated in paragraph 1, Article 423. Limit of liability fordamages is the minimum liability amount provided in the Companies Act. This limited liability is applicable only
when the Company’s Outside Directors perform their duties in good faith and do not cause serious negligence.

3. Reasons for Choosing the Current Corporate Governance System

The Company has positioned the strengthening of its corporate governance system as one of its key
management issues.
In order to increase the effectiveness of management oversight by the Board of Directors, the ratio of outside
directors to the Board of Directors will be at least one-third, thereby further strengthening corporate
governance. In addition, we are reviewing the corporate officer system to clarify the separation ofmanagement decision-making and supervisory functions from business execution functions andpromoting the delegation of business execution authority in order to speed up and improve the efficiencyof business execution.

15

[Translation]

III. Status of implementation of Measures Concerning Shareholders and Other
Stakeholders
1. Efforts to Revitalize the General Meeting of Shareholders and Facilitate the Exercise of
Voting Rights
Supplementary explanation
Early dispatch of Notice of General
Meeting of Shareholders
Setting up a shareholder meeting to
avoid a concentrated date

The notice of the 26th Ordinary General Meeting of Shareholders issent out 20 days prior to the date of the General Meeting of
Shareholders. It is also posted on the Tokyo Stock Exchange andthe Company's website 22 days prior to the date of the General
Meeting of Shareholders.
The 26th Annual General Meeting of Shareholders will be held on
June 23, 2021, a date that avoids the so-called concentrated date
for shareholders' meetings.

Exercise of Voting Rights by
Electromagnetic Means

In order to improve convenience for shareholders, from the 21st
Annual General Meeting of Shareholders, voting rights can be
exercised by electromagnetic means.

Participation in an electronic voting
platform and other efforts to improvethe voting environment for
institutional investors

In order to improve the voting environment for institutional investors
in Japan and abroad, we have been participating in the electronic
voting platform since the 21st Annual General Meeting of
Shareholders.

Provision of the notice ofconvocation (summary) in English

An English version of the convocation notice is prepared andposted on the Company's website.

2. Status of IR activities
Supplementary explanation

Creation and publication ofDisclosure Policy

The Company has established a disclosure policy
and publishes it on its website.

Regular briefings for individual
investors

In principle, the Company plans to hold a briefing
session for individual investors once a year.

Periodic briefings for analysts andinstitutional investors

Holding regular briefings foroverseas investors

Posting of IR materials on our
websiteWe are currently holding a financial result briefing forthe second quarter and these financial results
briefing. These meetings include a report on thefinancial results by the representative director and abriefing for analysts and institutional investors on
future business strategies. In addition, quarterly
earnings announcements are followed by visits todomestic and overseas institutional investors.
Several times a year, the Company visits
overseas investors individually to explain its
business performance and other matters.
Timely disclosure materials are posted on the
Company's website immediately after disclosure. In
addition, a library of previously disclosed materials
is available on the Investor Relations section of theCompany's website.
In addition, the Company holds briefings for analysts
and institutional investors on its second quarter
financial results and this earnings release anddiscloses materials from these briefings to theTimely Disclosure Service and posts them on the
Company's website.

16

Explanation byrepresentative

Yes

Yes

No

[Translation]

Establishment of an IR department(person in charge)

The Corporate Strategy Division has a department incharge of IR with five people in charge of IR. The
director in charge of this division is the director in
charge of IR and is also responsible for IR
administration.

3. Efforts to Respect the Stakeholder's Position
Supplementary explanation

Formulation of policies on theprovision of information to
stakeholders

The Company strives to provide all of its stakeholders, including
shareholders and investors, with prompt information on the basis oftransparency, fairness and continuity.
The Company's basic policy is to disclose information in accordancewith the Financial Instruments and Exchange Law and the timely
disclosure rules of the Tokyo Stock Exchange.
The Company will proactively disclose as much information as
possible in a timely manner, even if it is not covered by the Timely
Disclosure Rules, if it is deemed to be useful in gaining a better
understanding of the Company.
In addition, the Company has established an English-language
version of its corporate website and has produced English-language
versions of the Notice of General Meeting of Shareholders, financial
results briefing materials, and important press releases in an effort
to enhance information disclosure in English.

17

[Translation]

IV. Matters Related to Internal Control Systems, etc.
1.The Basic Concept and Status of the Internal Control System

As for the Company's internal control system, the Board of Directors has passed a resolution on the basic
policy for establishing an internal control system and has been developing it. The Company's basic approach
to its internal control system is as follows.

a. Basic Policy for the Execution of Duties
The following ”Principle” and “Credo” are the basic policies for all officers (directors, corporate auditors or
their equivalents) and employees (employees, contract workers, contract workers, temporary workers andothers engaged in the Company's business) in the execution of their duties.
<Principle>
Think for yourself and question authority.
<Credo (Behavioral Philosophy) >・TENACITY
Have a strong will
・OPENNESS Question your common sense
・INTEGRITY Stay straight・AGILITY
Be agile
・COURAGE
Be brave
Based on these “Principle” and ”Credo,” the Company has established a system to ensure that all officers
and employees of the Group comply with laws and regulations and make appropriate decisions and takeappropriate actions with high ethical standards.
b. Basic Policy on Internal Control
In accordance with the Companies Act, the Ordinance for Enforcement of the Companies Act, and the
Financial Instruments and Exchange Act, the Company shall establish a system to ensure theappropriateness of its operations (hereinafter referred to as "internal control") as follows.
(1) Systems to Ensure that the Execution of Duties by Directors and Employees(hereinafter referred to as "Directors and Employees") of the Company and directors, etc. (hereinafter referred
to "Directors, etc." as defined in Article 110-4, Paragraph 2, Item 5 (a) of the Ordinance for Enforcement of
the Companies Act) and employees of the Company’s subsidiaries comply with laws and regulations and the
Articles of Incorporation
All Directors and Employees of the Company, as well as Directors, etc. and employees of the Company's
subsidiaries, are required to act with integrity based on the ethics and values expected of them as membersof society. Based on this recognition, the Company has established the Compliance Program as a specificcode of conduct to be applied to its Directors and Employees, as well as Directors, etc. and employees of theCompany's subsidiaries, to ensure fair and appropriate management and harmony with civil society throughstrict compliance with social norms, ethics, and laws and regulations.
In addition, to ensure that the Company, as an operating holding company, is fully compliant, each divisionof the Company and the Company's subsidiaries are classified according to business segment and othercategories ("Business Segments"), and the General Manager of the Corporate Strategy Division oversees
the compliance efforts of each business division and the Company's subsidiaries on a cross-sectional basis.
The Corporate Strategy Division's personnel will work with each business unit and subsidiary to educate andenlighten Directors and Employees of the Company and Directors, etc. and employees of its subsidiaries.
The Company's Board of Directors oversees each business unit and operating company within the Group bybusiness segment, and the Corporate Strategy Division audits or understands the compliance status of eachbusiness unit and Group company by business segment. The Company's directors and the Corporate
Strategy Division shall report regularly on these activities to the Company's Board of Directors and theCompany's Audit and Supervisory Committee.
With respect to acts, etc., that raise questions about legal compliance within the Group, the Company has
employees of each Group company contact the Compliance Committee Secretariat or a law firm that serves
as an outside point of contact for matters that may have a significant impact on the Company and its Group
companies, as well as legal compliance status, in addition to the legal requirements. In addition, the18[Translation]
Company's Compliance Committee shall promptly report the information received from a reporter to President
Executive Officer and the Director, who is a member of the Audit and Supervisory Committee.
The Company shall not have any relationship with antisocial forces that threaten the order and safety of civilsociety and shall reject any unreasonable demands from antisocial forces.
(2) System for the Storage and Management of Information Related to the Execution of Duties of theCompany's Directors
The directors of the Company shall properly record, store and manage information relating to the executionof duties by the directors of the Company in documents or electromagnetic media (hereinafter referred to as"Documents and Others") in accordance with the internal rules for document management and otherregulations. In accordance with the Document Management Rules, the person responsible for management
shall maintain access to these Documents and Others to the directors, etc. of the Company (including
directors who are Audit and Supervisory Committee members) as necessary.
(3) Rules and Other Systems to Manage the Risk of Loss for the Company and its Subsidiaries
The Corporate Strategy Division prepares rules and guidelines to address compliance, information security
and disaster-related risks for Directors and Employees of the Company and Directors, etc. and employees of
its subsidiaries. In addition, the Corporate Strategy Division prepares and distributes manuals and conducts
training for the efficient functioning of these rules and guidelines at the Company and its subsidiaries, as well
as monitoring and operating the risks. In addition, the Board of Directors shall promptly appoint a director or
corporate officer to be responsible for responding to any new risks that arise.
(4) Systems to Ensure the Efficient Execution of Duties by the Directors of the Company and the Directors,
etc. of the Company's Subsidiaries
The Board of Directors of the Company shall establish objectives that shall be shared by all directors andemployees of the Group, the director or corporate officer in charge of each business segment shall set specificobjectives for the achievement of such objectives in cooperation with the head of each business segment andthe directors of the Company's subsidiaries in each business segment, and each business segment and theCompany's subsidiaries shall determine efficient methods for achieving such objectives.
The Board of Directors of the Company shall periodically review the progress and advise, through thedirector or corporate officer in charge of each business unit and the directors of the Company's subsidiaries
in each business unit, as well as encourage improvements as necessary, in order to establish a system toimprove the efficiency of the Group's operations.
(5) System to Ensure the Appropriateness of the Business Operations of the Corporate Group Consisting of
the Company and its Subsidiaries
The Company classifies each of its business divisions and subsidiaries into business categories and appoints
a director or corporate officer to be in charge of each business category. The director or corporate officer incharge of each business segment is responsible for ensuring that the Board of Directors or the Executive
Committee of the Company's Board of Directors and the Executive Committee work to improve operational
efficiency, ensure legal compliance and appropriate risk management systems for each business segment
and the Company's subsidiaries, as well as monitoring these systems. In addition, the Corporate Strategy
Division shall promote these systems across the board and regularly review and manage their progress. While
respecting the autonomy of the management of each company in the Group, the Company shall receive
regular reports on its business activities.
(6) Matters Related to Directors and Employees who are to Assist the Duties of the Audit and Supervisory
Committee, Matters Related to the Independence of Such Employees from Directors (Excluding Directors who
are Audit and Supervisory Committee Members) and Matters Related to Ensuring the Effectiveness ofInstructions to Such Employees
The Audit and Supervisory Committee of the Company may order employees of the Internal Audit Office toperform their duties, and employees who receive necessary orders from the Audit and Supervisory Committee
shall not concurrently serve as employees of other departments, and with respect to such orders, they shallact solely under the direction and orders of the Audit and Supervisory Committee to serve as directors of theCompany (directors who are Audit and Supervisory Committee members). The Company shall not be subject
to the orders and instructions of the Audit and Supervisory Committee (except for those of the Company). In
addition, the Audit and Supervisory Committee staff shall be assigned to assist the Company's Audit andSupervisory Committee as necessary.

19

[Translation]
The Board of Directors of the Company (excluding directors who are Audit and Supervisory Committee
members) and the Audit and Supervisory Committee of the Company shall exchange opinions on such
personnel matters.
(7) Systems for Reporting to the Company's Audit and Supervisory Committee by Directors (Excluding
Directors who are Audit and Supervisory Committee Members), Accounting Advisors, and Employees of theCompany, as well as by Directors, Accounting Advisors, Corporate Auditors, Executive Officers, Employees
who Execute Operations of the Company's Subsidiaries, and Other Persons and Employees of theCompany's Subsidiaries who Perform their Duties as Defined in Article 598-1 of the Companies Act or Other
Persons who are Equivalent to These Persons or who Receive Reports from These Persons(hereinafter referred to as "Directors, employees, etc."), other systems for reporting to Audit and Supervisory
Committee, and systems for ensuring that those who have reported to Audit and Supervisory Committee are
not subjected to any adverse treatment on account of their reportingi. As soon as possible, directors (excluding directors who are Audit and Supervisory Committee
members), accounting advisors and employees of the Company and Directors, employees, etc. of
the Company's subsidiaries shall report to the Audit and Supervisory Committee on matters that
may have a significant impact on the Company and the Group, as well as on the status of compliance,in addition to matters required by law. The Company shall have a reporting system in place. The
method of reporting (e.g., reporter, recipient, timing of reporting, etc.) shall be determined throughconsultation between the directors of the Company (excluding directors who are Audit andSupervisory Committee members) and the Audit and Supervisory Committee of the Company.
ii. The Company shall ensure that the reporter will not be subjected to any disadvantageous treatment
as a result of the report described in the preceding paragraph and shall ensure that all officers andemployees within the Group are aware of this system.
(8) Other Systems to Ensure that the Audits of the Audit and Supervisory Committee of the Company are
Conducted Effectively
The Company's Audit and Supervisory Committee and the Company's directors (excluding directors who are
Audit and Supervisory Committee members) shall set up periodic meetings to exchange views to ensure that
the Audit and Supervisory Committee's audits are conducted effectively.
(9) System to Ensure the Reliability of Financial Reporting
The Company shall establish and promote the establishment and operation of an internal control system toensure the reliability of the financial reporting of the Company and the Group.
(10) Matters Relating to the Procedure for the Advance Payment or Reimbursement of Expenses Incurred in
the Performance of the Duties of the Audit and Supervisory Committee of the Company and Other Matters
Relating to the Treatment of Expenses or Liabilities Incurred in the Performance of Such Duties
i. If Audit and Supervisory Committee of the Company makes a request to the Company for advancepayment of expenses, etc. pursuant to Article 399-2, Paragraph 4 of the Companies Act as a resultof the execution of its duties, the Company shall promptly process such expenses and liabilities after
deliberation by the department in charge, unless it is determined that the expenses and liabilities
related to such request are not necessary for the execution of Audit and Supervisory Committee's
duties.
ii. If the Company's Audit and Supervisory Committee requests its own outside experts (attorneys,
certified public accountants, etc.) to serve as advisors to the Audit and Supervisory Committee, theCompany shall bear the cost of such advisors, unless they are deemed not necessary for the
execution of the Audit and Supervisory Committee's duties.
Under such a system, the Company will strive to ensure the legality and efficiency of its operations andmanage risks, while constantly reviewing its internal control system in response to changes in thesocioeconomic situation and other environmental conditions, in order to establish a more appropriate
internal control system.

2. Basic Approach to the Elimination of Antisocial Forces and the Status of its Development

Based on the Compliance Program, the Group's basic policy is to have no relationships with antisocial forces
and to firmly reject any unreasonable demands from antisocial forces.
In addition, the Corporate Strategy Division has been designated as the department in charge of overseeing
the response to anti-social forces, and in order to prepare for unreasonable demands by anti-social forces,

20

[Translation]
the Company has been working to establish close relationships with external specialist organizations,such as the police and lawyers, on a regular basis.
In addition, the Company has appointed a person in charge of preventing undue demands, collecting
information on anti-social forces and participating in seminars and other activities.

21

[Translation]

V. Other Matters
1. Adoption of Anti-takeover Measures
Adoption of Anti-takeover Measures

Not Adopted

Supplementary Explanation
Basic Policy on Control of the Corporation(1) Basic Policy on Control of the Company
As a listed company, the Company believes that shareholders of the Company are determined through free
trading in the market, and even in cases where a large-scale purchase of the Company's shares is conductedby a large-scale purchaser, it is ultimately up to the shareholders who hold the Company's shares to decide
whether or not to accept the large-scale purchase and sell their shares. The Company believes that a LargeScale Purchaser's involvement in the management of the Company is not necessarily detrimental to thecorporate value of the Company, and if it leads to the improvement of the corporate value of the Company
and, in turn, the common interests of its shareholders, the Company will not deny it. We do not deny that alarge-scale acquirer's involvement in the management of the Company is not necessarily detrimental to thecorporate value of the Company, as long as it leads to the improvement of the corporate value of the Company
and, in turn, the common interests of its shareholders. However, there are many cases of unilateral largescale purchases that are carried out without sufficient consultation and agreement processes with the target
company and are considered inappropriate, such as those that do not provide sufficient information toshareholders regarding the purpose of the purchase or management policy after the acquisition, or those that
do not provide sufficient time for the target company's board of directors to review the details of the largescale purchase and to provide an alternative proposal.
We believe that those who control decisions on the Company's financial and business policies must
understand the Company's purpose and build smooth relationships with various stakeholders to contribute tosociety, maximize the Company's corporate value, and ensure the common interests of shareholders. The
Company's Board of Directors is of the opinion that a person who conducts a large-scale acquisition of theCompany's shares that would unintentionally damage the corporate value of the Company and cause
disadvantages to its shareholders is not an appropriate person to control decisions on the Company's financial
and business policies. Therefore, the Company believes that a person who engages in a large-scale purchasethat would inadvertently damage the corporate value of the Company and create a disadvantage for its
shareholders is not an appropriate person to control decisions on the Company's financial and business
policies.
(2) Efforts to Contribute to the Realization of the Basic Policy on Control of the Company
The Company aims to expand and improve the profitability of the Group's businesses as a whole, and byproactively creating businesses that will become pillars of the Group's future earnings, the Company aims toachieve its corporate value and, in turn, the common interests of its shareholders, and to encourage large
numbers of investors to hold the Company's shares over the long term by taking the following measures We
are implementing the following.
a. The Company's Basic Management Policy
Our purpose is to design “new context” for a sustainable society with technology. The basic concept of ourbusiness is to be a "context company" that organically connects companies, people and information. By
making effective use of our solutions know-how based on our experience from the dawn of the Internet
industry and the latest network technology, we have been developing functions that organically connect
various complex information and enhance the value of the three parties, companies, people and information.
Our basic management policy is to build services that contribute to a comfortable society in which people,
the environment and the digital information society can coexist in harmony, always keeping our eyes a few
steps ahead of the times. Our basic management policy is to build services that contribute to a comfortablesociety in which people, the environment and the digital information society can coexist in harmony, by
always keeping a perspective several steps ahead of the times and by calmly and accurately selecting theright contexts.
b. Medium- to Long-Term Initiatives to Increase Corporate Value
Our mission and values are "to continuously create sustainable “business context” from an earth-centric
perspective by integrating technology, ESG, and incubation with First Penguin Spirit," and we are22[Translation]committed to providing our clients with the latest Internet technology, marketing technology that is one stepahead of the trends in the world, and reliable and trustworthy services. We believe that creating newcontexts at the point of contact between real space and cyberspace (virtual space), based on our advanced
financial technology, will help to ensure and enhance our corporate value and, in turn, the common
interests of our shareholders.
With this in mind, we have formulated a medium-term, five-year plan starting from the fiscal year ending
March 31, 2021, as a means of enhancing our corporate value over the medium to long term.
c.

Measures to Prevent Inappropriate Persons from Controlling Decisions on Financial and Business
Policies of the Stock Company
In the event of a Large-Scale Purchase of the Company's Shares, etc., the Company will strive to actively
collect and disclose information in a timely and appropriate manner in order to secure the Company's
corporate value and the common interests of its shareholders, and will take appropriate measures to theextent permitted by the Financial Instruments and Exchange Law, the Companies Act, other relevant laws
and regulations, and the Company's Articles of Incorporation.
(3) The Board of Directors' Decision on the Above Initiatives
Each of the above initiatives is intended to enhance the corporate value of the Group and, in turn, the common
interests of its shareholders, are not intended to maintain the status of the Company's officers, and are all inline with the basic policy described in (1) above.

2. Other Matters Related to the Corporate Governance System, etc. Updated---23

[Translation]

Corporate Governance Organization Chart24

[Translation]

Expertise and Experiences of the Company’s Board of Directors (Skill Matrix)25

[Translation]

Overview of Timely Information Disclosure

26