インテリＷ（4847） – (Delayed) Corporate Governance Report

(Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail. CORPORATE GOVERNANCE Corporate Governance INTELLIGENT WAVE INC. Last Updated: December 22, 2021 INTELLIGENT WAVE INC. Chief Executive Officer, Representative Director: Kunimitsu Sato Contact Information: TEL: 03-6222-7016 Securities Code: 4847 https://www.iwi.co.jp 1. Basic Views highly convenient.” The corporate governance of INTELLIGENT WAVE INC. (hereinafter referred to as “our company”) is described below. Ⅰ. Basic Views on Corporate Governance and Basic Information on Capital Structure, Corporate Profile and Others Our company pursues to “create safety and convenience for the information society of the next generation” as its management philosophy, and in accordance with that philosophy, our company sets our management policy as to contribute to society by boosting our enterprise value by promoting a business that “provides IT infrastructure that is swift, secure, high-quality, and The system developed by our company is the (IT) infrastructure indispensable for society, because of which a product of high standards is being demanded to successfully execute high speed and safe transactions with the stability of the system being a necessary condition. Our company boasts of many developmental achievements and safe operations, and we believe the trust we have gained from these results will continue to support our company’s business and become its developmental foundation. Our company’s management policy is to meet the expectations of our stakeholders by expanding our company’s business foundation by offering an IT infrastructure that will continue to be trusted by more customers. Our company is promoting the strengthening of our management supervisory function by appointing independent outside directors and outside auditors, as well as placing the Nomination and Compensation Committee, which will be comprised mostly of these independent executives, under the Board of Directors. Further, our company’s basic policy is to guarantee transparency in management by fairly and quickly disclosing any valuable information necessary for the understanding of our company’s management and business status, as well as promoting dialogue with the marketplace. In addition, training for increasing employees’ awareness of compliance will be thoroughly conducted to comprehensively enhance our corporate governance. In accordance with the Sustainable Development Goals (SDGs), we will contribute to the sustainable growth of our business and the sustainable development of society by working autonomously to resolve issues related to the environment, society, and governance. Among the ESG issues, we have been focusing on efforts to improve human capital for our employees, and established the Sustainability Committee in April 2021 as the central organization to promote these activities. The Sustainability Committee is chaired by the President and Representative Director Kunimitsu Sato, and consists of mainly full-time directors. The Committee has established policies regarding “contribution to society,” “building a good corporate culture,” “respect for diversity,” “consideration for the global environment,” and other practices set forth in our Corporate Code of Conduct, and has been acting as a core organization that ensures continuous promotion of company-wide (Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail. activities. As a system development company that is responsible for the important social infrastructure of credit-card payment, our employees are our most important management resources, and enhancing their health is extremely beneficial to the realization of our mid-term management goals and management philosophy. To share this basic concept with our employees and all stakeholders, we have formulated the Declaration of Health Management and are promoting specific measures for health management, and the Sustainability Committee plays a central role in this. 【Reasons for Non-compliance with the Principles of the Corporate Governance Code】 Updated Note: This report is based on the Code revised in June 2021. 【Supplementary Principle 3-1-3 Enhancement of the Quality and Quantity of Disclosure Based on the TCFD or Equivalent We believe that the results of our efforts to address ESG issues will enhance the sustainability of our business and increase our corporate value. The products and services we provide are all infrastructure (IT infrastructure) that are essential functions Framework】 for society. In particular, efforts to improve the human capital of our employees will not only ensure the stable operation of our IT infrastructure, but will also have a significant effect on the improvement of the quality of our products and services, beyond simply managing business risks. continuity and growth of our business. Making the best use of the skills and knowledge of our engineers and growing them is the most important factor for the Based on this idea, we are pursuing a variety of initiatives in pursuit of ease of work and job satisfaction, with a policy of realizing a work style that allows employees to make the most of their individuality. We believe that it is essential to create an environment that supports autonomous work styles so that employees can take on new challenges and grow with the company. For specific examples of our initiatives, please refer to our Sustainability Report 2021, which is available on our website (https://www.iwi.co.jp/sustainability/sustainability-report/). On the other hand, our company is unable to disclose the impact of climate change-related risks and opportunities on its business activities, earnings, etc., based on the TCFD or an equivalent framework because it has not yet been able to sufficiently collect and analyze enough data. In the FY 6/2021, we estimate that our carbon dioxide emissions, mainly from electricity consumption, will be approximately 713 t-CO2 (based on the Ministry of the Environment’s Guidelines for Calculating Greenhouse Gas Emissions from Businesses). We will continue to strive to reduce carbon dioxide emissions through the appropriate use of electricity, but if the cost of procuring electricity and other energy increases in the future due to higher carbon prices or other factors, our business may be affected by the increase in costs. 【Disclosure Based on Principles of the Corporate Governance Code】 Updated 【Principle 1-4 Cross-Shareholdings】 Our company owns listed shares as cross-shareholdings with the aim of expanding its business and strengthening its relations, but it has a policy of examining the appropriateness of possession of shares when necessary and reducing owned shares if it is judged that the continued ownership of said shares will not contribute to the improvement in value of our company or the issuing company. voting rights. of Directors.” (Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail.

Our company performs a quarterly evaluation on the business conditions of each issuing company of our owned shares, evaluating its future prospects and its relevance to our company’s business, and comprehensively discusses the medium/long-term economic rationality of the ownership of said shares. We make an effort to examine the risk and return in holding the shares as concretely as possible using indices such as capital cost. Further, in the case our company decides to sell its owned shares, our company discloses the details of the examination process as much as possible. Our basic policy on exercise of voting rights is to contribute to the expansion of our business, strengthen relations between both parties, and the increase in enterprise value of both parties. Further, our company follows this policy when holding discussions regarding proposals. In the future, if the number of cross-shareholdings increases significantly or the like, our company plans to respond appropriately in accordance with its policy on exercise of voting rights, such as preparing other standards for the exercising of 【Principle 1-7 Related Party Transactions】 Regarding the transactions between related parties, our company makes sure to conform to the Companies Act and in-house regulations as well as accounting standards related to the disclosure of related parties. In case a transaction between related parties takes place, it is determined by a resolution of the Board of Directors, in accordance with the “Regulations for the Board Further, regarding directors and auditors, the circumstances of the transactions are submitted through an “Investigation Report on Transactions Between Related Parties,” which are then inspected by an accounting auditor. 【Supplementary Principle 2-4-1 Ensuring Diversity】 We are recruiting people with diverse values, without making distinctions based on gender or nationality. With the expansion of the scale of our business, the number of employees has increased 1.4 times compared to five years ago. The percentage of female and non-Japanese employees is also increasing, and by respecting the diverse working styles of each employee, we will form an organizational culture in which diversity is a strength. In accordance with the Act on Promotion of Female Participation, the Action Plan on Promotion of Female’s Participation submitted to the Ministry of Health, Labour and Welfare sets a goal of doubling the ratio of female managers and high-level professionals in our development divisions from 3.5% as of December 2019 to 7% by 2022. To help achieve our goals, we are operating the Intelligent Women’s Wave mentoring system for female employees. As of the end of June 2021, 40 female employees, or 40.4% of the total 99 female employees, are using this system as part of our efforts to create an environment where female employees can easily consult with each other about their career paths and life plans. In addition, as of the end of June 2021, there are 23 non-Japanese employees (5.2%). In order to help foreign nationals adjust to life and work in Japan, the hiring manager and the employees at their assigned department work together to support them in improving their business-level Japanese language skills. When promoting employees to managers, we do not refer to their nationalities or how they were recruited. Accordingly, we do not have specific measurable goals for the promotion of foreign nationals and mid-career hires to managers. As of the end of June 2021, there are 188 mid-career hires, including 56 managers, accounting for 42.6% and 12.7% of all (Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail. employees, respectively. 【Principle 2-6 Roles of Corporate Pension Funds as Asset Owners】 Our company has been a member of the Japan Computer Information Service Employees’ Pension Fund since April 2011, and this fund entrusts the management of our pension assets to a management institution. The Pension Fund stipulates that decisions regarding the component ratio of pension assets shall be made by people with expertise on the subject and experience, who perform regular market valuation regarding management circumstances and results. 【Principle 3-1 Full Disclosure】 (1) Company Objectives (e.g., Business Principles), Business Strategies, and Business Plans Our company pursues “to provide safety and convenience for the information society of tomorrow” as its management philosophy, and sets its management policy as to boost our enterprise value and contribute to society by promoting a business that “provides IT infrastructure that is swift, secure, high-quality, and highly convenient.” Our company is engaged in system development using our online, real time network connection technology for credit card settlements and stock exchange as its strength, and offers systems to its client companies. The system developed by our company is (IT) infrastructure indispensable for society, because of which a product of high standards is being demanded to successfully execute high speed and safe transactions with the stability of the system being a necessary condition. Our company boasts of many developmental achievements and safe operations, and we believe the trust we have gained from these results will continue to support our company’s business and become its developmental foundation. Our company’s management policy is to meet the expectations of our stakeholders by expanding and growing our company’s business foundation by offering IT infrastructure that will continue to be trusted by more customers. (2) Basic Views and Guidelines on Corporate Governance Please refer to “1. Basic Views” of this report. (3) Board Policies and Procedures in Determining the Remuneration of Senior Management and Directors The remuneration for directors shall be determined by the resolution of the Board of Directors, and the remuneration for corporate auditors shall be determined by consultation of the corporate auditors, both within the limit of the amount of remuneration approved at the General Meeting of Shareholders. At the 23rd Ordinary General Meeting of Shareholders held on September 27, 2006, it was resolved that the maximum amount of remuneration for directors shall be 300 million yen per year (not including salaries as employees). The number of directors after the resolution of the said General Meeting of Shareholders is fifteen. In addition, at the 34th Ordinary General Meeting of Shareholders held on September 27, 2017, a resolution was passed to limit the annual amount of remuneration to be paid for the grant of transfer-restricted stock to seven directors, excluding outside directors and part-time directors, to 10,000 thousand yen. The maximum amount of remuneration for corporate auditors was resolved at the 32nd Ordinary General Meeting of Shareholders held on September 29, 2015, to be no more than 50 million yen per year. The number of corporate auditors after the resolution of this General Meeting of Shareholders is five (including three outside corporate auditors). (Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail. How the decision policy is determined The Nomination and Compensation Committee, which is an advisory body to the Board of Directors and is chaired by an independent outside director and composed of mainly independent outside directors, deliberates on the decision-making policy regarding the details of remuneration, etc. for individual full-time directors, including the appropriateness of the level of remuneration, and submits its report to the Board of Directors for the Board of Directors to make a resolution. Outline of the content of the decision policy benefits, and stock-based remuneration. each position. Remuneration, etc., for full-time directors shall consist of fixed monthly remuneration, performance-based bonuses, retirement The fixed monthly remuneration is determined after calculating the amount using the standard remuneration table defined for With respect to bonuses as performance-based remuneration, to clearly reflect the business results for the fiscal year, we operate a remuneration system that uses operating profit as an index and calculates bonuses according to a coefficient determined based on the position of the employee. In addition, the fixed monthly remuneration was reduced and the coefficient of performance-based remuneration was increased in the FY 6/2021, so that the performance-based portion would comprise approximately 30% of the total. The target operating profit for the current fiscal year was 1,150 million yen, and the actual result was 1,130 million yen. The amount of retirement benefits is calculated by adding up points given annually for each position, job qualification, and years of service and multiplying the sum by the unit compensation. At the 34th Ordinary General Meeting of Shareholders held on September 27, 2017, it was resolved that the annual amount of remuneration to be paid for transfer-restricted stock to directors excluding outside directors and part-time directors shall be 10,000 thousand yen or less. At the Ordinary Meeting of the Board of Directors held on the same day, our company introduced a transfer-restricted stock compensation plan with an annual amount of 10,000 thousand yen or less, 20,000 shares or less per year, and a transfer restriction period of three years, and the transfer restriction from October 27, 2017, to October 27, 2020 was lifted. The remuneration for outside directors, who are independent from the execution of business, consists of fixed monthly remuneration and retirement benefits, and there is no performance-based remuneration or stock-based remuneration. Fixed monthly remuneration is paid on an individual basis. In the fiscal year under review, the Board of Directors passed a resolution to delegate the decision on the specific details to Kunimitsu Sato, President and Representative Director, and the decision was made by him after the appointment. The amount of retirement benefits is calculated by adding up points given annually for each position, job qualification, and years of service and multiplying the sum by the unit compensation. The fixed monthly remuneration for full-time directors is determined by using the standard remuneration table defined for each position in accordance with the internal rules and taking into consideration factors such as the duties and responsibilities of the director in charge. The amount of fixed monthly remuneration for corporate auditors is determined through discussion by the Board of Corporate Auditors, considering whether or not the auditor is a full-time employee. (Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail. With respect to performance-based bonuses, to clearly reflect the business results for the fiscal year, we operate a remuneration system that uses operating profit as an index and calculates bonuses according to a coefficient specified based on the position of As stock-based compensation, at the 34th Ordinary General Meeting of Shareholders held on September 27, 2017, our company adopted a transfer-restricted stock compensation plan for directors, excluding outside directors and part-time directors, with an annual amount of up to 10,000 thousand yen, an annual number of up to 20,000 shares, and a transfer restriction period of three years, for the purpose of promoting further value sharing with shareholders by encouraging them to hold our company’s the employee. shares. (4) Board Policies and Procedures in the Appointment/Dismissal of the Senior Management and the Nomination of Directors and Auditors Candidates Regarding the nomination of a director, an auditor, or a senior management, a wide variety of candidates from both inside and outside our company are selected at the Nomination and Compensation Committee, which is an advisory committee under the Board of Directors, out of whom candidates with excellent personality along with the ability to make precise and fair decisions regarding the management of our company, an abundance of experience and outlook, or knowledge and expertise on our company’s business and the industry, or academic knowledge, are selected and the opinions are summarized, after which the candidate is reported to the Board of Directors. Regarding candidates for auditors, the candidate is also reported to the Board of Company Auditors and after earning the consent of the Board of Company Auditors, the nomination of each candidate is decided by the Board of Directors. If a representative director, a director, or a senior management is found to have committed a serious violation of the law, or have performed an act which gravely damaged the reputation or reliability of our company, or displayed a serious lack in business performance, or did not fulfill duties and needs to be dismissed, the Board of Directors will resolve to remove the person in question from his/her post after appropriate deliberation on the matter. Further, in case a director is facing dismissal, the matter will be brought up at the Shareholders’ General Meeting. (5) Explanation regarding Individual Nominations and Dismissals when the Board of Directors Nominate and Dismiss Senior Management, and Nominate Candidates for Directors and Auditors in Accordance with the Above Section (4) The reason for the nomination of individual candidates for directors and auditors is recorded and explained in the Shareholders’ General Meeting’s reference documents included in the convocation notice for the Shareholders’ General Meeting. Further, the reason for the dismissal of a representative director is disclosed in a timely manner along with a written explanation. Further, should a situation arise which necessitates the dismissal of a director or an auditor, the reason for the dismissal will be recorded and explained in the Shareholders’ General Meeting’s reference documents, like the procedure at the time of nomination. The Shareholders’ General Meeting’s reference documents are available on our company’s website. （https://www.iwi.co.jp/ir/stock/general_meeting.html） Documents for timely disclosure are available on the Timely Disclosure Information Service (TDnet) as well as our company’s website. （https://www.iwi.co.jp/ir/ir-news/） (Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail. Framework】 【Supplementary Principle 3-1-3 Enhancement of the Quality and Quantity of Disclosure Based on the TCFD or Equivalent As described in 【Reasons for Non-compliance with the Principles of the Corporate Governance Code】. 【Supplementary Principle 4-1-1 Roles and Responsibilities of the Board】 Our company established the Board of Directors, which is comprised of six directors (including two independent outside directors), as an organ that would discuss and take decisions on important administrative matters, as well as supervise the execution of the tasks of each director. Our company stipulates that the Board of Directors will see to the appropriate fulfillment of the following responsibilities. 1. Detailing the visions for business strategies and such 2. Discussing and executing measures that will contribute to an increase in enterprise value based on a spirit of wholesome entrepreneurship 3. Performing highly effective supervision on directors or executive officers The following are the details of the performance of the Board of Directors in FY 6/2021. Our company holds a regular meeting of the Board of Directors every month, as well as extraordinary meetings as needed. During the fiscal year under review, the Board of Directors met 18 times, and all directors and corporate auditors attended all meetings. The Board of Directors was able to have efficient and sufficient opportunities for discussion due to the adoption of the executive officer system on September 25, 2020, to monitor management and clarify responsibility for business execution, and the explanation and sharing of information related to agenda items in advance at management meetings. During FY 6/2021, the Board of Directors voted on a total of 61 important administrative matters, including those on the review and approval of medium-term business plans, executives’ compensation, personnel systems for employees, organizational restructuring and management personnel affairs, and the establishment of the governance system. Regarding proposals on research and development, projects that were considered to be of high importance based on the contents and scale were discussed and voted on. Regarding proposals on financial affairs, mainly the approval for account settlement and budgets were voted on. In addition, the Board supervised the execution of duties by the directors and executive officers by individually reviewing and discussing 57 matters reported, including business forecasts and business progress, matters reported by the committees, related party transactions, and the status of approval decisions. For both resolutions and reported matters, independent outside directors requested details explanations from directors in charge, and there was aggressive exchange of opinions on matters of discussion. Our company established and operates management meetings with the aim of stimulating and enhancing debate during the Board of Directors’ meetings. In management meetings, which are attended by all directors, executive officers, and auditors, supplementary information on the backgrounds of matters to be brought up at the Board of Directors’ meeting as well as information necessary to understand the points of discussion are explained by executive officers, the head of each department, the business supervisor, and other related personnel within our company. Further, reports on the state of progress and related risks concerning research and development projects already in progress and individual development projects and technical knowledge and information related (Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail. to our company’s products and services are explained, which help the directors and auditors deepen their understandings on such subjects. As they are a form of coordination of information meant to raise the quality of discussion at the Board of Directors’ meetings, the management meeting does not have any decision-making authority and no decisions are made. In FY 6/2021, management meetings were held a total of 12 times with 28 topics of discussion, and the duration of each meeting was about an hour. Reports on R&D projects such as the development of next-generation products, reports on development investment related to new large-scale projects in the cloud services business, reports on the plans and progress of new businesses, and reports on the status of individual development projects in progress were the main items on the agenda, Some topics of discussion at the management meetings for FY 6/2021 are later introduced at the Board of Directors’ meetings and voted on after sufficient and efficient discussion. We believe the establishment and operation of management meetings will enhance our corporate governance, especially debates at the Board of Directors’ meetings, and contribute to an appropriate accounting for 20 topics. decision-making process. 【Principle 4-8 Effective Use of Independent Outside Directors】 Out of six directors, our company nominates two independent outside directors. The independent outside directors take part in management from an objective standpoint, and each of them uses their expertise to offer appropriate advice and recommendations, fulfilling important risk management and management supervision roles through debates at the Board of Directors’ meetings and performing their tasks efficiently during decision-making with high explanatory abilities. 【Supplementary Principle 4-8-3 Independent Outside Directors Occupying the Majority】 Updated The Board of Directors of our company is composed of two directors who have worked mainly for the parent company of our company, two directors who have worked mainly for our company, and two independent outside directors who are independent of the controlling shareholders. Namely, the ratio of independent outside directors is one third. In addition, our company established a special committee on December 8, 2021. The purpose of the special committee is to deliberate and discuss important transactions and actions that would cause a conflict of interest between controlling shareholders and minority shareholders. In order to secure the independence of the committee, it is composed of two independent outside directors and one independent outside auditor. When the Board of Directors of our company makes a decision about an important transaction, the special committee will sufficiently discuss whether or not said transaction will bring detriment to minority shareholders, while collecting opinions from those who have no stake in controlling shareholders. 【Principle 4-9 Independence Standards and Qualification for Independent Outside Directors】 Please refer to “Independent Executives” of this report. 【Principle 4-10-1 Policy, Authority, Roles, etc. regarding the Independence of the Committee】Updated Our company established and operates the Nomination and Compensation Committee as an advisory body of the Board of Directors, in accordance with “the Regulations for the Nomination and Compensation Committee.” The Nomination and Compensation Committee is composed of two independent outside director and the representative director, and chaired by an independent outside director. As independent outside directors occupy the majority, an external viewpoint can be secured. The committee nominates (Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail. candidate directors and candidate auditors as suggested by the Board of Directors, deliberates items regarding their remunerations, collects opinions, and submits reports to the Board of Directors. The establishment and operation of such a committee contribute to the enhancement of the independence, objectivity, and accountability of functions of the Board of Directors for nominating directors and determining their remunerations. 【Principle 4-11-1 Policy for the Balance, Diversity, and Scale of the Board of Directors】 Updated Our company selects candidate directors after deliberating whether they possess expertise, experience, and advanced skills required for making decisions appropriately and swiftly at meetings of the Board of Directors and candidate auditors after deliberating whether they possess expertise, experience, and advanced skills required for having discussions at meetings of the Board of Auditors and overseeing directors. The current compositions of the Board of Directors and the Board of Auditors are well-balanced, and they are considered to be effective, but we conduct self-evaluation questionnaire surveys regularly and other measures, to evaluate and improve the effectiveness of the Board of Directors of our company. As shown in Appendix 2, our company produced a skills matrix listing the knowledge, experience, abilities, etc. of each director, after the evaluation and supervision by a third party. The standards for evaluating each sill are as written in Appendix 【Supplementary Principle 4-11-2 Concurrent Positions Held by Directors and Auditors】 In case an outside director or an outside auditor holds a concurrent position as an executive for another listed company, our company confirms that their involvement with the given company is to a reasonable extent so as not to affect their duties in our company. Further, the state of major concurrent positions including executives in another company are disclosed in the convocation notices of Shareholders’ General Meetings and securities report. Other than the auditor Hiroshi Sato, who is an outside director for IBC Co., Ltd. and an outside auditor for Terilogy Co., Ltd., the auditor Noboru Takebayashi, who is representative director and president of DXA Co., Ltd., an auditor for webrage CO., LTD. and an auditor for bravesoft inc., and the auditor Masayuki Horie, who is the visiting professor of the Institute of Information Security, an outside auditor for NEC Networks & System Integration Corporation and a permanent trustee of Japan Society for Systems Audits, and an auditor for Japanese Internal Control Research Association, there are no directors or auditors who hold concurrent positions in other listed companies. 【Supplementary Policy 4-11-3 Analysis and Evaluation of the Effectiveness of the Board】 Our company’s Board of Directors periodically commissions an external organization to conduct a questionnaire survey targeted at all executives regarding the effectiveness of the Board of Directors, and receives reports on the results. Our company is making efforts to enhance debate at the Board of Directors’ meetings by holding management meetings as an opportunity for executives to share information, with reporting, explaining, and making opportunities to ask questions on information necessary for broad-ranging items to be discussed. Further, our company has taken steps to optimize management and strengthen information management by facilitating the reading and sharing of documents for Board of Directors’ meetings by introducing tools for paperless meetings and online meetings. Our company is promoting an increase in efficiency for Board of Directors through the above steps. 【Supplementary Principle 4-14-2 Training Policy for Directors and Auditors】 2. (Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail. Our company is making an effort to increase the quality of our directors and auditors through participation in various seminars about corporate governance, internal controls, compliance, etc. and organizing workshops, with the aim of cultivating knowledge deemed necessary for each director and auditor to be able to properly fulfill the responsibilities and duties expected of them. 【Principle 5-1 Policy for Constructive Dialogue with Shareholders】 (Policies) Our company engages in the transmission of information with the principle that all our stakeholders, including shareholders and investors, are provided with information related to our company’s management policy, business strategy, and financial affairs that is (1) Accurate, (2) Fair, (3) Timely, and (4) Easy to Understand. Further, our company is promoting the English translation of disclosed documents and reports, and the disclosure of English brief financial reports, quarterly reports, and convocation notices for Shareholders’ General Meetings takes place simultaneously with the disclosure of the original Japanese documents. The English translations of timely disclosed documents and financial results briefing documents are also disclosed simultaneously with the original Japanese documents. Financial results briefing sessions for institutional investors are held every quarter, and the minutes of the speeches made during the briefings are disclosed in both Japanese and English. Since the translation of securities report takes time, these are disclosed quickly as soon as the Reports on our company’s initiatives regarding ESG issues, which are of interest to our investors, are produced in both Japanese and English, and are disclosed on our company’s website, etc. translations are complete. (System) (1) Our company has appointed supervisors who concurrently serve as IR managers. The representative directors also proactively participate in dialogue and promote constructive discussions to facilitate investor relations activities. (Specific Examples) ・Periodically holding briefings for individual investors Participation in company briefings for individual investors held in Osaka and other regional cities ・Periodically holding briefings for institutional investors Holding briefings after the release of quarterly and term-end financial results ・Organizing individual meetings with domestic and overseas institutional investors as needed ・Attendance at IR conferences held overseas, organizing individual meetings with local institutional investors ・Enhancement of information disclosure Issuing of business report, production of English and Japanese versions of sustainability reports, information disclosure through ・Disclosure of English translations of quarterly summary, brief financial statements, and reference material for briefing financial (2) The IR supervisor reports the contents of the dialogue with shareholders and others to the representative directors as necessary. (3) Our company makes efforts to appropriately disclose information in accordance with our IR policy, and thoroughly manage insider information to prevent information leakage in accordance with the “Regulations on the Prevention of Insider Trading.” our company’s website results 2. Capital Structure Foreign Shareholding Ratio Less than 10% (Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail. 【Status of Major Shareholders】 Name Dai Nippon Printing Co., Ltd. Kazuhiko Adachi The Master Trust Bank of Japan, Ltd. (Trust Account) Custody Bank of Japan, Ltd. (Trust Account) Intelligent Wave Employee Shareholding Association BNYM AS AGT/CLTS 10 PERCENT Momoko Mizota Hideki Nishino MUFG Bank, Ltd. Koji Kobayashi Controlling Shareholders (except for parent company) ― No. of Shares Owned Percentage [%] 13,330,700 2,382,900 733,900 559,500 535,000 308,505 307,200 209,000 200,000 191,600 50.61 9.05 2.79 2.12 2.03 1.17 1.17 0.79 0.76 0.73 Parent Company Dai Nippon Printing Co., Ltd. (Listed: Tokyo) (Code: 7912) Supplementary Explanation ― 3. Corporate Attributes (2) Fiscal Year-End (3) Type of Business (1) Listed Stock Exchange and Market Section Tokyo Stock Exchange First Section June Information and Communications Industry Over 100 and less than 500 Over 10 billion yen and less than 100 billion yen (4) Number of Employees (consolidated) as of the End of the Previous Fiscal Year (5) Sales (consolidated) as of the End of the Previous Fiscal Year (6) Number of Consolidated Subsidiaries as of Less than 10 the End of the Previous Fiscal Year 4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder Our company is making an effort to not damage the interests of minority shareholders when trading with the parent company, by determining fair and appropriate trading conditions based on rational judgement like the case of trading with other clients. Before conducting transactions with the parent company, internal approval procedures are carried out as in the case of other business partners. In the case of transactions exceeding a certain threshold in terms of amount, etc., the terms and conditions of each transaction are deliberated and reviewed individually by a committee consisting of two or more executives, including the representative directors and a director in charge of the quality assurance division, and relevant internal personnel, thereby preventing transactions with inappropriate terms and conditions. In addition, the details of important transactions with the parent (Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail. company are reported to the Board of Directors. As mentioned above, our company established a special committee on December 8, 2021. The purpose of the special committee is to deliberate and discuss important transactions and actions that would cause a conflict of interest between controlling shareholders and minority shareholders. In order to secure the independence of the committee, it is composed of two independent outside directors and one independent outside auditor. When the Board of Directors of our company makes a decision about an important transaction, the special committee will sufficiently discuss whether or not said transaction will bring detriment to minority shareholders, while collecting opinions from those who have no stake in controlling shareholders. 5. Other Special Circumstances Which may have a Material Impact on Corporate Governance Dai Nippon Printing Co., Ltd., which is our company’s parent company, owns 50.61% of our company’s outstanding shares, which makes our company its consolidated subsidiary. Our company maintains a cooperative business relationship with the parent company for the purpose of continuous improvement of business performance, while conducting independent management and operations. With the common goal of increasing corporate value, our company and our parent company are engaged in the information system industry, especially in the fields of cloud service business for settlement and operation of credit cards, etc., and product sales of cyber security measures, while mutually collaborating by utilizing our respective strengths. Out of six directors, our company has nominated two independent outside directors, and has built and is managing a governance system that preserves and strengthens autonomy and independence in management. From the perspective of ensuring independence from the parent company, we are considering the establishment of a special committee to deliberate and review important transactions and actions that conflict with the interests of the controlling shareholder and minority shareholders. Ⅱ. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management 1. Organizational Composition and Operation Organizational Form Company with company auditors 【Directors】 Maximum Number of Directors Stipulated in Articles of Incorporation 15 (Upper Limit) Term of Office Stipulated in Articles of Incorporation Chairperson of the Board Number of Directors Appointment of Outside Directors Number of Outside Directors Relationship with Our Company (1) Number of Outside Directors Appointed as Independent Executives 1 Year President Appointed 6 2 2 Relationship with our company（※） (Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail. Name Attributes（※） a b c d e Akira Watanabe Lawyer Kenichi Miki Member of another company f g h △ △ i j k ※ Items for Selection Regarding the Individual’s Relationship with Our Company ※ “〇”: The individual falls under the item in question presently or recently, “△”: The individual fell under the item in question in the past ※ “●”: A close relative of the individual falls under the item in question presently or recently, “▲”: A close relative of the individual fell under the item in question in the past. a Executive of our company or its subsidiary b Executive or non-executive director of the parent company of our company c Executive of a sister company of our company d Individual or an executive of a company with our company as a major business partner e Major business partner or an executive of a major business partner of our company f Consultant, an accounting expert, or a legal expert receiving large sums of money or other assets from our company outside of g Major shareholder of our company (in case the major shareholder in question is a corporation, then an executive of the h Executive of a business partner of our company (not falling under either d, e, or f) (only for the individual in question) i Executive of a company in which an outside executive has a concurrent post (only for the individual in question) j Executive of a company to which our company has donated (only for the individual in question) executive compensation corporation) k Other Relationship with Our Company (2) Name Independent Supplementary Explanation Executive Regarding Applicable Items Reason for Appointment of the Outside Director in Question (In case the individual is appointed as an independent executive, the reason for the appointment will also be included) Our company decided to appoint Mr. Akira Watanabe as an outside director because he possesses legal expertise as a lawyer with an abundance of academic experience working as a specially-appointed professor at the Research Center for Advanced Science and Technology, the University of Tokyo, which will allow him to participate in management objective from standpoint and offer appropriate advice and recommendations independent of the senior managements responsible for task execution. Additionally, He was an Lawyer of Akira Watanabe Law Firm Visiting Researcher at the Research Center for Advanced Science and Technology, the University of Tokyo. Our company had previous relationships with Mr. Akira Watanabe as a legal advisor regarding legal affairs, but there are no longer such transactions. Our company has entered an advisory contract with another lawyer belonging to Akira Watanabe Law Office, but this does not constitute a transaction Akira Watanabe ○ (Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail. with Mr. Akira Watanabe, and in light of the size and nature of the the transaction under contract, our company believes that there is no risk of influence on of shareholders and investors. judgment the Mr. Kenichi Miki held the positions of senior managing director and advisor at Daiwa Institute of Research Business Innovation Ltd., from which he in April 2017. Our retired company transaction has relations with Daiwa Institute Business of Research Innovation Ltd., but it has decided to omit the entry of a summary as there is no fear of the relationship impacting the decisions made by shareholders and investors, given the scale and quality of transactions. in and June 2021, advice further appropriate strengthening of the appointed as a member of Compensation Nomination Committee and participates in decisions regarding the selection of candidates for directors and the executive officers, as well as compensation of directors, from an objective and neutral standpoint. He has been appointed as an outside director in the expectation that he will contribute to the the Company’s governance system and and provide recommendations. As mentioned in the left column, our company had prior relationships with Mr. Akira Watanabe, but there is no fear of any conflicts of interest arising out of them, and since he has met all the requirements to become an independent executive, our company designated him as an independent executive. Mr. Kenichi Miki possesses experience as a manager and deep knowledge regarding the industry, which will allow him to participate in management from an objective standpoint and offer appropriate and recommendations independent of the senior managements responsible for task execution. Moreover, In June 2021, he was appointed as the Chairman of the Compensation Nomination and the in Committee, and participates selection of candidates for directors and executive officers, as well as decisions on director compensation and other matters from an objective and neutral standpoint. He has been appointed as our outside director in the expectation that he will contribute to the further the Company’s strengthening provide governance appropriate and recommendations. As mentioned in the left column, Mr. Kenichi Miki held the positions of senior managing director and advisor at one of our company’s client companies, but as he has since retired from both these positions, there is no fear of any conflicts of interest of system advice advice and Kenichi Miki ○ (Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail. arising out of them, and since he has met all the requirements to become an independent executive, our company appointed him as an independent executive. Voluntary Establishment of Committee(s) Corresponding to Nomination Committee or Compensation Committee Yes Status of Voluntary Committees, Membership, and Chairperson (Chairperson)’s Attributes. Committee Members Full-time Company Outside Outside Others Committee Title Members Directors Directors Experts Chairperson Corresponding to Compensation 3 1 1 2 0 0 Voluntary Committee Nomination andNomination Committee Committee Voluntary Committee Corresponding to Nomination andCompensation Committee Committee Supplementary Explanation Outside Director Outside Director Compensation 3 1 1 2 0 0 On April 22, 2020, our company enacted the “Regulations on the Nomination and Compensation Committee” and established and manages the Nomination and Compensation Committee as an advisory committee to the Board of Directors, based on the Nomination and Compensation Committee Regulation. The Nomination and Compensation Committee is comprised of five outside executives and a representative director, which guarantees an outside perspective due to the majority of the committee being composed of outside executives, and after consultation with the directors, topics related to the nomination and compensation of directors and auditors are deliberated on, after which all opinions are summarized and reported to the Board of Directors. Such a structure and management of the Nomination and Compensation Committee contributes to the autonomy and objectivity of the functions of the Board of Directors related to the nomination and compensation of directors, as well as the strengthening of accountability. The Nomination and Compensation Committee held five meetings during FY 6/2021, with each meeting lasting for about an hour. Our response policy to the revision of the Corporate Governance Code, nomination of director candidates and executives, and a review of the compensation system for full-time directors were discussed and debated on as major topics. After an exchange of opinions among the members at the meeting, the Nomination and Compensation Committee reports the results to the Board of Directors, and the Board of Directors conducts a vote on the following items. At the ordinary meeting of the Board of Directors held on June 23, 2021, the Board of Directors resolved to revise the Rules of the Nomination and Compensation Committee to reorganize the Committee into a committee chaired by an independent outside director and composed of a majority of independent outside directors, with the aim of strengthening the independence of (Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail. the Nomination and Compensation Committee. The Company resolved to appoint two independent outside directors, Kenichi Miki, and Akira Watanabe, and President and Representative Director Kunimitsu Sato, as members of the Nomination and Compensation Committee. In addition, the Nomination and Compensation Committee appointed Kenichi Miki, an independent outside director, as the Chairman of the Nomination and Compensation Committee on the same day. Regarding the compensation system, the Board of Directors voted for a review of the compensation system for FY 6/2021, where the ratio of the performance-based compensation will increase from 21% to 30% due to a reduction in the monthly fixed compensation and an increase in compensation based on performance as a result of a review of the bonus calculation method. Further, to increase the correlation with the results in business performance, the Board of Directors voted to change the index for business performance correlation from income before taxes to operating profit for FY 6/2021. 【Regarding Auditors】 Establishment of a Board of Auditors Established Total Number of Auditors as per the Articles of Incorporation 5 Number of Auditors 5 Cooperation Among Auditors, Accounting Auditors and Internal Audit Department A cooperative relation with accounting auditors is maintained by holding an exchange of opinions and interviewing to gather information when necessary, witnessing audits in certain situations, etc. and any problems that arise are discussed and resolved as they appear. Auditors formulate an annual auditing plan and carry out the auditing of necessary items in cooperation with the Internal Audit Department. Further, auditors periodically hold exchange meetings with the Internal Audit Department for information and opinions related to internal controls, to share the evaluation on the effectiveness of the internal controls. State of Appointment of Outside Auditors Appointed Number of Outside Auditors Number of Outside Auditors Appointed as 3 3 Independent Executives Relationship with Our Company (1) Name Attributes (※) Hiroshi Sato Member of a Different Company Noboru Takebayashi Member of a Different Company Masayuki Horie Member of a Different Company Relationship with our company (※) a b c d e f g h i j k l m △ 〇 〇 〇 ※ Items for Selection Regarding the Individual’s Relationship with our company ※ “〇”: The individual falls under the item in question presently or recently, “△”: The individual fell under the item in question in the past ※ “●”: A close relative of the individual falls under the item in question presently or recently, “▲”: A close relative of the individual fell under the item in question in the past (Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail. a Executive of our company or its subsidiary b Non-executive director or accounting consultant of our company or its subsidiary c Executive or non-executive director of the parent company of our company d Auditor of the parent company of our company e Executive of a sister company of our company f An individual or an executive director of a company with our company as a major business partner g A major business partner or an executive director of a major business partner of our company h A consultant, an accounting expert, or a legal expert receiving large sums of money or other assets from our company outside i A major shareholder of our company (in case the major shareholder in question is a corporation, then an executive director from of executive compensation the corporation) j Executive of a business partner of our company (not falling under either f, g, or h) (only for the individual in question) k Executive of a company in which an outside executive has a concurrent post (only for the individual in question) l Executive of a company to which our company has donated (only for the individual in question) m Other Relationship with Our Company (2) Updated Name Independent Supplementary Explanation Regarding Appointment of the Outside Auditor in Executive Applicable Items Question (mandatory) Hiroshi Sato ○ Outside director, IBC Co., Ltd. Outside auditor, Terilogy Co., Ltd. No company special relationship with our Noboru Takebayashi ○ President and CEO, DXA Co., Ltd. Auditor, webrage CO., LTD. Auditor, bravesoft inc. No company special relationship with our Our company believes Mr. Hiroshi Sato can strengthen our auditing ability through his personal history as a manager of a company in the same industry as our company, along with an abundance of expertise and wide-ranging knowledge. There is no fear of any conflicts of interest arising with shareholders, and he has met all the requirements to become an independent executive. Mr. Noboru Takebayashi has managerial experience like working as a director, and our company nominated him because we believe he can strengthen our auditing ability through extensive knowledge and experience in the IT industry as well as wide-ranging knowledge, along with being able to offer and recommendations from an objective and independent standpoint as an outside auditor in other companies. There is no fear of any conflicts of interest arising appropriate advice (Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail. of Institute Professor, College of Commerce, Nihon University Visiting professor, Information Security Outside auditor, NEC Networks & System Integration Corporation Permanent trustee, Japan Society for System Audits Auditor, Research Association No company relationship with our Internal Control special Japan with shareholders, and he has met all the requirements to become an independent executive. As a university professor, Mr. Masayuki Horie has deep knowledge mainly related to IT internal controls and IT auditing in business management, and our company nominated him because we believe he can offer appropriate advice and recommendations from an objective and independent standpoint with having experience as an outside auditor in other companies. There is no fear of any conflicts of interest arising with shareholders, and he has met all the requirements to become an independent executive. Masayuki Horie ○ 【Independent Executives】 Number of Independent Executives 5 Other Items Related to Independent Executives Our company judges that outside directors and outside auditors will have autonomy, when they do not fall under any of the following items. (1) An individual, or an executive director of a company with our company as a major business partner (Note 1) A major business partner is that who receives more than 5% of their annual consolidated sales from transactions with our company during one of the three most recent fiscal years (Note 2). (2) A major business partner or an executive director thereof of our company (Note 1) A major business partner is that who receives more than 5% of their annual consolidated sales from transactions with our company during one of the three most recent fiscal years (Note 2). (3) A consultant, an accounting expert, or a legal expert receiving large sums of money or other assets from our company outside of executive compensation. Large sums of money or other assets is defined as anything with a monetary value greater than 10 million yen per year. (4) An individual who fell under any of the above items (1) to (3) anytime in the past three fiscal years (Note 2). (5) Those who have fallen under any of the following ① to ③ at any time within 10 years prior to their appointment. ① Executive or non-executive director of the parent company of our company ② Corporate auditors of our company’s parent company (limited to cases where outside corporate auditors are designated as independent directors) ③ Business executor of a sister company of the parent company ① An individual who falls under any of the above items (1) to (5) (6) An individual within the second degree of kinship to an individual who falls under any of the following items ① to ④ (Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail. ② An executive director of a subsidiary of our company (Note 1) ③ A director of a subsidiary of our company who is not an executive director (For cases when outside auditors are nominated ④ An executive director of our company (Note 1), or an individual who falls under the above item ① or ② in the past three as independent executives) fiscal years (Note 2) (7) A major shareholder of our company or an executive director thereof (Note 2) A major shareholder is defined as anyone who directly or indirectly owns more than 10% of our company’s voting rights. (Note 1) An executive director is defined as anyone who meets the standards set in Article 2, Pa