ＴＩＳ（3626） – [Delayed]Corporate Governance Report

[TRANSLATION] This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. Corporate Governance Report Contact: Corporate Management Dept., Corporate Planning SBU Last Update:June 1, 2022 TIS Inc. Yasushi Okamoto, President +81-3-5337-4569Securities Code: 3626 https://www.tis.com/ir/ The corporate governance of TIS Inc. (hereafter, “TIS” and “the Company”) is described below. I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and OtherBasic Information1. Basic ViewsTIS will constantly strive to achieve the highest level of corporate governance and will work to maintain and further enhance its approaches to corporate governance. Management believes that the key to good corporate governance is to ensure transparency and fairness in decision-making processes, make full and effective use of management resources, and raise the integrity of management practices through swift and accurate assessment of situations, from the viewpoint of promoting sustainable corporate growth and boosting medium- and long-term corporate value. Accordingly, management at the Company is committed to upholding good corporate governance in line with the following basic principles. 1. To respect the rights of shareholders and to ensure equality.2. To consider the interests of stakeholders, including shareholders, and work with stakeholders in an appropriatemanner to achieve stated goals. 3. To disclose corporate information appropriately and ensure transparency.4. To engage in constructive dialogue with shareholders based on a medium- to long-term investment perspective.Note that management has laid out basic views on corporate governance for TIS under Basic Policy on Corporate Governance, and the Company discloses the content of this policy on its website. https://www.tis.com/ir/policy/governance/ Reasons for Non-compliance with the Principles of the Corporate Governance Code TIS complies with all principles of the Corporate Governance Code. These statements are based on the codes after the June 2021 revision. In addition, they pertain to the listing on the Prime Market, which will be applied from April 2022. Disclosure Based on the Principles of the Corporate Governance Code These statements are based on the codes after the June 2021 revision. In addition, they pertain to the listing on the Prime Market, which will be applied from April 2022. 1 Principle 1-4 Cross-Shareholdings (1) Policy on cross-shareholdings While TIS has made reduction of domestically listed shares a priority issue and adheres to this as much as possible in accordance with Company-defined basic policy on corporate governance, the Company holds shares in other companies, including start-ups and venture companies, only when management believes that it will contribute to the sustainable growth and higher medium- to long-term corporate value of the Company and the Group. Specifically, when cooperation, co-creation and stable partnerships with such companies are deemed essential to continuous creation of business opportunities and utilization of technologies to actively promote business development particularly in the areas of financial inclusion, urban concentration and regional decline, low-carbon/decarbonization and health concerns, which are all social issues where the TIS INTEC Group can help to realize a more sustainable society, then such cross-shareholdings are considered investments consistent with the Group’s growth strategy and defined as strategic shareholdings. In verifying the rationale behind retaining these holdings, management has divided them into the three categories described below and considered their value to TIS and the TIS INTEC Group using the method assigned to each category: Capital alliance partners After an acquisition, shares are held for a predetermined period of time to establish a foundation for the strategic alliance. After that period, the capital alliance is qualitatively reviewed to determine status and ongoing viability as a collaborative business venture. When it is deemed that the significance of the shareholding is diminished, any listed shares are sold based on market conditions and other factors. For any privately held shares, measures are discussed with the issuer and sold as soon as a buyer is found. Customers A percentage of total business-related revenue and dividend income from the issuer and companies affiliated with the issuer is calculated on a balance sheet basis to determine whether the respective shareholding exceeds 10%. Based on the result and other qualitative evaluation, such as any expected future transactions, when the significance is deemed diminished, any listed shares are sold based on market conditions and other factors. For any privately held shares, measures are discussed with the issuer and sold as soon as a buyer is found. Others A process is undertaken to determine whether or not business transaction volume with the issuer in the last fiscal year increased by 5% or more compared with the average of the past three fiscal years. When the significance of shareholding is deemed diminished based on the result – except when difficulties in securing personnel or technology necessary for the operation are anticipated – any listed shares are sold based on market conditions and other factors. For any privately held shares, measures are discussed with the issuer and sold as soon as a buyer is found. 2 In addition, as TIS pursues reduction of cross-shareholdings in line with the aforementioned policy and corporate stance, management seeks to push the cross-shareholdings on a balance sheet basis as a percentage of consolidated net assets below the 10% benchmark. Toward this end, the balance sheet amount of cross-shareholdings as of March 31, 2022, dropped by ¥8,294 million, to ¥54,359 million, mainly through reduction in nine issues (¥7,538 million), of which eight were completely sold off, and changes in market value due to stock market conditions. Consequently, the aforementioned ratio declined 4.5 points to 17.9% as of March 31, 2022, but if strategic shareholdings are excluded from the calculation, the ratio falls to 11.7%. (2) Criteria for exercising voting rights for cross-shareholdings TIS appropriately exercises voting rights for the listed shares in its possession after comprehensively determining whether such action will contribute to the sustainable corporate growth and higher medium- to long-term corporate value of the TIS INTEC Group and investee company, taking into consideration policy advice from proxy advisory firms. (3) Number of issues held by the Company for purposes other than portfolio investment and total amounts recorded on the balance sheet Category Number of issues (of which) Strategic shareholdings Cross-shareholdings Fiscal 2021, ended March 31, 2021 88 issues Fiscal 2022, ended March 31, 2022 85 issues 48 issues 40 issues 52 issues 33 issues Total balance-sheet amount 62,654 million yen 54,359 million yen (of which) Strategic shareholdings 21,881 million yen 18,946 million yen Cross-shareholdings 40,773 million yen 35,413 million yen Note: In the consolidated fiscal year ended March 31, 2022, TIS acquired five new issues (¥646 million), mostly venture companies with which it has formed capital alliances, seeking to build strategic partnerships aimed at promoting open innovation. (Supplementary Principles 1-4-1, 1-4-2 Relationships with strategic shareholders (those who hold a company’s shares for the purpose of cross-shareholding)) When strategic shareholders, that is, cross-shareholders, of TIS indicate that they intend to sell Company shares, TIS responds appropriately and in such a way so as not to hinder the sale. In addition, the Company will not execute transactions with strategic shareholders if such transactions lack an economic rationale. (Principle 1-7 Related Party Transactions) Board of Directors’ Approval on Related Party Transactions In the event of competing transactions or conflict-of-interest transactions between the Company and its directors, subsidiaries or other related parties, prior approval by the Board of Directors will be required to ensure that such transactions do not harm the Company or the common interests of shareholders. In the event a director finds him/herself in a conflict-of-interest situation, he/she will inform the Board of Directors immediately and obtain approval from the Board of Directors before proceeding with the transaction. 3 Disclosing Related Party Transactions Details on related party transactions are provided to the Board of Directors on a regular basis, with a summary included in notes to consolidated financial statements in the Yuka Shoken Hokokusho (annual securities report filed in Japanese by companies listed in Japan) as well as in notes to non-consolidated financial statements presented in notices of convocation for General Shareholders Meetings, in accordance with provisions set forth under related laws and regulations. (Supplementary Principle 2-4-1：Ensuring Diversity in Promotion to Core Human Resources, Etc.) Thoughts on ensuring diversity TIS INTEC Group aims to create value by solving social issues in Japan and overseas with its IT technologies and contribute to people’s happiness going beyond the expectations of society through its business. The Group positions “Diversity & Inclusion” as an important management theme to realize the environment where human resources with individual qualities take advantage of their differences, strengths and opinions and create new value in the changing environment and society. To promote the diversity management, it is important to instill views of the top management and ensure diversity in core human resources (executive officers and managers) responsible for planning strategies and running the organization. TIS INTEC Group will promote the active promotion, human resource development, and the development of related programs and infrastructure in order to create a culture which enables its people to fully exercise their capabilities and express their humanity, and actively participate regardless of any differences in gender, nationality, career and experience, ability/disability, age, sexual orientation/gender identity, values and workstyle, and the like. Status of ensuring diversity and voluntary and measurable goals (1) Promotion of women to core human resources For ensuring diversity in gender, each of Group companies formulates Action Plan to Promote Women’s Participation, taking its issues into consideration, and promotes the promotion of women to core human resources. TIS has set goals of raising percentage of female employees in management positions from 10.8% to 12.8% and female director ratio from 6.5% to 9.0% toward April 2024, and will continue to develop related programs and environment and promote the development and promotion of high-quality human resources who will support and lead its business. (2) Promotion of foreign nationals to core human resources For ensuring diversity in foreign nationals, the Group promotes its alliances with top-class local IT companies in ASEAN regions and the recruitment and promotion of local human resources at overseas subsidiaries based on the business portfolio of global strategies led by TIS. The Group has positioned the expansion of global operations as a growth engine and taken a robust approach to M&A opportunities and capital and business alliances. In the fiscal 2021, ended March 31, 2021, the scale of global operations was about ¥69 billion (net sales of subsidiaries and equity method affiliates in ASEAN regions), 4 and an office network and number of employees exceeded 100 companies and 4,000 employees respectively in The operations are carried out by TIS employees and local employees of Group companies together, and diverse nationalities work for local alliance companies. Diversity is ensured in the environment where diverse human resources who contribute to management/operational decisions for the entire global operations actively ten countries. participate. Going forward, aiming to achieve a goal for global operations for the fiscal 2027, ending March 31, 2027 (consolidated net sales of ¥100 billion), we will promote the recruitment and promotion of local human resources with foreign nationalities and acquisition of local companies, etc., and ensure diversity in human resources who will contribute to management/operational decisions. (3) Promotion of midcareer hires to core human resources For ensuring diversity in career and experience, each of Group companies plans midcareer hiring, taking its human resource needs into consideration. TIS strengthens the recruitment and promotion to core human resources for realizing the business portfolio under the medium-term management plan and accelerating the structural transformation of its business. The Company has calculated the planned number of midcareer hires based on the targeted number of core human resources expected to be necessary as of the end of the fiscal 2024, ending March 31, 2024, and set a challenge of midcareer hires ratio in management positions from 29.1% to a maximum of 34% in March 2023. The goal will be reset year by year based on the re-evaluation of human resource portfolio plan in conjunction with the business plan and the actual number of midcareer hires. Policy on human resource development for ensuring diversity To build a comfortable working environment where diverse human resources actively participate with motivation, the Group will promote the sophistication of organizational management. In addition, the Group will make active investments in education and develop programs to support growth of its employees so that they can learn from various experiences. Policy on internal environmental improvement for ensuring diversity Focusing on differences in working mindset, living environment and operational environment of its employees, the Group strives to build a working environment where diverse human resources can fully exercise their capabilities as self-disciplined professionals. The Group will promote the workstyle reform and improve the environment for flexible workstyle, including the office, infrastructure, and human resource system and rules corresponding to “diverse needs for working”. The Group’s initiatives for ensuring diversity are described on “Corporate Sustainability Initiatives” page in the corporate website. https://www.tis.com/group/sustainability/social / (Principle 2-6 Roles of Corporate Pension Funds as Asset Owners) 5 TIS established a defined contribution pension plan to facilitate stable asset formation for employees, carefully undertakes the selection of asset managers and investment products appropriate to this plan, and creates opportunities for employees to learn about pension systems and operation. TIS uses the reserves of a closed defined benefit plan—that is, a defined benefit plan that provides ongoing accruals but that have been amended to limit those accruals to some or all of the employees who participated in the plan on a specified date—for investment. Personnel with the necessary experience and qualifications are assigned to the Human Resources Department and the Finance and Accounting Department, which are responsible for putting these reserves to work, and efforts are made to upgrade the skills of personnel through education and training. The Company entrusts actual management and operation of funds to external asset managers, such as trust banks, and the departments responsible for corporate pension fund investment monitor fund performance on a regular basis and make adjustments as appropriate. (Principle 3-1(i) Company objectives (that is, business principles), business strategies and business plans) TIS describes its corporate philosophy—Our Philosophy (the TIS INTEC Group Management Philosophy)—on Business Principles its corporate website. https://www.tis.com/group/philosophy/ TIS describes its Group Vision 2026 on its corporate website. https://www.tis.com/group/vision/ Group Vision Business Plan TIS describes its Medium-Term Management Plan (2021 – 2023) on its corporate website. https://www.tis.com/ir/policy/midtermpolicy/ (Principle 3-1(ii) Basic views and guidelines on corporate governance) TIS set out its Basic Policy on Corporate Governance, based on OR PHILOSOPHY (the TIS INTEC Group Management Philosophy) and the Group Vision, to realize a higher corporate value for the Group as a whole over the medium to long term. Efforts are continuously directed toward enhancing corporate governance practices. (Principle 3-1(iii) Board policies and procedures in determining compensation to senior management and directors) 1. Policy on determining officers’ compensation The Company established the Compensation Committee, comprising mainly independent external directors, as an advisory body to the Board of Directors to ensure objectivity and transparency in the process for determining officers’ compensation and to strengthen the corporate governance structure. The basic policy on officers’ compensation is to provide greater incentive to improve business results through a system of compensation linked to measures of Company performance. Appropriate amounts are determined by the Board of Directors, based on discussion with and suggestions from the Compensation Committee. 6 2. Structure of officers’ compensation Compensation to Company directors consists of a basic component, a performance-linked component and a performance-linked stock incentive. When measures of Company performance are fully achieved, compensation comprises the basic component, the performance-linked component and the performance-linked stock incentive in a ratio of 6:3:1. *TIS introduced this performance-linked stock compensation system in fiscal 2019 for directors, executive officers and executive fellows (excluding external directors and those resident outside Japan) to increase eligible directors’ awareness of their contribution to enhanced business performance and improved corporate value over the medium to long term, and to better align their interests with those of shareholders. 3. Structure of compensation for external directors and Audit & Supervisory Board members Compensation paid to external directors is limited to basic compensation only, with no performance-linked Compensation for Audit & Supervisory Board members is decided through discussions among corporate auditors. In order to maintain a high degree of independence, compensation is not linked to business performance and consists solely of basic compensation. component. 4. Other a. Upon the introduction of the performance-linked stock incentive plan, the Board of Directors decided to stipulate a provision for illegal acts in the Stock Delivery Regulations. The provision allows the Company to reclaim the amount equivalent to the shares delivered to violators and cancel any points accrued under the performance-linked stock incentive scheme explained below. b. To boost medium- to long-term business performance, directors (excluding outside directors) are asked to contribute a certain portion of their basic compensation toward the purchase of treasury stock through the Company’s share ownership plan for directors and officers, and they are expected to retain such stock in full for the duration of their time in office so that the acquired stock shares value with all shareholders. 5. Process for determining executive compensation a. Attainment of business goals and achievement of business plans formulated at the beginning of the fiscal year in accordance with the mid-term management plan are evaluated at the Performance Evaluation Meeting held in late May. the meeting referred to in (a) above. b. The President and Representative Director evaluates the directors and Audit & Supervisory Board members at c. The Compensation Committee meets in the middle of June to consult on the results of the evaluation in (b) above and on the appropriate amounts of compensation based on the results of evaluation. d. The Board of Directors votes on whether to approve the amounts of executive compensation proposed by the Compensation Committee in (c) above. in July. e. Monthly payments of the annual compensation amount determined by the Board of Directors in (d) above start 7 f. A third-party agency is contracted to research the executive compensation level of other companies for comparison in July. g. The Compensation Committee meets in November to consider the results of the research in (f) above and modifications to executive compensation, as appropriate. The amount of performance-linked stock compensation is calculated in accordance with the Stock Delivery Regulations. The Board of Directors and the Compensation Committee have no room for discretion. 6. Status of activities by the advisory committee regarding determination of officers’ compensation In the fiscal year ended Mach 31, 2022, the Compensation Committee met five times in total and provided advice on the appropriateness of officers’ compensation of the Company by comparison and analysis of the compensation amounts of peer companies conducted by the research agency. The Board of Directors presented proposals on officers’ compensation based on the advice given by the Committee. 7. Calculation of compensation amount 1) Basic compensation Basic compensation is paid according to the size of the role and scope of responsibilities of each position. 2) Calculation of performance-linked compensation Performance-linked compensation is determined by the degree to which measures of corporate performance have been achieved, on the basis of the management plan for each fiscal year, and shall fall within 0% and 50% of a performance evaluation coefficient, which is determined based on the basic compensation for each position. For every officer, organizational performance and individual performance are each evaluated on a five-point scale to determine the amount of performance-linked compensation based on the amount determined by corporate performance evaluation. (organizational performance component: individual performance component = 3:7) When the corporate performance evaluation coefficient is 30% in the standard model, 33% is applied to AA of organizational performance evaluation/individual performance evaluation, 27% to BB, 20% to CC, 13% to DD, and 7% to EE. 3) Performance-linked stock incentive When the performance-linked stock incentive was introduced, the Board of Directors established the Stock Delivery Regulations. Points are granted to directors on a scale between 0% and 15% of basic compensation, set for each position according to the level of achievement made toward reaching performance targets stated in the management plan and as provided for in the Regulations. The number of shares delivered will correspond to the number of points accumulated. The following indicators were adopted to measure corporate performance: Consolidated Operating Income, Earnings Per Share (EPS) and Service Business Gross Profit (as financial indicators) to encourage pursuit of business growth for the attainment of enhanced corporate value as expected by the shareholders, and Job 8 Satisfaction, Customer and Service Satisfaction, and Business Partner Satisfaction (as nonfinancial indicators) to encourage pursuit of higher satisfaction with the Company among stakeholders. (Principle 3-1(iv) Board policies and procedures for selecting/rejecting candidates in the nomination process for senior management positions, namely, directors and members of Audit & Supervisory Board) In determining a list of candidates for the position of a director or a member of the Audit & Supervisory Board, the Board of Directors considers individuals with abundant experience, sharp insight and a high degree of specialization well-suited to the duties of a director or a member of the Audit & Supervisory Board, based on selection criteria established by TIS. For director candidates, the Board of Directors takes recommendations from the Nomination Committee, which is chaired by an independent external director and comprises a number of directors, the majority of whom are independent external directors. This approach is intended to realize effective corporate governance and build a structure that supports sustained corporate growth and higher corporate value over the medium to long term, while reflecting broader perspectives on diversity, including gender, nationality beyond domestic borders, career and age.If a situation arises that requires a core member of the executive team to be removed from office, the Board of Directors will make a proposal for dismissal. The dismissal of a director will be undertaken in accordance with the Companies Act and other relevant rules and regulations. (Principle 3-1(v) Explanations with respect to selecting/nominating candidates for senior management positions, based on iv above) For all candidates being nominated to the position of director or a member of the Audit & Supervisory Board, TIS provides reasons in each proposal for electing a named candidate that appears in the reference materials of the Notice of Convocation for the General Shareholders Meeting at which these candidates are put forward for approval by shareholders. TIS presented candidates—nine directors—who were subsequently approved by shareholders at the 13th Annual General Meeting of Shareholders. They are introduced below. The reasons for electing five individuals to the Audit & Supervisory Board are also presented below. Directors Toru Kuwano After assuming the office of President and Representative Director of the Group company, Mr. Kuwano was appointed as a Director of the Company in June 2013 and President and Representative Director in June 2016. In April 2021, he assumed the office of Chairman and Director of the Company. He has a wealth of experience and knowledge about the Company’s and Group’s business, as well as in business administration. Since June 2018, he has also held the position of Chairperson of the Board of Directors. He has promoted a stronger and more effective corporate governance structure and has worked toward the sustainable growth and increase in the medium- to long-term corporate value of the Company. He is nominated as a candidate for Director since he is expected to continue to fulfill the duties of significant decision-making for the Group as well as the administration and oversight of business management. (13th Annual General Meeting of Shareholders) Yasushi Okamoto 9 Mr. Okamoto has been serving as Senior Managing Executive Officer and Division Manager of the planning and development department of industrial systems since July 2016, and has been in the office of Director since June 2018, after having been engaged in corporate business in the corporate planning department of the Company for many years. In April 2021, he assumed the office of President and Representative Director of the Company. Based on these experiences, he has been shown to be a person who can exert leadership to further promote the sustainable growth and increase in corporate value of the Group through the steady implementation of the new Medium-term Management Plan (2021-2023). He is nominated as a candidate for Director since he is expected to fulfill the duties of significant decision-making for the Group and oversight of business management. (13th Annual General Meeting of Shareholders) Masahiko Adachi Mr. Adachi has been in the office of Representative Director since June 2018 following his tenure as Division Manager of the corporate department and the financial system department of a financial institution and the Group company. Based on these experiences, he is nominated as a candidate for Director since he is expected to continue to promote group governance as set out in the new Medium-term Management Plan (2021-2023), centered on the corporate function, and to fulfill the duties of significant decision-making for the Group and oversight of business (13th Annual General Meeting of Shareholders) management. Josaku Yanai Mr. Yanai was mainly engaged in the corporate section of the corporate planning department of the Company and its Group company for many years. He assumed the office of Executive Officer and Division Manager of the corporate planning division of the Company in April 2011. Since June 2016, he has been serving as a Director of the Company, and in April 2021, he assumed the office of Representative Director of the Company. He has a wealth of experience and knowledge about the business of the Company and its Group, as well as in business administration. Based on these experiences, he is nominated as a candidate for Director since he is expected to continue to further promote the sustainable growth and increase in corporate value of the Group through the steady implementation of the new Medium-term Management Plan (2021-2023) and to fulfill the duties of significant decision-making for the Group and the administration and oversight of business management. (13th Annual General Meeting of Shareholders) Takayuki Kitaoka Mr. Kitaoka was engaged in business related to IT infrastructure of INTEC Inc., the Company’s major subsidiary, and served in management administration of the Group companies at the Company for three years since April 2012. Furthermore, he assumed the office of President and Representative Director of INTEC Inc. in April 2018 and the office of Director of the Company in June 2018. He is nominated as a candidate for Director since he is expected to continue to promote the duties of INTEC Inc. assigned by the new Medium-term Management Plan (2021-2023) and to fulfill the duties of significant decision-making for the Group and the administration and oversight of business management, based on the above experiences and from the viewpoint of Group management. 10 (13th Annual General Meeting of Shareholders) Mr. Shinkai was engaged in the business of new service planning and marketing and assumed the office of Director and Executive Vice President of INTEC Inc., the Company’s major subsidiary, in April 2018, and the office of Director of the Company in June 2018. Based on these experiences, he is nominated as a candidate for Director since he is expected to continue to promote the new Medium-term Management Plan (2021-2023) and to fulfill the duties of significant decision-making for the Group and the administration and oversight of business (13th Annual General Meeting of Shareholders) Akira Shinkai management. Koichi Sano Mr. Sano has worked mainly in the finance and accounting departments, and served as Executive Vice-President and Representative Director of Mitsui Chemicals, Inc., and has a wide range of experience and a wealth of expertise in corporate management. Since June 2016, he has been serving as an External Director of the Company. He is nominated as a candidate for External Director since his advice and suggestions from an independent perspective by utilizing these experiences and expertise in the Company’s business will ensure that the decisions to be made by the Company’s Board of Directors will be reasonable and appropriate, and he is expected to be a person who will continue to contribute to the increase in the corporate value and enhancement of the corporate governance of the Company. While the Company has business transactions with Mitsui Chemicals, Inc. (“MC”), which Mr. Sano belonged to until June 2015, MC’s consolidated sales to the Company represent 0.2% and 0.5% of the Company’s consolidated and non-consolidated sales, respectively. Because Mr. Sano satisfies the requirements of the “Criteria Concerning Independence of External Officers” and the proportion of sales is minimal, we have determined that his independence as an External Directors is sufficiently secured. He assumed office as an External Director of the Company in June 2016 and shall have served five (5) years at the conclusion of this Annual General Meeting of Shareholders. (13th Annual General Meeting of Shareholders) Fumio Tsuchiya Mr. Tsuchiya previously worked in an important position in overseas offices and the Corporate Planning Department of Japan Airlines Co., Ltd. After having assumed the office of Director of Japan Airlines in June 2004, he served as Managing Director and was thereafter appointed as President & CEO of JALCard, Inc. in June 2007, which is a group company of Japan Airlines. He has a wide range of experience and a wealth of expertise in corporate management. Since June 2017, he has been serving as an External Director of the Company. He is nominated as a candidate for External Director since his advice and suggestions from an independent perspective by utilizing these experiences and expertise in the Company’s business will ensure that the decisions to be made by the Company’s Board of Directors will be reasonable and appropriate, and he is expected to be a person who will continue to contribute to the increase in the corporate value and enhancement of the corporate governance of the Company. 11 While the Company has business transactions with JALCard, Inc. (“JALCard”), which Mr. Tsuchiya belonged to until June 2010, JALCard’s consolidated sales to the Company represent 0.1% and 0.2% of the Company’s consolidated and non-consolidated sales, respectively. Because Mr. Tsuchiya satisfies the requirements of the “Criteria Concerning Independence of External Officers” and the proportion of sales is minimal, we have determined that his independence as an External Directors is sufficiently secured. He assumed office as an External Director of the Company in June 2017 and shall have served four (4) years at the conclusion of this Annual General Meeting of Shareholders. (13th Annual General Meeting of Shareholders) Naoko Mizukoshi Ms. Mizukoshi is a qualified lawyer and has a wealth of professional knowledge of, and experiences in, intellectual property, ICT and international transactions. Since June 2018, she has been serving as an External Director of the Company. Her advice and suggestions from an independent perspective will ensure that the decisions to be made by the Company’s Board of Directors will be reasonable and appropriate by utilizing these experiences and expertise in the Company’s business. Since February 2021, she has acted as Chairperson of the Nomination and Remuneration Committees which are voluntary advisory bodies to the Board of Directors, and fulfils an important role in the deliberation and advice to the Board of Directors on the nomination and remuneration of directors, etc. She is expected to be a person who will continue to contribute to the increase in corporate value and enhancement of the corporate governance of the Company. She has not participated in corporate management but has expertise in corporate legal affairs. She is nominated as a candidate for External Director since she is deemed capable of effectively discharging the duties of External Director. There is no business relationship between the Company and Leftright Law & IP to which Ms. Mizukoshi currently belongs. She fulfils the “Criteria Concerning Independence of External Officers”, and the Company believes that she has no conflict of interest with any shareholders. Ms. Mizukoshi has been in office as an External Director of the Company since June 2018 and shall have served three (3) years at the conclusion of this Annual General Meeting of Shareholders. (13th Annual General Meeting of Shareholders) Audit & Supervisory Board Members Tetsuya Asano Mr. Asano has a wealth of expertise in finance and accounting as well as in corporate management, accumulated through many years of experience of working at financial institutions. He has been nominated as a candidate for Audit & Supervisory Board Member as he is expected to utilize his experience to discharge appropriately and properly the audit and supervisory duties in regard to the business execution of the Directors of the Company. (12th Annual General Meeting of Shareholders) Tatsufumi Matsuoka Mr. Matsuoka has a wealth of expertise in finance and accounting as well as in corporate management, accumulated through many years of experience of working at financial institutions. He has been nominated as a candidate for Audit & Supervisory Board Member as he is expected to utilize his experience to discharge 12 appropriately and properly the audit and supervisory duties in regard to the business execution of the Directors of the Company. (12th Annual General Meeting of Shareholders) Sadahei Funakoshi Mr. Funakoshi has a wealth of experience and knowledge in corporate management, through management of investment and loan, credit and administrative departments at Mitsubishi Corporation, as well as his service as an auditor at IT companies. He was appointed as an external member of the Audit & Supervisory Board, based on expectations that TIS would benefit from his comprehensive management advice and that he would enhance auditing and supervision related to the execution of business from an external perspective. Note that Mr. Funakoshi was appointed as an outside auditor of TIS in June 2016 and that his term of office is five (5) years, effective from the time that the 13th Annual General Meeting of Shareholders ended. (12th Annual General Meeting of Shareholders) Yukio Ono Mr. Ono is a licensed certified public accountant. His expertise and knowledge in the field of finance and accounting are beneficial to the Company in strengthening the audit system of the Company. Although he has not participated in corporate management, he is nominated as a candidate for External Audit & Supervisory Board Member as he is considered to be able to appropriately perform the duties of External Audit & Supervisory Board Member as a result of the above credentials. Note that Mr. Ono was appointed as an outside auditor of TIS in June 2020 and that his term of office is one year, effective from the time that the 13th Annual General Meeting of Shareholders ended. (12th Annual General Meeting of Shareholders) Akiko Yamakawa Ms. Yamakawa is a qualified lawyer. Based on his experience, such as being responsible for litigation at global corporations, she can be expected to provide appropriate monitoring and supervision of the global business execution of the Company. Although she has not participated in corporate management, she is nominated as a candidate for External Audit & Supervisory Board Member as she is considered to be able to appropriately perform the duties of External Audit & Supervisory Board Member as a result of the above credentials. Note that Ms. Yamakawa was appointed as an outside auditor of TIS in June 2020 and that her term of office is one year, effective from the time that the 13th Annual General Meeting of Shareholders ended. (12th Annual General Meeting of Shareholders) (Supplementary Principle 3-1-3 Sustainability Initiatives, Etc.) TIS describes its initiatives on investments in human capital and intellectual property in its medium-term management plan. https://www.tis.com/ir/policy/midtermpolicy/ 13 Furthermore, TIS makes the systematic disclosure of information based on the TCFD recommendations, including Governance, Strategy, Risk Management and Metrics and Targets, on “Information Disclosure based on TCFD Recommendations” page in its corporate website. https://www.tis.com/group/sustainability/environment/tcfd/ (Supplementary Principle 4-1-1 Scope of Delegation of Authority to Management) TIS introduced an executive officer system to enhance the transparency of management- and business execution-related functions and responsibilities and to make decision-making faster and more efficient. The Company also established the Management Committee to discuss and decide on specific important matters related to management that fall within the scope of authority delegated to the Board of Directors. Different levels of management are tasked with decisions on different issues, and the matters to be addressed as well as associated authority standards are defined in Rules for the Board of Directors, Rules for the Management Committee and Rules for Document Approval (ringi kessai kitei: rules for reaching a decision using a draft proposal prepared by someone in charge of the matter and circulated for collective deliberation and final approval by another executive group). This clarifies the extent of authority delegated according to position. (Principle 4-8 Effective Use of Independent Directors) TIS seeks to realize a higher level of fairness in the decisions and actions of the Board of Directors while also reinforcing corporate governance and does so by appointing three independent external directors—representing one-third of the Board of Directors—whose role is primarily to encourage active discussion at board meetings and ensure appropriate decision-making and supervision. (Principle 4-9 Independence Standards and Qualification for Independent Directors) TIS formulated Criteria Concerning Independence of External Directors, based on the requirements of the Companies Act as well as independence criteria established by the Tokyo Stock Exchange, and appoints independent external directors and independent external members of the Audit & Supervisory Board in accordance with these rules and regulations. https://www.tis.com/ir/policy/governance/ Criteria Concerning Independence of External Directors is available for viewing on the TIS website. (Supplementary Principle 4-10-1 Appropriate Involvement and Advice from Independent External Directors through Establishment of Independent Nomination Committee and Compensation Committee) The independence of the Nomination Committee and Compensation Committee is secured because they are chaired by an independent external director and comprises a number of directors, the majority of whom are independent external directors. The mandates and roles of the Nomination Committee and Compensation Committee are to provide recommendations on the selection of candidates to the position of director and the appropriateness of the process to decide policy on compensation for directors, etc. as an advisory body to the Board of Directors. The Board of Directors conducts deliberations based on their recommendations. 14 (Supplementary Principle 4-11(1) Thoughts on Composition of Board of Directors) The Board of Directors shall comprise no more than 15 directors, at least one-third of whom shall be independent external directors. The Board of Directors recognizes its fiduciary responsibility toward shareholders, formulates management strategy and management plans, makes decisions on other important matters and supervises the execution of Company business in accordance with relevant laws, the Articles of Incorporation and rules of the Company, and bears a responsibility to ensure sustainable growth and higher corporate value over the medium to long term. Directors who sit on the Board of Directors shall, in accordance with selection criteria established by the Company, consider the candidacy of and ultimately nominate individuals who possess extensive experience, sharp insight and a high level of specialization well suited to the role of director, giving thought to gender, nationality beyond domestic borders, career, age and other aspects of diversity and taking into account recommendations by the Nomination Committee, which comprises a number of executives, the majority of whom are independent external directors. A skill matrix of directors is presented in “Board of Directors Skills Matrix” at the end of this report. (Supplementary Principle 4-11(2) Status of Directors and Members of the Audit & Supervisory Board with Concurrent Roles at Other Companies) The status of directors and members of the Audit & Supervisory Board who hold concurrent executive posts at other listed companies is described in the business section of convocation notices for the annual general meetings of shareholders’. Board of Directors Overall) (Supplementary Principle 4-11(3) Summary of Results from Analysis and Evaluation of Effectiveness of Since fiscal 2016, ended March 31, 2016, the Company has evaluated the effectiveness of the Board of Directors each fiscal year. This process reveals issues and points for improvement and leads to initiatives that will raise the effectiveness of the Board of Directors to a higher level. For the fiscal 2022 evaluation, all directors and members of the Audit & Supervisory Board were given a questionnaire to be submitted anonymously. The questionnaire asked them to conduct a comprehensive self-evaluation and self-analysis of the composition and operation of the Board of Directors, and then the Board of Directors pursued discussions based on the results. The method and results of the evaluation, as well as future issues brought to light through this process and measures to address such issues are described below. 1. Method of evaluation TIS distributed a questionnaire regarding the effectiveness of the Board of Directors to all directors and members of the Audit & Supervisory Board and obtained responses. In addition, personnel of its administrative office conducted an interview to all directors and members of the Audit & Supervisory Board. The Company’s Board of Directors then used these results to analyze and evaluate the effectiveness of the Board of Directors. Note that TIS conducted this effectiveness evaluation based on advice and verification by an external attorney. 2. Results of analysis and evaluation of effectiveness of the Board of Directors 15 The Company’s Board of Directors concluded that a certain degree of effectiveness had been ensured to appropriately supervise the approval of important management matters and business execution, such as the execution status of business activities and investments at the Company and Group companies, through deliberation based on Company regulations. In addition, the Board of Directors concluded that the level of effectiveness continues to trend upward, reflecting improvement measures based on the results of the effectiveness evaluation conducted in the previous fiscal year. However, management acknowledged the importance of promoting discussions to further improve the functions of the Board of Directors in order to promote more sophisticated management of the Company. 3. Future issues and associated responses, based on analysis and evaluation In light of the analysis and evaluation previously mentioned, TIS will focus particular efforts on the following issues. (1) Further improve the functions of the Board of Directors Aiming at promoting more sophisticated management, the Company will sort out issues, such as the Board of Directors’ supervisory function for the medium- to long-term growth and sharing roles of executive officers, to create the management structure for the future. (2) Promote discussions to improve medium- to long-term corporate value The Board of Directors will plan and discuss themes for improved corporate value, such as medium- to long-term strategies, and carry out proactive activities to enhance corporate value. (Supplementary Principle 4-14(2) Training Policy for Directors and Members of the Audit & Supervisory For directors and members of the Audit & Supervisory Board, including external directors and external members of the Audit & Supervisory Board, the Company will provide and arrange training opportunities that are appropriate for individual directors and members of the Audit & Supervisory Board and will cover the cost of such training. The objective of such training is to provide opportunities to acquire knowledge necessary to the Group’s business pursuits, financial affairs and organization and to understand the duties and responsibilities that directors and members of the Audit & Supervisory Board must fulfill in assuming office, as well as to continuously update these skills and knowledge during terms of office. (Principle 5-1 Policy for Constructive Dialogue with Shareholders) TIS actively engages in constructive dialogue with shareholders, in accordance with the Company’s investor relations (IR) policy, to support sustainable corporate growth and higher corporate value over the medium to long term. In addition, the Company is working to develop a system to promote constructive dialogue with shareholders. The director responsible for the department that handles IR activities will supervise dialogue with shareholders, and the president and representative director, executive officers assigned to the dialogue process and the IR Department will look into methods to address issues brought up during dialogue opportunities and will respond appropriately. The IR Department is organically integrated into the dialogue structure, sharing Board) 16 information with relevant departments and exchanging opinions as necessary, based on various specialist perspectives, to support dialogue with shareholders. For shareholders, TIS strives to enhance approaches for dialogue, including one-on-one interviews, responses by telephone, business briefings and small meetings. The Company also takes an active approach toward information disclosure, which is the basis of dialogue, and seeks to enrich the content of its Integrated Report, which is positioned as an effective tool for dialogue. Opinions brought up in constructive dialogue with capital market participants, including shareholders, investors and securities analysts, will be shared in-house through reports to the Board of Directors and other methods and will be used in reviewing management strategy and other business-related purposes. In conversations with shareholders, TIS will pay careful attention to fairness in information disclosure and will manage internal information appropriately, in accordance with Rules for Prevention of Insider Trading. (Principle 5-2 Establishing and Disclosing Business Strategies and Business Plans) TIS discloses content described under this principle in its Medium-Term Management Plan (2021-2023), which runs from April 1, 2021 through March 31, 2024), as well as in its Group Vision. Management Plan https://www.tis.com/ir/policy/midtermpolicy/ Group Vision https://www.tis.com/group/vision/ 2. Capital Structure Percentage of Foreign Shareholders More than 30% Status of Major Shareholders Name Number of shares Shareholding ratio The Master Trust Bank of Japan, Ltd. ICHIGO TRUST PTE. LTD. Custody Bank of Japan, Ltd. Employees’ Shareholding Association of TIS INTEC Group FUNDS Nippon Life Insurance Company MACQUARIE BANK LIMITED DBU AC NORTHERN TRUST CO.(AVFC) RE FIDELITY SSBTC CLIENT OMNIBUS ACCOUNT BNYM AS AGT/CLTS NON TREATY JASDEC GOVERNMENT OF NORWAY 35,920,109 23,171,300 15,153,800 6,656,845 6,219,159 6,011,200 5,410,776 5,194,118 4,007,614 3,578,937 17 (%) 14.30 9.23 6.03 2.65 2.48 2.39 2.15 2.07 1.60 1.42 Existence of Controlling Shareholders (excluding parent company) Existence of parent company Supplementary Explanation — None 1. The status of major shareholders shown above is based on the shareholder registry as of March 31, 2022. 2. In addition to the above, TIS holds 1,274 treasury shares (representing 0.0% of total number of shares outstanding). Note that this amount does not include 1,179 thousand TIS shares held in the Employees’ Shareholding Association of TIS INTEC Group special trust account or 213 thousand TIS shares held in the executive compensation board incentive plan (BIP) trust account. 3. In a large-volume holdings report made available to the public on August 5, 2021, BlackRock Japan Co., Ltd. through seven affiliate companies, held TIS shares in the breakdown provided below, as of July 30, 2021. However, TIS is unable to confirm the actual number of shares held by these affiliate companies, and has therefore not included them in the status of major shareholders shown above. BlackRock Japan Co., Ltd. Number of shares held: 3,087 thousand, Ratio: 1.17% BlackRock (Netherlands) BV Number of shares held: 754 thousand, Ratio: 0.29% BlackRock Fund Managers Limited Number of shares held: 450 thousand, Ratio: 0.17% BlackRock Asset Management Ireland Limited Number of shares held: 2,085 thousand, Ratio: 0.79% BlackRock Fund Advisors Number of shares held: 3,512 thousand, Ratio: 1.33% BlackRock Institutional Trust Company, N.A. Number of shares held: 3,128 thousand, Ratio: 1.19% BlackRock Investment Management (UK) Limited Number of shares held: 496 thousand, Ratio: 0.19% Total Number of shares held: 13,516 thousand, Ratio: 5.13% 4. In a large-volume holdings report made available to the public on February 7, 2022, Fidelity Investments (Japan) Limited held TIS shares in the breakdown provided below, as of January 31, 2022. However, TIS is unable to confirm the actual number of shares held by this company in the shareholder registry, and has therefore not included it in the status of major shareholders above. FMR LLC Number of shares held: 15,781 thousand, Ratio: 6.28% Total number of shares held: 15,781 thousand, Ratio: 6.28% 5. In a change report of large-volume holdings report made available to the public on March 22, 2022, Mitsubishi UFJ Financial Group, Inc., through three affiliate companies, held TIS shares in the breakdown provided below, as of March 14, 2022. However, except for MUFG Bank, TIS is unable to confirm the actual number of shares held by these affiliate companies, and has therefore not included them in the status of major shareholders shown above. MUFG Bank, Ltd. Mitsubishi UFJ Trust and Banking Corporation Number of shares held: 5,312 thousand, Ratio: 2.12% Mitsubishi UFJ Kokusai Asset Management Co., Ltd. Number of shares held: 1,474 thousand, Ratio: 0.59% Number of shares held: 3,474 thousand, Ratio: 1.38% 18 fiscal year Shareholder ――― ――― Total number of shares held: 10,261 thousand, Ratio: 4.09% 6. Of the above number of shares held, the number of shares in the trust business is as follows: The Master Trust Bank of Japan, Ltd. Custody Bank of Japan, Ltd. 35,920 thousand shares 15,153 thousand shares 3. Corporate Attributes Fiscal year-end Type of business Listed Stock Market and Market Section Tokyo Stock Exchange, First Section March Information & Communication Number of employees (consolidated) as of the end of More than 1000 the previous fiscal year Sales (consolidated) as of the end of the previous From ¥100 billion to less than ¥1 trillion Number of consolidated subsidiaries as of the end of the previous fiscal year From 10 to less than 50 4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling 5. Other Special Circumstances Which May Have Material Impact on Corporate Governance II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management 1. Organizational Composition and Operation Organization Form Company with Audit & Supervisory Board Directors Maximum Number of Directors Stipulated in Articles of Incorporation Term of Office Stipulated in Articles of Incorporation Chairperson of the Board Number of Directors Selection of External Directors Appointed Number of External Directors Number of Independent Directors 15 One year Chairman 9 3 3 19 External Directors’ Relationship with the Company (1) Name Attribute Relationship with the Company* a b c d e f g h i j k Koichi Sano From another company Fumio Tsuchiya From another company Naoko Mizukoshi From another company * Categories for “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 past a. Executive of the Company or its subsidiaries b. Non-executive director or executive of a parent company of the Company c. Executive of a fellow subsidiary company of the Company d. A party whose major client or supplier is the Company or an executive thereof e. Major client or supplier of the listed company or an executive thereof f. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as a director/member of Audit & Supervisory Board g. Major shareholder of the Company (or an executive of a major shareholder if the shareholder is a legal entity) h. Executive of a client or supplier company of the Company (which does not correspond to any of d, e, or f) (the director himself/herself only) i. Executive of a company between which and the Company external directors/Audit & Supervisory Board members are mutually appointed (the director himself/herself only) j. Executive of a company or organization that receives a donation from the Company (the director himself/herself only) k. Others External directors’ Relationship with the Company (2) Name Designation as Independent Director Supplementary Explanation of the Relationship Reasons of Appointment Koichi Sano ○ ― Mr. Sano has worked mainly in finance and accounting departments, and served as executive vice-president and representative director of Mitsui Chemicals, Inc., building an extensive portfolio of experience and a wealth of expertise in corporate management. In June 2016, he assumed his position as an external director and he was reappointed as an external director at TIS. Because his advice and suggestions from an independent perspective by utilizing these experiences and expertise in the Company’s business will ensure that the decisions to be made by the Company’s Board of Directors will be reasonable and appropriate, and he is expected to be a person who will continue to contribute to the increase in the 20 corporate value and enhancement of the corporate governance of the Company. Note that Mr. Sano satisfies the requirements for an external director, as stipulated in the Companies Act, as well as Criteria Concerning Independence of Outside Officers, established by TIS, and management feels there is no chance of any conflict of interest arising between Mr. Sano and ordinary shareholders. Mr. Tsuchiya previously held an important position at overseas offices and the Corporate Planning Department of Japan Airlines Co., Ltd. After he assumed the position of director of Japan Airlines in June 2004, he served as managing director and in June 2007 he was appointed president & CEO of JALCard, Inc., a company in the Japan Airlines Group. He has a wide range of experience and a wealth of expertise in corporate management. In June 2017, he assumed his position as an external director and he was reappointed as an external director at TIS. Because his advice and suggestions from an independent perspective by utilizing these experiences and expertise in the Company’s business will ensure that the decisions to be made by the Company’s Board of Directors will be reasonable and appropriate, and he is expected to be a person who will continue to contribute to the increase in the corporate value and enhancement of the corporate governance of the Company. Note that Mr. Tsuchiya satisfies the requirements for an external director, as stipulated in the Companies Act, as well as Criteria Concerning Independence of Outside Officers, established by TIS, and management feels there is no chance of any conflict of interest arising between Mr. Tsuchiya and ordinary shareholders. Ms. Mizukoshi is a qualified lawyer and has a wealth of professional knowledge and experience related to intellectual property, ICT and international transactions. Since June 2018, she has been serving as an External Director of the Company. Her advice and suggestions from an independent perspective will ensure that the decisions to be made by the Company’s Board of Directors will be reasonable and appropriate by utilizing these experiences and expertise in the Company’s business. Since February 2021, she has acted as Chairperson of the Nomination and Remuneration Committees which are 21 Fumio Tsuchiya ○ ― Naoko Mizukoshi ○ ― voluntary advisory bodies to the Board of Directors, and fulfils an important role in the deliberation and advice to the Board of Directors on the nomination and remuneration of directors, etc. She is expected to be a person who will continue to contribute to the increase in corporate value and enhancement of the corporate governance of the Company. While she has not participated in a corporate management setting before, she is well-acquainted with corporate legal affairs from her work as a lawyer. She was appointed as an external director, based on management’s view that she would duly execute the duties of an external director. Note that Ms. Mizukoshi satisfies the requirements for an external director, as stipulated in the Companies Act, as well as Criteria Concerning Independence of Outside Officers, established by TIS, and management feels there is no chance of any conflict of interest arising between Ms. Mizukoshi and ordinary shareholders. Voluntary Establishment of Committee(s) Corresponding to Nomination Committee or Remuneration Committee Established Committee’s Name, Composition, and Attributes of Chairperson Optional Committee Corresponding to Nomination Committee Nomination Committee Optional Committee Corresponding to Remuneration Committee Compensation Committee 4 0 1 3 0 0 Outside director Outside director Committee’s Name All Committee Members Full-time Members Directors External Directors Outside Experts Other Chairperson 4 0 1 3 0 0 Supplementary Explanation 1. Method of selecting committee members approval by the Board of Directors. 2. Role of committee members Members of the Nomination Committee and the Compensation Committee are selected on the advice of the Nomination Committee, of which the majority of members are independent external directors, and given final 22 • Provide advice for selecting candidates to the position of director and matters related to the appointment of such (1) Role of members on Nomination Committee individuals (2) Role of members on Compensation Committee • Provide advice on matters related to decisions on compensation for directors 3. Status of activities by committees (including frequency of meetings, major topics of discussion, attendance on a member basis) (1) Nomination Committee In fiscal 2022, ended Ma