いちご（2337） – Corporate Governance Report

[Provisional Translation Only] This English translation of the original Japanese document is provided solely for information purposes. Should there be any discrepancies between this translation and the Japanese original, the latter shall prevail. Corporate Governance Report Last Update: June 7, 2022 Ichigo Inc. Scott Callon, Chairman Contact: Takanori Sakamatsu, Senior Statutory Executive Officer Tel. 03-3502-4818 Securities Code: 2337 www.ichigo.gr.jp/en I. Corporate Governance Principles & Corporate Structure 1. Basic Policy Ichigo is a Japanese sustainable infrastructure company dedicated to making the world more sustainable. We are committed to growing long-term value for shareholders by contributing to a sustainable society. Ichigo’s key businesses are: 1) Sustainable Real Estate – preserving and improving real estate, lengthening the useful life of buildings and other physical and social infrastructure; 2) Asset Management – managing the Tokyo Stock Exchange-listed Ichigo Office (8975), Ichigo Hotel (3463), and Ichigo Green (9282), and private real estate funds; 3) Clean Energy – developing and operating solar and wind power plants nationwide that supply clean energy and bring productive use to idle land. Ichigo works to continually strengthen its compliance culture and corporate governance in order to improve its business performance, enhance transparency, and promote its sustainable growth. Ichigo is committed to optimizing its organizational structure and further developing the capabilities of its employees. In pursuit of these goals, Ichigo has taken the following actions: (a) Ichigo has adopted the Company with Committees (Nominating, Audit, Compensation) governance structure. All Directors on Ichigo’s Board of Directors (the “Board”) are aware of their fiduciary responsibility towards shareholders and work collaboratively and appropriately with other stakeholders to ensure sustained value creation for shareholders. ・Ichigo’s Board focuses on setting and supervising long-term corporate strategy and management, and delegates day-to-day management of Ichigo to Statutory Executive Officers while making clear the respective roles and responsibilities of the executive team. Through its supervision, the Board aims to drive management transparency and agility. ・In order to ensure active and meaningful discussion, the Board is comprised of four Directors who also serve as Ichigo Statutory Executive Officers, thus having hands-on understanding of Ichigo’s business, and six Independent Directors with specialized expertise, including former CEOs of major Japanese companies and experts in finance and accounting. ・The Nominating Committee is comprised of a majority of Independent Directors and selects Director candidates for approval at Ichigo’s shareholder meetings, appoints Statutory Executive Officers, and provides advice on the selection of Directors at all Ichigo group companies. – 1 – ・Ichigo has established a Compliance Committee directly under the Board that is independent from management in order to monitor and evaluate critical compliance matters. ・As of the date of this report, the number of Directors on the Board and its committees are as follows: Board: 10 (of whom 6 are Independent Directors) Nominating Committee: 5 (of whom 3 are Independent Directors) Audit Committee: 3 (of whom all are Independent Directors) Compensation Committee: 5 (of whom 3 are Independent Directors) Compliance Committee: 4 (of whom 2 are Independent Directors) (b) Ichigo works to ensure that all employees understand its mission and values and work to fulfill the mission and values through the following measures: ・Ichigo’s mission and values are communicated on an ongoing basis to all employees, including during annual business goal-setting and personnel evaluations. ・Ichigo shares its Code of Corporate Ethics and Code of Conduct with all Ichigo group companies to ensure that all employees are fully informed of the importance of adhering to them. ・All Ichigo employees, including at all Ichigo group companies, participate in annual training where the content of the Code of Corporate Ethics and Code of Conduct is explained and discussed, and all employees expressly acknowledge and pledge their compliance in writing. Explanation of Any Non-Compliance with Corporate Governance Code Principles Supplementary Principle 2.4.1 Diversity of Core Personnel More than 90% of Ichigo’s personnel are mid-career hires with diverse career backgrounds, and when appointing core personnel, Ichigo evaluates their abilities and achievements according to requirements of the expected roles, regardless of gender, age, and nationality. Details of personnel composition, including the many women that serve in various managerial roles, are disclosed in Ichigo’s Sustainability Report. Ichigo’s human resources policy and information about our workplace environment are disclosed on its corporate website. Ichigo constantly undertakes progressive measures to ensure both creativity and diversity as Ichigo continues to expand its businesses, and will promptly disclose such measures as necessary. Supplementary Principle 3.1.3 Sustainability Initiatives Ichigo has established an Ichigo Sustainability Policy in order to drive its sustainability initiatives, and discloses details of such initiatives on its website. The knowledge and expertise of our personnel are essential underpinnings of our business, and we work to grow and develop this critical human capital through measures such as providing in-house trainings. Ichigo considers employee health a management priority and also works to set policies and workplace environments that support employees in realizing their best. Its various efforts towards these ends are disclosed on its website. Ichigo’s investments in intellectual property include those related to its promotion of Real Estate DX (digital transformation), as disclosed in its long-term vision, as well as software investments aimed at enhancing operational efficiency and accuracy. Ichigo has been accelerating its initiatives aimed towards a net-zero carbon society, such as joining RE100 and establishing the ReGeneration Group, which directly reports to the CEO and is responsible for Ichigo’s group-wide environmental initiatives. The ReGeneration Group works to gather information towards becoming climate positive, assess and implement related initiatives, calculate greenhouse gas emissions and obtain third-party verifications thereof, and proactively participate in various international initiatives. (Note: Climate positive refers to a state in which reductions in greenhouse gasses exceed emissions.) Ichigo is in the final phase of collecting and analyzing data on various climate change scenarios, and upon completing an analysis of climate change impact on its business activities, earnings, and finances, Ichigo plans to disclose its TFCD-compliant long-term policies and targets towards addressing climate change by the end of this fiscal period. – 2 – Disclosure with respect to Compliance with Corporate Governance Code Principles Principle 1.4 Cross-Shareholdings Ichigo does not engage in cross-shareholdings. Principle 1.7 Related Party Transactions Any transaction with a Director or a major shareholder (a “Related Party Transaction”) is carefully examined with respect to its purpose, the process of negotiation, the fairness of its price, and whether it will contribute to Ichigo’s shareholder value, and is further examined by external legal counsel and discussed by Ichigo’s Audit Committee before being submitted for consideration to the Board. Furthermore, at the end of each business year the Audit Committee requires all Directors, Statutory Executive Officers, and Directors of all Ichigo group companies to submit a signed statement confirming the absence of any conflicts of interest, illegal provision of profits, abnormal transactions, or violations of fiduciary duty during the course of their duties. Supplementary Principle 2.4.1 Diversity of Core Personnel Refer to “Explanation of Any Non-Compliance with Corporate Governance Code Principles” Principle 2.6 Roles of Corporate Pension Funds as Asset Owners Ichigo does not have a corporate pension plan, so therefore does not oversee any pension fund management. Principle 3.1 Full Disclosure (i) Ichigo discloses its mission, corporate strategy, and long-term vision on its corporate website. (ii) Ichigo provides details on its corporate governance through this report, available on its corporate website, and through its Financial Report (Yuka Shoken Hokokusho). (iii) Ichigo’s policy on Director and Statutory Executive Officer compensation is disclosed in this report, its Financial Report (Yuka Shoken Hokokusho), and its Business Report (Jigyo Hokokusho). (iv) With respect to the Board’s selection and dismissal of Directors and the appointment of Statutory Executive Officers, the two principles described in (1) and (2) below are considered by the Nominating Committee in making its recommendations. (1) Nomination of Candidates for Directors and Statutory Executive Officers Ichigo’s Nominating Committee, comprised of a majority of Independent Directors, is responsible for nominating candidates for Director and Statutory Executive Officer. The Nominating Committee holistically considers: 1) the candidates’ ability to contribute both to Ichigo and to society in adherence with Ichigo’s mission and Code of Conduct; and 2) the candidates’ understanding and compliance with relevant laws and regulations. (2) Nomination of Candidates for Independent Directors Nomination of candidates, provided that the candidates do not have any personnel, capital, or other relationship in conflict with Ichigo, are based on a holistic consideration of the Tokyo Stock Exchange’s standards for independence; the candidates’ depth of expertise and experience in fields such as management, law, accounting, and finance; and the candidates’ ability to objectively monitor Ichigo’s management. Candidates are nominated by the Nominating Committee and approved by the Board. (v) Explanations with respect to the nomination and appointment of each Director are disclosed in Ichigo’s shareholder meeting materials. Supplementary Principle 3.1.3 Sustainability Initiatives Refer to “Explanation of Any Non-Compliance with Corporate Governance Code Principles” – 3 – Supplementary Principle 4.1.1 Roles and Responsibilities of the Board The Board examines and decides on matters stipulated by law and regulation, set in Ichigo’s Articles of Incorporation, defined in internal rules pertaining to the Board, and presented to the Board as an agenda item. All other decision matters are delegated to Ichigo’s management with the objective to promote sound governance through a clear separation between business execution and the supervision thereof. All Statutory Executive Officers are expected to efficiently and effectively make decisions and lead employees within their specific scope of delegated responsibility and authority. To this end, Ichigo has established internal rules that clearly define the specific roles, responsibilities, authority, and requirements for consultation of the Board and the respective Executive Officers such that each individual business case is appropriately examined and decided upon by the relevant organization. Principle 4.9 Independence Standards and Qualifications of Independent Directors Pursuant to both the Company Law and the Tokyo Stock Exchange’s standards for independence, Ichigo selects Independent Directors who have significant experience in the field of finance and corporate management, are accountants with extensive experience in advising various tax and accounting transactions, including M&A, or are former CEOs of major Japanese companies. Ichigo’s standards for independence are as defined by the TSE, and are disclosed both in Ichigo’s Financial Report (Yuka Shoken Hokokusho) and Ichigo’s shareholder meeting materials. Supplementary Principle 4.10.1 Appropriate Independent Director Involvement and Advice via the Independent Nominating and Compensation Committees Ichigo has adopted the Company with Committees (Nominating, Audit, Compensation) governance structure and has established the Nominating and Compensation Committees, each comprised of a majority of Independent Directors, to deliberate and resolve on critical issues such as the nomination, appointment, and dismissal of directors, while carefully considering gender diversity and candidate skillset. Supplementary Principle 4.11.1 Preconditions for Board Effectiveness Ichigo’s view with respect to the diversity, knowledge, experience, and expertise of the Board is consistent with its criteria used to select individual Directors as disclosed in its response to Principle 3-1 (iv). The skill matrix of Ichigo’s Board of Directors has been disclosed on page 26 of the Materials for the Twenty-Second Annual Shareholder Meeting. www.ichigo.gr.jp/ir/news/p_news_file/file/Ichigo_20220503_FY2022_AGM_ENG.pdf Ichigo’s Articles of Incorporation stipulates that the Board must comprise no more than twelve Directors with a majority of the Directors being Independent Directors. Ichigo believes the size of the Board is appropriate for effective supervision of management and deliberation of Board matters. Also, the Board is comprised of Independent Directors with specialized expertise, including former CEOs of major Japanese companies. Supplementary Principle 4.11.2 Positions Held at Other Companies by Directors Positions held at other companies by Directors and Independent Directors are within reason and do not interfere with their roles and responsibilities at Ichigo. Any Director seeking to assume a position at another company must notify Ichigo in advance and receive prior approval by the Board with respect the appropriateness of assuming such position. Positions held at other companies by Directors are disclosed in the Securities Report and on page 54 of the Materials for the Twenty-Second Annual Shareholder Meeting. www.ichigo.gr.jp/ir/news/p_news_file/file/Ichigo_20220503_FY2022_AGM_ENG.pdf Supplementary Principle 4.11.3 Board Evaluation Ichigo’s Board in the previous fiscal period consisted of nine Directors, of whom a majority (five Directors) were Independent Directors. Ichigo conducts the Board evaluation by having each Director independently assess the Board with respect to the below evaluation criteria, followed by the Board collectively analyzing and reviewing the results. – 4 – (1) Board Composition (2) Board Operation (3) Board Effectiveness (4) Board Support Resources (5) Engagement with Shareholders and Stakeholders (6) Board Operation Under Covid (7) SDGs and Sustainability Initiatives The Board confirmed that its deliberation and decision-making processes are effective, leveraging the knowledge and experience of the Directors, and that the Board is appropriately overseeing management in line with Japan’s Corporate Governance Code. The Board thus concluded that it is functioning properly. This year the Board added a new evaluation criterion, “SDGs and Sustainability Initiatives.” Ichigo expects to conduct a Board evaluation on an annual basis, and is continuing to work to strengthen the effectiveness of its Board. Ichigo is committed to further increasing its shareholder value by ensuring the effectiveness of its Board and actively communicating with its shareholders and investors. Ichigo disclosed the details of its most recent board evaluation in its May 25, 2022 release “Board of Directors Evaluation.” www.ichigo.gr.jp/news/p_news_file/file/Ichigo_20220525_Board_Evaluation_ENG.pdf Supplementary Principle 4.14.2 Director and Auditor Training Ichigo is a member of the Japan Association of Corporate Directors (JACD) and the Japan Audit & Supervisory Board Members Association (JASBA) and provides its Directors, including Independent Directors, with opportunities to participate in seminars and trainings held by these associations. Furthermore, Ichigo will bear expenses with respect to any training and materials that Directors feel are necessary in order for them to execute their supervisory responsibilities. Additionally, Ichigo has established Ichigo University, available to all Ichigo employees, in order to provide opportunities for employees to enhance their skills necessary to successfully perform their respective roles. Ichigo also permits employees to pursue relevant licenses and qualifications at Ichigo’s expense. Ichigo-wide compliance training (including the topic of insider trading prevention) is conducted at least once a year. In addition, employees of the two Ichigo companies operating with Financial Instrument and Exchange Law (FIEL) licenses are subject to a strict compliance regime that includes four mandatory training sessions each year. Newly appointed Independent Directors are briefed on Ichigo’s corporate governance, its business, and financial statements, and are given direct exposure to Ichigo’s business activities via briefings and site visits to Ichigo real estate assets. Principle 5.1 Policy for Constructive Dialogue with Shareholders Ichigo’s IR team within the Finance Division is responsible for shareholder relations. A corporate presentation on Ichigo’s financial results is held quarterly for analysts and institutional investors. In addition, an English-language earnings webinar is held every quarter for the benefit of global investors. Ichigo also makes available video recordings and transcripts of the Q&A sessions of these corporate presentations and webinars on Ichigo’s corporate website. Small group meetings and one-on-one meetings are also conducted for analysts and investors, both domestically and abroad. The IR team also services telephone calls, email inquiries, and other correspondences with shareholders, and is responsible for reporting all such shareholder interaction with management. In recognition that Ichigo’s shareholder meetings are a critical forum for dialogue with shareholders, Ichigo always holds its shareholder meetings on weekends in order to maximize shareholder attendance and endeavors to share quality time with shareholders not just at the shareholder meeting but also by conducting a business results meeting and reception for shareholders. Ichigo addresses all questions pertaining to voting agenda items in earnest and tries to ensure that shareholders fully understand Ichigo’s business strategy. – 5 – 2. Shareholding Structure Percentage of Non-Japanese Shareholders Over 30% Major Shareholders Name Number of Shares Percentage (%) 225,108,200 48.11% Morgan Stanley MUFG Securities Co., Ltd. 20,019,452 ICHIGO TRUST PTE. LTD. (Standing Proxy: The Hong Kong and Shanghai Banking Corporation Limited, Tokyo Branch) The Master Trust Bank of Japan, Ltd. (Trust Account) MACQUARIE BANK LIMITED DBU AC (Standing Proxy: Citibank, N.A., Tokyo Branch) BNYM SA/NV FOR BNYM FOR BNY GCM CLIENT ACCOUNTS M LSCB RD (Standing Proxy: The Bank of Tokyo-Mitsubishi UFJ, Ltd.) SMBC Nikko Securities Inc. Ueda Yagi Tanshi Co., Ltd. MORGAN STANLEY SMITH BARNEY LLC CLIENTS FULLY PAID SEG ACCOUNT (Standing Proxy: Citibank, N.A., Tokyo Branch) NORTHERN TRUST CO. (AVFC) RE HSD00 (Standing Proxy: The Hong Kong and Shanghai Banking Corporation Limited, Tokyo Branch) Citigroup Global Markets Japan Inc. 27,693,100 22,653,000 16,471,822 9,130,700 8,298,300 8,124,800 7,785,900 7,004,813 Controlling Shareholder Parent Company N/A N/A Supplementary Explanation Percentage (%) in the above table is calculated excluding treasury shares (37,466,500 shares). 5.92% 4.84% 4.28% 3.52% 1.95% 1.77% 1.74% 1.66% 1.50% – 6 – 3. Corporate Profile Stock Exchange Fiscal Year-End Type of Business Number of Employees (Consolidated) as of the End of the Previous Fiscal Year Revenue (Consolidated) as of the End of the Previous Fiscal Year Number of Consolidated Subsidiaries as of the End of the Previous Fiscal Year Tokyo Stock Exchange Prime February Real Estate Between 100 and 500 Between JPY 10 billion and JPY 100 billion Between 50 and 100 4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling or Major Shareholder In the event of any transactions with its major shareholder (Ichigo Trust), Ichigo takes special care to protect the interests of minority shareholders and has in place appropriate procedures to that effect, including the due diligence of all transactions by the Compliance Department, Internal Audit Department, Audit Committee, Board, and external legal counsel. Although Ichigo currently does not have a controlling shareholder, the majority of the Board are Independent Directors. 5. Other Special Circumstances which may have Material Impact on Corporate Governance N/A II. Business Organization and Other Corporate Governance Systems for Decision-Making, Business Execution, and Management Oversight 1. Organizational Structure Organizational Form Directors Company with Committees (Nominating, Audit and Compensation) Maximum Number of Directors Stipulated in Articles of Incorporation Term of Office Stipulated in Articles of Incorporation 12 1 year Board Chairperson Number of Directors Appointment of Independent Directors Number of Independent Directors Chairman (Internal Director) 10 Yes 6 – 7 – Relationship of Independent Directors with Ichigo (1) k Relationship with Ichigo* Name Background j i f g h a b c d e Management (unrelated to Ichigo) Accountant Management (unrelated to Ichigo) Management (unrelated to Ichigo) Management (unrelated to Ichigo) Management (unrelated to Ichigo) Tetsuya Fujita Noriko Kawate Yukio Suzuki Masatoshi Matsuzaki Nobuhide Nakaido Amina Sugimoto * Categories for “Relationship with Ichigo” ○ 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 Ichigo or its subsidiaries b. Non-executive Director or executive of a parent company of Ichigo c. Executive of a fellow subsidiary of Ichigo d. A party whose major client or supplier is Ichigo or an executive thereof e. Major client or supplier of Ichigo or an executive thereof f. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from Ichigo besides compensation as a Director/Auditor g. Major shareholder of Ichigo (or an executive of the said major shareholder if the shareholder is a legal entity) h. Executive of a client or supplier of Ichigo (which does not correspond to any of d, e, or f) i. Executive of a company with which Ichigo Independent Directors/Auditors are mutually appointed j. Executive of a company or organization that receives a donation from Ichigo k. Others Relationship of Independent Directors with Ichigo (2) Name Tetsuya Fujita Registered with TSE as Independent Director Yes Noriko Kawate Yes Committee Membership Nominating/ Compensation/ Audit Nominating/ Compensation/ Audit Reason for Appointment Ichigo’s Nominating Committee and Board have nominated Mr. Tetsuya Fujita as a candidate for Director based upon his extensive knowledge and experience working for a leading property insurance company and a leading life insurance company. Ichigo’s Nominating Committee and Board have nominated Ms. Noriko Kawate as a candidate for Director based upon her experience in statutory audit at a major auditing firm and her experience in accounting and tax advisory as a certified public accountant and tax accountant. – 8 – Name Committee Membership Yukio Suzuki Audit Registered with TSE as Independent Director Yes Masatoshi Matsuzaki Nominating/ Compensation Yes Nobuhide Nakaido Yes Amina Sugimoto Yes Reason for Appointment Ichigo’s Nominating Committee and Board have nominated Mr. Yukio Suzuki as a candidate for Director based upon his extensive experience and knowledge of corporate and securities research from serving important roles at a securities company, think tank, and asset management company at a major financial group, and his experience and knowledge in operational monitoring and risk control, which he can draw upon to fully monitor Ichigo’s activities. Ichigo’s Nominating Committee and Board have nominated Mr. Masatoshi Matsuzaki as a candidate for Director based upon his extensive experience as the CEO and Chairman leading a major global office equipment manufacturer, driving a positive structural transformation and business innovation, and his leading role in developing a best-practice board committee system to support strong corporate governance, which he can draw upon to fully monitor Ichigo’s activities on behalf of shareholders. Ichigo’s Nominating Committee and Board have nominated Mr. Nobuhide Nakaido as a candidate for Director based upon his extensive experience and knowledge as the Executive Vice President of one of Japan’s largest trading companies and President & Chairman of a leading Japanese IT system company, driving innovation in the IT service industry and increasing shareholder value through workstyle and workplace transformation, which he can draw upon to fully monitor Ichigo’s activities on behalf of shareholders. Ichigo’s Nominating Committee and Board have nominated Ms. Amina Sugimoto as a candidate for Director based upon her extensive experience and knowledge from having obtained a master’s degree from Tokyo University and a doctorate in public health from the London School of Hygiene and Tropical Medicine, from having served as a strategy and marketing advisor for global medical and healthcare startups, and from currently serving as the Representative Director at a healthcare startup. She has been nominated for her global and next-generational perspective, which she can draw upon to fully monitor Ichigo’s activities on behalf of shareholders. – 9 – Committees Committee Composition and Chairperson Nominating Committee Compensation Committee Audit Committee All Committee Members Full-time Members Internal Directors Independent Directors Chairperson 2 2 0 3 3 3 Internal Director Internal Director Independent Director Statutory Executive Officers Number of Statutory Executive Officers 11 Statutory Executive Officer Duty Status Name Representative Authority Additional Duties as Director Nominating Committee Member Yes Compensation Committee Member Yes Additional Duties as Employee Scott Callon Takuma Hasegawa Minoru Ishihara Eri Murai Go Watanabe Takeyuki Yoshimatsu Takanori Sakamatsu Kazunori Kurita Takashi Ohigawa Yasutoyo Senda Kenji Tanaka Yes No No No No No No No No No Yes No No No No No No No No No No No No No Yes Yes Yes Yes Yes Yes Yes 5 5 3 Yes Yes No No No No No No No No No 1 1 0 Yes Yes Yes Yes No No No No No No No – 10 – Audit Structure Appointment of Directors and/or Employees to Support the Audit Committee Yes Matters Related to the Independence of Directors and Employees from Statutory Executive Officers Directors and employees who assist in the performance of the duties of the Audit Committee report to the Audit Committee. The appointment, transfer, appraisal, and compensation of the relevant employees require the consent of the Audit Committee. This ensures independence from the Statutory Executive Officers. Other matters regarding the independence of such Directors and employees are pursuant to internal rules as separately provided. Coordination between the Audit Committee, External Auditors, and Internal Audit Executive decisions are monitored by both the Audit Committee, from the perspective of supervision, and the Internal Audit Department, from the perspective of execution. The Internal Audit Department works closely with the Audit Committee and its members in discussing the internal audit plan, conducting internal audits, and reporting findings to management. Additionally, the Audit Committee and Internal Audit Department work closely with External Auditors by discussing and exchanging views on important matters. Independent Directors Number of Independent Directors 6 Compensation & Incentives Incentive Policies for Directors and/or Statutory Executive Officers Supplementary Explanation Performance-Linked Compensation, Stock Options Compensation of Directors and Statutory Executive Officers is determined based on a variety of factors, including job content, job performance, and market-based compensation. – Compensation of Directors Compensation of Directors consists of a base salary and a performance-based bonus. The base salary is a fixed amount based on the role and responsibilities of each Director. The performance-based bonus is based on Ichigo’s total corporate performance, the Director’s level of contribution towards value creation across the Ichigo Group, and the Director’s level of achievement of their respective goals. – Compensation of Statutory Executive Officers Compensation of Statutory Executive Officers consists of a base salary and a performance-based bonus. The base salary is a fixed amount based on the role of each Statutory Executive Officer. The performance-based bonus is based on Ichigo’s total corporate performance, the performance of the operating unit or area for which the Statutory Executive Officer is responsible, the Statutory Executive Officer’s individual performance, and the Statutory Executive Officer’s contribution towards enhancing operations and alignment with the corporate mission and corporate code of conduct. – 11 – Stock options are granted to further strengthen commitment towards Ichigo’s sustainable growth and the maximization of shareholder value. These stock options are granted in addition to the compensation described above and are awarded based on the position and specific role and responsibility of the recipient. Internal Directors, Independent Directors, Statutory Executive Officers, and Employees – Stock Options Recipients of Stock Options Supplementary Explanation All Ichigo employees work together to strengthen Ichigo’s finances and operating performance and increase shareholder value. To this end, stock options are issued to all Directors and employees to further strengthen this commitment. Compensation for Directors and Statutory Executive Officers Disclosure of Individual Directors’ Compensation Disclosure of Individual Statutory Executive Officers’ Compensation N/A N/A Supplementary Explanation Aggregate compensation is disclosed for Directors, Statutory Executive Officers, and Independent Directors. Policy on Determining Compensation Amounts Yes and Calculation Methods Disclosure of Policy on Determining Compensation Amounts and Calculation Methods – Compensation of Internal Directors Compensation of Directors consists of a base salary and a performance-based bonus. The base salary is a fixed amount based on the role and responsibilities of each Director. The performance-based bonus is based on Ichigo’s total corporate performance, the Director’s level of contribution towards value creation across the Ichigo Group, and the Director’s level of achievement of their respective goals. Compensation of Independent Directors Compensation of Independent Directors consists of a base salary and a performance-based bonus. The base salary is a fixed amount in accordance with the number of points assigned to each Independent Director based on their respective supervisory roles and past management experience. If a performance-based director bonus is to be paid, the amount is based on a point system, similar to that used for base salary, taking into consideration the importance of the supervisory function and the contribution towards value creation across the Ichigo Group. – Compensation of Statutory Executive Officers See above. – 12 – – Stock Option See above. Ichigo has adopted a Company with Committees (Nominating, Audit, Compensation) governance structure, and the Compensation Committee, comprised of a majority of Independent Directors, has the authority to decide Ichigo’s compensation policy and the compensation amount for each officer. The Compensation Committee Chairman drafts a proposal regarding each Director and Statutory Executive Officer’s compensation, and the Compensation Committee members evaluate the performance of each individual to finalize the proposal. In addition, the Compensation Committee acts as an advisory body with respect to compensation at all Ichigo group companies and reviews the compensation of all officers within the Ichigo group to ensure strong corporate governance. The Compensation Committee is comprised of five members, two of which are Internal Directors and three are Independent Directors. The Committee held six meetings this year with 100% attendance by all five members. Compensation of Ichigo’s Internal Directors consists of a base salary, a performance-based bonus, and stock options, with the breakdown 20% to 40% base salary, 45% to 70% performance-based bonus, and 10% to 15% stock options. The proportion of the performance-based bonus and stock options is higher than the base salary in order to align their interests with Ichigo shareholders and reflect their responsibility as members of senior management for Ichigo’s total corporate performance. (The proportion of base salary relative to total compensation is higher for Statutory Executive Officers.) The performance-based bonus is based on a comprehensive assessment of Ichigo’s total corporate performance and growth in shareholder value and incorporates metrics including achievement of Ichigo’s annual operating profit, recurring profit, and net income forecasts, shareholder returns (dividends and buybacks), and progress with respect to the KPIs in the Ichigo 2030 long-term vision. Administrative Support for Independent Directors – The Board Secretariat supports the effective execution of duties by the Board by drafting meeting agendas and related materials, providing pre-notification of the agendas, scheduling meetings, and recording meeting minutes. – The Nominating Committee Secretariat ensures the effective execution of duties by drafting meeting agendas and related materials, providing pre-notification of the agendas, scheduling meetings, and recording meeting minutes. – The Audit Committee Secretariat and Ichigo employees selected by the Audit Committee ensure the effective execution of duties by the Audit Committee by drafting meeting agendas and related materials, providing pre-notification of the agendas, scheduling meetings, and recording meeting minutes. – The Compensation Committee Secretariat ensures the effective execution of duties by the Compensation Committee by drafting meeting agendas and related materials, providing pre-notification of the agendas, scheduling meetings, and recording meeting minutes. 2. Overview of Current Corporate Governance System Ichigo operates under the Company with Committees (Nominating, Audit, Compensation) structure to ensure robust supervision of management, agile business execution, and effective, transparent, and ethical business operations. – Business Execution Aside from responsibilities specifically assigned to the Board by law or Ichigo’s Articles of Incorporation, internal rules, and shareholder meeting resolutions, the Board delegates responsibility for business execution to the Statutory Executive Officers, who in turn lead and direct employees based on the management policy set by the Board and in accordance with their respective assigned roles. The Chairman – 13 – and President oversee Statutory Executive Officers serving as division heads, and in turn these division heads oversee their respective teams. Of Ichigo’s Statutory Executive Officers, there are ten men and one woman. Ichigo regularly holds a Senior Management Meeting at which important business matters across all of Ichigo’s businesses are deliberated. Senior Management Meeting participants are: Scott Callon (Chairman), Takuma Hasegawa (President), Minoru Ishihara (Executive Vice President & COO), Eri Murai (Executive Managing Director), Go Watanabe (Executive Managing Director), Takeyuki Yoshimatsu (Executive Managing Director), Takanori Sakamatsu (Senior Statutory Executive Officer), Hiroshi Iwai (President, Ichigo Investment Advisors), Yasuhide Hosono (President, Ichigo Estate), Ryutaro Yamamoto (Executive Vice President, Ichigo Estate), Eiichiro Gotoh (President, Ichigo ECO Energy), and Masahiko Koketsu (President, Ichigo Owners). Ichigo works to achieve efficient business execution by setting a clear management policy and business targets. Specifically, Ichigo sets a business plan, the President’s annual policy direction, and annual business goals for Ichigo and each business unit, and these are shared with all of Ichigo’s Directors and employees. In addition, the Compliance Department reviews all material business matters. – Monitoring The Board sets a long-term management policy and monitors business execution based on this. In order to promote active dialogue and effective internal control, the Board is comprised of six Independent Directors with specialized fields of expertise and four Internal Directors also serving as Statutory Executive Officers (Chairman, President, Executive Vice President, and Executive Managing Director). Of the ten members of the Board, three are women. Ichigo has three statutory committees (Nominating, Audit, Compensation) and a Compliance Committee. Nominating Committee (Held 5 meetings in the previous fiscal year): Chairman: Takuma Hasegawa; Members: Scott Callon, Tetsuya Fujita, Noriko Kawate, Masatoshi Matsuzaki Audit Committee (Held 20 meetings in the previous fiscal year): Chairman: Tetsuya Fujita; Members: Noriko Kawate, Yukio Suzuki Compensation Committee (Held 6 meetings in the previous fiscal year): Chairman: Takuma Hasegawa; Members: Scott Callon, Tetsuya Fujita, Noriko Kawate, Masatoshi Matsuzaki Compliance Committee (Held 2 meetings in the previous fiscal year): Chairman: Takuma Hasegawa; Vice Chairman: Yukio Suzuki; Members: Scott Callon, Tetsuya Fujita – Independent Director Activities in the Previous Fiscal Year Tetsuya Fujita: Attended 11 out of 11 meetings (100%) of the Board of Directors. Attended 20 out of 20 meetings (100%) of the Audit Committee and attended 2 out of 2 meetings (100%) of the Compliance Committee. Attended 5 out of 5 meetings (100%) of the Nominating Committee and 6 out of 6 meetings (100%) of the Compensation Committee. Commented and advised on resolutions and discussions from an objective standpoint independent from the management team, primarily in the areas of corporate management, risk management, and ESG. Noriko Kawate: Attended 11 out of 11 meetings (100%) of the Board of Directors. Attended 20 out of 20 meetings (100%) of the Audit Committee. Attended 5 out of 5 meetings (100%) of the Nominating Committee and 6 out of 6 meetings (100%) of the Compensation Committee. Commented and advised on resolutions and discussions from an objective standpoint independent from the management team, primarily in the areas of finance and investment, and risk management. – 14 – Yukio Suzuki: Attended 11 out of 11 meetings (100%) of the Board of Directors. Attended 20 out of 20 meetings (100%) of the Audit Committee and attended 2 out of 2 meetings (100%) of the Compliance Committee. Commented and advised on resolutions and discussions from an objective standpoint independent from the management team, primarily in the areas of corporate management, finance and investment, and risk management. Masatoshi Matsuzaki: Attended 11 out of 11 meetings (100%) of the Board of Directors. Attended 5 out of 5 meetings (100%) of the Nominating Committee. Attended 6 out of 6 meetings (100%) of the Compensation Committee. Commented and advised on resolutions and discussions from an objective standpoint independent from the management team, primarily in the areas of ESG, and human resource development. Nobuhide Nakaido: Attended 11 out of 11 meetings (100%) of the Board of Directors since becoming a director. Commented and advised on resolutions and discussions from an objective standpoint independent from the management team, primarily in the areas of corporate management, finance and investment, and human resource development. – Independent Director Limited Liability Agreements In order to retain Independent Directors of the highest quality, Ichigo has in place limited liability agreements pursuant to Article 427 Clause 1 and Article 423 Clause 1 of the Company Law. These agreements set the maximum liability to be borne by an Independent Director as the minimum liable amount specified in Article 425 Clause 1 of the Company Law. However, limitation of liability is predicated upon execution of duty in good faith and in absence of any gross negligence. 3. Reason for Adoption of Current Corporate Governance System Ichigo is working to strengthen its corporate governance to ensure effective and ethical management and drive sustainable shareholder value creation. Since May 2006, Ichigo has adopted the Company with Committees (Nominating, Audit, Compensation) governance system to ensure robust supervision of management, agile business execution, and effective, transparent, and ethical business operations. III. Measures for Shareholders and Other Stakeholders 1. Measures to Vitalize Shareholder Meetings and Promote the Exercise of Voting Rights Scheduling the Meeting to Maximize Attendance Allowing Electronic Exercise of Voting Rights Participating in Electronic Voting Platform Providing Shareholder Meeting Materials in English Other Supplementary Explanation Ichigo always holds its shareholder meetings on the weekends in order to make it easier for shareholders to participate. Ichigo allows for electronic voting via the Internet. Ichigo encourages voting from as many shareholders as possible by participating in the TSE’s electronic voting platform, thus making it easier for institutional investors, both domestic and overseas, to exercise their votes. This also helps to ensure that the interests of shareholders are reflected in the management of Ichigo. Ichigo provides early disclosure of its shareholder meeting materials in both Japanese and English on both the TSE’s electronic voting platform as well as its corporate website. Ichigo views its shareholder meeting as a critical forum for dialogue with its shareholders. In order to ensure that shareholders have sufficient time to understand and consider agenda items, the convocation notice is sent three weeks in advance of the shareholder meeting. At its shareholder meetings, Ichigo ensures that shareholders have ample opportunity to engage in dialogue with the company and have questions answered. – 15 – 2. IR Activities Regular Investor Briefings for Analysts and Institutional Investors Regular Investor Briefings for Overseas Investors Posting of IR Materials on Website Establishment of Department and/or Manager in Charge of IR Other Supplementary Explanation Ichigo conducts half-year and full-year results meetings, along with Q1 and Q3 earnings calls, led by the Chairman and President. Ichigo also conducts small meetings as well as one-on-one investor meetings on a regular basis. Ichigo also participates in investor conferences hosted by securities companies. Ichigo holds an English-language earnings call every quarter, led by the Chairman, along with conducting one-on-one meetings and participating in investor conferences. Ichigo posts IR materials on its IR release page of the corporate website immediately after disclosure via the Tokyo Stock Exchange. Ichigo also posts financial statements, press releases, and corporate presentation materials, including video/audio recordings of earnings meetings and earnings calls, on the website. Investors and shareholders can also send inquiry emails to the IR team using a form on the website. In order to ensure that differential language disclosure does not result in any information disadvantage for all Ichigo stakeholders, Ichigo releases its IR information simultaneously in both Japanese and English. Ichigo’s investor and shareholder relations are handled by the IR team within the Finance Division. Communication with investors and shareholders is conducted via phone calls, email, and conventional mail. Ichigo sends IR-related announcements and updates to investors in real-time via an email distribution service. In order to promote a deeper understanding of Ichigo and its businesses, Ichigo hosts a business results meeting for the benefit of shareholders on the same day as its shareholder meeting. – 16 – 3. Measures to Ensure Due Respect for Stakeholders Internal Rules for Respecting the Position of Stakeholders Environmental & CSR Activities Information Provision to Stakeholders Other Supplementary Explanation Ichigo’s mission is to contribute to Japanese society. All of Ichigo’s business activities are conducted with this mission at heart and in strict compliance with Ichigo’s Code of Corporate Ethics, Code of Conduct, and Ichigo’s internal rules. With its mission of contributing to Japanese society, Ichigo puts environmental protection and ESG activities at the center of its business, and discloses these initiatives in its Sustainability Report. (Please refer to Ichigo’s website for details on Ichigo’s ESG initiatives.) Ichigo’s Code of Corporate Ethics stipulates that Ichigo will ensure a balanced relationship between clients, shareholders, and all other stakeholders, and make disclosures in a fair, timely, and equitable manner. It further stipulates that Ichigo will focus on transparent and ethical management as a means to enhance its business operations. Supportive Workstyle and Workplace Initiatives ・Ichigo offers all employees the option of a shortened six-hour work day in order to accommodate the diverse needs of employees at different life stages and with different personal circumstances. ・Ichigo provides employees with the option of maternity/paternity leave for two years (or up to three years under certain circumstances); subsidies (JPY 10,000 per day for a maximum of 10 days per month) to help cover childcare and nursing expenses during overtime, weekend work, and business trips; and paid leave to tend to young children. ・To support the health of and prevent the illness of employees working certain levels of overtime hours, Ichigo offers regular check-ups with an occupational health physician. ・Ichigo’s retirement age is set at 70. ・Ichigo has implemented a remote work policy to provide employees with the flexibility to work outside the office and support their job satisfaction and productivity. Percentage of women in executive positions: 10.5% Percentage of women in management positions (includes Team Leaders): 34.4% Percentage of women employees: 44.9% Return rate of employees who take maternity/paternity leave: 100% (as of February 28, 2022） Health Management Initiatives ・Best Place to Work initiative to promote the health of all employees. ・Reduction of work hours (monitoring overtime, opportunities to meet with occupational health physicians, management training, and ongoing monitoring by the HR Division). Average overtime was reduced from 13 hours in 2020 to 10.7 hours in 2021, and was 11.7 hours in 2022. ・Mental healthcare training and mental healthcare checks for all ・Enhanced periodic health check-ups and subsidies for follow-up medical employees. examinations. ・Promotion of the full use of paid vacation days. ・Sharing of health-related information. ・Ichigo University seminars on lifestyle-related health issues. – 17 – ・Provision of a positive working environment, including flexible and versatile office layouts, communal spaces, nutritional foods for employees, etc. ・Sponsorship of Ichigo clubs such as golf, running, soccer, and flower arrangement. Covid Initiatives ・Shift to remote work via limiting employees in the office to 30% and giving department heads responsibility to manage the number of employees in the office. ・Introduction of flextime, shifting the start of business hours by one hour to help reduce public commute congestion, and implementation of temperature checks, sanitization, and social distancing measures. ・Support for employees in adapting to work environment changes during Covid, including regular surveys to check employee health and sharing health-related information with respect to working remotely. – 18 – IV. Internal Control Systems 1. Internal Control System Details Pursuant to Japan’s Company Law, Ichigo has set forth a “Basic Policy for the Establishment of Structure of Internal Controls,” and established the required internal policies, ensured the legality and efficiency of Ichigo’s operations, and established an appropriate risk management system. Ichigo will strive to improve and reinforce these systems through continuous review. a. Internal Controls to Ensure that Statutory Executive Officers and Employees Execute Their Duties in Compliance with Laws and Regulations and Ichigo’s Articles of Incorporation (i) Corporate Governance – Ichigo’s Board determines material matters regarding management and monitors the execution of duties by Statutory Executive Officers pursuant to laws and regulations, the Articles of Incorporation, shareholder meeting resolutions, Ichigo’s corporate mission, Board rules, Ichigo’s Code of Corporate Ethics, and Ichigo’s Code of Conduct. – The Statutory Executive Officers make decisions on the execution of business that are delegated by the Board, and perform their duties pursuant to these decisions, Board resolutions, and internal rules. – In order for the Board to monitor the execution of duties by Statutory Executive Officers, the Statutory Executive Officers report on the status of the execution of business to the Board at least quarterly. Statutory Executive Officers monitor and supervise the execution of one another. – The status of the execution of duties by Statutory Executive Officers will be audited by the Audit Committee. (ii) Compliance – Ichigo has established a Code of Corporate Ethics and Code of Conduct which provide rules and standards for action to be taken by all employees including Directors and Statutory Executive Officers. – Ichigo has established a Compliance Committee to deliberate major issues regarding compliance. The Compliance Committee is independent from the Statutory Executive Officers. – Ichigo’s compliance structure comprises Responsible Officers (Chairman and President), a Statutory Executive Officer (Corporate Operations), a Compliance Officer, and a Compliance Department under Corporate Operations. These parties work together across businesses and Ichigo group companies to ensure proper compliance across Ichigo. – Ichigo has in place a whistleblower system whereby Directors, Statutory Executive Officers, and employees can report any questionable acts to a designated internal person or external lawyer. (iii) Structure to Ensure Appropriate Financial Reports – Ichigo has established internal systems to ensure lawful and appropriate financial reports by establishing internal rules and by complying with the Financial Instruments and Exchange Act, accounting standards, and other related laws and regulations. – The President, Statutory Executive Officers (Audit, Finance, HR, and Corporate Operations), and Internal Audit Department promote and establish an internal structure which complies with J-SOX. (iv) Internal Audit – Ichigo has established a Statutory Executive Officer (Audit) and Internal Audit function which conducts an internal audit with respect to compliance with laws and regulations, the Articles of Incorporation, internal rules, and the appropriateness of the execution of duties, and reports the results of the audit to the Audit Committee, the Chairman, the President, and the Board. The Statutory Executive Officer (Audit) and the Internal Audit Department reports on corrective activities called for by the audit to the Audit Committee, the Chairman, the President, and the Board. The Internal Audit Department closely collaborates with the Audit Committee and Audit Committee members to establish an internal audit plan and reports the results of audits. The Audit Committee, Audit Department, and the Corporate Auditor also hold meetings as required to exchange views on material audit-related matters. – 19 – (v) Elimination of Involvement with Anti-Social Forces – In order to prevent anti-social forces from entering into the real estate and financial markets, Ichigo has established a Code of Corporate Ethics which prohibits interaction with anti-social forces, working in cooperation with the Police Department and other institutions. – Ichigo has designated Statutory Executive Officer (Corporate Operations), Compliance Officer, and the Compliance Department as responsible for working to prevent any and all interaction with anti-social forces by: coordinating with the Police Department, external counsels, and other external experts; becoming a member of police-related institutions; establishing manuals for the screening of anti-social forces; conducting due diligence checks on transaction counterparties; including language in contracts to prevent interaction with anti-social forces; and establishing manuals with respect to the handling of interaction with anti-social forces. – In the event Ichigo encounters an anti-social force, the Statutory Executive Officer (Executive Vice President & COO) shall promptly contact and relay the information to the police, external counsel, and all Ichigo companies and take a forceful attitude and fully reject any interaction with the anti-social force. (vi) Structure to Prevent Insider Trading – In order to prevent insider trading, the Chairman and President have appointed a Statutory Executive Officer (Finance) as the person responsible for information control with regards to information specified by the stock exchange and a Statutory Executive Officer (Corporate Operations) as the person responsible for information control by Ichigo’s internal rules. The Statutory Executive Officer (Finance), responsible for providing the management structure of internal information and for the management of transactions of specific securities by employees, thoroughly prevents insider trading within each Ichigo company in cooperation with the designated Statutory Executive Officer (Finance). (vii) Initiatives to Fight Climate Change – Ichigo’s President is responsible for initiatives to fight climate change, and has directed the Statutory Executive Officer (Executive Vice President & COO) and the ReGeneration Group to coordinate with all Ichigo group companies to reduce greenhouse gases produced by Ichigo’s businesses. The President sets long-term and annual greenhouse gas reduction targets, and together with the Statutory Executive Officer (Executive Vice President & COO) and the ReGeneration Group, monitors progress against these targets. The Board monitors the progress of these climate change initiatives based upon annual reports after fiscal-year end from the President, Statutory Executive Officer (Executive Vice President & COO), and the ReGeneration Group. b. Systems for the Retention and Management of Information Pertaining to Execution of Duties by Statutory Executive Officers Ichigo properly retains and manages documents and other information pertaining to the execution of duties by the Statutory Executive Officers with due care and in compliance with laws and regulations and internal rules. c. Risk Management Policies and Systems (i) The Board delegates decision-making authority as appropriate to Statutory Executive Officers to support the agile execution of duties. All employees are responsible to establish policies with respect to their own activities that are appropriate to effective execution of risk management. (ii) As a means to facilitate strong risk management and appropriate handling of material risks, Ichigo has established a risk management structure comprised of Responsible Officers (Chairman and President), the Overseeing Statutory Executive Officer (Corporate Operations), and a Risk Management Department. (iii) The Statutory Executive Officer (Corporate Operations) together with the Risk Management Department are responsible for monitoring risks associated with business execution. – 20 – (iv) The Statutory Executive Officer (Corporate Operations) is responsible for setting and coordinating a risk management framework to handle situations of crisis, including natural disasters. In the event of a crisis, a crisis management team will be established under the President, aimed at preventing any further damages and a speedy recovery of business. d. Systems to Ensure Effective Execution of Duties by Statutory Executive Officers (i) The Board authorizes Statutory Executive Officers to make certain decisions for the appropriate and agile execution of duties. In order to comprehensively discuss and deliberate on material management matters, the Statutory Executive Officer (Finance) convenes regular management meetings comprised of the Chairman & Representative Statutory Executive Officer, the President & Representative Statutory Executive Officer, the Executive Vice President & Statutory Executive Officer, and the President of major subsidiaries, thus ensuring smooth execution of duties by Statutory Executive Officers. (ii) Ichigo creates mid-term management plans, annual Ichigo-wide business targets, and annual subsidiary and division business targets. The Statutory Executive Officer (Finance) ensures effective and efficient management by tracking Ichigo’s progress against these plans and targets. e. Directors and Employees Assisting the Performance of the Duties of the Audit Committee (i) Directors who assist in the performance of the duties of the Audit Committee will be determined by the Board in line with the opinions of the Audit Committee. (ii) Employees assisting the performance of the duties of the Audit Committee are members of the Internal Audit Department appointed by the Head of the Internal Audit Department and the Audit Committee. Following the direction of the Audit Committee or a member of the Audit Committee assigned by the Audit Committee, the Head of the Internal Audit Department manages the members of the department or directly leads the execution of assisting in the performance of the duties of the Audit Committee. (iii) Statutory Executive Officers must confirm that the Audit Committee and employees assisting in the performance of the duties of the Audit Committee receive no undue constraints in carrying out duties. In case such employees receive undue constraints in carrying out duties, the employees can report to the Audit Committee or one or more Audit Committee Members appointed by the Audit Committee in advance, and request for such constraints to be resolved. f. Independence of Directors and Employees from Statutory Executive Officers Directors and employees who assist in the performance of the duties of the Audit Committee report to the Audit Committee. The appointment, transfer, appraisal, and compensation of the relevant employees require the consent of the Audit Committee. This ensures independence from the Statutory Executive Officers. Other matters regarding the independence of such Directors and employees from the Statutory Executive Officers are pursuant to internal rules as separately provided. g. Reporting by Directors, Statutory Executive Officers and Employees to the Audit Committee and Other Systems for Reporting to the Audit Committee (i) Audit Committee Members may attend the meetings of the Board, the Compliance Committee, and other important meetings and listen to the status of the execution of duties by Statutory Executive Officers, inspect related materials, and ask for explanations and reports at the meetings. (ii) All Statutory Executive Officers, department heads, and other employees must explain and report to the Audit Committee and Audit Committee Members as required. (iii) Statutory Executive Officers and employees must immediately report on the matters below to the Audit Committee or to its members. Where determined to be necessary, Statutory Executive Officers and employees can also report matters not listed below to the Audit Committee or its members. If the matter reported falls within Ichigo’s Whistleblower policy, then such report shall follow the procedures of the policy. Any person making a report shall not be relieved of employment and shall not receive any disadvantageous treatment directly as a result of making such report. – 21 – 1. Any matter that may have a material impact on Ichigo’s business operation and financial standing (including matters of compliance and risk management) 2. Any matter that has material impact on Ichigo’s internal control systems 3. Any matter that impacts Ichigo’s handling of complaints or whistleblower reports 4. Any matter stipulated in the rules with respect to matters to be reported to the Audit Committee 5. Any matter that may materially impact the audits conducted by the Audit Committee or its members h. Other Systems to Ensure Effective Audits by the Audit Committee (i) The Internal Audit Department works closely with the Audit Committee and the Audit Committee Members by discussing the internal audit plan and handles the reporting of the results. Audit Committee Members and the Internal Audit Department also work closely with the External Auditor and exchange opinions about internal audit issues. (ii) The Audit Committee or the Audit Committee Member designated by the Audit Committee may retain any lawyers, certified public accountants, consultants, and other outside advisors at Ichigo’s cost without prior approval from the Board or the Statutory Executive Officers. (iii) The Audit Committee Member designated by the Audit Committee reports the status of the execution of duties by the Audit Committee to the Board at least quarterly. i. Systems to Ensure Fully Appropriate Business Activities by Ichigo and its Subsidiaries (i) Ichigo’s subsidiaries share Ichigo’s Management Philosophy, Code of Corporate Ethics, and Code of Conduct. (ii) In managing its subsidiaries, Ichigo provides advice with respect to each subsidiary’s corporate governance, compliance, risk management, and prevention of involvement with anti-social forces pursuant to Ichigo’s internal rules, in addition to Ichigo exercising its rights as a shareholder. (iii) Ichigo has established a Business Promotion Department to supervise and monitor Ichigo subsidiaries, including de