Monogatari : Corporate Governance Report

Corporate Governance

CORPORATE GOVERNANCE	The Monogatari Corporation

Last Update: July 1, 2022

The Monogatari Corporation

Hisayuki Kato, President and Representative Director

Inquiries: Growth Strategy Office, [phone]

Securities Code: 3097

The corporate governance of The Monogatari Corporation is described below.

Ⅰ . Basic Views on Corporate Governance, Capital Structure, Corporate Profile, and Other Basic Information

1. Basic Views

We have established five basic policies for corporate governance: prompt decision-making and pursuit of management efficiency, clarification of management responsibilities, enhancement of management transparency and compliance systems, strengthening of the audit function by auditors for the status of business execution by directors, and realization of risk management philosophy. By committing to this management stance, we believe that we can earn the trust of our shareholders and all other stakeholders, increase corporate value over the long term, and enable sustainable growth.

[Reasons for Noncompliance with the Principles of the Corporate Governance Code]

[Supplemental Principle 4-11(1): Diversity of the Board of Directors as a whole]

Our company nominates candidates for directors based on the results of deliberations by the voluntary Nomination and Compensation Committee, taking into account the Board of Directors' overall approach to diversity and balance of knowledge, experience and ability. Internal directors are nominated based on the balance of their abilities in sales, accounting, risk management and other areas. Outside directors are nominated based on a balance of experience and abilities, as well as management experience at other companies and the perspective of diversity. When necessary, we have established a system that is more conscious of the balance of knowledge, experience, and abilities, diversity, and scale of the Board of Directors as a whole. In addition, we will work to disclose a skills matrix, etc. that list the knowledge, experience, abilities and other skills of each director.

[Disclosure Based on the Principles of the Corporate Governance Code] (Update)

The status of implementation of each principle of the Corporate Governance Code is described in the " Initiatives Related to Japan's Corporate Governance Code" posted on our website below.

http://www.monogatari.co.jp/ir/c_g.html

2． Capital Structure

Foreign Shareholding Ratio (Update) 20% or more but less than 30%

[Status of Major Shareholders] (Update)

	Name / Company Name	Number of Shares	Percentage
	Owned	(%)
	The Master Trust Bank of Japan, Ltd. (Trust Account)	1,202,800	9.95
	Yoshio Kobayashi		1,009,714	8.35
	Custody Bank of Japan, Ltd. (Trust Account)		692,000	5.72
	Yusuke Kobayashi		529,600	4.38
	Sanae Kobayashi		419,080	3.46
	NORTHERN TRUST CO. （AVFC） RE FIDELITY FUNDS (Standing proxy: The Hongkong and	345,296	2.85
	Shanghai Banking Corporation Limited, Tokyo Branch)
	AOYAMA TRADING Co., Ltd.		296,000	2.44
	Toyohashi Shinkin Bank		220,000	1.82
	Yohei Kobayashi		207,270	1.71
	JP MORGAN CHASE BANK		191,274	1.58
	Controlling Shareholder (except for	―――
	Parent Company)
	Parent Company	NA

―――

3． Corporate Attributes

Listed Stock Market and Market Section (Update)	Tokyo Stock Exchange Prime Market
Fiscal Year-End	June
Type of Business	Retail trade
Number of Employees (consolidated) as of the End of the Previous	More than 1000
Fiscal Year
Sales (consolidated) as of the End of the Previous Fiscal Year	From ¥10 billion to less than ¥100 billion
Number of Consolidated Subsidiaries as of the End of the Previous	Less than 10
Fiscal Year

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

―――

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 Corporate Auditors

[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

Appointment of Outside Directors

Number of Outside Directors

Number of Independent Directors out of Outside Directors

13

1 year

Chairperson (not concurrently serving as president)

9

Appointed

4

4

Relationship with the Company (1) (Update)

Name

Attribute

Relationship with the Company*

a

b

c

d

e

f

g

h

i

j

k

Moriyasu Kasahara

From another company

Yukitaka Nishikawa

From another company

Masahiro Sumikawa

From another company

Kana Yasuda

Certified Public Accountant

• 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
• 1. Executive of the Company or its subsidiary
  2. Non-executivedirector or executive of a parent company of the Company
  3. Executive of a fellow subsidiary company of the Company
  4. A party whose major client or supplier is the Company or an executive thereof
  5. Major client or supplier of the listed company or an executive thereof
  6. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as a director/corporate auditor
  7. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a legal entity)
  8. Executive of a client or supplier company of the Company (which does not correspond to any of d, e, or f) (the director only)
  9. Executive of a company, between which and the Company outside directors/corporate auditor are mutually appointed (the director only)
  10. Executive of a company or organization that receives a donation from the Company (the director only)
  11. Others

Relationship with the Company (2)

Name	Independent	Supplementary Explanation of the	Reasons of Appointment
Director	Relationship
			He built a track record as an employer of a
			business corporation and contributed to the
			development of a local community as vice-
			president of the Toyokawa Chamber of
			Commerce and Industry through his
			activities. He was appointed as an outside
			director, for utilizing his broad knowledge,
Moriyasu Kasahara	○	Not applicable	experience, etc. nurtured in his career for
			management judgment for our company.
			[Reason for appointing her as an
			independent executive]
			He concurrently serves as representative
			director of Hakuyo Corporation,
			Orangetheory Japan Co., Ltd., and Ilex
			Sports Life Inc. However, there is no
			special relationship between our company
			and any of these three companies.
			Accordingly, it was concluded that there
			would be no conflict of interest with general
			shareholders, so she was designated as an
			independent executive.
			Utilizing plenty of experience in the
			Toyohashi Chamber of Commerce and
			Industry, he serves as a practical
			management consultant, and has published
			a lot of books pertaining to management of
			human resources and labor affairs. Like
			this, he is flourishing in a broad range of
Yukitaka Nishikawa	○	Not applicable	fields, so he was appointed for utilizing his
			broad knowledge, experience, etc. nurtured
			in his career for management judgment for
			our company.
			[Reason for appointing her as an
			independent executive]
			He concurrently serves as representative
			director of Business Link Co., Ltd., an
			outside director of Honda Plus Co., Ltd.,
			and an outside director (audit and
			supervisory committee member) of Kaitori
			Okoku Co., Ltd. However, there is no
			special relationship between our company
			and any of these three companies.
			Accordingly, it was concluded that there
			would be no conflict of interest with general
			shareholders, so she was designated as an
			independent executive.

			He is versed in overseas markets, because
			he engaged in various businesses at many
			private companies in mainly Asia, including
			China and Taiwan, and he built a track
			record as an employer by serving as a
			director and an auditor, establishing
			business companies, forming alliances
Masahiro Sumikawa	○	Not applicable	between enterprises, and carrying out M&A.
			Like this, he was appointed as an outside
			director, for utilizing his knowledge and
			experience for management judgment for
			our corporate group.
			[Reason for appointing her as an
			independent executive]
			He concurrently serves as representative
			director of Sumick Co., Ltd. However, there
			is no special relationship between our
			company and the company.
			Accordingly, it was concluded that there
			would be no conflict of interest with general
			shareholders, so she was designated as an
			independent executive.
			She experienced the audit of accounts at
			an audit corporation, established an
			accounting office, and engaged in corporate
			tax affairs. In addition, she was directly in
			charge of the management of the office,
			and served as a director and an auditor of
			many listed companies. She was appointed
			for utilizing her sufficient track record as an
Kana Yasuda	○	Not applicable	employer for strengthening the governance
			of our corporate group and the
			management decision of our company.
			[Reason for appointing her as an
			independent executive]
			She concurrently serves as head of Yasuda
			Tax & Accountant Office, an outside auditor
			of Sugi Holdings Co., Ltd., an outside
			director of Geo Holdings Corporation, an
			outside director of Chuo Spring Co., Ltd.,
			and an outside director (audit and
			supervisory committee member) of
			Kondotec Inc. However, there is no special
			relationship between our company and this
			office and any of these four companies.
			Accordingly, it was concluded that there
			would be no conflict of interest with general
			shareholders, so she was designated as an
			independent executive.

State of establishment of Voluntary Committee(s)

Yes

Corresponding to Nomination Committee or Compensation

Committee

Committee's Name, Composition, and Attributes of Chairperson

Committee's Name

All Committee

Full-time

Inside

Outside

Outside

Other

Chairperson

Directors

Director

Experts

Members

Members

(Name)

(Name)

(Name)

Voluntary Committee

Nomination and

Corresponding to

8

0

3

4

0

1

Outside

Compensation

Nomination

Director

Committee

Committee

Committee

Nomination and

Corresponding to

8

0

3

4

0

1

Outside

Compensation

Compensation

Director

Committee

Committee

Suppleme

In order to increase the transparency and objectivity of the process of deciding candidates for Directors and Auditors, as well as the process of determining compensation for Directors, we have established the Nomination and Compensation Committee, which is composed of a majority of independent outside directors and independent outside auditors. The Nomination and Compensation Committee deliberates on

the following matters and reports to the Board of Directors.

1. Matters concerning the election of candidates for directors and auditors
2. Matters concerning the policy for determining director compensation, etc.
3. Matters concerning determination of individual compensation, etc. for directors
4. Matters concerning dismissal of directors and auditors
5. Matters concerning the appointment and dismissal of representative director
6. Matters concerning the succession plan

The selection of the chairperson of the Nomination and Compensation Committee is elected by resolution of the Nomination and Compensation Committee. The Growth Strategy Office is in charge of the committee's secretariat.

[Corporate Auditors]

Establishment of a Board of Auditors	Established
Maximum Number of Auditors	5
Stipulated in Articles of Incorporation
Number of Auditors	4

Cooperation among Auditors, Accounting Auditors and Internal Audit Office

The auditors will exchange information with the accounting auditors and the Internal Audit Office and work together to ensure the effectiveness of the Company's audits. We will create an environment in which corporate auditors can cooperate with lawyers, certified public accountants, and other outside experts when deemed necessary in the execution of their duties. In addition, in the event the auditor request advance payment or reimbursement of expenses incurred in the performance of his/her duties, such expenses or liabilities shall be promptly disposed of unless deemed unnecessary for the performance of duties by such auditor.

Employees belonging to the Internal Audit Office, which reports directly to the president, assist the auditors when required by them. The appointment and dismissal of these directors will also be decided upon prior consultation with the Board of Auditors.

In order to ensure the independence from directors of the employees assisting the corporate auditors as described above, we establish a system that enables them to perform their duties under the direction and orders of the corporate auditors, and will consult with the Board of Auditors to determine the personnel evaluation of the employees.

Appointment of Outside Auditors

Number of Outside Auditors

Number of Independent Directors out of Outside Auditors

Appointed

4

4

Relationship with the Company (1)

Name

Attribute

Relationship with the Company*

a

b

c

d

e

f

g

h

i

j

k

l

m

Yasunari Imamura

From another company

Hajime Iwata

Certified Tax Accountant

▲

Takeharu Amagi

Certified Public Accountant

△

Ayako Nakagawa

Lawyer

• 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

1. Executive of the Company or its subsidiary
2. Non-executivedirector or accounting advisor of the Company or its subsidiaries
3. Non-executivedirector or executive of a parent company of the Company
4. Corporate auditor of a parent company of the Company
5. Executive of a fellow subsidiary company of the Company
6. A party whose major client or supplier is the Company or an executive thereof
7. Major client or supplier of the Company or an executive thereof
8. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as a corporate auditor
9. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a legal entity)
10. Executive of a client or supplier company of the Company (which does not correspond to any of f, g, or h) (the corporate auditor only)
11. Executive of a company, between which and the Company outside directors/corporate auditors are mutually appointed (the corporate