ID : Corporate Governance Report

Corporate Governance

Last updated: June 20, 2022

ID Holdings Corporation

Masaki Funakoshi, President and Representative Director

Inquiries: Yasuhiro Araki, Manager of Corporate Strategy Department Tel: +81-3-3262-5177

Securities code: 4709

https://www.idnet-hd.co.jp

The corporate governance of the ID Group is described below.

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

1. Basic views

The ID Group perceives "increasing corporate value in an ongoing manner" to be of top priority in its management. With this in main, we are working steadily to improve our corporate governance and monitoring functions in accordance with the following guidelines: (1) Assurance of transparency and soundness through the separation of management and execution; (2) Speedy decision-making and execution of business (3) Clarification of accountability; (4) Prompt and appropriate/fair disclosure of information.

The Group has published its basic views concerning corporate governance on its website as "Corporate Governance Guidelines" (hereinafter, "the Guidelines").

URL: https://www.idnet-hd.co.jp/corporate/policy.html

Reasons for non-compliancewith the principles of the Corporate Governance Code UpdatedThe description below is in accordance with the Corporate Governance Code as revised in June 2021.

[Supplementary Principle 4.11 (1) Approach to Diversity in the Board of Directors]

The Board of Directors of the ID Group is composed of Directors with diverse backgrounds in terms of professional knowledge, experience and other aspects, in a number the Group deems optimal for effective and efficient execution. In selecting officers, the Group carefully considers diversity in terms of gender, international outlook, work experience and age, while maintaining an appropriate number of members. Outside Officers are selected primarily from among persons such as those with experience in corporate management at other companies, academia/education and engineering, as well as in professions such as accounting.

The Group's current roster of three Outside Directors do not have experience in management at other companies but are all Independent Outside Directors, possessing a wealth of experience in other fields as well as a wide range of perspectives. The Group will continue to make every effort to employ an appropriate number of Outside Directors of suitable diversity.

More information on the diversity and individual skills of the Group's Directors and Auditors can be found on the Group website. (Skill Matrix and Diversity of the Board of Directors)

URL: https://www.idnet-hd.co.jp/corporate/policy.html

Disclosure based on the principles of the Corporate Governance Code Updated

The description below is in accordance with the Corporate Governance Code as revised in June 2021.

[Principle 1.4 Cross-shareholdings]

(1) Policy on cross-shareholdings of listed shares

To support and strengthen business relationships and improve medium-to-long term corporate value, the Group sometimes holds shares in business partners and others. Each year the Board of Directors scrutinizes individual cross-shareholdings in detail, examining whether the purpose of each cross-shareholding and its risks and benefits are suitable in terms of its capital cost. The Board of Directors discloses the results of these examinations and, if it deems that continuing to hold the shares is no longer reasonable, sells the shares with appropriate timing.

(2) Criteria for exercising voting rights in cross-shareholdings

The Group judges whether to exercise its voting rights in cross-shareholdings based on overall consideration of the robustness of corporate governance at the invested company and the existence or otherwise of proposals conducive to the improvement of medium-to-long term corporate value, as well as the effect of the exercise of voting rights on the Group.

[Principle 1.7 Related-party Transactions]

Before they can conduct a transaction with the Group, Directors, Auditors and major shareholders must obtain the approval of the Board of Directors.

Before issuing such approval, the Board of Directors obtains confirmation by Independent Officers and Auditors of the appropriateness and reasonableness of the details of the transaction. Even after approval is granted, the Board of Directors confirms the status of said transactions on a regular basis.

[Supplementary Principle 2.4 (1) Securing Diversity in the Appointment, etc. of Core Personnel]

The Group recognizes that the active fusion and mobilization of a wide range of perspectives, backed by a corporate culture that celebrates diversity, is vital in maximizing the capabilities of the entire Group and creating an exciting future (Waku-Waku) for everyone. For this reason, the Group actively advances the hiring and appointment of people of diverse backgrounds, including nationality, experience, area of specialization, values, lifestyle, ability/disability and orientation. To enable that individuality to flourish, the Group makes great efforts to train employees and furnish supportive workplace environments, including promotion of work-life balance, providing training in cross-cultural communication and making in-house documents available in multiple languages.

In terms of measurable numerical targets, the Group stipulates and applies percentage targets for non-Japanese employees and women in management positions. As of March 31, 2022, the percentage of management positions held by women was 16.9% and on a rising trend. The Group aims to increase that share to 30% over the medium term.

Also, the proportion of mid-career hires in management positions has reached nearly 50%. Therefore, we recognize that they are already at an adequate level, and have not set specific targets.

For information on the Group's policies on securing diversity in our workforce, our training policy, our workplace environment, our targets for the ratio of foreign nationals in management positions, and the status of our mid-career hire managers, please visit the Group website. (Sustainability (Workplace Environment for Employees))

URL: https://www.idnet-hd.co.jp/sustainability/labor_practices.html

[Principle 2.6 Roles of Corporate Pension Funds as Asset Owners]

As part of its system of benefits for its employees, the Group has introduced a defined contribution pension scheme. Although it is not in the position of being the owner of employees' corporate-pension assets, the Group provides employees with education, training and information on investment matters.

[Principle 3.1 i) Company Objectives (corporate philosophy: the IDentity)]

Guided by its corporate philosophy, the "IDentity," the ID Group strives to achieve its mission of creating an exciting future (Waku-Waku) for everyone, in accordance with its basic management policy of providing customers with high-value-added information services that serve their needs and contributing to the development of an information society.

The IDentity and the Mid-term Management Plan are described on the Group website. The Group also actively discloses information through regular briefings aimed at institutional and individual investors.

(The Identity)

URL: https://www.idnet-hd.co.jp/corporate/vision.html(Mid-term Management Plan)

URL: https://www.idnet-hd.co.jp/ir/strategy.html

[Principle 3.1 ii) Basic Views and Guidelines on Corporate Governance] Please refer to "I. 1. Basic Views on Corporate Governance" in this Report.

[Principle 3.1 iii) Board Policies and Procedures in Determining the Remuneration of the Senior Management and Directors] Please refer to "II. 1. Organizational composition and operation: Director remuneration" in this Report.

[Principle 3.1 iv) Board Policies and Procedures in the Appointment/Dismissal of the Senior Management and the Nomination of Director and Auditor Candidates]

To enhance the independence and objectivity of the Board of Directors, the Group has established a Nomination and Remuneration Committee. This Committee advises the Board of Directors on the appointment and dismissal of senior management personnel and the nomination of Director and Auditor candidates. When appointing and dismissing senior management personnel and selecting and nominating Director candidates, the Board of Directors reaches its decisions with the greatest respect for the deliberations of this Committee.

When nominating Auditor candidates, the Board of Directors explains the deliberations of the Nomination and Remuneration Committee in detail to all currently serving Auditors and, after providing sufficient time for deliberation, obtains the agreement of the Board of Auditors.

(Group Guidelines, Chapter 3, Article 2: Basic Policy and Procedures for the Appointment and Dismissal of Senior Management and Nomination of Director and Auditor Candidates)

[Principle 3.1 v) Explanations with Respect to the Individual Appointments/Dismissals and Nominations Based on iv]

Reference documents for the convocation of General Meetings of Shareholders for the appointment of Directors and Auditors list the reasons for appointment of each candidate selected by the Board of Directors.

Notifications of convocation of General Meetings of Shareholders are posted on the Group website. (General Meetings of Shareholders (Notices of Convocation))

URL: https://www.idnet-hd.co.jp/ir/stockholder.html

[Supplementary Principle 3.1 (3) Measures for Sustainability, etc.]

(1) Measures to ensure the Group's sustainability

The ID Group sets a basic sustainability policy based on its business philosophy mission of creating an exciting future (Waku-Waku) for everyone. It aims to attain a sustainable society based on that policy. In addition, in the medium-term management plan, the company will set an "SDGs Strategy" as one of our four basic strategies, and will actively work to solve social issues by providing information services, which is our main business. Also, as an initiative for climate change, the Group discloses information according to "Governance," "Strategy," "Risk Management," and "Metrics and Targets" in accordance with the framework of the Task Force on Climate-related Financial Disclosure (TCFD).

The Group's policies and measures on sustainability are described on the Group website. (Sustainability)

URL: https://www.idnet-hd.co.jp/sustainability(Initiatives for Climate Change)

URL: https://www.idnet-hd.co.jp/sustainability/environment.html

(2) Investments in personal and intellectual assets, etc.

With regard to company investments in human capital, the company will set a "human resource strategy" as one of our four basic strategies in our medium-term management plan, and will strengthen our training of mid- to senior-level engineers in the cloud, cybersecurity, and AI-related fields, and will develop our innovative leaders who can propose solutions with new ideas in order further to expand our DX business.

Furthermore, with regard to our investment in intellectual property, the company will collect information on advanced technologies through investments in US venture funds and our collaboration with Keio University. The company is also committed to research on image analysis, video technology, speech recognition, smart glass utilization, and research in fields related to web 3.0.

Human capital, and the like are listed on the Group website. (Medium-term Management Plan)

URL: https://www.idnet-hd.co.jp/ir/strategy.html

[Supplementary Principle 4.1 (1) Overview of Scope of Delegation to the Management]

The Board of Directors delegates all decisions on the execution of Group duties to the Group's management, headed by the President and Representative Director, with the exception of items prescribed by laws and regulations to be resolved at meetings of the Board of Directors and other items commensurate therewith.

(Please refer to Chapter 3, Article 3 (2), "Responsibilities of the Board of Directors," part 2), in the Group's Guidelines.)

[Principle 4.9 Independence Standards and Qualification for Independent Outside Directors]

For information on the Group's criteria for the independence of Outside Directors, please refer to the Appendix of the Group's Guidelines.

[Supplementary Principle 4.10 (1) Use of Optional Arrangements]

Please refer to "II. 1. Organizational composition and operation: Directors: Committees established voluntarily, their composition, and attributes of chairperson / Supplementary explanation" of this Report.

[Supplementary Principle 4.11 (2) Status of Directors serving concurrent posts]

Please refer to "II. 1. Organizational composition and operation: Directors: Outside Directors' relationships with the Company (2)" of this Report.

[Supplementary Principle 4.11 (3) Evaluation of Overall Effectiveness of the Board of Directors]

The Group strives to achieve further improvement of the effectiveness of the Board of Directors through a continuous process (PDCA cycle) of analyses and evaluations conducted each fiscal year. These efforts consist of examining and implementing improvements and solutions for newly raised problems and continuing issues.

The Board of Directors conducts self-evaluations of its overall effectiveness and other issues, aiming to support the sustainable growth of the Group

4. Policy on measures to protect minority shareholders in conducting transactions with controlling shareholder

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5. Special circumstances which may have material impact on corporate governance

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