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    4819   JP3549070005

DIGITAL GARAGE, INC.

(4819)
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Digital Garage : Corporate Governance Report

06/18/2021 | 02:33am EDT

[Translation]

Corporate Governance Report

Digital Garage, Inc.

Last updated on June 3, 2021 Digital Garage, Inc.

Kaoru Hayashi Representative Director, President Executive Officer and Group CEO Contact: 03-6367-1111 Securities Code: 4819 https://www.garage.co.jp/en/

The corporate governance of Digital Garage, Inc. (the "Company") is as follows:

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

1. Basic Views

In accordance with the following "Management Philosophy" and "Credo", the Company is working to enhance and strengthen its corporate governance to realize transparent, fair, rapid and decisive decision-making in order to live up to the trust of its shareholders and other stakeholders, as well as to achieve sustainable growth and increase corporate value over the medium to long term.

By using the Internet and other means to connect multiple phenomena in different fields, we create new value and contribute to society by creating useful contexts for the world.

TENACITY

Have a strong will

OPENNESS

Question your common sense

INTEGRITY

Stay straight

AGILITY

Be agile

COURAGE

Be brave

Based on these "Management Philosophy" and "Credo", we have created a number of first-of-its-kind Internet businesses in Japan by incubating businesses with investments, etc. by utilizing our two revenue bases, namely, marketing technology, which anticipates the trends of the world, and the provision of highly reliable financial technology.

In particular, our mission is to create new contexts at the interface between real space and cyberspace. The Company group's basic approach and policy on corporate governance is described in the "Corporate Governance Basic Policy" on the Company's website (https://www.garage.co.jp/en/company/corporate- governance/).

[Reasons for not Implementing the Principles of the Corporate Governance Code]

[Supplementary Principle 4-1(3) : Supervision of Succession Planning for CEO and Other Top Executives] Although the Company does not currently have a clear succession plan for the CEO and other members of the Board of Directors, the Company's representative directors are constantly working to develop human resources through corporate management, business execution and other activities while anticipating candidates for succession.

[Disclosure in Accordance with the Principles of the Corporate Governance Code] Updated

[Principle 1-4 : Strategic Holdings]

As a company that creates useful "contexts" for the world, we sometimes hold our shares for the purpose of collaborating with various companies based on long-term, stable strategic alliances. In examining our strategic shareholdings, we examine them in detail to determine whether or not they will contribute to the enhancement of our corporate value over the medium to long term through the strengthening of relationships and the creation of synergies, and we consult with the Board of Directors when necessary, including the sale of shares. When exercising the voting rights of our policy-holding shares, we exercise them in an appropriate manner after comprehensively considering whether or not they will contribute to improving the medium- to long-term corporate value of the issuing company and the Company.

1

[Translation]

As of the end of the fiscal year ending March 31, 2020, the Company has determined that it is appropriate to hold all shares held by the Company based on a comprehensive judgment from the perspectives of improving corporate value and maintaining and strengthening relationships with investees over the medium to long term.

[Principle 1-7 : Related Party Transactions]

The Company appropriately monitors transactions with related parties by approving and reporting on the transactions at the Board of Directors' meeting to ensure that such transactions do not harm the Company or the common interests of shareholders.

[Principle 2-6 : Exercising the Function of an Asset Owner of a Corporate Pension Plan]

We do not have a corporate pension fund system. In order to ensure stable asset formation for our employees, we have introduced a corporate defined contribution pension plan.

[Principle 3-1 : Enhance Information Disclosure]

(1)Management Philosophy, Management Strategy and Management Plan

The Company's management philosophy, management strategy and management plan are available on the Company's website (https://www.garage.co.jp/en/) and in its annual report.

On May 13, 2020, the Company announced its new medium-term management plan, based on the concept of "Designing our New Normal Context," which covers the five years from the fiscal year ending March 31, 2021 to the fiscal year ending March 31, 2025. With the global pandemic of the new coronavirus infection as an opportunity, a new normal is emerging in the areas of daily life, economy, education and medicine. We see this as the dawn of an era, and we will create the next generation of contexts to accelerate and evolve the digital transformation. We will maintain dynamic equilibrium and neutrality while collaborating with a wide range of companies, from start-ups to large corporations, that are engaged in cutting-edge initiatives both in Japan and abroad, to create new contexts that will benefit society. Through the implementation of our medium-term management plan and the achievement of our business goals, we will achieve further growth and increase our corporate value.

(2)Basic Policy on Corporate Governance Please refer to "I. 1. Basic Views" in this report.

  1. Policies and Procedures for Determining Directors' Remuneration

Please refer to "II. 1. Items Related to Organizational Structure and Management, [Directors] Disclosure of Policy for Determining Remuneration Amounts of Calculation Methods Thereof" in this Report.

  1. Policies and Procedures for Determining Candidates for Election and Dismissal as Directors Candidates for the election of directors (excluding members of the Board of Corporate Auditors and outside directors) should be of excellent character and insight and should have knowledge and experience that will enable them to execute the Company's management accurately, fairly and efficiently. President Executive Officer shall draft and submit a proposal to the Nomination and Renumeration Advisory Committee from the perspective of whether or not the candidate is capable of providing advice on all aspects of the company's operations and appropriately reflecting the opinions of stakeholders, including minority shareholders, from an independent standpoint at the Board of Directors, and President Executive Officer shall consult with the Nomination and Remuneration Advisory Committee on the candidate's proposal based on the Committee's report. This decision is made by a resolution of the Board of Directors. Candidates for the appointment of directors as Audit and Supervisory Committee members shall be drafted by President Executive Officer and referred to the Nomination and Remuneration Advisory Committee from the viewpoint of whether or not they have excellent character and insight, as well as the knowledge and experience to accurately, fairly and efficiently audit the execution of duties by directors. The Board of Directors will decide on this proposal by a resolution of the Board of Directors, after obtaining the consent of the Audit and Supervisory Committee.
    In the event of a serious violation of law or the Articles of Incorporation, significant lack of eligibility, or other reasons for dismissal under the Director's Regulations, the Board of Directors shall decide whether or not to submit a proposal for the dismissal of a Director to the General Meeting of Shareholders.

(5)Explanation of Individual Elections, Dismissals and Nominations of Senior Management and Nominations of Director Candidates

Reasons for the election and dismissal of individual director candidates will be disclosed in the notice of the General Meeting of Shareholders.

[Supplementary Principle 4-1(1) : Scope of Delegation to Management]

2

[Translation]

The Board of Directors decides on matters stipulated by laws and regulations and the Articles of Incorporation, as well as matters stipulated in the Regulations of the Board of Directors. Other decisions on business execution are delegated to the Management Committee and full-time directors and corporate officers, and the details of these decisions are defined in the internal rules of the Executive Committee and the Rules for Internal Approval.

[Principle 4-8 : Effective Use of Independent Outside Directors]

The Company has appointed six independent outside directors, who provide appropriate supervision and advice to the Company's overall management based on their own knowledge and experience from an independent perspective.

[Principle 4-9 : Criteria for Judging the Independence of Independent Outside Directors and their Qualifications]

The Company appoints the Company's independent outside directors from among those who have no conflicts of interest with the Company and who do not have any conflicts of interest with general shareholders, referring to the requirements of the Companies Act and the criteria for determining independence established by the Tokyo Stock Exchange and other bodies, while noting that they are expected to play an objective and appropriate supervisory or auditing role based on their own knowledge and experience.

[Supplementary Principle 4-11(1) : A View on the Balance, Diversity and Size of the Board's Knowledge, Experience and Abilities as a Whole]

The number of directors (excluding directors who are Audit and Supervisory Committee members) is 10 or less, and the number of directors who are Audit and Supervisory Committee members is 5 or less. In order to effectively fulfill the roles and responsibilities of the Board of Directors, the Board of Directors not only has a well-balanced level of knowledge, experience, and competence as a whole, but also recognizes that diverse perspectives, such as those of women and foreign nationals, contribute to the promotion of business and supervision of management, and the Board of Directors appoints women and people from companies and organizations with international operations as directors. We strive to be composed of human resources.

[Supplementary Principle 4-11(2) : Directors' Concurrent Positions as Officers of Other Listed Companies]

The status of directors' concurrent positions as officers of other listed companies is disclosed in the Notice of General Meeting of Shareholders and the Annual Securities Report. Some of the Company's directors serve concurrently as outside directors, outside auditors, and other officers of listed companies other than the Company, but we believe that their service is limited to a reasonable degree.

[Supplementary Principle 4-11(3) : Analysis, Evaluation and Disclosure of the Effectiveness of the Board of Directors as a Whole]

Based on each director's self-evaluation, the Board of Directors analyzes and evaluates the effectiveness of the Board of Directors as a whole, including the composition and operation of the Board of Directors, its deliberations, and its roles and responsibilities, as well as the roles and responsibilities of the Nominating and Remuneration Advisory Committee and items that do not implement each principle of the Corporate Governance Code.

As for the evaluation results for the fiscal year ending March 31, 2020, we have confirmed that the effectiveness of the Board of Directors as a whole is fully ensured. In particular, the Board of Directors was assessed as having established a system that enables prompt decision-making regarding the execution of important business operations, actively discussing the Company's medium- to long-term strategies and plans, and proactively engaging in information disclosure to promote dialogue with shareholders. With regard to the establishment of an independent, voluntary committee, the Board of Directors resolved at its February 21, 2020 meeting to establish a Nomination and Remuneration Advisory Committee, which will consist of at least three members who are directors and a majority of whom will be independent outside directors. We are steadily implementing the PDCA cycle.

The Group will continue to improve the functions of the Board of Directors and the Nomination and Remuneration Advisory Committee in order to promote management aimed at enhancing corporate value, based on the results of this evaluation of effectiveness and the various opinions expressed by each director in this process.

We will continue to discuss issues such as succession planning and human resource development as issues for consideration in order to further enhance the effectiveness of the Board of Directors. In addition, we will reinforce the PDCA cycle for increasing corporate value through management that considers the

3

[Translation]

cost of capital, and we will further enhance our time to discuss the ESG and SDGs (Sustainable Development Goals).

[Supplementary Principle 4-14(2) : Training Policy for Directors]

Directors are committed to acquiring and honing the knowledge necessary to properly fulfill their expected roles and responsibilities. To this end, the Company provides directors with training opportunities from time to time at the Company's expense that are useful for the acquisition of necessary knowledge.

[Principle 5-1 : Policy on Constructive Dialogue with Shareholders]

In order to promote constructive dialogue with our shareholders, we are working to develop systems and initiatives in accordance with the following basic policy.

  1. The officer in charge of information disclosure shall be the officer who oversees all dialogue with shareholders and, to the extent reasonable, the directors shall handle dialogue with shareholders. In addition, the officer in charge of information disclosure shall be in charge of the relevant departments within the Company and shall coordinate with other departments on a daily basis.
  2. We will strive to understand the structure of our shareholders and enhance the means of dialogue (e.g., holding individual interviews in Japan and abroad, holding financial results and individual investor briefings, etc.).
  3. Opinions received in dialogue with shareholders are fed back to the Board of Directors and are used to enhance corporate value.
  4. When engaging in dialogue with shareholders, the Company shall strive to prevent the leakage of undisclosed material facts in accordance with the internal rules for preventing insider trading.

2Capital Structure

Foreign shareholder ratio30% or more

[Major Shareholders]

Name

Number of shares

Ratio (%)

held (shares)

Kaoru Hayashi

6,819,200

14.82

The Master Trust Bank of Japan (Trust Accounts)

3,464,500

7.53

Dentsu Group Inc.

3,300,000

7.17

TIS Inc.

2,364,500

5.14

Japan Trustee Services Bank, Ltd (Trust Accounts)

1,859,700

4.04

Japan Trustee Services Bank, Ltd (Trust Accounts 9)

1,755,900

3.82

J.P. Morgan Bank Luxembourg S.A. 385576

1,572,426

3.42

The Bank of New York Mellon 140051

1,212,900

2.64

Japan Trustee Services Bank, Ltd (Trust Accounts 5)

720,200

1.57

Credit Saison Co.,Ltd.

655,200

1.42

Controlling shareholders (excluding parent company)

-

Parent company

None

Supplementary Explanation

Nomura Securities Co., Ltd. and the two co-owners below held the following shares as of November 15, 2019 in the large-volume holding report, which is available for public inspection on November 20, 2019. However, since the Company cannot confirm the actual number of shares owned as of March 31, 2020, it is not included in the above list of major shareholders. The details of the large-volume holding report are as follows.

4

[Translation]

Nomura Securities Co., Ltd. Number of shares held: 1,686,600 (3.44%)

Nomura Asset Management Co., Ltd. Number of shares held: 1,019,600 (2.15%)

Nomura International plc Number of shares held: 139,593 (0.28%)

In the large-volume holding report, which is available for public inspection on February 7, 2020, Mizuho Securities Co., Ltd. and the following two co-owners hold the following shares as of January 31, 2020. However, since the Company cannot confirm the actual number of shares owned as of March 31, 2020, it has not been included in the above list of major shareholders. The details of the large-volume holding report are as follows.

Asset Management One Co., Ltd. Number of shares held: 2,290,600 (4.81%)

Mizuho Securities Co., Ltd. Number of shares held: 159,434 (0.33%)

Mizuho International plc Number of shares held: 0 (0.00%)

In the large-volume holding report, which is available for public inspection on April 6, 2020, JPMorgan Asset Management (Japan) Limited and the following five co-owners are as follows as of March 31, 2020. However, since the Company cannot confirm the actual number of shares held as of March 31, 2020, it is not included in the above list of major shareholders. The details of the large-volume holding report are as follows.

JPMorgan Asset Management (Japan) Limited Number of shares held: 3,243,100 (6.84%)

J.P. Morgan Asset Management (Asia Pacific) Limited Number of shares held: 112,000 (0.24%)

J.P. Morgan Securities LLC Number of shares held: 104,220 (0.22%)

J.P. Morgan Investment Management Inc. Number of shares held: 96,900 (0.20%)

J.P. Morgan Securities plc Number of shares held: 70,603 (0.15%)

JPMorgan Securities Japan Co., Ltd. Number of shares held: 1,700 (0.00%)

In the large-volume holding report, which is available for public inspection on April 7, 2020, Schroder Investment Management (Japan) Limited and the following three co-owners are as follows as of March 31, 2020: Although it is stated that the Company holds shares, the Company cannot confirm the actual number of shares owned as of March 31, 2020, so it is not included in the above list of major shareholders. The details of the large-volume holding report are as follows.

Schroder Investment Management (Japan) Limited Number of shares held: 1,490,300 (3.14%)

Schroder Investment Management North America Limited Number of shares held: 682,964 (1.44%)

Schroder Investment Management (Switzerland) AG Number of shares held: 498,381 (1.04%)

Schroder Investment Management Limited Number of shares held: 471,200 (0.99%)

3. Company Attributes

Listed stock market and market section

Fiscal Year-End

Industry

Number of employees (consolidated) as of the end of the previous fiscal year

(Consolidated) sales in the previous fiscal year

Number of consolidated subsidiaries as of the end of the previous fiscal year

Tokyo Stock Exchange, First Section

March

Information & Communication

More than 500 persons, less than 1000 persons

More than 10 billion yen and less than 100 billion yen

More than 10 companies and less than 50 companies

4. Guidelines for Measures to Protect Minority Shareholders in Transactions, etc. with Controlling Shareholders

---------

5

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Digital Garage Inc. published this content on 18 June 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 June 2021 06:32:02 UTC.


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Spread / Average Target 11,8%
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