Ichiyoshi Securities : Corporate Governance Report

CORPORATE GOVERNANCE REPORT

(English translation for reference purposes only)

Ichiyoshi Securities Co., Ltd.

Last updated: June 28, 2021 Representative Executive Officer, President & Director: Mr. Hirofumi Tamada Enquiry to: Public Relations Office (Tel: [phone])

Securities code: 8624 (Tokyo Stock Exchange)

https://www.ichiyoshi.co.jp

The status of the corporate governance of Ichiyoshi Securities Co., Ltd. (the "Company") is as described below.

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

1. Basic views

The Company holds a motto of "Building a securities house like no other in Japan" and aims to be a "Name- brand boutique house in the finance and securities industry." In its efforts for realization, the Company intends to heighten the fairness and transparency of management along its below-mentioned "Ichiyoshi Credo" (corporate philosophy) and to promote flexible and relevant decision-making, thereby maximizing earnings and corporate value while bolstering its corporate governance. The Company has also adopted a company with three

committees system to tighten its surveillance capability over business executions and has in place an operating officer system to enhance the promptitude and effectiveness of business executions.

[Ichiyoshi Credo (corporate philosophy)]

Management philosophy: To remain a company of customers' trust and choice.

Management objective:	Name-brand boutique house in the finance and securities industry.
Action guidelines:	Gratitude, Integrity, Courage, Responsiveness, Continuity and Long-Term Good
	Relation.
Based on the Ichiyoshi Credo, the Company has its raison-d'etrevis-à-vis each of its stakeholders:
Vis-à-vis employees:	Respecting employees' individuality and striving for human resource cultivation.
	"The Ichiyoshi Spirit" -- Fighting on with passion and sincerity.
	"Job Satisfaction" -- Building a free and invigorated corporate climate that
	optimizes employees' abilities and creativity by prioritizing
	teamwork.
Vis-à-vis customers:	Aiming to be every customer's first choice.
	"Customer Prioritization" -- Always providing advice with sincerity from the
	customer's standpoint.
	"Quality Services" -- Responding to social and market changes and providing high-
	quality products and services.

Vis-à-vis shareholders: Striving for continuous improvement in performance and corporate value.

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Vis-à-vis society:

"Return to Shareholders" -- Raising business profitability and strengthening financial health, then returning profits to shareholders.

"Information Disclosure" - Ensuring business management transparency through appropriate disclosure and investor relation activities.

Contributing to the development of society as a participant in the financial and securities markets.

"Social Responsibility" -- Complying with laws and regulations and behaving with high ethical standards.

"Social Contribution" -- Contributing to the development of regional communities and securities markets through corporate activities.

[Reasons for Non-Compliance with the Principles of the Corporate Governance Code] The Company complies with all principles of the Corporate Governance Code.

[Disclosures Based on the Principles of the Corporate Governance Code] Update [Principle 1-4---Policy-based holdings of stocks]

As of June, 2021, the Company' policy-based holdings of stocks amounted to 39 million yen, or 0.14% of its net assets. The purpose of policy-based holdings of stocks is limited to the case of apparently enhancing relationships with companies with which the Company has business relations. Other than in such exceptional cases, the Company has a policy not to do policy-based holdings of stocks. It is the Company's policy to limit the sum of the holdings of investment securities and policy-based holdings of stocks to 10% or less of the Company's net assets in accordance with the Board of Directors' resolution. The Company does not have any cross-held stocks. The Board of Directors reviews and verifies, based on proposals made by the Investment Committee, each of potential and executed investments of policy-based holdings of stocks and scrutinizes their rationality, purpose and benefit as needed.

The Company's voting rights on policy-based holdings of stocks is exercised after analyzing the condition of subject companies, and having a dialogue with subject companies and seriously judging whether proposed resolutions are conducive to the sustainable growth of subject companies and to the growth of the Company's business.

[Principle 1-7--- Matters Regarding Related-Party Transactions]

The Rules concerning the Board of Directors stipulate that related-party transactions require the Board of Directors' resolutions in order not to jeopardize the interests of the Company and its shareholders. The directors and officers of the Company are obliged to answer to "Business Execution Confirmation" and "Questionnaire on Related-Party Transactions" every year.

[Principle 2-6 ---Role as Asset Owner of Corporate Pension Plan]

The Company has in place a hybrid pension plan combining a defined benefit pension plan and a defined

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contribution pension plan. The Pension Meeting of the Company receives from the department in charge a quarterly report on the defined benefit pension management and an annual-account settlement report on the defined contribution plan (the both reports are originally presented by the pension plan manager) and annually decides on the basic rate of defined benefit pension plan for the coming year.

In addition to the Pension Meeting, the Pension Management Meeting is organized to formulate and review basic pension management policy, verify and review invested products and investment methods and monitor the pension plan manager.

[Principle 3-1--- Enhanced Disclosure] 3-1-(1)

The Company has in place the "Ichiyoshi Credo" which contains management philosophy, management objective and action guidelines, and has formulated its 3-yearmedium-term management plan every three years since 1996, which have been published on its website.

3-1-(2)

The purpose of the Company's corporate governance is to ensure that the management of the Company is performed in fairness in accordance with rules and regulations, and the Company's corporate governance, along with its Internal Control System and Timely Disclosure System, forms the core body of the Company.

As part of its corporate governance efforts, the Company adopted its company with three committees system in June 2003, among many others.

The Company believes that the company with three committees system is the most effective system for corporate governance. The following are reasons why the Company moved to the company with three committees system:

• To separate the function of the Board of Directors (which include decision on basic management policy and material business matters and supervision on duty performances of directors and officers) and the function of executive officers (which includes execution of business decisions), thereby speeding up management decision-making and enhancing the flexibility of business execution.
• To ensure the wholesome growth of the Company, enhance the transparency of corporate management, operate the Company's business from the standpoint of shareholders and further strengthen the corporate governance.
• To employ outside directors well experienced in laws, accounting and corporate management whose expert views and opinions will benefit the management of the Company.

3-1-(3)

The individual remunerations of the Company's directors and executive officers are decided by the Remuneration Committee. The Remuneration Committee consists of 3 directors of whom 2 are outside directors. The following is an outline of the policy of the Remuneration Committee for the determination

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of individual remunerations and related procedures:

• Basic policy:
  To lift the desire and will of directors and executive officers for company management and derive their utmost management capability, so that they will contribute to the achievement of desired business result.
• Contents of remunerations:
  Remunerations of directors and executive officers shall consist of "Monthly Basic Remuneration,"
  "Remuneration Linked to Business Result," "Stock-Related Remuneration" and "Non-monetary Remuneration (such as a residential subsidy for living apart from family)."
• Procedures:
  The Remuneration Committee meets each director and executive officer twice every year to rate his/her performance and decide his/her remuneration.
  The policy and procedures for determination of individual remunerations of directors and executive officers are disclosed in the notice of shareholders' meeting and the annual securities report.

3-1-(4)

The Company is a company with three committees system. A proposed resolution for nominees for directors or dismissal of incumbent directors to be submitted every year to the shareholders' meeting is decided at the Nominating Committee which consists of independent outside directors as majority members and is chaired by an independent outside director. The nomination and/or dismissal of executive officers is made by the Board of Directors. The specific policy and procedures for nomination and/or dismissal are disclosed in the notice of the shareholders' meeting and the annual securities report.

3-1-(5)

The selection of nominees for directors and dismissal of incumbent directors to be submitted to the shareholders' meeting shall be decided by the Nominating Committee in accordance with the criteria established by the Nominating Committee.

The following are the selection criteria for nominees as established by the Nominating Committee and included in the Notice of 79th Annual Meeting of Shareholders:

For inside directors;

• Superb management sense
• Superb leadership, foresightedness and planning ability
• High law-abiding nature
• Personal magnetism in and out of the Company
• Healthiness physically and mentally

For outside directors;

• High personality and insight

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• Plentiful experience and expertise in business operations
• High law-abiding nature
• Unwavering independency as outside director
• Healthiness physically and mentally

In addition, the nominees for outside directors are required to be qualified as the Outside Directors under the provisions of the Ordinance of the Company Law of Japan and to have no conflict of interest with shareholders as the Independent Directors under the regulations of the Tokyo Stock Exchange.)

The reasons for the selection of nominees for directors at the last shareholders' meeting are disclosed in the attachment hereto.

With respect to the appointment or dismissal of executive officers, they should be qualified to make business executions entrusted by the Board of Directors.

[Supplementary Principle 4-1-1]

The power and role of the Board of Directors are stipulated in the Regulations of the Board of Directors (the "Board"). The basic function of the Board is "to resolve on legally-required matters, decide or approve basic management policies and material matters on business executions and supervise business executions by directors and executive officers".

Executive officers are appointed by resolution of the Board of Directors. The scope and contents of their business executions are stipulated by the Regulations of Executive Officers. Their term of office is 1 year. Executive Chairman, Executive President, Executive Deputy President, Senior Managing Executive Officer, Managing Executive Officer and Representative Executive Officer are appointed by resolution of the Board of Directors.

[Principle 4-8-Effective use of independent and outside directors] [Supplementary Principle 4-8-① ] [Supplementary Principle 4-8-②]

In order for independent and outside directors to perform their role and responsibility for the sustainable growth of the Company and the medium- to long-term enhancement of its corporate value, the Company has in place the "Meeting of Directors without Executive Power" and the "Meeting of Independent and Outside Directors." The Meeting of Independent and Outside Directors has its head independent and outside director who officiates for liaison with the management team and for relationship enhancement among independent and outside directors.

[Principle 4-9--- Judging criteria and quality for independent outside directors]

Outside directors of the Company are required to meet with conditions set out in the Company Law, to be independent as defined under the Regulations of the Tokyo Stock Exchange and satisfy the selection criterion for outside directors laid out by the Nominating Committee of the Company.

The outside directors of the Company provide the Company with fair and objective views and opinions

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