United Arrows : 〔Delayed] Corporate Governance Report

TRANSLATION FOR REFERENCE PURPOSE ONLY

This is a translation of the original release in Japanese. In the event of any discrepancy, the original release in Japanese shall

prevail.

[Delayed] Corporate Governance Report

Last Update: July 5, 2022

UNITED ARROWS LTD.

Yoshinori Matsuzaki, Representative Director, President and CEO

Contact: IR Department [phone]

Securities Code: 7606

http://www.united-arrows.co.jp/en/

The corporate governance of UNITED ARROWS LTD. (the "Company" or "we") is described below.

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

Other Basic Information

1. Basic Views

At the time of its founding in October 1989, UNITED ARROWS LTD. defined its founding spirit as "contributing to society by setting new standards of Japanese lifestyle." The essence of this spirit has been maintained and its expressions updated to better match the times so that it can continue to function as the basis for the actions of all directors and employees as our Company Policy. In addition, we have defined our promise to society and the creation of value for five distinct stakeholders as key features of our Policy Structure. The five distinct stakeholders for which value is to be created are customers, employees, business partners, society, and shareholders. In this regard, the Company's mission is to increase value for all stakeholders. In order to maintain the proper mindset that will allow us to realize our Company Policy, we put in place the Code of Conduct. This code expresses how we should think and act to achieve our stated goals.

Recognizing the critical need to build a transparent and fair management framework, along with a structure under which we are capable of making timely and bold decisions, we are committed to continuously strengthening and expanding our corporate governance capabilities and functions in order to realize our Company Policy, fulfill our promise to society, and create value for five distinct stakeholders. Through these means, we are working to enhance our corporate value on a long-term and continuous basis. To enhance corporate governance continuously, the Company develops and discloses its corporate governance policy. http://www.united-arrows.co.jp/corporate/governance.html(Japanese only)

[Reasons for Non-compliance with the Principles of the Corporate Governance Code] Updated

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Explanation on business portfolio policies and status of revision in establishing and disclosing business strategies, etc.

In order to respond to radical changes in the external environment during the COVID-19 pandemic, the Company fully revised the content of the medium-term management plan (from the fiscal year ended March 2021 to the fiscal year ending March 2023) which was established before the COVID-19 pandemic. The revised medium-term management plan was resolved at the Board of Directors in November 2020, and was disclosed externally. The business strategies, etc. that were established in the medium-term management plan, however, are positioned as time-limited strategies to focus mainly on elimination and consolidation, etc. for overcoming the COVID-19 pandemic. Currently, under the new management framework launched in April 2021, the Company has been continuously deliberating on the long-term corporate vision. In the deliberation, the Company is also discussing an ideal business portfolio domain, etc. for regrowth. There is no basic policy on the business portfolio at the moment. Going forward, the Company plans to disclose a new medium-term management plan based on these discussions in May 2023.

[Disclosure Based on the Principles of the Corporate Governance Code] Updated

[Principle 1.3 Basic Strategy for Capital Policy]

Sustainable growth and improving business results are our top priority toward realization of Our Promise-Our Five Core Values stated in our Company Policy. The Company will use cash generated from earnings growth to invest for medium- to long-term growth, while at the same time improving its capital policy by paying robust dividends and carrying out share buybacks. We aim to support business activities by implementing a flexible financial/capital policy, while at the same time creating value for all stakeholders in "Our Five Values" by increasing capital efficiency.

[Principle 1.4 Cross-Shareholdings]

The Company sold all shares it held as cross-shareholdings in 2015 when Japan's Corporate Governance Code was enacted and currently does not hold any such shares.

Going forward, if we decide to hold shares in another company as cross-shareholding, judging that the cross-shareholding is appropriate after considering its purpose, benefits (e.g., dividends, benefits from associated transactions), capital cost and other factors comprehensively, the Company will develop and disclose specific standards for exercising voting rights for the cross-shareholding.

In the case where the company holding the Company's shares as a cross-shareholding (cross- shareholding shareholder) shows an intention to sell the shares, the Company will not disturb such sales.

The Company will not engage in transactions that lack economic rationale with the company holding the Company's shares as a cross-shareholding(cross-shareholding shareholder).

[Principle 1.7 Related Party Transactions]

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If the Company engages in any transaction with its related party (director or major shareholder of the Company), the Company will obtain prior approval of its Board of Directors for the transaction so as not to harm the interests of the Company or the common interests of its shareholders.

The Company will disclose related party transactions in accordance with the Companies Act, Accounting Standard for Related Party Disclosures, and other related provisions.

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

The Company has a defined contribution pension system, and its human resources division conducts awareness-building activities for stable asset formation by employees.

[Supplementary Principles 2.4.1]

■View on ensuring diversity in hiring, etc. of core resources

The Company is working to increase productivity while ensuring job satisfaction for each employee, recognize diversity and establish an organizational culture and labor environment that respect individuals.

- Diversity on employment category

More than 70% of the employees are mid-career employees, and the percentage of mid-career employees in the core resources is also at the same level. The diversity of new graduates and mid-career employees for positions from store sales to store managers, managers and officers is sufficiently ensured, and the Company will maintain the current level going forward.

- Gender diversity

The ratio of female employees that are in a section head or higher was 18% as of April 2021. The Company has established a goal by manager hierarchy to raise the percentage to 30% as of the end of March 2026. The Company confirms the number of managers by gender at the annual manager appointment, and advocates achieving the goal for appointed managers in five years. As of April 2022, the ratio of female employees at the section head and above is 20.5%. The appointment goal and the actual results of annual appointment of female managers have been disclosed on the Company website. Together with ensuring diversity, the Company invests in education where both male and female employees can play active roles to lead the enhancement of the corporate value.

The Company website

https://www.united-arrows.co.jp/csr/about/value_02.html(Japanese only)

- Diversity on nationality

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Since the Company's current major market is within Japan, all core resources are Japanese. Therefore, the Company does not set a goal of appointing, etc. foreign employees to core resources. However, UNITED ARROWS TAIWAN LTD., an overseas subsidiary of the Company, works to ensure there is management other than the President with locally hired employees. Going forward, together with the overseas expansion scenario, the Company will consider appointing, etc. locally hired employees to core resources.

■Policies on resource development and internal environment establishment

Policies on resource development and internal environment establishment as well as their implementation statuses at the Company are disclosed on the Company website.

The Company website

https://www.united-arrows.co.jp/csr/about/value_02.html(Japanese only)

[Principle 2.6 Demonstrating the Function as Asset Owner of Corporate Pension]

The Company has a defined contribution pension system. For employees to create stable assets, the Human Resources Department engages in educational activities regarding the system.

[Principle 3.1 Full Disclosure]

1. Company objectives (e.g., company policy), business strategies and business plans Company policy: our "Policy Structure" is posted on the Company website.
   Business strategy: UNITED ARROWS Group's Medium-Term Vision and business strategies/measures to achieve the Vision are published on the Company website and in documents such as financial results, and securities report.
   Business plan: information such as management policy and performance targets are published in financial results, presentation materials of earnings announcements and other documents.
2. Basic views and guidelines on corporate governance based on each of the principles of the Code (original)
   At the time of its founding in October 1989, UNITED ARROWS LTD. defined its founding spirit as "contributing to society by setting new standards of Japanese lifestyle." The essence of this spirit has been maintained and its expressions updated to better match the times so that it can continue to function as the basis for the actions of all directors and employees as our Company Policy. In addition, we have defined our promise to society and the creation of value for five distinct stakeholders as key features of our Policy Structure. The five distinct stakeholders for which value is to be created are customers, employees, business partners, society, and shareholders. In this regard, the Company's mission is to increase value for all stakeholders. In order to maintain the proper mindset that will allow us to realize our Company Policy, we put in place the Code of Conduct. This code expresses how we should think and act to achieve our stated goals.

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Recognizing the critical need to build a transparent and fair management framework, along with a structure under which we are capable of making timely and bold decisions, we are committed to continuously strengthening and expanding our corporate governance capabilities and functions in order to realize our Company Policy, fulfill our promise to society, and create value for five distinct stakeholders. Through these means, we are working to enhance our corporate value on a long-term and continuous basis.

To enhance corporate governance continuously, the Company develops and discloses its corporate governance policy. http://www.united-arrows.co.jp/corporate/governance.html(Japanese only)

1. Board policies and procedures in determining the remuneration of the senior management and directors;
   The Company positions director remuneration as incentive for achieving sustainable growth and higher corporate value over the medium to long term in line with the Company Policy.
   The remuneration of executive directors consists of a monthly fixed "base compensation," "bonuses" that is linked to single-fiscal-year business performance, and "stock-based compensation" that is set according to the level of achievement against the medium-term business plan.
   For base compensation, a director remuneration table according to position is set out by referring to such information as industry standards and the results of director remuneration surveys by external research organizations. Remuneration recommendations are calculated according to the roles and responsibilities of each Director within the corresponding range in the table.
   For bonuses, after putting forward a proposal for the total amount of director bonuses, a proposal for allocations of bonuses to individual executive directors is determined. The proposal for the total amount of bonuses is determined based on a comprehensive review of management ratios such as consolidated operating cash flow and ROE, in addition to the degree of meeting the initial plan figures for operating performance, especially consolidated operating income, over any given single fiscal year. Allocations to individual directors are determined in such a way that a higher-ranking director in the director remuneration table will have a higher bonus coefficient (i.e., the ratio of bonuses to the sum of base compensation and bonuses). The objective of this is to strengthen their commitment to achieving management targets over any given single fiscal year. In principle, no bonus will be paid if consolidated operating income is below a certain level against the initial earnings forecast.
   Stock-based compensation in the form of "restricted shares" is granted to executive directors with the objective of sharing value with shareholders and establishing a remuneration framework that contributes to higher corporate value over the medium to long term. Transfer restrictions on the restricted shares will be removed if targets under the medium-term management plan are met within a fixed transfer restriction period. The shares are to be unrestricted according to the degree of achieving the targets.
   Bonuses and stock-based compensation will not be paid to non-executive directors. Only base compensation will be paid to them according to their individual roles and responsibilities.
   The remuneration of each director who is not an Audit and Supervisory Committee member is determined in accordance with the policy described above by resolution of the Board of

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