UT : Corporate Governance Report Dec.24,2021

Corporate Governance Report

Last Update: December 24, 2021 UT Group Co., Ltd.

Yoichi Wakayama, President, Representative Director & CEO Tel: [phone] Securities Code: 2146

https://www.ut-g.co.jp/english

Corporate governance of UT Group Co., Ltd.

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

1. Basic Views

UT Group Co., Ltd. ("UT Group" or "the Company") has redefined its corporate philosophy to make its aim and values more easily understood by people who newly join the Company. Consistent with this, corporate governance has been identified as one of the most important aspects of management. In order to continuously strengthen governance in response to the Corporate Governance Code, the Basic Policy on Corporate Governance (effective April 1, 2021) has been newly defined by a resolution of the Board of Directors in its meeting held on March 29, 2021, and has been published on the Company website. To assure the effectiveness of corporate governance based on this policy, Basic Policy on Compliance, Basic Policy on Risk Management, and Basic Policy on Information Security have been adopted.

The content of the Basic Policy on Corporate Governance is summarized as follows:

• Shareholders' rights

UT Group respects the rights of its shareholders and strives to ensure equality of shareholders, and to create an environment in which shareholders can exercise their rights appropriately.

• Collaboration with stakeholders

UT Group strives to promote sustainable corporate value by working properly with its employees, clients, business partners and all other stakeholders.

• Proper disclosure of information and ensuring transparency

In order to gain the trust of its shareholders and other stakeholders, UT Group actively discloses information with high transparency and strives to disclose information in an integrated manner so as to clearly communicate its vision and its management strategy intended to contribute to realization of the vision.

• Responsibilities of the Board of Directors, etc.

In order to achieve sustained improvement of corporate value which has high growth potential, consistent with the mission "Create vigorous workplaces empowering workers," UT Group's Board of Directors delegates its executive authority to executive officers, who are instructed to make speedy decisions, in a fair manner and in the best possible way, while providing effective oversight functions as its major role in management supervision.

The composition of the Board of Directors is not limited to the internal structure of the organization. Half of the Directors are independent, their number and share of Board positions intended to assure that the Board performs effective supervisory functions, while also making it possible for the Board to discuss various matters from a wide range of perspectives with the benefit of the effects of diversity in terms of knowledge of related fields, capability, industry experience, age, and gender.

In order to make decisions in appointing directors as well as executive officers who are responsible for business execution, and to determine their remuneration, reliance is made on an advisory committee of which a majority of its members are outside experts so as to ensure transparency. In addition, UT Group has developed a remuneration system that reflects an arrangement that is balanced from the perspectives of short- and medium-to-long-term, an arrangement believed to support risk-taking for growth. The Company has also established a system to manage risk. The system and its operation are consistently supervised.

• Dialogue with shareholders

As an important aspect of its relation with shareholders UT Group strives to disclose management direction and strategy for improving medium- to long-term corporate value, and to engage in constructive dialogue with shareholders. The Company seeks to establish a proper structure to enable it and to get a good picture of the shareholder structure.

• Ethical standards and corporate culture

UT Group provides intangible social infrastructure that supports employment and production activities and, based on its awareness of social responsibility as expressed by being engaged with each worker, the Company strives to foster a corporate culture that contributes to a sustainable society by adhering to local laws and regulations, as well as international norms, including human rights.

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

【Supplementary Principle 5-2-1 Disclosure of Policy on Business Portfolio】

UT Group announced the Fourth Medium-Term Business Plan in May 2020. The Company is currently considering the formulation of a basic policy on its business portfolio in consideration of this plan, and plans to announce the policy in the next fiscal year and to disclose the status of the review of the business portfolio based on the basic policy.

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

【Principle 1-4Cross-shareholdings】

UT Group has a policy of not holding shares of individual companies for the purpose of cross shareholdings.

【Principle 1-7 Related Party Transactions】

UT Group has stipulated rules concerning transaction between the Company and Directors or major shareholders in order to prevent the transactions from harming the shared interests of the Company and its shareholders. Such transactions including competing transactions and conflict-of-interest transactions with its Directors, or transactions with other companies, are explicitly stated as matters to be resolved by the Board of Directors, in accordance with the "Rules on Transaction Control of Related Insiders" and the "Rules for the Board of Directors". The relevant Director(s) in such a case shall be excluded as a related party of special interest from a quorum of the decision-making persons dealing with the matter.

The status of such individual transactions shall be reported to the Board of Directors and be monitored, based on the Rules on Transaction Control of Related Insiders, while the Audit & Supervisory Board shall audit the matter based on the Audit Standards of Audit & Supervisory Board Members. In addition, a framework for control of transactions of related parties has been devised and an annual survey is conducted to check if there has been any transaction between related parties.

【Supplementary Principle 2-4-1 Ensuring Diversity on Promotion of Core Personnel】

Under the mission of "Creating vigorous workplaces empowering workers," UT Group has been promoting an environment in which diverse personnel work vigorously, regardless of their nationality, academic background or age. The ratio of female managers currently stands at 10.5%, but the Company aims to reach 15% by the beginning of fiscal year ending March 2026. In the Diversity Promotion Activities, the Company will promote workstyle reform and institutional and culture reforms, particularly in business divisions with a low proportion of women.

【Principle 2-6 Roles as Asset Owners of the Corporate Pension Plan】

Although UT Group has not introduced the fund-type and contract-type fixed benefit pension and welfare pension funds as a system, the Company plans to introduce a corporate-type defined contribution pension fund on October 1, 2021, and will provide educational opportunities to employees through training and e-learning to promote stable asset formation for employees.

【Principle 3-1 Full Disclosure】

1. The Company's Mission, Vision, Values, and Medium-Term Business Plan are disclosed on its website.
2. The Basic Views on Corporate Governance are published in the Company's website, Corporate Governance Report, and Securities Report.
3. Remuneration of Directors is published in the Securities Report.
4. Based on the policy of choosing as directors those who are anticipated to contribute to the Group's sustainable growth and enhancement of medium- to long-term corporate value, director candidates are selected by the Nomination and Remuneration Committee, an advisory body attached to the Board of Directors, with consideration given to ensuring balance in ability and knowledge of the overall Board, and are appointed by the Board. Concerning candidates for auditors, the Nomination and Remuneration Committee selects candidates who can contribute to maintenance and enhancement of the Company's sound management and social credibility and can do neutral, objective auditing, and upon agreement by the Audit & Supervisory Board, the Board of Directors decides who shall be Audit & Supervisory Board members. Concerning External Directors and External Audit & Supervisory Board Members, using the Tokyo Stock Exchange's standards related to independence for reference, candidates who are believed to ensure sufficient independence are elected, with consideration given to their experience and relationship with the Company. Concerning dismissal of Directors and Audit & Supervisory Board Members, procedures for dismissal shall be begun for those whose misconduct or material facts in violation of laws and regulations or the Articles of Incorporation have been detected; those who are recognized as falling far short of the selection standards; those who have significantly damaged corporate value by neglect of duties; and those who are deemed to be difficult to appropriately carry out duties. Procedures for dismissal of Directors and Audit & Supervisory Board Members shall be resolved by the Board of Directors, upon fair, rigorous discussions by the Nomination and Remuneration Committee, and be decided at the General Meeting of Shareholders.
5. Reasons for election of director candidates and auditor candidates are disclosed in the Notice of the General Meeting of Shareholders. Dismissal of Directors and Audit & Supervisory Board Members shall also be disclosed in the Notice of the General Meeting of Shareholders or other documents, as needed.

【Supplementary Principle 3-1-3 Efforts on Sustainability】

Concerning sustainability issues and responses, UT Group has discussed them at the business execution organization and at the Board of Directors meetings while holding interviews with stakeholders, has identified important issues (Materiality) to be addressed as priorities, and has established measures to address these issues as a "Basic Policy on Sustainability."

[UT Group Materiality]

• Workers' potential to be broadened

We respect and are engaged with each worker and continue to create an environment where workers can vigorously work.

• Continued strengthening of business base

We continue to lead the staffing industry from the perspective of workers, without being constrained by legacy customs.

• Fair and transparent organizational controls

We foster a corporate culture that respects each individual, and maintain an open and fair corporate attitude.

• Appropriate environmental considerations

We recognize our impact on the natural environment and appropriately control it.

(https://www.ut-g.co.jp/sustainability/)

【Supplementary Principle 4-1-1 Outline of the Scope of Delegation to the Management】

UT Group has separated the decision-making and overseeing function of management and the execution of operations by establishing both the Board of Directors as a decision-making and overseeing body of management and the Management Committee as a system for execution of operations based on the Board's decision-making. The Board of Directors discusses and makes decisions on matters stipulated in laws and the Articles of Incorporation and significant matters related to the Company and its subsidiaries. In addition, the Company has adopted an Executive Officer System whereby Executive Officers carry out business execution according to the Rules on Authority of Duties on significant matters of business execution resolved by the Board of Directors. In the Management Committee, the status of execution and issues involving important matters concerning execution of duties are reported, and specific execution methods are resolved with regard to policies concerning matters discussed at the Board of Directors and basic management policies resolved at the Board of Directors. The Rules on Authority of Duties clearly specify the authority of the Board of Directors, President, Management Committee, and other bodies.

【Principle 4-9 Independence Standards and Qualification of Independent External Directors】

UT Group does not specifically set forth independence standards and policies for External Directors and External Audit & Supervisory Board Members.However, independent directors and auditors are selected based on the standards provided by the Tokyo Stock Exchange. Individuals who can serve in roles and execute duties of contributing to the Company's sustainable growth and enhancement of its medium- to long-term corporate value, who have professional knowledge needed in corporate management, who can be expected to make candid, active, and constructive contributions to discussions by the Board of Directors, and who are fully qualified, are selected as candidates for independent external director posts.

【Supplementary Principle 4-10-1 Authority and Roles of the Nomination and Remuneration Committee】

UT Group is a company with the Audit & Supervisory Board, and the Board of Directors consists of seven members, four of whom are independent outside directors. Independent outside directors have reached a majority of the Board of Directors, and they use their high expertise and rich experience to express their opinions on important matters through deliberations by the Board of Directors and provide advice where necessary.

In order to ensure the objectivity and transparency of the procedures for nominating candidates for directors, and to strengthen the accountability of the Board of Directors, the Nomination and Remuneration Committee has been established as an advisory body of the Board of Directors, to obtain appropriate involvement and advice from independent outside directors.

【Supplementary Principle 4-11-1 Basic Views on the Overall balance of knowledge, experience and skills and the diversity and scope of the Board of Directors】

In order to realize the Fourth Medium-Term Business Plan, UT Group has identified the skills and other attributed to be held as a whole by the Board of Directors and has developed a skills matrix that shows the key skills, careers, and expertise of each director. The Nomination and Remuneration Committee selects candidates for directors in consideration of the number of directors and skills of each director, depending on the Company's status and business environment. Please refer to the Company's website for the skills matrix.

(https://www.ut-g.co.jp/ir/management/governance/)

Refer to "Principle 3-1 (iii) to (v)" concerning UT Group's views on the balance of knowledge, experience, and skills of the Board as a whole, and diversity, as well as policies and procedures for selection of directors.

【Supplementary Principle 4-11-2 Concurrent Positions of Directors and Audit & Supervisory Board Members】

The status of concurrent positions held by Directors and Audit & Supervisory Board Members is disclosed in the Securities Report and the Notice of the General Meeting of Shareholders every year.

At present, three out of four External Directors concurrently hold a position of director of other listed companies. The two External Directors concurrently are directors of two other listed companies while the one External Director concurrently holds a position of director of another listed company. Three External Audit & Supervisory Board Members do not concurrently hold position of director of another listed company.

The number of companies where the Directors hold concurrent position is considered reasonable and the Directors and Audit & Supervisory Board Members are believed to have sufficient time and energy to appropriately carry out expected roles and duties.

【Supplementary Principle 4-11-3 Overall Analysis and Evaluation of the Effectiveness of the Board of Directors】

UT Group conducts analysis and evaluation of the effectiveness of the Board of Directors since September 2021 to strengthen the function of the Board of Directors. For 2021, with advice from an external organization, questionnaire concerning "Management and organization of the Board of Directors", "Management strategy and business strategy", "Corporate ethics and risk management", "Performance monitoring, and evaluation and compensation of management" and "Dialogue with shareholders" was implemented to all directors and all audit & supervisory board members. (Answers were given directly to the said external organization, maintaining anonymity)

The evaluation was summarized and analyzed based on the advice of the said external organization.

As a summary of the results of the analysis and evaluation, we confirmed that effectiveness of the Board is generally ensured, based on the following reasons as the result of the questionnaire.

The composition of the Board was evaluated as appropriate due to the appointment of a female outside director and the resulting increased diversity of the Board.

The selection of agenda items for Board of Directors meetings and the allocation of matters for resolution and matters to be delegated to the business executive side were evaluated as appropriate.

The Company has been achieving sustained growth through the effective functioning of its strategy to develop business centered on advancement in the skills and careers of technical employees.

The Company's agile efforts to respond to changes in the external environment, such as the rise of social demands on sustainability, was appreciated.

The Company properly responds to external requests concerning corporate ethics and shares the status of risk assessment, and that internal auditing is functioning effectively.

The performance evaluation of each director and each executive officer by the Nomination and Compensation Committee was evaluated to be appropriate.

Dialogue with shareholders and others is undertaken in a timely and appropriate manner and that the contents are properly reported to the Board of Directors.

To further strengthen the effectiveness of the Board of Directors, we will deepen discussions on medium- to long-term management plans, risk management, and sustainability, and will continue efforts to strengthen the function of supervising the post-investment reviews and discussions of acquired companies. Please refer to the Company's website for the results of the evaluation of the effectiveness. (https://www.ut-g.co.jp/news/)

【Supplementary Principle 4-14-2 Policy on Directors and Audit & Supervisory Board Members Training】

UT Group's Directors and Audit & Supervisory Board Members constantly and actively acquire and learn information concerning the Company's financial conditions, compliance with laws and regulations, corporate governance, and other matters. The Company has External Directors and External Audit & Supervisory Board Members who have expert knowledge in legal, accounting, and tax affairs. They share their knowledge on laws and regulations, and other relevant matters at the Board of Directors meetings and other occasions, when appropriate. Audit & Supervisory Board Members receive training to enhance the level of auditing, such as training by the Japan Audit & Supervisory Board Members Associations, as a part of their carrying out of appropriate auditing duties.

【Principle 5-1 Policy on Constructive Dialogues with Shareholders】

UT Group's IR activities are mainly performed by the unit in charge of IR in the Management Reformation Division. Every quarter a video of the financial result presentation by President & Representative Director is uploaded on the website. The Company also attends conferences hosted by securities companies and welcomes one-on-one meetings. Information on business plans and operating conditions is proactively disclosed on the Company's website.

The division in charge of IR reports details of dialogues with shareholders and investors to the Board of Directors, when appropriate, in order for the information to be available for use in operations and management. The IR Policy, with its basic policy being to provide prompt information disclosure with transparency, fairness, and consistency, has been officially determined and is disclosed on the corporate website.

2. Capital Structure
	Foreign Shareholding Ratio			30% or more
[Status of Major Shareholders]		Updated
	Name / Company Name	Number of	Percentage (%)
	Shares Owned
	Yoichi Wakayama						9,031,178	22.37
	The Master Trust Bank of Japan, Ltd. (Trust Account)	4,534,700	11.23
	Custody Bank of Japan, Ltd. (Trust E Account)	2,836,700	7.03
	J.P. MORGAN BANK LUXEMBOURG S.A. 381572	1,845,500	4.57
	Custody Bank of Japan, Ltd. (Trust Account)	1,572,600	3.90
	THE BANK OF NEW YORK MELLON SA / NV10	950,000	2.35
	Lei Hau' oli Co., Ltd.						908,600	2.25
	Copernicus Co., Ltd.						908,600	2.25
	THE BANK OF NEW YORK MELLON 140044	813,493	2.02
	JP MORGAN CHASE BANK 385632	777,434	1.93
	Controlling Shareholder (except for
	Parent Company)
	Parent Company			N/A

Supplementary Explanation

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3. Corporate Attributes

Listed Stock Market and Market Section	First Section of Tokyo Stock Exchange
Fiscal Year-End	March
Type of Business	Service
Number of Employees (consolidated)	More than 1,000
as of the End of the Previous Fiscal
Year
Sales (consolidated) as of the End of	From 100 billion yen to less than 1 trillion yen
the Previous Fiscal Year
Number of Consolidated Subsidiaries as	From 10 to less than 50
of the End of the Previous Fiscal Year

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

―

5. Other Special Circumstances which May Have Material Impact on Corporate Governance

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1. Business Management Organization and Other Corporate Governance Systems RegardingDecision-making, Execution of Business, and Oversight in Management

１．Organizational Composition and Operation

Organization Form

Company with Audit & Supervisory Board Members

[Directors]

Maximum Number of Directors

10

Stipulated in Articles of Incorporation

Term of Office Stipulated in Articles of

1 year

Incorporation

Chairperson of the Board of Directors

President & Representative Director

Number of Directors

7

Appointment of External Directors

Yes

Number of External Directors

4

Number of Independent External

4

Directors

Relationship with the Company (1)

Name

Attribute

Relationship with the Company (●)

a

b

c

d

e

f

g

h

i

j

k

Noboru Hachimine

From another company

〇

Tetsuro Yoshimatsu

From another company

Taisuke Igaki

Lawyer

〇

Hiroko Sasaki

From another company

〇

Categories for "Relationship with the Company"

• • "〇" when the director presently is in or recently became associated with the category; "△" when the director was in the category in the past
• "●" when a close relative of the director presently is in or recently became associated with the category;