Yamato : CORPORATE GOVERNANCE

Part 3

CORPORATE GOVERNANCE

M E S S A G E

Message from the Chairperson of the Board of Directors

In June 2022, Outside Director Shiro Sugata was appointed as the chairperson of the Board of Directors.

Pursuing benefits for all our stakeholders

P R O F I L E

Shiro	Chairperson of the Board and Outside Director
Sugata

CORPORATE GOVERNANCE

Part 3

Message from Chairperson of the Nomination and Compensation Committee

In June 2022, Outside Director Mariko Tokuno was appointed as chairperson of the

Nomination and Compensation Committee.

For governance that ensures transparency and fairness

		P R O F I L E
Mariko		Chairperson of the Nomination and
	Compensation Committee and
Tokuno
	Outside Director

Mindset Needed to Be Chairperson of the Board of Directors

As a company that utilizes an executive officer system, I feel that it is appropriate to entrust matters relating to short-term and daily business operations to the management team as much as possible. Meanwhile, discussions and decision-making at Board of Directors meetings should be more about important medium- to long-term policies and initiatives.

Additionally, while outside directors are generally said to be the representatives of shareholders, it is my belief that we should also provide benefits to all of our stakeholders, including customers, business partners, local communities, and employees, in addition to our shareholders. Accordingly, I place importance on management speed. A management style that can prevent delays in decision- making and implementation while avoiding hasty decisions will definitely lead to the maximization of benefits for stakeholders.

As chairperson of the Board of Directors and an outside director, I will propose management policies and specific initiatives that contribute to medium- to long-term benefits for all our stakeholders and will endeavor to select agenda items and keep proceedings on track to achieve this.

Effectiveness of the Board of Directors

I was appointed as an outside director in 2019. Over the last three years, Yamato's Board of Directors has been thoroughly enhanced, not only in terms of structure, such as the ratio of outside directors, but also in terms of substance, including details of agenda items and discussions and pre-meeting briefings. For example, at Board of Directors meetings we discuss vital agenda items, such as the transfer of shares in consolidated subsidiaries and the introduction of cargo flights (freighters) as a new trunk-route transportation method, from the planning stage. The decisions made, as well as the subsequent progress, are then reported to and discussed by the executive side. According to the requests of outside directors, we also proac- tively report strategic failures and hold constructive discussions based on these. Going forward, I hope to encourage outside directors to gain an understanding of the business and deepen discussions with the executive side by creating opportunities for outside directors to visit the front line, and communicate with working

employees, although this depends on the spread of COVID-19. However, the effectiveness of the Board of Directors cannot truly

be assessed until several years later. Factors including future performance and stock price, the level of customer satisfaction, and the level of employee satisfaction, can help us confirm the appropriateness of our current discussions and decision-making process. Accordingly, we must be aware of whether the corporate governance system, including the Board of Directors, has the best and most suitable structure and operational status. As the chairperson of the Board of Directors, in the future I will participate from the preparatory stage in deciding how each topic is selected and adopted, including items for resolution, reports, and consultation, with the aim of further enhancing effectiveness.

Improvement of Long-Term, Sustainable Corporate Value

It is important to hold discussions with an even greater awareness of sustainability for the future ahead. Sustainability ensures the sustainable growth of the Yamato Group. This entails not only environmental aspects, such as the reduction of greenhouse gas emissions and decarbonization, but also the enhancement of the services and operations we provide, utilization of digitalization (DX) and human capital in response to the declining working population, new busi- nesses, and global expansion. Our business continuity plans are also an important topic. As a part of social infrastructure, our services must remain uninterrupted, even during natural disasters, including abnormal weather and earthquakes. It is vital to reinforce a structure and business operations that are prepared for these risks.

These business continuity plans are capable of maintaining sufficient profit levels. We must continue to generate high levels of profit to maintain proactive long-term investments and a stable business operational structure. I will continue to place importance on profitability with "sustainable corporate value improvement" as a vital key phrase.

The Nomination and Compensation

Committee's Significance and My Role as

Chairperson

The purpose of outside directors is to ensure transparent and fair management through effective corporate governance and to contribute to enhancing corporate value over the medium to long term. The same is also said of the Nomination and Compensation Committee. Deliberation of the nomination process ensures the transparency and fairness of the management structure through the selection and dismissal of directors, the evaluation of the president and succession plans, and the composition of the entire Board of Directors, including outside directors. Deliberation of the process for determining compensation sets out transparent and fair compensation systems and decision-making policies for securing talented human resources and encourages them to play an active role in the development of the Yamato Group of the future.

As of June 2022, the Yamato Group's Nomination and Compensation Committee comprises one inside director (executive officer and president) and five outside directors (all outside directors of the Board). We transitioned to the current composition to eliminate the information gap between outside directors and ensure a higher level of discussion and decision-making. The Nomination and Compensation Committee deliberates on nomination and compensation but is also a forum for vital communication between the outside directors and the president, who is the chief executive officer of Yamato's operations. The discussions of outside directors become even more beneficial when carried out with a deep understanding of the president. In actively exchanging opinions on not only agenda items in the Nomination and Compensation Committee but also our vision for the future of the Yamato Group, including the axis of management decision-making, the thought process leading to those decisions, and the direction the president is considering, I, as chairper- son, will play the role of facilitator in stimulating these discussions.

Status of Nomination and Compensation Committee Activities and Issues to Consider Going Forward

In the fiscal year ended March 31, 2022, deliberations regarding nomination included the number and structure of directors and

necessary personnel based on a skills matrix, the selection of new candidates for director, and the appointment process for independent outside directors. Yamato's process for appointing directors is to narrow down a list of candidates based on the experience and skills they possess that are necessary for the Group. In light of the Group's growth strategies, we will continue to examine the Board of Directors, including details of the skills its members should have.

Deliberations regarding compensation included the establishment of performance benchmarks for performance-linked, share- based compensation, the establishment of a mission for inside director officer compensation, and a revision of policies for determining individual compensation for directors (removal of decision- making power from the president).

From the fiscal year ended March 31, 2022, we have raised the percentage of performance-linked compensation (variable compen- sation) as an incentive and introduced a new officer compensation system with revised performance indicators. However, we are only just catching up to an average compensation system in Japan. I believe that there is still room to advance the officer compensation system and we will continue examining a compensation system that better motivates directors to improve corporate value over the medium to long term, such as how to set percentages for performance -linked compensation and incentives.

Key Topic That Contributes To Corporate Value in the Medium to Long Term

A key topic that needs to be thoroughly discussed going forward is a succession plan for the president. Regardless of the president's age and term length, we must always keep the future in mind and consider the successor appointment process and methods for their develop- ment. For example, we must consider measures including the reinforcement of outside director points of contact with the executive side; presentations by candidates; the creation of opportunities to understand human nature, values, and enthusiasm; and the utilization of external programs. We will deepen deliberations as soon as possible to establish a mechanism and fulfill our role as the Nomination and Compensation Committee.

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	Part 3	CORPORATE GOVERNANCE
Corporate Governance
	Basic Position on Corporate Governance
Based on its corporate philosophy, the Yamato Group carries out	the Group is one of the top priorities of management, and we have
business activities in accordance with the law and social norms and	implemented measures and bolstered management systems as part

Management Structure

			Nomination and
Name	Position	Outside	Compensation

Committee member

CORPORATE GOVERNANCE

Part 3

		Expertise and experience
		Human		Legal affairs
Corporate	Marketing	resources	Finance and	IT and digital
and risk	Global
management	and sales	and labor	accounting	technologies
management
		management

actively promotes compliance management. Striving to maximize	of our corporate governance initiative.
corporate value by effectively utilizing the management resources of
	Corporate Governance System (As of July 1, 2022)

Yutaka Nagao	Representative
Director, Executive
	Officer and President
	Representative
Toshizo Kurisu	Director, Executive
Officer and Vice
	President
	Representative
Yasuharu Kosuge	Director, Executive
Officer and Vice
	President

The Company is a Company with an Audit & Supervisory Board. In addition to important management decision-making and the supervision of business execution by the Board of Directors, Audit & Supervisory Board members and the Audit & Supervisory Board, which are independent from the Board of Directors, shall audit the status of the execution of duties by directors.

Also, to supplement the supervisory functions of the Board of Directors, the Company established the Nomination and Compensation Committee comprising a majority of independent outside directors. At the same time, the Company has separated the supervision and execution of management and adopted an executive officer system to ensure even more prompt decision-making related to business execution.

System	Company with an Audit &
Supervisory Board
Number of directors	9
Outside directors	5
Number of Audit & Supervisory Board members	5
Outside auditors	3
Term of directors	1 year
Voluntary advisory committees	Yes (Nomination and
Compensation Committee)
Executive officer system in place	Yes
Independent auditor	Deloitte Touche
Tohmatsu LLC

Kenichi Shibasaki	Representative
Director
Mariko Tokuno	Director	(Chairperson)
Yoichi Kobayashi	Director
Shiro Sugata	Director
Noriyuki Kuga	Director
Charles Yin	Director
Yoshihiro Kawasaki	Full-time Audit &
Supervisory Board
	Member
Tsutomu Sasaki	Full-time Audit &
Supervisory Board

Composition of the Board of Directors, Audit & Supervisory Board, and Nomination and Compensation Committee

	Member
Takashi Yamashita	Audit & Supervisory
Board Member

Board of Directors

	Independent		Inside directors
	outside directors
5 members 56%	4 members 44%

Chaired

by

an outside

director

	Audit & Supervisory Board		Nomination and Compensation Committee
	Outside Audit &		Inside Audit &		Independent		Inside directors
	Supervisory Board		Supervisory Board		outside directors
	members		members
3 members 60%	2 members 40%	5 members 83%	1 members 17%

Chaired

by

an outside

director

Ryuji Matsuda	Audit & Supervisory
Board Member
Yoshihide Shimoyama	Audit & Supervisory
Board Member

Note: Shiro Sugata took on the role of the Chairperson of the Board on June 23, 2022.

Corporate Governance Framework

		General Meeting of Shareholders
Elect	Elect	Elect
		Nomination and
	Audit &	Compensation

Change in the Composition of the Board of Directors

July 1, 2011		As of July 1, 2022
		Ratio of			Ratio of
		independent			independent
		outside			outside
		directors			directors
		33%			56%
4 inside directors  2 independent outside directors	4 inside directors  5 independent outside directors
				(including 1 female outside director)

Supervisory Board

Board of Directors

Committee

Coordinate

Audit

Report

Report

Make decisions /

Propose / Report

Legal Advisor

Supervise

Executive

Management Committee

CSR Department

Accounting

Conference

audit

AuditorIndependent

Report

Execute

Propose / Report

Execute business

business

Audit Department

Group Companies

Internal

audit

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Part 3

CORPORATE GOVERNANCE

Corporate Governance

Efforts to Improve Corporate Governance

Management Strategy
			DAN-TOTSU		DAN-TOTSU	KAIKAKU 2019 for NEXT100			YAMATO NEXT100
			Three-Year Plan HOP		Three-Year Plan STEP			One Yamato 2023
2002-	2011-	2014-	2017-	2020-"YAMATO NEXT100"
	2021-"One Yamato 2023"
Board of Directors and Audit & Supervisory Board		Transition to a structure in which		Appointed a female inde-		Appointed independent outside members as the majority
	outside directors comprised at		pendent outside director		of members on the Board of Directors (June 2020)
		Shortened the term of directors to one year (June 2003)		least one-third of all directors		(June 2017)		Appointed outside members as the majority of
					(June 2015)				members on the Audit & Supervisory Board (June 2020)
		Appointed outside directors (June 2005)		Implemented evaluation of					Appointed an independent outside director as the
					effectiveness of the Board of					Chairperson of the Board of Directors (June 2022)
					Directors (June 2016)		Transitioned to a structure in which independent outside directors comprised one-half of
							all directors (June 2019)
Committees, etc.
		Established the Nomination and Compensation Committee (June 2005)

CORPORATE GOVERNANCE

Part 3

				Attendance at
	Name	Concurrent posts	Overview of reasons for appointment and expected roles	meetings during the
	fiscal year ended
				March 31, 2022
		• Representative of Takashi	Takashi Yamashita comments as needed based on ample experience and professional knowledge of finance	Board of Directors:
	Takashi	Yamashita CPA Office	and accounting. He confirms the status of the execution of duties by directors based mainly on ample experi-	18 of 18 meetings
	• Outside Director of Shin	ence and extensive knowledge as a certified public accountant. Furthermore, he attended all 19 Audit &	Audit & Supervisory
	Yamashita
	Nippon Biomedical	Supervisory Board meetings held in the fiscal year under review and exchanged opinions at regular meetings	Board:
		Laboratories, Ltd.	with the representative director and president.	19 of 19 meetings
Outside
		Ryuji Matsuda comments as needed based on ample experience and professional knowledge of finance and	Board of Directors:
Audit &	Ryuji	• Attorney-at-Law of Matsuda	accounting and as a lawyer. He confirms the status of the execution of duties by directors based mainly on	18 of 18 meetings
Supervisory	ample experience and extensive knowledge as a lawyer. Furthermore, he attended all 19 Audit & Supervisory	Audit & Supervisory
Board	Matsuda	Law Office	Board meetings held in the fiscal year under review and exchanged opinions at regular meetings with the	Board:
Members			representative director and president.	19 of 19 meetings
			Yoshihide Shimoyama comments as needed based on ample experience in management and auditing. He	Board of Directors:
	Yoshihide	• Outside Audit & Supervisory	confirms the status of the execution of duties by directors based mainly on ample experience and extensive	18 of 18 meetings
	Board Member of NIPPON	knowledge as a manager and an outside Audit & Supervisory Board member. Furthermore, he attended all 19	Audit & Supervisory
	Shimoyama
	HUME CORPORATION	Audit & Supervisory Board meetings held in the fiscal period under review and exchanged opinions at regular	Board:
			meetings with the representative director and president.	19 of 19 meetings

Board of Directors

		Established the Compliance and Risk Committee (August 2006)
Corporate Structure and Other Systems and Initiatives
		Introduced executive officer system (June 2004)		Established Corporate		Abolished advisor position		Decided to revise officer compensation system and
			Governance Guidelines		(June 2018)		introduce a performance-linked,share-based compen-
		Eliminated retirement benefit system for directors		(September 2015)				sation system (June 2020)
		(June 2004)		Implemented director training
		Disclosed ROE target in medium-term management plan
			(October 2015)

(January 2005)

Introduced performance-linked compensation system (April 2005)

Transitioned to a pure holding company (November 2005) Introduced succession plans (July 2006)

Concurrent Posts and Main Activities of Outside Directors and Outside Audit & Supervisory

Board Members (Year Ended March 31, 2022)

				Attendance at
	Name	Concurrent posts	Overview of reasons for appointment and expected roles	meetings during the
	fiscal year ended
				March 31, 2022
		• Senior Advisor of International	Masakatsu Mori comments and advises as needed on all aspects of business management based on ample
		experience and extensive knowledge as a businessperson. Accordingly, he plays an important role in drawing
		University of Japan	Board of Directors:
		on his insight to provide oversight and advice from a managerial standpoint, particularly regarding matters of
		• Outside Director of Stanley	18 of 18 meetings
	Masakatsu	management strategy, overall encompassing business execution, business strategy, financial strategy, and
	Electric Co., Ltd.	Nomination and
	sustainability strategy, to contribute to ensuring the transparency and appropriateness of decision-making.
	Mori	• Outside Director of Kirin	Compensation
	Furthermore, he attended all 11 meetings held in the fiscal year under review as a member of the Nomination
		Holdings Company, Limited	Committee:
		and Compensation Committee and fully demonstrated supervisory functions in the decision process for the
		• External Statutory Auditor of	11 of 11 meetings
		selection of candidates for officers and the evaluation of their compensation from an objective and neutral
		FAST RETAILING CO., LTD.
		standpoint.
			Mariko Tokuno comments and advises as needed on all aspects of business management based on ample
		• Outside Director of HAPPINET	experience and extensive knowledge as a businessperson. Accordingly, she plays an important role in drawing	Board of Directors:
	Mariko	CORPORATION	on her insight to provide oversight and advice from a managerial standpoint and customer and employee	18 of 16 meetings
	• Outside Director of Mitsubishi	standpoints, particularly regarding matters of business execution, business strategy, and HR strategy, to	Nomination and
	Tokuno	Materials Corporation	contribute to ensuring the transparency and appropriateness of decision-making. Furthermore, she attended all	Compensation
		• Outside Director of Shiseido	11 meetings held in the fiscal year under review as a member of the Nomination and Compensation	Committee:
		Company, Limited	Committee and fully demonstrated supervisory functions in the decision process for the selection of candi-	11 of 11 meetings
			dates for officers and the evaluation of their compensation from an objective and neutral standpoint.
			Yoichi Kobayashi comments and advises as needed on all aspects of business management based on ample
Outside			experience and extensive knowledge as a businessperson. Accordingly, he plays an important role in drawing	Board of Directors:
		on his insight to provide oversight and advice from a managerial standpoint, particularly regarding matters of	18 of 18 meetings
Directors	Yoichi
	business execution, business strategy, and investment strategy, to contribute to ensuring the transparency and	Nomination and
	-
	Kobayashi	appropriateness of decision-making. Furthermore, he attended all 11 meetings held in the fiscal year under	Compensation
			review as a member of the Nomination and Compensation Committee and fully demonstrated supervisory	Committee:
			functions in the decision process for the selection of candidates for officers and the evaluation of their	11 of 11 meetings
			compensation from an objective and neutral standpoint.
			Shiro Sugata comments and advises as needed on all aspects of business management based on ample
			experience and extensive knowledge as a businessperson. Accordingly, he plays an important role in drawing	Board of Directors:
		• Outside Director of JSR	on his insight to provide oversight and advice from a managerial standpoint, particularly regarding matters of
		18 of 18 meetings
		Corporation	business execution, business strategy, productivity enhancement, and cost structure reform, to contribute to
	Shiro Sugata	Nomination and
	• Outside Director of Yokogawa	ensuring the transparency and appropriateness of decision-making. Furthermore, he attended all 11 meetings
	Compensation
		Electric Corporation	held in the fiscal year under review as a member and chairperson of the Nomination and Compensation
		Committee:
			Committee, leading its operations, and fully demonstrated supervisory functions in the decision process for the
			11 of 11 meetings
			selection of candidates for officers and the evaluation of their compensation from an objective and neutral
			standpoint.
			Noriyuki Kuga comments and advises as needed on all aspects of business management based on ample
	Noriyuki		experience and extensive knowledge as a businessperson. Accordingly, he plays an important role in drawing	Board of Directors:
	-	on his insight to provide oversight and advice from a managerial standpoint, particularly regarding matters of
	Kuga	18 of 18 meetings
		business execution, financial strategy, and corporate governance, to contribute to ensuring the transparency
			and appropriateness of decision-making.

Roles and duties

The Board of Directors shall make important decisions concerning the Company's business and supervise the execution of duties by executive directors and executive officers.

The Board of Directors shall recognize the medium-term management plan as one of the commitments to shareholders and supervise the effectiveness of strategies, such as the Company's business portfolio and the optimal allocation of management resources, to achieve the goals of this plan. Moreover, the Board of Directors shall sufficiently analyze the initiatives aimed at realizing the goals of the medium-term management plan as well as the extent to which the plan's objectives are being achieved. In addition to providing explanations to share- holders, such analyses shall be reflected in future management plans. The Board of Directors shall encourage executive officers to demonstrate a healthy entrepreneurial spirit and to not excessively avoid or

curb risk, while at the same time establishing a framework that enables it to ensure accountability.

The scope of responsibility of each executive officer shall be decided and disclosed by the Board of Directors. Executive officers shall execute business in accordance with internal regulations.

Management

To allow Board of Directors meeting attendees the opportunity to prepare for meetings in advance, the Board of Directors secretariat shall send agenda items and related materials to directors well in advance of the meeting date and provide explanations in advance as needed.

The annual schedule of Board of Directors meetings as well as anticipated agenda items shall be decided in advance, and this information shall be provided to directors and Audit & Supervisory Board members.

The number of issues to be deliberated as well as the frequency of meetings shall be appropriately set, and the time of meetings shall be decided so as to allow sufficient time for deliberations.

As needed, meetings comprising Board of Directors meeting attendees shall be held for the purpose of exchanging ideas, thereby encouraging lively debate.

Evaluation of effectiveness

To verify the effectiveness of the Board of Directors, the Company

surveys all directors and Audit & Supervisory Board members on an annual basis regarding the composition and operational status of the Board of Directors. Based on the survey results, the Company carries out an evaluation on the Board's effectiveness in terms of such matters as the condition of the Board's operation and the state of deliberation held at Board meetings. From the fiscal year ended March 31, 2020, in addition to the survey, the chair (in the fiscal year ended March 31, 2022: the chairperson of the Board of Directors) has begun performing interviews to further enhance the usefulness of the evaluation.

Results of Evaluation for the Fiscal Year Ended March 31, 2022

In the effectiveness evaluation for the fiscal year ended March 31, 2022, the Company received an evaluation that the composition, management conditions, and deliberation conditions of the Board of Directors were largely appropriate as a system where the Board of Directors serves as the oversight function, and that a culture where attendees actively speak up and engage in unrestricted discussions at the Board of Directors meeting had taken hold.

Specifically, the Board of Directors was able to gain sufficient information on items to be discussed in pre-meeting briefings and the executive side was able to confirm and examine points raised in those briefings before attending Board of Directors meetings, enabling directors to make risk-based management decisions through more in-depth discussions. Furthermore, in addition to monthly reports from the president on the status of business execution at Board of Directors meetings, the executive officers of operating companies regularly present issues and medium- to long-term themes in their areas of jurisdiction and discuss them with the Board of Directors, thereby deepening directors' knowledge of business operations.

Based on the results of the effectiveness evaluation, the Company has confirmed that the Board of Directors has been able to display an effectiveness that contributes to securing sound management and achieving prompt and accurate decision-making and business execu- tion, which are the Company's basic policies for corporate governance.

Going forward, the Company will further strengthen corporate governance to improve the soundness of the Yamato Group's entire management structure while continuously working to maintain and improve the effectiveness of the Board of Directors for the execution of the growth strategies called for in the medium-term management plan "One Yamato 2023."

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Part 3

CORPORATE GOVERNANCE

Corporate Governance

Audit & Supervisory Board

CORPORATE GOVERNANCE

Part 3

Compensation of Directors and Audit & Supervisory Board Members

Roles and duties

The Audit & Supervisory Board and its members shall exercise their authority proactively to sufficiently fulfill their role and responsibili- ties, including operational audits, accounting audits, and other functions, and they shall appropriately state their opinions at Board of Directors meetings as well as to members of senior management.

to the execution of business, express reasonable opinions, hold effective Audit & Supervisory Board meetings, and ensure that information is shared and that members work together in a coordinated manner.

The Audit & Supervisory Board shall regularly hold information exchange meetings for the purpose of sharing information with outside directors, thereby ensuring more robust gathering of infor-

						(Fiscal year
Directors and	Total compensation and	Total by compensation category (Millions of yen)	Head count of eligible
Audit & Supervisory Board members	other remuneration	Basic compensation	Performance-linked	Non-monetary	directors and Audit &	ended
(Millions of yen)	compensation	compensation, etc.	Supervisory Board members	March 31,
						2022)
Directors	456	321	135	-	9
(Outside directors)	(73)	(73)	(-)	(-)	(5)
Audit & Supervisory Board members	81	81	-	-	5
(Outside Audit & Supervisory Board	(33)	(33)	(-)	(-)	(3)
members)
Total	537	402	135	-	14
(Outside directors)	(106)	(106)	(-)	(-)	(8)

The full-time Audit & Supervisory Board members shall attend Board of Directors meetings and other important meetings related

mation and encouraging teamwork.

Policy for Determining Compensation Amounts and Calculation Methods

1. Basic policy

Following this, the amount paid out to individuals is determined within a range of 0% to 150% in line with the achievement rate for Yamato's performance benchmarks and the evaluation of individual missions.

Nomination and Compensation Committee

The Company's compensation for directors is determined based on the following factors.

Furthermore, the performance benchmarks comprise ROE, total shareholder return, and ESG indicators (greenhouse gas emissions). The

The Nomination and Compensation Committee shall comprise a majority of independent outside directors and inside directors and act as an advisory body to the Board of Directors. The committee shall deliberate on particularly important matters pertaining to nomination and compensation and present the results of these discussions to the Board of Directors in an effort to enhance management transparency.

The committee shall deliberate on matters related to the appointment or dismissal of directors, Audit & Supervisory Board mem- bers, and executive officers on the basis of business performance and multifaceted observations and evaluations, verify the validity of such decisions, and present the results to the Board of

Directors. The committee shall also deliberate on matters related to policies for determining compensation, such as for directors and executive officers and the details of individual compensation, verify the validity of such decisions, and present the results to the Board of Directors.

The committee shall propose several candidates to the Board of Directors, including candidates recommended by the serving representative to the Board of Directors, as successors to the representative director to the Board of Directors, following deliberation and based on multifaceted observations and evaluations of candidates' track records, human nature, and other factors and verification of their appropriateness.

A competitive level of compensation

• Provide rewards according to roles and responsibilities, as well as performance, and set compensation at an adequate level to secure talented human resources

A compensation system emphasizing the improvement of corporate and shareholder value

- Link compensation to business performance so as to motivate directors to achieve performance goals

• Establish a compensation composition that promotes the sharing of common interests with shareholders by linking it to corporate value over the medium to long term

A fair and equitable compensation system

• Ensure that the process for determining compensation is objective and highly transparent

amount of medium- to long-termperformance-linked,share-based compensation (variable compensation) is paid out as points, whereby one share equals one point for each fiscal year, dividing the standard amount by the average of the closing prices of the Company's shares at the Tokyo Stock Exchange in the month preceding the fiscal year in which the medium-term management plan starts.

6. Policy for determining mix of compensation and other remuneration types for individual directors

The mix of compensation types is such that the higher a director's position, the more weight is assigned to performance-linked compensa- tion. The Company has opted for this approach upon having taken into account compensation levels at other companies, in part because this approach makes it possible to further fuel motivation with respect to achieving performance targets, generating medium- to long-term corpo-

Key Discussion Items for the Nomination and Compensation Committee in the Fiscal Year Ended March 31, 2022

Related to Nomination		Related to Compensation
Number and structure of directors and requirements for human resources		Performance benchmarks related to performance-linked,share-based
based on a skills matrix		compensation
New candidates for directors		Establishment of missions for inside director compensation
Appointment process for independent outside directors		Reform of decision-making policies for compensation and other remu-
		neration for individual directors

Support Framework for Directors and Audit & Supervisory Board Members

2. Compensation structure

The Company's compensation for directors consists of basic compensation (fixed compensation), which takes compensation levels at other companies and other such factors into consideration; short-term performance -linked compensation (variable compensation); and medium- to long-termperformance-linked,share-based compensation (variable compensation). Medium- to long-termperformance-linked,share-based compensation (variable compensation) has been applied to compensation paid out from July 2022 onward. In addition, compensation for Audit & Supervisory Board members and independent outside directors consists exclusively of basic compensation, due to the nature of their functional roles.

rate value, and attaining sustainable growth, and also because the Company seeks to offer competitive compensation levels for recruiting and retaining talented human resources.

7. Timing of delivery and conditions

The Company pays its basic compensation (fixed compensation) and short-termperformance-linked compensation (variable compensation) as monetary sums on a monthly basis, encompassing twelve equal installments annually.

Medium- to long-termperformance-linked,share-based compensation (variable compensation) is granted once a year in June in the form of points. Points accumulated up to retirement are paid out, with one point equaling one share, at the time of retirement in accordance with

The Company shall establish a support framework that enables it to provide necessary and adequate information at the necessary time to allow directors to effectively fulfill their roles and duties.

By participating in key business strategy meetings for the overall Group, including the Management Plan Presentation Meeting, and by observing key Group business sites, including those overseas, participants are able to confirm business strategies and their promotion and provide opportunities for proactive involvement in projects.

As a system to help Audit & Supervisory Board members smoothly perform their duties, employees in the internal audit department shall be appointed to assist Audit & Supervisory Board members and ensure a support system.

Audit & Supervisory Board members shall exercise their authority to perform investigations in accordance with the Companies Act. In addition, if a director or employee discovers a fact that could

potentially inflict marked damage on the Company, they shall immediately report this fact to an Audit & Supervisory Board member, even if there is no request to do so from an Audit & Supervisory Board member.

If a director or Audit & Supervisory Board member believes it to be necessary, they shall obtain advice from an outside expert at the Company's expense.

The internal audit department shall regularly hold meetings with the full-time Audit & Supervisory Board members and provide audit reports in a planned manner to the Board of Directors and the Audit & Supervisory Board, thereby enhancing the provision of information to, as well as bolstering coordination with, outside directors and outside Audit & Supervisory Board members.

1. Policy for determining basic compensation (fixed compensation) Basic compensation (fixed compensation) is determined in accordance with rank and title and based on responsibilities, upon having consid- ered compensation levels at other companies and other such factors.
2. Policy for determining short-termperformance-linked compensation (variable compensation)

The standard amount is set within the range of 45% to 55% of basic compensation (fixed compensation) in accordance with rank and title. Following this, the amount paid out to individuals is determined within a range of 0% to 150% in line with the achievement rate for Yamato's performance benchmarks and the evaluation of individual missions. Furthermore, the performance benchmarks comprise Group consolidated operating revenues, Group consolidated operating profit, and Group consolidated profit attributable to owners of parent.

5. Policy for determining medium- to long-termperformance-linked,share-based compensation (variable compensation)

The standard amount is set within the range of 30% to 40% of basic compensation (fixed compensation) in accordance with rank and title.

regulations for director share benefits.

8. Decisions on compensation and other remuneration for individual directors

To ensure transparency and objectivity, the Nomination and Compensation Committee, which is chaired by an independent outside director and comprises a majority of independent outside directors, discusses the amounts of basic compensation (fixed compensation), short-termperformance-linked compensation (variable compensation), and medium- to long-termperformance-linked,share-based compensation (variable compensation) for individual directors and details of their calculation in advance. The Board of Directors determines the amount of compensation based on the results of these discussions.

9. Other

A certain percentage of the monetary compensation shall be allocated to the purchase of shares of the Company through the Officers and Executives' Shareholding Association.

52	YAMATO HOLDINGS CO., LTD.
Integrated Report 2022

YAMATO HOLDINGS CO., LTD. 53 Integrated Report 2022

Part 3

CORPORATE GOVERNANCE

Corporate Governance

Performance-linked and short-termperformance-linked compensation (variable compensation) for April 2021 to March 2022 has been determined according to each calculation method applied to the old officer compensation system and the new officer compensation system in the following manner.

1. Old Executive Compensation System (Applied from April 2021 to June 2021)

The Company uses consolidated operating profit as a benchmark for performance-linked compensation to better link compensation to corporate performance and also to achieve greater transparency and objectivity.

CORPORATE GOVERNANCE

Part 3

We have also established a system to carry out evaluations in		Internal control over the financial reporting of the Yamato Group
line with our internal control report system pursuant to the Financial		as of March 31, 2022 was considered valid, and an internal control
Instruments and Exchange Act and immediately put improvements		report was submitted to the Kanto Local Finance Bureau.
in place should there be any shortcomings. Furthermore, we prepare
internal control reports on financial reporting and receive an audit of
the internal system by independent auditors.

performance-linked compensation>

Consolidated operating profit x Percentage share of operating profit*1 x Percentage share by rank and title*2 + Extra allowance amount*3

*1 Percentage share of operating profit: Varies depending on achievement of targets for consolidated operating profit Achievement of target 100% or more = 0.15%; from 90% to less than 100% = 0.10%; less than 90% = 0.00%

*2 Percentage share by rank and title: Varies in the range of 20% to 34% depending on rank and title

*3 Extra allowance amount: Consolidated operating profit × 0.05% share of extra allowance × 60% share for directors

The amount calculated using this formula serves as the basis for extra allowance allocations made upon having assessed the extent to which targets have been achieved on an individual basis.

The consolidated operating profit for the fiscal year ended March 31, 2020, served as a benchmark for determining performance-linked compensation paid in the fiscal year ended March 31, 2022. The consolidated operating profit target was ¥72 billion, and the actual consolidated operating profit was ¥44.7 billion.

The Company has calculated the annual amount of performance-linked compensation based on these results and then converted that result to a monthly amount, which is applied to the period extending from April 2021 through June 2021.

2. New Executive Compensation System (applied from July 2021 to March 2022)

For the benchmark for determining short-termperformance-linked compensation, the Company has calculated the amount of individual compensation based on the achievement of quantitative performance indicators of "Group consolidated operating revenues," "Group consolidated operating profit," and "Group consolidated profit" and the achievement of individuals' missions as evaluated by individual progress and role satisfaction, in order to have a better link with the Company's performance and to improve the transparency and objectivity of the compensation.

The Company calculated the annual amount of short-termperformance-linked remuneration based on these results and then converted that result to a monthly amount, which is applied to the period extending from July 2021 through June 2022. The formula applied was as follows.

Enhancing the whistle-blower system

The Yamato Group has established a whistle-blower system to promptly identify and swiftly resolve violations to laws and/or internal regulations. In addition to compliance-related issues, such as corruption and human rights violations, the whistle-blower system accepts reports on any action that violates internal regulations and the Group's Management Philosophy.

We have established an internal point of contact operated by the Compliance and Risk Committee, an external point of contact with law- yers, a contact point with the president for suggestions, and a consultation center independent of Group companies as whistle-blower services that ensure a system that broadly responds to employees' voices. To create an environment that encourages whistle-blowing, we have established whistle -blowing regulations that protect the privacy of whistle-blowers and ensure that they do not suffer any unfair treatment as a result of making a report. Under these regulations, the Group carries out investigations of all reports, regardless of whether whistle-blowers are anonymous or provide their real name. We aim to enhance awareness of the whistle-blower system by sharing it with employees through methods including poster

Additionally, we conduct regular training for people who work as responders under this whistle-blower system. When a report is made on an issue, the whistle-blower system works to promptly confirm the facts, enact the necessary response and corrections, and promote measures to prevent a reoccurrence. Reports are also periodically made to the Compliance and Risk Committee, which discusses issues and countermeasures related to the promotion of Groupwide risk management and its thorough implementation at all Group companies.

The committee reports the details of deliberations to the Board of Directors each quarter. In addition, the committee quickly shares information with directors, auditors, and other related people in the event of an emergency in which a major risk is realized in order to understand the circumstances accurately and rapidly.

	2022/3 Results
Number of whistle-blower cases	634 (193 less than 2021/3)

Formula for Calculating Short-TermPerformance-Linked Compensation

<_reference3a_ relationship="" between="" target="" achievement="" rate="" and="" payment="">

displays in all offices and introduction in internal newsletters.

Note: The Compliance and Risk Committee meets each quarter at Yamato Holdings and every month at Group companies, including Yamato Transport.

Variable		Indicator rate	Actual	Target	Achievement
Performance indicator	on each	(Billions of	(Billions of
compensation	rate (%)
	director	yen)	yen)
	i) Group consolidated	●	1,695.9	1,623.0	104.5
	operating revenues	30%
Short-term	ii) Group consolidated	●	92.1	60.0	153.5
operating profit	30%
performance
	●
benchmarks iii) Group consolidated profit	56.7	30.0	189.0
30%
	iv) Evaluation of mission	●		-
	(individual)	10%

(Achievement rate of i. x 0.3 + Achievement rate of ii. x 0.3 + Achievement rate of iii. x 0.3) + Evaluation of mission (individual) 10% maximum

[Payment Rate]

[Payment Rate]

Maximum

Maximum 150%  Standard 100%

150%

Minimum 0.25%

Standard

100%

[Achievement rate]

Minimum

Maximum 120%  Standard 100%

0.25%

Minimum 60.1%

[Achievement rate]

Minimum

Standard

Maximum

Note: If the achievement rate is less than

60.1%

100%

120%

60%, the payment rate shall be zero.

Achievement rate on performance indicator in 2021: 134.1% (i 104.5% x 0.3 + ii 153.5% x 0.3 + iii 189.0% x 0.3)

Building solid relationships with business partners (suppliers and contractors)

To conduct responsible procurement with an awareness of the environ-	Additionally, we conduct questionnaires of suppliers and con-
ment and society together with all our business partners (suppliers and	tractors of equipment and other business necessities as an initiative
contractors), we formulated the Yamato Group Responsible	aimed at implementing and realizing our Corporate Stance. The
Procurement Policy with fair, equitable, and honest business transactions	results of these surveys are used to promote improvements and
as its foundation. Furthermore, the Yamato Group Business Partner	strengthen communication toward the continued development of
Guidelines clarify what we expect our business partners to comply with	strong relationships with our business partners.
when procuring products, materials, and raw materials, including quality,	For details on the Yamato Group Responsible

Note: The new executive compensation system stated above (short-termperformance-linked compensation) and medium- to long-term performance- linked, share-based compensation, which was introduced in the fiscal year ended March 31, 2022, have been applied to performance-linked compensation (variable compensation) from July 2022 onward.

Policy on Cross-Shareholdings

performance, pricing, and delivery times, as well as human rights, labor,	Procurement Policy and the Yamato Group Business
the environment, and anti-corruption. We are fully committed to	Partner Guidelines, please refer to our corporate website.
become socially responsible across our entire supply chain.	https://www.yamato-hd.co.jp/english/csr/esg/policy.html

The Company has a policy of owning stocks that are deemed meaningful based on comprehensive consideration from a medium- to long-

holding the stocks from a quantitative and qualitative perspective. The Company works to reduce the number of stocks it owns that are

Business Continuity Plan

term perspective of the relationship with the Group's businesses, the profitability, and the potential for creating new business opportunities, among other factors. A decision shall be made every year at the Board of Directors meeting concerning whether to continue holding the stocks based on careful consideration of various factors, including previous business transactions with the Company and the market price of the shares, after verifying the benefits and risks associated with

deemed to be of little significance.

In exercising the voting rights of shares held, the decision to support or oppose agenda items at the shareholders' meeting shall be made on a case-by-case basis, with consideration given to the issuing company's enhancement of corporate value, the issuing company's compliance framework, and the possibility of a negative impact on the Group's business, among other factors.

As a corporate group that offers the TA-Q-BIN service as a part of social infrastructure, the Yamato Group has formulated a business continuity plan (BCP) to ensure that it can keep offering services in a steady manner even under unforeseeable circumstances. In light of experience gained after the 2011 Great East Japan Earthquake and other major disasters, we have also established the Yamato Group BCP Basic Policy, which is supported by the three pillars of giving the

and guidance for customers regarding the impact on our services. In cases where there is concern about particularly serious impacts, related departments work together to share information necessary for recovery and support and strive to restore business operations as quickly as possible. After recovery, we collaborate

with local governments and other organizations to deliver relief supplies and provide other assistance to areas affected by disaster.

Compliance

Strengthening internal control for the Group overall
The Yamato Group has established an internal control system in order		without any misbehavior or mistakes. Having stipulated its basic policy
to promote a sound corporate culture in the Group as a whole and to		on the internal control system in accordance with the Companies Act,
enable employees to perform their duties effectively and efficiently		each Group company is working on strengthening internal control.

utmost priority to human life, aiming for the prompt restoration of operations at each Group company, and meeting the expectations of local community members as a part of social infrastructure. We provide safety information for our employees and business partners

Going forward, we will strengthen our response to ever-worsening natural disasters and reinforce our crisis management system on a Groupwide basis.

54	YAMATO HOLDINGS CO., LTD.
Integrated Report 2022

YAMATO HOLDINGS CO., LTD. 55 Integrated Report 2022