Corporate Governance Structure

Officers and Business Execution Structure

As management bodies, the Company has established a Board of Directors centered on External Directors and has adopted a system of Statutory Auditors (kansayaku) that it considers capable of demonstrating effective management oversight functions in light of the Company's size.

The Company Board of Directors consists of six Directors. Its roles include making decisions on Group management policies, management strategies, business plans, acquisition and disposal of important properties, and important organizational and personnel matters, and overseeing the business execution of the Company and subsidiaries. The Board of Statutory Auditors consists of three Statutory Auditors, whose roles are to establish audit policies and plans through deliberations of the Board of Statutory Auditors and to audit the execution of the duties of Directors through attendance in regular and extraordinary meetings of the Board of Directors and in other internal meetings as necessary, as well as auditing the state of business and property at the head office, other business facilities, and subsidiaries. In addition, all external officers have been reported to the Tokyo Stock Exchange as independent officers, and efforts are being made to strengthen governance through operation of a Board of Directors and a Board of Statutory Auditors in which independent officers play a central role.

At the Company, Executive Directors, executive officers, division heads and operations section heads execute business based on business plans formulated by the Board of Directors. The Board of Directors meets monthly, in principle, as well as meeting as needed, to carry out management decision-making and oversight and management of business execution by Directors through review of reports of business results. In addition, to enhance the functions of the Board of Directors and improve management efficiency, the Representative Director holds a monthly Group Management Conference with members including Executive Directors, business division heads, and subsidiary presidents, to share management information and to efficiently deliberate on matters related to business execution.

Accounting Auditor

Through comprehensive consideration of matters such as the availability of a structure capable of centralized audits of Group business activities, in addition to perspectives such as the presence of a quality control system, independence and expertise and continuity and efficiency of auditing, the Company has chosen Grant Thornton Taiyo LLC as an auditing firm, to which it entrusts account auditing operations. It has employed this auditing firm for 15 years.
The names of certified public accountants employed in account audits for the period ended November 2022 and the composition of assistants involved in auditing, are shown below.

• Certified public accountants employed in account auditing: Designated limited liability employee / business execution employee Yoichi Honma (period of continuous audit one year), Gen Takehara (period of continuous audit six years)
• Composition of assistants involved in audits: nine certified public accountants and 18 other assistants

Independence of External Directors

None of the External Directors or External Statutory Auditors has a background with a parent company or other affiliate or is a major shareholder in the Company. In addition, none of the External Directors or External Statutory Auditors is a spouse, relative within three degrees of consanguinity, or equivalent party of an executive director, executive officer, etc. of the Company or specific affiliated business of the Company. None receives executive compensation or other financial gains from Company subsidiaries. Accordingly, both External Directors and External Statutory Auditors are deemed sufficiently independent from the Company.
While the Company has not established specific standards or policies concerning independence in its appointment of External Directors and External Statutory Auditors, their appointment is based on individual judgment of matters such as their freedom from specific interests in the Company, such as personal or capital ties, and their ability to oversee Group management based on a high degree of knowledge, with reference to the standards for independence established by the Tokyo Stock Exchange.

Reasons for Appointment of External Directors and External Statutory Auditors

Skills Matrix

* This table does not show all skills possessed by each director and statutory auditor.

Remuneration of Directors and Statutory Auditors

The maximum limit on annual remuneration for Directors under a resolution of the February 27, 2018 general meeting of shareholders is 200 million yen (including up to 30 million yen per year for the remuneration of External Directors). Remuneration amounts are determined in consideration of the posts and duties of each Director within this maximum limit.
Remuneration of Executive Directors consists of fixed remuneration and performance-linked bonuses. In addition, the work-linked bonus for representative directors incorporates social and environmental items as non-financial indicators and is linked to short- and long-term compensation programs. Amounts of which are calculated through methods specified in internal rules. In consideration of the nature of their posts, remuneration for non-executive Directors and Statutory Auditors, whose positions are independent from business execution, is paid in the form of fixed remuneration only.
Amounts of fixed remuneration for Executive Directors are proposed for each individual by the Representative Director in a regular meeting of the Board of Directors held after the annual settlement of accounts has been finalized, reflecting matters such as the duties, abilities, experience, and years of service of each Director in addition to his or her performance in the previous period, including increases or decreases in corporate value, measures implemented regarding returns to shareholders, growth in sales and profit, development of new businesses, and progress of human resource development and organizational development. Final decisions are made through deliberation on the proposed remuneration amounts among parties including non-executive Directors and Statutory Auditors.

Matters Related to Internal Control Systems, etc.

Considering the main purposes of internal controls to be maintaining legal and regulatory compliance, improving business efficiency, and ensuring the reliability of financial reports, the Company strives to establish effective internal control systems through appropriate planning, development, operation, monitoring, and audits.

1. Overview of the state of operation during this business year

Compliance initiatives

The Company President and Representative Director issues periodic messages on the importance of compliance to Company and subsidiary Directors and employees. Internal training is provided on information security, prevention of insider trading, and other topics, as part of continuous efforts to raise awareness on compliance.

Risk management initiatives

The Board of Directors ascertains and evaluates risks Groupwide and considers responses to risks with impacts across the organization. In addition, monthly Group Management Conferences in which the External Directors and Standing Statutory Auditor take part include information sharing and deliberation on the state of management of risks accompanying the businesses of individual sections and subsidiaries.
During the fiscal period ended November 2022, on a quarterly, the Risk Management Committee, chaired by the director in charge of President's Office played central roles in managing and reviewing the risk generation status and the status of implementing preventive measures for risks the Company has consistently deemed of utmost importance: those involving legal amendments or strengthened regulations with the potential to impact the business environment; labor issues, such as industrial accidents and long working hours, leakage of personal information and industry-specific issues that may impact management strategies, such as changes in economic or market conditions, as well as the potential impact of events involving competitors, including mergers and acquisitions or decisions to open competing facilities.The committee's activities are subject to appropriate oversight by the Board of Directors. The results of its deliberations are submitted or reported to the Board.
In addition, the Group is working actively to strengthen productivity through IT investments and other initiatives. We have raised the importance score of the risk of failing to achieve the purpose of introducing IT systems due to inadequate prior consideration regarding their introduction and are carefully ascertaining current conditions and managing progress.

Efforts to ensure the propriety and efficiency of the performance of duties of Directors

The Company Board of Directors consists of six Directors, including three External Directors. The three External Statutory Auditors also attend Board meetings. During the fiscal period ended November 2022, the Board of Directors met 17 times and implemented timely decision-making while paying close attention to lawful and appropriate operations. Matters related to risk management and business execution were deliberated on, in addition to confirmation and analysis of and development of appropriate strategies for the state of progress in businesses and performance of each section and subsidiary. The Board of Directors also monitored the state of performance of the duties of Directors of the Company and subsidiaries.
Materials for deliberation by the Board of Directors are distributed in advance to enable attendees to prepare adequately. Directors and Statutory Auditors actively exchange opinions at the deliberations.
Matters involving important management decision-making at subsidiaries are resolved at the Company’s Board of Directors meetings.

Systems for reporting by Directors and employees to Statutory Auditors, and other systems related to reporting to Statutory Auditors

An internal whistleblowing system (compliance hotline) has been established as a reporting system for the entire Group, with non-standing External Statutory Auditors serving as contact points. In addition, efforts are being made to raise awareness among all Group employees through the Group intranet.

Performance of the duties of Statutory Auditors

Based on audit plans, the Standing Statutory Auditor attends Group Management Conferences and important meetings of subsidiaries to confirm appropriate business execution and shares information in meetings of the Board of Statutory Auditors, which met 15 times during the fiscal period ended November 2022. In addition, business auditing is conducted in cooperation with the Internal Audit Office, ascertaining information on a wide range of risks through interviews with officers and employees. Meetings also are held with the accounting auditor, both periodically and at other times as needed, to ascertain the propriety of financial accounting.

2. Basic concept on exclusion of antisocial forces and state of these efforts

Basic concept on exclusion of antisocial forces

The Company's basic policy is to refuse any and all relations to antisocial forces and to respond resolutely, as an organization, to any improper demands or inducements.

State of efforts to exclude antisocial forces

The Company's General Affairs Department is tasked with coordinating response to antisocial forces. Since December 2003, we have been a member of Tokubouren, an association under the Metropolitan Police Department that seeks to prevent specified acts of violence. In addition to striving to collect information through attending its regular meetings and other events, we seek its guidance as needed.

Dialogue with Shareholders and Investors

1. State of initiatives to stimulate participation in the general meeting of shareholders and facilitate the exercise of voting rights

Issuing notices of convening general meetings of shareholders early

In principle, to allow sufficient time for full consideration of meeting resolutions while ensuring the accuracy of the content of the notices, we send out notices of convening general meetings of shareholders by one day before the legal deadline.
We also announce convocations of general meetings of shareholders on our website and that of the Tokyo Stock Exchange before sending out notices of convening the meetings to ensure shareholders have enough time to consider the resolutions fully.

Scheduling general meetings of shareholders to avoid dates when there are large numbers of such meetings held

We avoid holding general meetings of shareholders on dates on which large numbers of such meetings are held by ending our fiscal period on November 30. We intend to continue to focus on stimulating participation in general meetings of shareholders. We hold briefings on topics such as the Company's lines of business and future strategies after the general meetings of shareholders to expand shareholder participation.

Exercise of voting rights through electromagnetic means

We have adopted exercise of voting rights through an electromagnetic method.

Participation in a platform for electronic exercise of voting rights and other initiatives to facilitate exercise of voting rights by institutional investors

We participate in a platform for electronic exercise of voting rights operated by ICJ, Inc.

2. State of IR activities

Holding periodic briefings for individual investors

Briefings are held several times a year for individual investors. In addition, videos of the briefings are streamed from the IR website for investors unable to attend in person.

Holding periodic briefings for analysts and institutional investors

Upon the settlement of accounts each year, the Chairman of the Board, President and Representative Director of the Company holds a briefing on the settlement of accounts and business strategies. A similar briefing is held in the second quarter.

Posting IR materials on the website

IR information is disclosed at www.spool.co.jp/investor/. Information on the settlement of accounts and timely disclosure materials, briefing materials, and FAQs are made available.

Establishing an IR section (person in charge)

The President's Office is in charge of IR.

Compliance