En japan : Corporate Governance Report (May 31, 2021)

Corporate Governance Report

Last Update: May 31, 2021

en Japan Inc.

Takatsugu Suzuki, President Contact: [phone] Securities Code: 4849 https://corp.en-japan.com/en/

The corporate governance of en Japan Inc. (the "Company") is described below.

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

1. Basic Views

At en Japan, our goal is to contribute to our shareholders, clients, many stakeholders, and society at large through our business. We have therefore positioned building an organization that can respond to changes in the management environment as an important policy for the group as a whole. We are therefore working to strengthen corporate governance and make it robust to enable healthy growth of our corporate group, and are working to create a fair management system.

We think that ensuring even stronger ethical values and integrity among our officers and employees is the basic premise upon which earning the true trust of our many stakeholders is built. We will continue to work on building an even stronger system of internal management through thorough education on compliance and other means. We will ensure sound management by making sure that this system functions properly.

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

[Supplementary Principle 4.8]

The Company has appointed one independent outside director. The outside director Taisuke Igaki satisfies all the requirements of an independent officer as stipulated in Article 436.2 of the securities listing regulations of the Tokyo Stock Exchange. Therefore, we have determined that there is no risk of a conflict of interest arising between the candidate and general shareholders. Nevertheless, we have not designated him as an independent officer or made a notification of such in accordance with the policy of the law firm to which the candidate belongs.

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

[Principle 1.4]

The Company does not hold the shares of listed companies, in principle. However, when we do hold the shares of a listed company based on the reasonable purpose of a business alliance or other business purpose, we periodically confirm that the reason for holding the shares is still valid. We sell the shares of companies that we have determined will no longer fulfill the purpose for which they are held over the medium to long- term, as the stock price and market trends permit.

In exercising voting rights on cross-shareholdings, we make a decision on each stock based on the perspective of whether it will lead to an increase in corporate value and shareholder return from a medium to long-term perspective. We exercise especial caution in regard to resolutions that could have an adverse effect on the corporate value of the company concerned.

[Principle 1.7]

The Company has established Guidelines on Managing Transactions with Interested Parties to clarify the procedural flow for ascertaining the scope of transactions with interested parties and managing transactions appropriately. We ascertain the scope of transactions with interested parties via questionnaires that the General Affairs Division updates once a year. Any transaction with an interested party requires either approval by the Board of Directors in advance or approval based on the Rules on Ringi Proposals and Applications, depending on the importance. The Administrative office director determines the importance of transactions effected with interested parties based on ASBJ Guidance No. 13 Guidance on Accounting Standard for Related Party Disclosures, and a summary of those decisions is disclosed in the annual securities report.

[Principle 2.6]

The Company does not have a corporate pension plan. This consequently poses no risk to the financial status of the Company.

Should we decide to consider introduction of a pension plan in the future, we will allocate human resources with sufficient skills to manage it.

[Principle 3.1]

1. Our corporate philosophy is Personal Development. This means to enhance your skills in the daily workplace where you are expected to produce results, and enrich yourself, not only mentally, but materially as well. In other words, our corporate philosophy means to enrich yourself both mentally and in terms of material wealth.
2. Our basic views on corporate governance are posted on our corporate website.
3. The compensation the Company pays to officers is within the scope of compensation approved by the General Meeting of Shareholders. It consists of fixed monthly wages (basic compensation). The voluntary Nomination & Compensation Committee, which consists mainly of outside officers, checks and verifies the compensation of directors. The Board of Directors then determines the compensation of directors based on the content of the report from the committee. The compensation of the Audit & Supervisory Board members is determined through discussions with the Audit & Supervisory Board. The Company has also decided to provide directors with performance-based compensation (cash bonus) in addition to basic compensation. This system is designed so that management shares the advantage of
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improving business performance as well as the risk of declining business performance with shareholders. We consider this to be compensation that raises the motivation of Directors to improve business performance each fiscal year and gives them the incentive to aim for a sustainable increase in corporate value. Furthermore, we are planning to introduce a performance-based stock compensation system as mid- to long-term incentive compensation by 2022 upon comprehensively considering the business situation.

1. The Company nominates individuals for election as internal directors who are suitable to promote a highly efficient management system that can respond quickly, flexibly and accurately to changes in the business environment in addition to possessing a high degree of expertise in their fields of responsibility. The prerequisite for this is that such individuals will be able to jointly develop the corporate philosophy of the Company and then focus their efforts on a daily basis toward achieving that.
   The individuals we nominate for election as outside directors are capable of independent management oversight from an objective perspective while sympathizing with the corporate philosophy of the Company without being unduly influenced by management or special interests, and possess broad insight. The individuals we nominate for election as outside audit & supervisory board members understand and possess broad insight into the roles and responsibilities that the Company must fulfill for society, without being unduly influenced by management or special interests.
   We consider dismissal of directors, including outside directors, when questions arise about a director's capabilities. Such instances include when a director is deemed to have failed to fulfill the duties of due care of a good manager and to have not acted in good faith, or is deemed to not be contributing to sustained profit growth and growth in corporate value. Engaging in fraud or violation of laws and regulations or other rules will result in the dismissal of a director.
   When nominating candidates for director, the Board of Directors examines such candidates based on the opinions of the voluntary Nomination & Compensation Committee, which consists mainly of outside officers, before making a decision. When nominating candidates for Audit & Supervisory Board member, the Board of Directors first solicits the opinions of the outside directors and obtains consent from the Audit & Supervisory Board, then considers the content proposed by the representative director and makes a decision.
2. The reasons for electing internal directors are as follows. Please note that the reasons for electing outside officers are disclosed in the annual securities report.
3. • Michikatsu Ochi, Chairman and Executive Officer
     After establishing Nihon Brain Center, K.K. in 1983, Mr. Ochi launched en Japan in 2000, and guides management as the founder.
   • Takatsugu Suzuki, President and Executive Officer
     After graduating and joining Nihon Brain Center, K.K., Mr. Suzuki joined en Japan when it was launched in 2000 and worked for the company for five years. He was elected as a director because of his highly-rated sales and management skills. He has been responsible for management as representative director since 2008.
   • Megumi Kawai, Director and Executive Officer
     After joining Nihon Brain Center, K.K. as a mid-career professional, Ms. Kawai joined en Japan when
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it was launched in 2000 and worked for the company for 10 years. She was elected as a director because of her highly-rated new service development skills. Since then, she has been involved in management for many years.

[Supplementary Principle 4.1.1]

The Company has designated the Board of Directors as the body that oversees the performance of duties by directors. The Board of Directors meets once a month and also convenes meetings as necessary. It monitors the status of performance of duties. The Board of Directors monitors progress on performance for each business division and the company as a whole. It also discusses matters that are important to management of the business and decides the course of action. Matters subject to resolution by the Board of Directors are specified in the Rules on the Board of Directors. Other decisions and performance of other duties are based on the Rules on Responsibilities and Authority, and the Rules on Ringi Proposals and Applications. These documents clearly specify the authority to deliberate on and approve matters, as well as other types of authority.

[Principle 4.9]

The Company has established our own Criteria for Determining the Independence of Outside Officers. We disclosed this in the 20th term securities report. When selecting candidates to serve as independent outside directors, we select those who satisfy the Company's own standards in addition to the standards stipulated by the Companies Act and the Tokyo Stock Exchange.

[Supplementary Principle 4.11.1]

The Company's views on balance and diversity in knowledge, experience, and skills in the Board of Directors as a whole closely align with its views on nominating candidates for director as stated in Section

3.1. iv. The en Japan Articles of Incorporation specify a maximum of 10 directors. We currently have five elected directors (three internal directors and two outside directors), which we consider an appropriate number for pursuing a system of highly efficient management.

[Supplementary Principle 4.11.2]

Concurrent positions in other listed companies held by directors and audit & supervisory board members are disclosed in the annual securities report and the Notice of the Annual Meeting of Shareholders.

[Supplementary Principle 4.11.3]

The Company gave all directors a questionnaire on the effectiveness of the Board of Directors in FY2019. The Board of Directors analyzed and evaluated the results of that. The Board of Directors evaluated the composition of the Board of Directors, the content of the agenda items and discussions, the situation of deliberations and the situation of operation toward stimulating discussions and deliberations. This led to the Board of Directors finding the results of this evaluation to be appropriate. Furthermore, the Board of Directors also received a positive evaluation in terms of the state of governance. Accordingly, the Board of Directors concluded that it is effective. The Board of Directors of the Company will endeavor to further improve its effectiveness. This will be achieved by conducting this analysis and evaluation every year in the future while maintaining the superiority of the governance structure that the Company has worked on and constructed up to now.

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[Supplementary Principle 4.14.2]

Directors and audit & supervisory board members are elected from among candidates who possess a broad range of expertise in business, finance, organizations, and other areas. We provide training to directors and audit & supervisory board members when elected, as necessary. The company also assumes the cost when directors and audit & supervisory board members participate in external training and other types of education, as necessary.

[Principle 5.1]

The Company has established an investor relations (IR) structure centered on the representative director. The Corporate Planning Department has been designated as the department in charge of IR. It holds briefings on financial results for shareholders and investors once every six months, and is gradually adding a series of small meetings and individual meetings in Japan and overseas.

2. Capital Structure

		Foreign Shareholding Ratio		More than 30%
[Status of Major Shareholders] - Updated
		Name / Company Name			Number of Shares			Percentage (%)
				Owned
		Michikatsu Ochi		4,383,900	9.79
		The Master Trust Bank of Japan, Ltd. (Trust account)	3,523,300	7.87
		en Human Capital Education Association Inc.		3,060,000	6.83
		Custody Bank of Japan, Ltd. (Trust account)		2,884,500	6.44
		En-Kikaku Ltd.		2,184,800	4.88
		M.O. Soken Ltd.		2,127,000	4.75
		THE BANK OF NEW YORK MELLON 140044		1,609,200	3.59
		Akiyuki Ochi		1,475,200	3.29
		NORTHERN TRUST CO.(AVFC) RE MONDRIAN	1,451,400	3.24
		INTERNATIONAL SMALL CAP EQUITY FUND, L.P
		THE BANK OF NEW YORK MELLON 140042		777,310	1.74
		Controlling Shareholder (except for Parent		―――
		Company)
		Parent Company		None

Supplementary Explanation - Updated

As noted below, the company submits a report on large shareholdings. The table above is based on the shareholders roster on March 31, 2021.

The report on changes in the large shareholding report, which was submitted and also provided for public inspection on November 20, 2020, notes that Mondrian Investment Partners Limited held the following number of shares on November 20, 2020.

[Name (number of shares held, number of shares held as a percentage of the number of shares issued)]

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