Intelligent Wave : (Delayed) Corporate Governance Report

(Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail.

Corporate Governance

CORPORATE GOVERNANCE

INTELLIGENT WAVE INC.

Last Updated: September 29, 2022

INTELLIGENT WAVE INC.

Chief Executive Officer, Representative Director: Kunimitsu Sato

Contact Information: TEL: [phone]

Securities Code: 4847

https://www.iwi.co.jp

The corporate governance of INTELLIGENT WAVE INC. (hereinafter referred to as "our company") is described below.

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

Our company pursues to "create safety and convenience for the information society of the next generation" as its management philosophy, and in accordance with that philosophy, our company sets our management policy as to contribute to society by boosting our enterprise value by promoting a business that "provides IT infrastructure that is swift, secure, high-quality, and highly convenient."

The system developed by our company is the (IT) infrastructure indispensable for society, because of which a product of high standards is being demanded to successfully execute high speed and safe transactions with the stability of the system being a necessary condition. Our company boasts of many developmental achievements and safe operations, and we believe the trust we have gained from these results will continue to support our company's business and become its developmental foundation.

Our company's management policy is to meet the expectations of our stakeholders by expanding our company's business foundation by offering an IT infrastructure that will continue to be trusted by more customers.

Our company appoints independent outside directors and independent outside corporate auditors, and has established a Nomination and Compensation Committee and Special Committee under the Board of Directors, whose main members are these independent directors and corporate auditors, to strengthen management oversight functions.

Further, our company's basic policy is to guarantee transparency in management by fairly and quickly disclosing any valuable information necessary for the understanding of our company's management and business status, as well as promoting dialogue with the marketplace. In addition, training for increasing employees' awareness of compliance will be thoroughly conducted to comprehensively enhance our corporate governance.

We are committed to contributing to the sustainable growth of our company's business and the sustainable development of society through our autonomous efforts to resolve environmental, social, and governance issues in accordance with the objectives of the Sustainable Development Goals (SDGs).

Among the ESG issues, we have been focusing on efforts to improve human capital for our employees, and established the Sustainability Committee in April 2021 as the central organization to promote these activities.

The Sustainability Committee is chaired by Kunimitsu Sato, President and Representative Director, and consists mainly of full-time directors and executive officers. The Committee has established policies regarding "contribution to society," "building a good corporate culture," "respect for diversity," "consideration for the global environment," and other practices set forth in our Corporate Code of Conduct, and has been acting as a core organization that ensures continuous promotion of company-wide

(Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail.

activities. As a system development company that is responsible for the important social infrastructure of credit-card payment, our employees are our most important management resources, and enhancing their health is extremely beneficial to the realization of our mid-term management goals and management philosophy. In order to share this basic approach with our employees and all stakeholders, our company has formulated the Declaration of Health-oriented Management and promoted measures to improve health, and on March 9, 2022, we were recognized as a "Corporation with Excellent Health-oriented Management 2022 (Large Corporation Category)" by the Ministry of Economy, Trade and Industry (METI). The Committee and its secretariat will further strengthen its structure from 2022 to promote the concept of ESG management within our company and at the same time, promote risk analysis and management, and contribute to society by creating new solutions that leverage our company's strengths.

【Reasons for Non-compliance with the Principles of the Corporate Governance Code】 Updated Note: This report is based on the Code revised in June 2021.

【Supplementary Principle 3-1-3 Enhancement of the Quality and Quantity of Disclosure Based on the TCFD or Equivalent Framework】

We believe that the results of our efforts to address ESG issues will enhance the sustainability of our business and increase our corporate value, and we are expanding and evolving our activities year by year. The products and services we provide are all infrastructure (IT infrastructure) that are essential functions for society.

In particular, efforts to improve the human capital of our employees will not only ensure the stable operation of our IT infrastructure, but will also have a significant effect on the improvement of the quality of our products and services, beyond simply managing business risks.

Making the best use of the skills and knowledge of our engineers and growing them is the most important factor for the continuity and growth of our business.

Based on this idea, we are pursuing a variety of initiatives in pursuit of ease of work and job satisfaction, with a policy of realizing a work style that allows employees to make the most of their individuality. We believe that it is essential to create an environment that supports autonomous work styles so that employees can take on new challenges and grow with the company.

In addition to this, from the perspective of co-creation with internal and external stakeholders, we will promote organic organizational collaboration by stimulating dialogue, co-creation among employees, and full-fledged ESG initiatives to address various social issues.

For specific examples of our initiatives, please refer to our Sustainability Report 2022, which is available on our website (https://www.iwi.co.jp/sustainability/sustainability-report/).

On the other hand, our company is unable to disclose the impact of climate change-related risks and opportunities on its business activities, earnings, etc., based on the TCFD or an equivalent framework because it has not yet been able to sufficiently collect and analyze enough data.

In the FY 6/2022, we estimate that our carbon dioxide emissions, mainly from electricity consumption, will be approximately 687t-CO2 (based on the Ministry of the Environment's Guidelines for Calculating Greenhouse Gas Emissions from Businesses). We are collecting and analyzing necessary data on risks and profit opportunities related to climate change and its impact on our own business, etc. We are considering enhancing the quality and quantity of disclosure based on the TCFD and other frameworks, and are preparing for the disclosure.

【Disclosure Based on Principles of the Corporate Governance Code】 Updated 【Principle 1-4 Cross-Shareholdings】

(Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail.

Cross-Shareholdings>

Our company owns listed shares as cross-shareholdings with the aim of expanding its business and strengthening its relations, but it has a policy of examining the appropriateness of possession of shares when necessary and reducing owned shares if it is judged that the continued ownership of said shares will not contribute to the improvement in value of our company or the issuing company.

Cross-Shareholdings>

Our company performs a quarterly evaluation on the business conditions of each issuing company of our owned shares, evaluating its future prospects and its relevance to our company's business, and comprehensively discusses the medium/long- term economic rationality of the ownership of said shares. We make an effort to examine the risk and return in holding the shares as concretely as possible using indices such as capital cost. Further, in the case our company decides to sell its owned shares, our company discloses the details of the examination process as much as possible.

Cross-Shareholdings>

Our basic policy on exercise of voting rights is to contribute to the expansion of our business, strengthen relations between both parties, and the increase in enterprise value of both parties. Further, our company follows this policy when holding discussions regarding proposals.

In the future, if the number of cross-shareholdings increases significantly or the like, our company plans to respond appropriately in accordance with its policy on exercise of voting rights, such as preparing other standards for the exercising of voting rights.

【Principle 1-7 Related Party Transactions】

Regarding the transactions between related parties, our company makes sure to conform to the Companies Act and in-house regulations as well as accounting standards related to the disclosure of related parties. In case a transaction between related parties takes place, it is determined by a resolution of the Board of Directors, in accordance with the "Regulations for the Board of Directors."

Further, regarding directors and auditors, the circumstances of the transactions are submitted through an "Investigation Report on Transactions Between Related Parties," which are then inspected by an accounting auditor.

In addition, we established special committee on December 8, 2021 to deliberate and review material transactions and actions that conflict with the interests of the controlling shareholder and minority shareholders.

【Supplementary Principle 2-4-1 Ensuring Diversity】

The number of our company's employees has increased approximately 1.3 times compared to five years ago due to the expansion of the scale of our business. In order to create added value by taking advantage of differences in attributes such as gender, nationality, age, and disabilities, we are hiring personnel with diverse values. Creating a working environment and systems that are suited for these increasingly diverse employees is essential for medium- to long-term growth.

In order to promote the success of female employees, we are strengthening various measures with the goal of doubling the number of female managers and highly specialized personnel from 11 in FY 6/2022 to 23 in the fiscal year ending June 30, 2025. Based on the idea that it is necessary to create an environment in which female employees can easily consult with each other, we are continuing the "Intelligent Women's Wave," a mentoring program for female employees, and are striving to create an

(Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail.

environment in which female employees can consult with each other. We support long-term career development and a smooth return to work after childcare leave by providing advice from senior employees and encouraging the use of various in-house systems so that female employees can envision their future career development even during life events unique to women.

In addition, we are actively appointing foreign nationals, including young employees, to the teams promoting overseas business. We have begun taking on new challenges in overseas business by taking advantage of the diversity created by the experiences and different values they have cultivated overseas.

As we do not use nationality or the type of hiring as a criterion for management appointments, we have not set measurable goals for the appointment of foreign nationals and mid-career hires to management positions.

As of June 30, 2022, there were 213 mid-career hires, of which 61 were in management positions, accounting for 47.4% and 13.5% of all employees, respectively.

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

Our company has been a member of the Japan Computer Information Service Employees' Pension Fund since April 2011, and this fund entrusts the management of our pension assets to a management institution.

The Pension Fund stipulates that decisions regarding the component ratio of pension assets shall be made by people with expertise on the subject and experience, who perform regular market valuation regarding management circumstances and results.

【Principle 3-1 Full Disclosure】

(1) Company Objectives (e.g., Business Principles), Business Strategies, and Business Plans

Our company pursues "to provide safety and convenience for the information society of tomorrow" as its management philosophy, and sets its management policy as to boost our enterprise value and contribute to society by promoting a business that "provides IT infrastructure that is swift, secure, high-quality, and highly convenient."

Our company is engaged in system development using our online, real time network connection technology for credit card settlements and stock exchange as its strength, and offers systems to its client companies. The system developed by our company is (IT) infrastructure indispensable for society, because of which a product of high standards is being demanded to successfully execute high speed and safe transactions with the stability of the system being a necessary condition. Our company boasts of many developmental achievements and safe operations, and we believe the trust we have gained from these results will continue to support our company's business and become its developmental foundation.

Our company's management policy is to meet the expectations of our stakeholders by expanding and growing our company's business foundation by offering IT infrastructure that will continue to be trusted by more customers.

1. Basic Views and Guidelines on Corporate Governance Please refer to "1. Basic Views" of this report.
2. Board Policies and Procedures in Determining the Remuneration of Senior Management and Directors
   The remuneration for directors shall be determined by the resolution of the Board of Directors, and the remuneration for corporate auditors shall be determined by consultation of the corporate auditors, both within the limit of the amount of remuneration approved at the General Meeting of Shareholders. At the 23rd Ordinary General Meeting of Shareholders held on September 27, 2006, it was resolved that the maximum amount of remuneration for directors shall be 300 million yen per year

(Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail.

(not including salaries as employees). The number of directors after the resolution of the said General Meeting of Shareholders is fifteen. In addition, at the 34th Ordinary General Meeting of Shareholders held on September 27, 2017, a resolution was passed to limit the annual amount of remuneration to be paid for the grant of transfer-restricted stock to seven directors, excluding outside directors and part-time directors, to 10,000 thousand yen.

The maximum amount of remuneration for corporate auditors was resolved at the 32nd Ordinary General Meeting of Shareholders held on September 29, 2015, to be no more than 50 million yen per year. The number of corporate auditors after the resolution of this General Meeting of Shareholders is five (including three outside corporate auditors).

Full-time Director> How the decision policy is determined

The Nomination and Compensation Committee, which is an advisory body to the Board of Directors and is chaired by an independent outside director and composed of mainly independent outside directors, deliberates on the decision-making policy regarding the details of remuneration, etc. for individual full-time directors, including the appropriateness of the level of remuneration, and submits its report to the Board of Directors for the Board of Directors to make a resolution.

Outline of the content of the decision policy

Remuneration, etc., for full-time directors shall consist of fixed monthly remuneration, performance-based bonuses, retirement benefits, and stock-based remuneration.

The fixed monthly remuneration is determined after calculating the amount using the standard remuneration table defined for each position.

With regard to bonuses as performance-linked compensation, in order to clearly reflect the business results for the fiscal year, we operate a compensation system in which operating profit is used as an indicator and calculated according to a coefficient determined based on position. In addition, our company reduced the fixed monthly compensation and increased the coefficient of performance-linked compensation in the fiscal year ended June 30, 2021, so that the composition of the performance-linked portion will be approximately 30%. As operating profit grew to 1,519 million yen in FY 6/2022, the component ratio of the performance-linked portion exceeded 40%.

The amount of retirement benefits is calculated by adding up points given annually for each position, job qualification, and years of service and multiplying the sum by the unit compensation.

At the 34th Ordinary General Meeting of Shareholders held on September 27, 2017, it was resolved that the annual amount of remuneration to be paid for transfer-restricted stock to directors excluding outside directors and part-time directors shall be 10,000 thousand yen or less. At the Ordinary Meeting of the Board of Directors held on the same day, our company introduced a transfer-restricted stock compensation plan with an annual amount of 10,000 thousand yen or less, 20,000 shares or less per year, and a transfer restriction period of three years, and the transfer restriction from October 27, 2017, to October 27, 2020 was lifted.

Since our company's Board of Directors determines the amount of compensation for each individual director by resolving the criteria for calculating fixed compensation and performance-linked compensation by position as discussed and reported by the Nomination and Compensation Committee as described above, our company believes that the details of compensation for each individual director for the fiscal year in question are in line with the determination policy.

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Compensation for outside directors, who are independent of the execution of business operations, consists of fixed monthly