OUTSOURCING : Corporata Governance Report

Disclaimer: This document is a partial translation of the Japanese original and does not constitute any guarantee, and the Company will not compensate for any loss or damage resulting from actions taken based on this document. If there is any discrepancy between the Japanese original and this document, the Japanese original prevails.

Corporate Governance Report

Last Update: March 30, 2022

OUTSOURCING Inc.

Haruhiko Doi, Chairman and CEO

Contact: Masashi Umehara, Director: [phone]

Securities Code: 2427https://www.outsourcing.co.jp/en/

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

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

Information

1. Basic Views

Fully embracing its responsibility to contribute to society as an exemplar corporate citizen, the Company established the "Corporate Principles." The Company recognizes that, in making efforts to achieve growth and enhance corporate value over the medium to long term in a constantly changing business environment, its management must assign the utmost priority to creating a fully autonomous, highly ethical corporate governance system that is closely monitored and routinely reviewed. The Company also recognizes that such a system will prove invaluable in the ongoing building of trust and confidence with all its stakeholders, including shareholders, clients, local communities and employees.

Towards this end, the Company has disclosed the frameworks of its corporate governance system in its "Corporate Governance Guidelines," and will continue to enhance and fortify this system through various initiatives going forward.

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

The Company complies with all principles of the Corporate Governance Code.

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

The Company discloses information based on the Corporate Governance Code revised in June 2021.

[Principle 1.4 Shares Held as Cross-Shareholdings]

The Company may possess shares of other companies as cross-shareholdings for purposes including sustainably increasing corporate value, expanding businesses and strengthening relationships with business partners. Decisions on the shares held as cross-shareholding, including the holding of the shares, continuation of holding and the selling of the shares, shall be made after sufficient deliberation by the Board of Directors based on a comparison of the Company's capital cost with the risks of the shareholding, the impact of the relevant company on the sales and profit of the Company over the past three years and economic rationality with regards to outlook over the medium to long term. Information on such decisions shall be disclosed when deemed to be necessary by the Board of Directors. In addition, the Board of Directors determines the specific terms of the exercise of voting rights by the relevant company based on the Board's judgement of whether the exercise will contribute to an increase in the corporate value of the relevant company and the Company over the medium to long term.

If a shareholder of cross-held shares of the Company offers to sell the shares, the Company will respect the shareholder's decision and will not impede with the sale of the shares.

[Principle 1.7 Related-Party Transactions]

Before engaging in transactions with parties related with the Company including its officers and directors, principal shareholders and other stakeholders, the Company shall obtain the Board of Directors' approval in accordance with the laws and regulations, the Board of Directors Rules and the Audit and Supervisory Committee Rules in order to ensure that the transactions will not harm the common interests of the Company and its shareholders. It is also stipulated that the relevant stakeholders shall not participate in the resolution regarding this approval. Significant related-party transactions are disclosed in the securities reports.

[Supplementary Principle 2.4.1 Ensuring Diversity in Hiring for Key Roles]

Under the corporate principle of "enhancing the quality of life of everyone around the world," the Group has been developing its business globally and recognizes that ensuring diversity, such as in hiring for keyroles, is an important goal in management.

The Company believes that its group's growth and increase in corporate value over the medium to long term are brought by creating employment opportunities and education opportunities for people around the world with various different backgrounds, working on the creation of work environments in which a diverse group of people can demonstrate each of their uniqueness and abilities regardless of their personal attributes (such as age, nationality, disability and gender) and continuously providing opportunities for reskilling and recurrent education to make the most of the values and perspectives of the diverse group of people working in the Group. The Company also of course works on promoting diversity at a global level in hiring for key roles and other related matters. In addition, along with respecting diversity and implementing diversity management, the Company has been working on realizing a society in which women can actively participate by launching the Promotion of Women's Participation and Advancement in Workplace Project and other initiatives to enhance the training for female manager candidates. In the SDGs Declaration made in FY2021, it has set the goal to raise the percentage of female directors (management team members) in the Group to 30% by FY2030 as its materiality (priority issues) and KPI. The Sustainability Committee monitors the progress with this goal.

[Principle 2.6 Fulfillment of Role as Asset Owner of Corporate Pension Plan]

The Company does not have a corporate pension plan that requires the Company to conduct stewardship activities as an asset owner. However, in FY2020, it adopted a corporate-type defined contribution pension plan to support its employees in stable asset building. Upon starting this pension plan, the Company started holding training workshops at least once a year for employees who are eligible to participate in the plan. The training workshops are aimed to help employees learn about making investments to realize their life plan. Relevant materials are also provided. In addition, the Company has set up a system to respond and answer to related inquiries, consultations and other matters, both online and by phone.

[Principle 3.1 Proper and Detailed Disclosure of Information]

• (i) The Company's Goals (corporate principles and other), Management Strategy and Management Plan

  The Company's corporate principles, management strategy and medium-term management plan are posted on its website.

  Corporate Principles:https://www.outsourcing.co.jp/en/company/philosophy

  Management Strategy:https://www.outsourcing.co.jp/en/ir/irlibrary/integratedreport

  Medium-term Management Plan:https://www.outsourcing.co.jp/en/ir/irlibrary/midiplan

• (ii) Basic Views and Policies on Corporate Governance Based on Each Principle of the Corporate Governance

  Code

  The basic views on corporate governance are described in "I-1. Basic Views" of this Report. The basic policies on corporate governance are set forth in the "Corporate Governance Guidelines," which is disclosed on the Company's website.

  Corporate Governance Guidelines:https://www.outsourcing.co.jp/en/company/csr/guideline

• (iii) Policies and Procedures for Board of Directors' Decisions on the Remuneration of Senior Executives of the Management Team and Directors

  Policies and procedures are described in "Disclosure of Policies for Deciding the Amount of Remuneration of Directors and Officers and the Method of Its Calculation" of this Report.

• (iv) Policies and Procedures for the Board of Directors'Appointment or Dismissal of Senior Executives of the

  Management Team and Nomination of Directors and Auditors

• (v) Explanation of Individual Appointments, Dismissals and Nominations Regarding the Board of Directors'

  Appointment or Dismissal of Senior Executives of the Management Team and Nomination of Directors and Auditors According to (iv) Above

  Decisions by the Board of Directors on the appointment or dismissal of management team members including the CEO and the directors (excluding directors who are also Audit and Supervisory Committee members) shall be made in accordance with fair and transparent procedures after taking sufficient time for

consideration and based on the recommendations of the Nomination and Remuneration Advisory Committee and the opinions of the Audit and Supervisory Committee.

The reasons for appointing each individual director are described in the convocation notice of the general meeting of shareholders.

[Supplementary Principle 3.1.3 Initiatives for Sustainability and Other Related Matters]

As initiatives for sustainability, the Company has identified its materiality (priority issues) and established KPIs in the SDGs Declaration made in the FY2021. It has also established the Sustainability Committee with the Representative Director as the chairperson. By monitoring the progress with the achievement of KPIs and working on initiatives to increase the effectiveness in achieving sustainability, as well as becoming a signatory to the United Nations Global Compact (UNGC) in the same year to participate in the initiative and becoming a member of GFNJ (Global Compact Network Japan), the Company is promoting compliance with the Ten Principles covering the four areas (Human Rights, Labour, Environment and Anti-Corruption) of the corporate initiatives.

Regarding the risks of climate change and their impact on the Company including its businesses, the Company has introduced KPIs in the SDGs Declaration that it will replace all vehicles used in sales activities by Japanese group companies with next-generation vehicles by FY2025 and increase the percentage of next-generation vehicles used by the entire Group (including overseas companies) to 70% by FY2030. The Company will work on collecting and analyzing the necessary data related to climate change and disclose the data which have been judged to be significant in accordance with the TCFD recommendations.

The Company's initiatives for sustainability are described in the integrated reports.

Integrated Reports (IR Library):https://www.outsourcing.co.jp/en/ir/irlibrary/integratedreport

[Supplementary Principle 4.1.1 Judgement and Decision by the Board of Directors and Extent of Delegation of Authority to the Members of the Management Team]

In accordance with the Company's Board of Directors Rules, the Company's Board of Directors engages in deliberation and decision-making on important managemental matters and conducts oversight of business management with the goals of sustaining growth as a company, raising corporate value over the medium to long term and ensuring appropriate cooperation with the stakeholders, while also fulfilling its fiduciary duty and accountability to the shareholders. The Board of Directors also makes decisions on the duties that the directors shall be in charge of and the extent of authority for executing business to be delegated to the management team members including the executive officers.

[Principle 4.9 Criteria for Independence and Qualities of the Independent External Directors]

In selecting a candidate for an external director, the Company selects a person who satisfies the requirements of an external director set forth in the Companies Act, has no risk of conflicts of interest with the general shareholders and has the qualities and insight necessary for carrying out objective oversight and audit based on his or her professional knowledge so that he or she can appropriately fulfill his or her role and obligation to appropriately reflect the opinions of stakeholders, including the minority shareholders, in the Board of Directors from a position independent from the management team and the controlling shareholders. In addition, the Company also takes into consideration the situation of the person, such as his or her concurrent position as an officer or director at another listed company and other factors, as a criterion for judging whether he or she can allot sufficient time for duties at the Company. Assessment of the independence of the independent external directors is based on the independence criteria set forth in the Code of Corporate Conduct of Tokyo Stock Exchange, the financial instruments exchange.

[Principle 4.10.1 Use of a Non-statutory System for the Directors' Nomination and Remuneration]

The Company has set up the (Nomination and Remuneration) Advisory Committee, a non-statutory committee. Pursuant to the rules, the Committee's chairperson is chosen from independent external directors or other outside persons such as external experts. Also, a majority of the committee members are independent external directors, while the remaining committee members are external directors such experts from outside the Company. Matters discussed by the Advisory Committee and its recommendations to the Board of Directors are disclosed in the Corporate Governance Guidelines.

Corporate Governance Guidelines:https://www.outsourcing.co.jp/en/company/csr/guideline

[Supplementary Principle 4.11.1 Skills Matrix of the Directors]

The Company not only selects directors based on strong knowledge and experience in corporate management, but also emphasizes the diversity of their backgrounds with regards to nationality, race, gender, age and other attributes. In addition to external directors with thorough knowledge of industry situations and the Company's internal situations, the Company has selected external directors with strong managemental experience and expertise. The Company aims for decision-making with wider perspectives, objectivity and transparency. For the skills matrix that specifically defines the skills and other attributes of the directors, please refer to the attached document.

[Supplementary Principle 4.11.2 Concurrent Positions Held by the Directors and Auditors]

Concurrent positions held at other organizations by each director, if any, are disclosed every year in the securities report.

[Supplementary Principle 4.11.3 Analysis and Evaluation of Effectiveness of the Board of Directors]

To improve the function of the Board of Directors, the Company conducted a survey toward all directors on the self-assessment of matters including whether sufficient deliberations have been conducted with regard to the Board of Directors' current operation, its composition, roles and duties as well as corporate strategies. Based on this survey, the Company analyzed and evaluated the effectiveness of the Board of Directors. The results of the FY2021 survey were as follows.

The results indicated that the Company's strength was in its effective incorporation of independent external directors and other appropriate participants in making deliberations on management strategies and business strategies. However, challenges were found in the risk management system, the effectiveness of the internal reporting system, discussions on medium/long-term and global management strategies, insufficient supervision of important business executions and other matters.

Based on these results, the Company will work on the challenges and continue to further improve the effectiveness of the Board of Directors.

[Supplementary Principle 4.14.2 Policies on Training of the Directors and Auditors]

To fulfill their roles and duties, the directors and auditors of the Company must continue to work on self-improvement such as by acquiring or appropriately renewing the necessary knowledge including corporate governance and compliance. For their support, the Company provides training opportunities and subsidies for the relevant expenses. For the external directors, upon their appointment, the Company will provide opportunities to acquire basic knowledge on matters such as company overview, business environment, management strategy, finance strategy and key audit items. After appointment, too, the Company will continue to share opportunities that encourage understanding of corporate culture, businesses, employees, etc.

In addition, the Company will provide opportunities to renew the knowledge of the directors and auditors by encouraging participation in external seminars and holding study sessions with external instructors.

[Principle 5.1 Policies on Constructive Dialogues with Shareholders]

Details on the Company's current engagement in dialogues (meetings) with shareholders, etc., are described below. During spreads of infections and other situations in which changes in the social condition discourage in-person meetings with shareholders, etc., the Company takes alternative measures such as shifting the following engagements online.

• 1. Specific IR-related measures and their results in Japan are disclosed in the IR Calendar on the Company's website.

  IR Calendar:

  https://www.outsourcing.co.jp/en/ir/calendar

• 2. Other than the general meetings of shareholders, a financial results briefing for analysts and institutional investors, hosted by The Securities Analysts Association of Japan, is held twice a year in Tokyo after the announcement of the financial results for the full fiscal year and the second quarter. With respect to IR activities toward individual investors, the Company participates in IR events hosted by the media or securities companies once or several times a year. The Company participates in such IR events for individual investors not only in Tokyo but also in regional cities.

• 3. In recent years, with an increasing percentage of foreign investors, the Company has also been actively carrying out overseas IR activities in other Asian countries, the U.S., the U.K., etc., and has been holding meetings with shareholders, institutional investors, etc.

• 4. When the Company receives requests from persons such as shareholders to hold dialogues (meetings), the relevant departments make arrangements and respond to them to an extent that is reasonably possible.

• 5. The Company aims to prepare materials for meetings and IR activities that include not only business results, but also the description and direction of business and the medium-term management plan, presented in an easy-to-read manner and in plain words. A system for periodically reviewing such materials, including their numerical values, is in place.

• 6. The Representative Director engages in the dialogue as much as possible. In case that is not possible, persons who fully understand the Company's business situations engage in the dialogue.

• 7. As a general rule, two or more persons from the Company engage in the dialogue and make sure that no insider information is leaked.

• 8. The persons who engaged in the dialogue give feedback to the Board of Directors on the opinions received from shareholders or institutional investors during the dialogue.

• 9. To enhance IR activities, the Company assesses the shareholder composition based on the list of shareholders as of the end of every December and the end of every June.

2. Capital Structure

Foreign Shareholding Ratio

30% or greater

[Status of Major Shareholders]

Name / Company Name	Number of Shares Owned	Percentage (%)
Haruhiko Doi	15,767,200	12.52
THE MASTER TRUST BANK OF JAPAN, LTD. (trust account)	14,693,500	11.67
Custody Bank of Japan, Ltd. (trust account)	6,553,300	5.20
JP MORGAN CHASE BANK 385635	4,704,958	3.74
JP MORGAN CHASE BANK 380072	3,632,900	2.88
THE BANK OF NEW YORK MELLON 140051	2,927,000	2.32
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.	2,914,090	2.31
SMBC Nikko Securities Inc.	2,792,100	2.22
JPMorgan Securities Japan Co., Ltd.	2,354,341	1.87
THE BANK OF NEW YORK MELLON SA/NV 10	2,300,000	1.83

Controlling Shareholder (except for Parent Company)	―――
Parent Company	None

Supplementary Explanation

・In the statement of changes to the statement of large-volume holdings available for public inspection as of October 19, 2020, it is stated that T. Rowe Price Associates, Inc. held 9,913,800 shares as of February 28, 2020. However, since the Company could not verify the actual number of shares held as of December 31, 2021, this information is not included in the above "Status of Major Shareholders."

・In the statement of changes to the statement of large-volume holdings available for public inspection as of December 6, 2021, it is stated that Sumitomo Mitsui Trust Asset Management Co., Ltd. and its joint holder, Nikko Asset Management Co., Ltd., held 4,796,900 shares and 2,389,500 shares, respectively, as of November 30, 2021. However, since the Company could not verify the actual number of shares held as of December 31, 2021, this information is not included in the above "Status of Major Shareholders."

・In the statement of changes to the statement of large-volume holdings available for public inspection as of December 7, 2021, it is stated that Baillie Gifford & Co. and its joint holder, Baillie Gifford Oversees Limited, held 5,183,700 shares and 2,132,200 shares, respectively, as of November 30, 2021. However, since the Company could not verify the actual number of shares held as of December 31, 2021, this information is not included in the above "Status of Major Shareholders." Also, since a change in the major shareholders was indicated by a statement of changes to the statement of large-volume holdings, the Company had submitted an extraordinary report (change of major shareholders) on November 19, 2021.

・In the statement of large-volume holdings available for public inspection as of January 7, 2022, it is stated that Nomura Securities Co., Ltd. and its two joint holders held 1,283,010 shares, 602,300 shares and 4,853,200 shares, respectively, as of December 31, 2021. However, since the Company could not verify the actual