POLA Orbis : Update of Corporate Governance Report

Corporate Governance Report

POLA ORBIS HOLDINGS INC.

Last Update: March 26, 2021

POLA ORBIS HOLDINGS INC.

Satoshi Suzuki, Representative Director and President Contact: Corporate Communications Office, [phone] Securities Code: 4927 https://www.po-holdings.co.jp/

The corporate governance of POLA ORBIS HOLDINGS INC. (the "Company") is described below.

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

Other Basic Information

1. Basic Views

Based on our Group mission to sensitize the world to beauty, the POLA ORBIS Group offers a number of brands each with differing properties. We deploy our businesses based on the recognition that our strengths are in our high brand loyalty through direct ties with customers, R&D capabilities in the skincare area through concentration of our resources, and multi-valuechain strategy exploiting strong synergistic effects of our brands upon each other. Each operating company under the Group umbrella essentially manages itself autonomously and independently, while POLA ORBIS HOLDINGS, as the holding company, retains management control over each operating company and strives to increase corporate value through ensuring sound management and improved efficiency in Group operations overall.

The POLA ORBIS Group also incorporates compliance into CSR activities, emphasizing compliance as an integral part of business. The POLA ORBIS Group strives to realize sustainable development of the Group through initiatives where the Group, as a good corporate citizen, works to deepen cooperation and establish trustful relationships with various stakeholders, including shareholders and business partners, and fulfills its corporate responsibilities. In addition, the Company has established the POLA ORBIS Group Code of Conduct to cover the various facets of responsible corporate activity, including legal compliance, environmental protection, and shareholder relations, and all executives and other employees pledge to abide by the Code of Conduct.

[Reasons for Noncompliance with the Principles of the Corporate Governance Code] Updated

Based on [Principle 3-1: Enhancement of Information Disclosure], with regard to policies on dismissal included under policies for the appointment and dismissal of core management, no grounds for dismissal are established based on performance requirements or other matters, aside from violations of laws, regulations, or these articles of incorporation and improper acts. Plans call for continued study of this topic by the Board of Directors and the Nomination Committee, taking into comprehensive consideration such matters as individual performance evaluations, experience, abilities, and qualifications based on appointment requirements.

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

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[Principle 3-1: Enhancement of Information Disclosure] 1. "Management mission, management plans, etc." and 3. "Policies and procedures for decisions on remuneration of Directors and core management" have been revised.

[Supplemental Principle 4-11(3): Analysis and evaluation of the efficacy of the board of directors as a whole] has been updated in part.

[Principle 5-1: Policies related to dialogs with shareholders] has been updated in part.

Disclosure based on each of the principles of the Company's Corporate Governance Code is described below.

In addition to this Report, the state of the Company's corporate governance efforts can be confirmed in the Corporate Report and other documents.

Corporate Report: https://ir.po-holdings.co.jp/ja/Library/AnnualReport.html

[Principle 1-4: Policy on Cross-shareholdings and Standards for Execution of Voting Rights on such Shares]

Cross-shareholdings>

When the Company holds listed shares, it shall do so based on the following policies.

1. It will not hold cross-shareholdings simply as a stable shareholder.
2. It will hold listed shares as cross-shareholdings only when recognized by the Board of Directors as reasonable and appropriate for business purposes, such as alliances and maintenance and strengthening of transactions.
3. The Board of Directors shall receive periodic reports on the status of individual cross-shareholdings, verify the reasonableness and appropriateness of such holdings, and disclose the contents thereof.

Voting rights on shares held shall be exercised appropriately based on the judgment of whether to support or oppose resolutions through consideration of the conditions of companies invested in, based on the precondition that proposed resolutions would not be harmful to shareholder value. Specific standards for execution shall be established for each issue held when holding shares of publicly traded stock.

[Principle 1-7: Appropriate Procedural Framework for Transactions with Interested Parties]

Transactions, such as those with interested parties, shall be subject to approval by the Company Board of Directors in a meeting whose participants include multiple outside directors to avoid harm to the joint interests of the Company and shareholders, and reporting to the Board of Directors after the transaction has been executed shall be obligatory. In addition, every fiscal year, the directors of the POLA ORBIS Group shall be subject to an investigation of transactions between them or their family members within two degrees of consanguinity and the Company or its subsidiaries. The presence of such transactions and the conditions thereof shall be disclosed appropriately in Securities Reports and other reports, pursuant to the provisions of laws and regulations.

[Principle 2-6: Demonstrating Functions as an Asset Owner for the Corporate Pension Plan]

The POLA ORBIS Group has adopted a contractual defined-benefit corporate pension plan covering the Company and some domestic subsidiaries. Pension assets are managed through the appropriate selection of

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multiple financial institutions, such as life insurers, and placement of human resources with specialties knowledge and experience in the sections in charge, and the state of such asset management is monitored periodically.

In addition, the Pension Management Committee has been established as an advisory body to ensure the stable and efficient management of the corporate pension plan. Chaired by the Company's executive officer in charge of finance, the Pension Management Committee's membership consists of persons from each company nominated by the chairperson, and the committee appropriately reviews the state of management and financial status of pension assets.

[Principle 3-1: Enhancement of Information Disclosure]

1. Management mission, management plans, etc.

The Company has identified as the Group mission to sensitize the world to beauty. In addition, its long-term vision and medium-term management plans are explained by the representative director at opportunities such as briefings on settlement of accounts, and related materials are posted to the website and made available through other means.

(Explanatory materials concerning the medium-term management plan etc.: https://ir.po- holdings.co.jp/ja/Top.html)

(Sustainability plan materials: https://www.po-holdings.co.jp/csr/data/pdf/sutainability2021.pdf)

1. Basic views and basic policy on corporate governance, based on the principles of the Corporate Governance Code
   As described in Section 1 under "Basic views on corporate governance, capital structure, corporate attributes, and other basic information" in this Report, the Company has strived to increase the corporate value of the Group as a whole by formulating the Basic Views on Corporate Governance and carrying out the management and supervision intended to secure the soundness of management and improve its efficiency at each Group member company as the Group holding company. To ensure that each Group member company, like individuals, can grow through continual learning, discussions, and improvement while securing and demonstrating independence and autonomy, individual diversity, and flexibility to adapt to external changes and accept differences, the Company Board of Directors considers it essential not only to understand and carry out the intent of the Corporate Governance Code but also to continually assess, improve, and build the Company's corporate governance. The Company Board of Directors has established the Basic Policy on Corporate Governance based on the five fundamental principles described in the Corporate Governance Code to fulfill its responsibilities while responding to the expectations of shareholders and other stakeholders.
2. Policies and procedures for decisions on remuneration of Directors and core management

The Board of Directors makes decisions on the remuneration for Company Directors and Executive Officers based on deliberations and reporting by the remuneration advisory committee taking into consideration

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individual positions and contributions to business performance. In its 13th Regular General Meeting of Shareholders held on March 26, 2019, the Company resolved to adopt a share-based remuneration program linked to medium- to long-term performance (hereinafter "Program") to replace the existing stock-option program. Policies and procedures for decisions on remuneration of directors in the POLA ORBIS Group following the adoption of this Program are outlined below.

(1) Basic views

The POLA ORBIS Group considers executive remuneration to be an important means of realizing the sustained growth of the Group and increases in corporate value over the medium to long term. As the Group holding company, the Company makes clear the roles and responsibilities in execution of their individual responsibilities for the Company directors and other executives, whose main duties are to make decisions on Group management as a whole and to supervise business execution, and the directors of subsidiaries to which the Company delegates business execution authority. Executive remuneration is based on the responsibility for business performance and other results in relevant areas of business execution and serves as strong motivation for the achievement of results over not only the short term but the medium and long terms as well. In addition, executive remuneration is oriented toward further sharing of gains with shareholders by making clear its linkage to share prices.

(2) Remuneration levels

Remuneration levels are set in light of the scale of individual roles and responsibilities, through consideration of the POLA ORBIS Group's business conditions and competitive strengths in external markets, and comparison with firms in the same industries or of the same size both in Japan and around the world.

(3) Remuneration structure

The POLA ORBIS Group's executive remuneration (excluding outside directors) consists of a fixed basic component and variable annual bonuses and a performance-linkedshare-based component. Remuneration for outside directors consists of a fixed basic component and a non-performance-linkedshare-based component. Remuneration for corporate auditors consists only of a fixed basic component.

The share of executive remuneration accounted for by variable remuneration is set within the range 40% to 50% depending on the job grade of the individual executive. The variable remuneration of annual bonuses varies within the range of 0% to 200% depending on such factors as the Group's achievement of business performance targets for the fiscal year, while that of the performance-linkedshare-based component varies within the range of 0% to 200% depending on such factors as the POLA ORBIS Group's achievement of business performance targets in the medium-term management plan and other targets.

(4) Executive remuneration decision-making process

To ensure objectivity and transparency in the executive remuneration decision-making process, the Company has established a remuneration advisory committee wherein the majority of the membership consists of outside directors to serve as a voluntary advisory body to the Board of Directors. Decisions on the POLA ORBIS Group's executive remuneration are made by the Board of Directors within the scope of the remuneration limits approved at the General Meeting of Shareholders based on deliberations and reporting by the remuneration advisory committee.

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4. Nomination of candidates for directors and corporate auditors and appointment and dismissal of the CEO and core management

(1) Nomination, appointment, and dismissal of directors

Candidate directors are nominated from persons who have the ability to contribute to the Group's sustained growth and medium to long-term increases in its corporate value, who fully understand the Group's management policies and strategies, and who possess such properties as multifaceted points of view, flexible thinking on reforms, and specialization with consideration for balance among such factors as knowledge, experience, abilities, and diversity of the Board of Directors as a whole based on an evaluation of executive competencies * reference 1. To ensure objectivity and transparency in the appointment and dismissal process, the Company has established a nomination advisory committee wherein the majority of the membership consists of outside directors to serve as a voluntary advisory body to the Board of Directors. Decisions on appointment and dismissal are made by the Board of Directors and submitted to the General Meeting of Shareholders based on deliberations and reporting by the nomination advisory committee.

(2) Appointment and dismissal of the Representative Director and President

Appointment and dismissal of the Representative Director and President are considered the most important decisions of the nomination advisory committee. Decisions on the appointment and dismissal of the Representative Director and President are made by the Board of Directors based on sufficient deliberations and reporting by the nomination advisory committee regarding whether or not the appointee possesses a suitable temperament, abilities, deportment, and other properties as the Group's chief executive officer.

(3) Appointment and dismissal of Group core management

Human resources chosen as Group core management executives are those who are highly familiar with the management and businesses of the Group companies and have the ability to contribute to the Group's sustained growth by performing their responsibilities for Group management or businesses and implementing appropriate reforms and innovations, while also demonstrating strengths in executive competencies. To ensure objectivity and transparency in the appointment and dismissal process, decisions are made by the Board of Directors based on deliberations and reporting by the nomination advisory committee. When appointing core management executives of the Company's major subsidiaries and sub-subsidiaries, a nomination advisory committee with different membership is convened.

(4) Nomination, appointment, and dismissal of candidate corporate auditors

In light of the nature of the post as a full-time position, nominees for corporate auditors must be able to collect internal information, maintain the auditing environment, and monitor and verify the state of development and operation of internal control systems on a regular basis to ensure the efficacy of auditing. Decisions on the appointment and dismissal of corporate auditors are made by the Board of Directors with the consent of the Board of Corporate Auditors and submitted to the General Meeting of Shareholders.

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