Yamato : Corporate Governance Report

Corporate Governance

Last Updated: May 31, 2021

YAMATO HOLDINGS CO., LTD.

Yutaka Nagao

President

Contact: [phone]

Securities Code: 9064

http://www.yamato-hd.co.jp

The corporate governance of YAMATO HOLDINGS CO., LTD. (the "Company") is described below.

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

1. Basic Views

Based on the Yamato Group Corporate Philosophy, the Company and its group companies (the "Group") has been engaging in business activities in line with laws and social norms, and promoting management in conformity with compliance.

Moreover, positioning the effective use of the Group's business resources to maximize its corporate value as one of utmost management priorities, the Group has been implementing measures to enhance its management structure as an approach to corporate governance.

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

The Company complies with all principles of Japan's Corporate Governance Code.

[Disclosure Based on the Principles of the Japan's Corporate Governance Code]

Initiatives of Yamato Holdings for corporate governance have been described in this report as well as the Corporate Governance Guidelines, the Notices of the General Meeting of Shareholders, Japanese securities reports and Integrated Reports prepared by the Company and its website, so please refer to these reports and website.

Details of disclosure items based on the principles of the Japan's Corporate Governance Code are as follows.

[Principle 1-4Cross-Shareholdings]Policy on cross-shareholdings

The Company maintains a policy of owning stocks that are deemed meaningful, based on a comprehensive consideration, from a medium- to long-term perspective, of the relationship with the Group's businesses, the profitability of the Company, and the possibility of creating business opportunities, among other factors.

A decision is made every year at the Board of Directors Meeting concerning whether to continue holding the stocks, based on quantitative and qualitative consideration regarding primarily the benefits and risks associated with holding the stocks, in light of various factors including the business track record with the Company, and the market price of the shares. If it is decided, as a result of the consideration, that there is little significance of holding stocks, the Company reduces the stocks held.

Exercise of voting rights

The Company maintains a policy of making decisions on supporting or opposing agenda items on a case-by-case basis, and exercises the voting rights, with consideration given to the issuing company raising its corporate value, the issuing company's compliance framework, and the possibility that the issue will have a negative impact on the Group's business, among other factors.

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[Principle 1-7 Transactions among Related Parties]

The Company has provided that the Board of Directors shall make decisions with respect to matters such as officers with interests in competing businesses and conflict-of-interest transactions, in accordance with the Board of Directors Regulations and other regulations.

Also, the Company has established a framework to enable the persons giving approval to make sure that, if the Company or a Group company engages in business transactions with key shareholders or other related parties, the interests of shareholders and the Company are not harmed, taking into consideration the importance and nature of the business transaction in question, in accordance with internal regulations.

[Principle 2-6 Roles as Asset Owners of Corporate Pension Plan]

The Yamato Group Corporate Pension Fund manages the reserves for the Company's corporate pension plan.

The Company facilitates the professional development of said Fund's staff mainly by allocating personnel with expertise at the Fund's secretariat, and by sending staff members to external seminars. The Fund's management policies are decided by the board of representatives, taking into consideration the deliberations of the Pension Assets Management Committee. Personnel with the appropriate qualities are assigned to the Pension Assets Management Committee and the board of representatives, and a labor union official is assigned as a representative for the beneficiaries.

[Principle 3-1 Enhancement of Disclosure]

1. Company objectives (e.g., Management Philosophy), management strategies and management plans
   The Company formulates the medium-term management plan based on the Management Philosophy for the purpose of increasing the overall corporate value while having respect for all stakeholders, and publishes this plan on its website and other media.
2. Basic views and basic policies on corporate governance

The Company Precepts form the origin of the corporate spirit of the Company. Recognizing that its Management Philosophy based on the Company Precepts represents what we aim to be, the Company seeks to continually enhance its corporate value. To this end, the Company aims to improve the satisfaction of all customers, shareholders, society and employees and pursues effective corporate governance by ensuring management transparency, fairness and swiftness.

1. The Board of Directors' policies and procedures in determining the compensation of the senior managements and Directors
   These are described in "Disclosure of Policy for Determining Compensation Amounts or Calculation Methods Thereof" under II. 1. [Director Compensation].
2. The Board of Directors' policies and procedures in the appointment and dismissal of the senior management and the nomination of candidates for Director and Audit & Supervisory Board Member Nominations are made following deliberations on the appointment and dismissal of the senior management by the Nomination and Compensation Committee, more than half of whose members are Outside Directors, under the policy of appointing a person who has abundant experience and considerable insight relating to corporate management and business promotion, has a sense of humanity from observing and evaluating from diverse perspectives, is able to grasp the essence of the issues facing the Company, and has capabilities that will enhance its management structure.
3. Explanation of the individual appointment and dismissal of the senior management and the nominations of candidates for the positions as Director and Audit & Supervisory Board Member by the Board of Directors based on (iv) above
   Individual backgrounds and reasons for election of candidates for Director and Audit & Supervisory Board Member have been described in Notices of the General Meeting of Shareholders.

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[Supplementary Principle 4-1-1 Determination and Disclosure of Scope of Matters Delegated to Management]

The Board of Directors Meeting is held at least once a month to deliberate on and decide the basic policies for business management.

On the other hand, the Company has set up the executive officer system in order to realize the efficiency of the management and the clarification of responsibility through the clear separation of management decision-making, supervision and execution. The scope of responsibility of each executive officer that is decided by the Board of Directors is disclosed, and executive officers execute business in accordance with internal regulations.

[Principle 4-9 Criteria for Determining Independence and Qualification for Independent Outside Directors]

As policies for independence from the Company to elect Outside Directors and Outside Audit & Supervisory Board Members, the Company has established its own criteria for determining independence as follows based on the criteria for determining independence presented by the Tokyo Stock Exchange.

The Company has appointed all of the Outside Directors and Outside Audit & Supervisory Board Members as independent officers provided for under the provisions of that exchange and registered the individuals as such with the exchange.

A party with respect to whom any of the following apply shall be deemed as not having met the requirements for independence of an Outside Director or Outside Audit & Supervisory Board Member of the Company.

• A party who is a major business partner of either the Company or a Group company (hereinafter collectively referred to as the "Company"), or otherwise if such party is a corporation or other such entity, a person who executes business thereof;
• A major business partner of the Company, or otherwise if such party is a corporation or other such entity, a person who executes business thereof;
• A consultant, accounting professional or legal professional who receives substantial monetary consideration and/or other economic benefits from the Company besides officer remuneration;
• A consultant, accounting professional, legal professional or other such professional who is a member of a corporation or other such entity that provides professional services acting as a major business partner of the Company;
• A major shareholder of the Company, or otherwise if such major shareholder is a corporation or other such entity, a person who executes business thereof;
• A recipient of donations from the Company or a person who executes business thereof;
• A person who now serves or has served in the past as a Director (excluding Outside Director), Audit & Supervisory Board Member (excluding Outside Audit & Supervisory Board Member), Executive Officer, or employee of either the Company or one of its subsidiaries;
• A close relative of a Director, Audit & Supervisory Board Member, Executive Officer or employee of the Company;
• A close relative of a person (excluding inconsequential persons) with respect to whom any of the aforementioned apply.

[Supplementary Principle 4-11-1 Views on Total Balance of Knowledge, Diversity and Size of the Board of Directors]

The Company's Board of Directors shall consist of Directors and Audit & Supervisory Board Members, the number of Directors shall be 12 or less, and the number of Audit & Supervisory Board Members shall be five or less. The Board of Directors shall comprise diverse officers with different backgrounds including professional expertise, experience, gender and global awareness, such as a Director possessing deep insight in the Group's businesses and an Outside Director who exercises supervision from an independent and objective standpoint.

The election of Directors is decided by the Board of Directors, following deliberations by the Nomination and Compensation Committee, more than half of whose members are Outside Directors and whose

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Chairperson is an Outside Director, based on evaluation of performance, a sense of humanity and other factors from diverse perspectives.

[Supplementary Principle 4-11-2 Concurrent Positions Held by Outside Officers]

The status of Outside Directors or Outside Audit & Supervisory Board Members having concurrent positions with other organizations is disclosed annually in the Notice of the General Meeting of Shareholders, the Japanese securities report and other materials.

[Supplementary Principle 4-11-3 Analysis and Evaluation of Effectiveness of the Board of Directors] In order to verify the effectiveness of the Board of Directors, the Company conducts a questionnaire survey relating to the composition and management conditions of the Board of Directors annually for all Directors and all Audit & Supervisory Board Members and based on the result of the said survey, the Company evaluates the effectiveness of the Board of Directors' management conditions, deliberation conditions, etc. Moreover, in the fiscal year ended March 31, 2020, in order to make the effectiveness evaluation more useful, interviews by the Chairperson (Director and Chairman) were conducted in addition to the questionnaire.

In the effectiveness evaluation for the fiscal year ended March 31, 2020, the Company received an evaluation that the composition, management conditions and deliberation conditions of the Board of Directors were largely appropriate as a system where the Board of Directors serves the oversight function, and that the culture where attendees actively speak up and engage in unrestricted discussions at the Board of Directors Meeting had taken hold.

Based on these situations, the Company has confirmed that the Board of Directors has been able to display effectiveness that contributes to securing sound management and achieving prompt and accurate decision-making and business execution, which are the Company's basic policies for corporate governance.

With regard to the transformation plan "YAMATO NEXT100," which was announced in January 2020, the Board of Directors conducted proactive exchanges of views and had exhaustive discussions on the effectiveness of this plan at the formulation stage. The Company will regularly monitor the progress of the plan, including the implementation of organizational restructuring, which is planned in April 2021.

Going forward, the Company will further strengthen corporate governance to improve the soundness of the entire Yamato Group's management while continuously work to maintain and improve the effectiveness of the Board of Directors for the execution of the growth strategies called for in the transformation plan "YAMATO NEXT100."

[Supplementary Principle 4-14-2 Policy on Training of Directors and Audit & Supervisory Board Members]

So that the Directors and Audit & Supervisory Board Members are able to fulfill their various roles and duties, the Company ensures opportunities in a regular and planned manner for them to obtain and improve the necessary knowledge regarding laws and regulations, finance, the management environment that surrounds the Group, new technology, etc.

Furthermore, the Company ensures opportunities to deepen understanding of the Group's management strategy, business activities and conditions, etc., through strategy meetings held with all of the people responsible for business activities in attendance, lively debates at meetings with outside experts, business location inspections, etc.

[Supplementary Principle 5-1 Policy for Constructive Dialogue with Shareholders]

In order to increase corporate value continuously and over the medium to long term through constructive dialogue with shareholders and investors, the Company promotes dialogue by the President and other members of senior management, among other measures.

The basic policies have been provided and disclosed in the Corporate Governance Guidelines developed by the Company.

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2. Capital Structure
		Foreign Shareholding Ratio			From 20% to less than 30%
[Status of Major Shareholders][Updated]
		Name				Number of Shares Owned			Shareholding Ratio
					(Shares)			(%)
	The Master Trust Bank of Japan, Ltd.	46,476,300			12.51
	(Trust Account)
	Yamato Employees' Shareholding	23,784,672			6.40
	Association
	Custody Bank of Japan, Ltd. (Trust	21,904,900			5.90
	Account)
	Meiji Yasuda Life Insurance Company	14,814,860			3.99
	Nippon Life Insurance Company	14,770,653			3.98
	Mizuho Bank, Ltd.	10,247,442			2.76
	Yamato Trading-Partner Shareholding	8,409,569			2.26
	Association
	TOYOTA MOTOR CORPORATION	5,748,133			1.55
	Sompo Japan Insurance Inc.	5,133,900			1.38
	Aioi Nissay Dowa Insurance Co., Ltd.	4,800,220			1.29
		Controlling Shareholder (except for			-
		Parent)
		Parent (Listed Stock Market)			N/A
		Supplementary Explanation
-

3. Corporate Attributes

	Listed Stock Market and Market Section		Tokyo Stock Exchange First Section
	Fiscal Year-End		March
	Type of Business		Land Transportation
	Number of Employees (Consolidated) at		1,000 or more
	End of the Previous Fiscal Year
	Net Sales (Consolidated) for the Previous		¥1 trillion or more
	Fiscal Year
	Number of Consolidated Subsidiaries at		From 10 to less than 50
	End of the Previous Fiscal Year

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