Corporate governance

Our approach to corporate governance

In order to enhance our corporate value over the long term in a rapidly changing business environment, we aim to build good relationships with a wide range of stakeholders and achieve sustainable development. We realize that, to achieve this goal, we strengthen our corporate governance by establishing a governance framework based on independence, objectivity, and transparency of management, and implementing various initiatives. In 2015, Sangetsu transitioned to become a company with an Audit and Supervisory Committee, with the aim of strengthening the auditing and supervisory functions with respect to the Board of Directors by having outside directors participate in management.
Furthermore, we have implemented all principles of the Corporate Governance Code revised in June 2021 and disclosed this information in our Corporate Governance Report.

Company’s Corporate Governance Report

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Corporate Governance System

In order to strengthen the independent, objective oversight of the Board of Directors, Sangetsu has adopted a new corporate governance system and management system that separates the “supervision” and the “execution” of management. We also altered the composition of the Board in FY2019 to include two directors who hold a concurrent position as executive officers, and five directors who concurrently serve as Audit and Supervisrory Committee Members. This aims not only to enhance auditing and supervision of business execution, but to promote active discussion from the perspective of shareholders. Meanwhile, we have established a system designed to increase the transparency of management by stipulating that accounting auditors, who are usually reappointed, have a maximum term limit of 10 years. This is to ensure a higher degree of independence and appropriate external auditing.

Corporate Governance System Chart

Changes to Strengthen Governance System

Board of Directors

Board of Directors of the Company perform duties such as resolutions for items stipulated under law and items that require important decision-making for the Company, and establishing corporate strategies. All or part of the decision-making responsibilities regarding the execution of certain operations have been delegated to the Representative Director (President and CEO). The Board of Directors monitors the progress of delegated matters.
The Board of Directors consists of four independent outside directors and three internal directors who meet at least once a month. Resolutions require attendance by a majority of the Directors and a vote of approval by a majority of the Directors in attendance.

Contents of Primary Discussions by Board of Directors

Discussion Theme	Specific Contents of Discussion
Internal control and risk management	Reports and discussions were held multiple times throughout the year regarding basic policies for the internal control system, the status of internal control activities, and the activities of various committees established to address specific risks recognized by the Company, such as the Risk Management Committee and the Compliance Committee. These discussions reviewed the status of internal control activities and the operation of risk management within the Group.
ESG	In accordance with the Company’s ESG and CSR policies, the Board of Directors receives reports on the activities of the ESG Committee and the initiatives it has considered and implemented. These reports are discussed to ensure the Board’s oversight and supervision of efforts related to ESG.
Corporate strategies	The Board monitored the progress of the Long-term Vision [DESIGN 2030] and the new Medium-term Business Plan [BX2025], and discussed the advancement of initiatives aimed at achieving these plans. Based on the growth strategies outlined in these plans, the Board reviewed investments intended to further strengthen and expand the business foundation.
Strengthening supply chain management	In order to optimize, streamline, and advance the entire supply chain, the Board discussed further strengthening the functions that support the Company’s operations, such as procurement, inventory management, order processing, delivery, and construction. It also reviewed measures to reinforce quality control and establish a stable supply framework.
Organization and execution system	With a view toward the Long-term Vision [DESIGN 2030], the Board reviewed efforts to further strengthen and advance the business foundation of the Company’s core interior product sales operations. It also discussed the transition to a business model that provides solution proposals leveraging various functions related to space creation, as well as organizational restructuring and the management execution framework required to implement each growth strategy.
Oversight of Group company status	The Board discussed the management structures and strategies for achieving sustainable growth at Group companies. In particular, for overseas Group companies, the Board reviewed on-site audit reports by Audit & Supervisory Committee members, examined measures to address management issues and risks, and conducted appropriate oversight and supervision.

Skill Matrix

With regards to the experience and knowledge expected of Directors and Audit and Supervisory Committee Members, we have established, for the growth of the Space Creation Company, a skill matrix based on fundamental management skills, expertise in divisions at the Company, as well as the skills necessary for growth.

Name	Current Position and Role at Sangetsu Corporation	Attributes	Gender ●Male ●Female	Tenure	Audit and Supervisory Committee Member	Nomination and Remuneration Committee Member	Experience and insight expected from Directors												Attendance at Board Meetings
							Experience and insight for basis of management						Expertise in line with the Company’s businesses and experience and insight necessary for growth
							Corporate management	Finance/ Accounting	Legal Affairs/Risk management	Human resources strategy	DX/IT	Sustainability/ ESG	Industry knowledge	Development /Quality	Sales/ Marketing	Supply chain management	Global business	Business model innovation and transformation
Yasumasa Kondo	President & CEO Nomination and Remuneration Committee Member	Executive	●	2 year		●	●	●	●	●	●	●	●	●	●	●	●	●	100% (14/14)
Yutaka Matsuo	Director, Executive Officer, General Manager of Business Division and in charge of Exterior Business and Space Solutions Business	Executive	●										●		●	●		●
Michiyo Hamada	Outside Director Audit and Supervisory Committee Member Chairman of the Nomination and Remuneration Committee	Outside Independent	●	10 year	●	●			●	●		●					●		100% (14/14)
Kenichi Udagawa	Outside Director Chairman of the Audit and Supervisory Committee Member Nomination and Remuneration Committee Member	Outside Independent	●	6 year	●	●	●		●	●		●	●	●			●		100% (14/14)
Osamu Terada	Outside Director Audit and Supervisory Committee Member Nomination and Remuneration Committee Member	Outside Independent	●	4 year	●	●	●			●		●	●	●	●		●		100% (14/14)
Aki Ogane	Outside Director Audit and Supervisory Committee Member Nomination and Remuneration Committee Member	Outside Independent	●		●	●	●	●			●	●			●		●
Yosuke Mine	Directors Full-time Audit and Supervisory Committee Member	Nonexecutive	●		●		●					●	●		●	●

Our approach to the skills required for Directors

Name of skill	Reason necessary
Corporate management	In order to achieve sustainable growth and enhance corporate value over the medium to long term, it is necessary to have Directors with extensive insight and experience in management as top executives.
Finance/Accounting	In order to effectively supervise financial strategy and accounting procedures, etc. and improve the reliability of various financial decisions, it is necessary to have Directors with extensive insight and experience in finance and accounting.
Legal Affairs/Risk management	In order to establish a sincere and highly transparent system for compliance with laws and regulations and a risk management system, which form the foundation of corporate activities, it is necessary to have Directors with extensive insight and experience in legal affairs, compliance, and risk management.
Human resources strategy	The driving force behind the promotion of growth strategies is “human resources,” and it is necessary to have Directors with extensive insight and experience in human resources strategy in order to maximize the value of human capital.
DX/IT	In order to respond appropriately to changes in the business environment and achieve strengthening of competitiveness and creation of new value, strategic utilization of digital technology is essential, and it is necessary to have Directors with extensive insight and experience in DX and IT.
Sustainability/ESG	In order to realize a sustainable circular society, respond appropriately to environmental and social issues, and achieve sustainable growth as a company, it is necessary to have Directors with extensive insight and experience in sustainability and ESG.
Industry knowledge	In order to transform into a Space Creation Company and expand the business domain, it is necessary to have Directors with specialized insight and experience not only in the existing interior industry but also in the entire value chain, including materials and construction.
Development/Quality	Innovative product development and design, as well as the provision of quality that ensures security and safety, are important factors for business continuity and expansion. Therefore, it is necessary to have Directors with extensive insight and experience in development and quality.
Sales/Marketing	In order to provide high-quality solutions from a market-in perspective, it is necessary to have Directors who are knowledgeable about the domestic and overseas market environment and relationships with stakeholders such as customers and business partners, and who have extensive insight and experience in formulating and executing sales strategies.
Supply chain management	In a business model that provides a wide variety of products to accurately meet diverse market and customer needs, optimal supply chain management is essential, and Directors with such specialized insight and experience are necessary.
Global business	It is essential to expand our business model and capture growth in large overseas markets, and therefore it is necessary to have Directors with extensive insight and experience in global business.
Business model innovation and transformation	In order to transform into a Space Creation Company, it is necessary to accelerate the expansion of business domain and the creation of new businesses. It is necessary to have Directors with multifaceted and extensive insight, experience, and a mindset for innovation and transformation.

Reasons for the appointment of Directors

Name	Reasons for the appointment	Attendance rate of Board of Directors’ meetings in FY2024
Yasumasa Kondo	Reasons for nomination as candidate for Director Mr. Yasumasa Kondo was engaged in chemical-related operations at a major trading company and was also previously involved in the management of a listed company (manufacturing) and has extensive knowledge and experience in overall corporate management. Since joining the Company, as an Executive Officer in charge of the President’s Office and the Corporate Division, he has been overseeing planning and administrative operations. He took office as President and CEO on April 1, 2024, working to achieve the Company’s Long-term Vision [DESIGN 2030] and Medium-term Business Plan (2023-2025) [BX 2025]. Given these experiences and achievements, the Company deemed that he is well qualified to continue to serve as a Director. Attendance to the Board of Directors’ meetings held in FY2024: 14/14	(14/14) 100%
Yutaka Matsuo	Reasons for nomination as candidate for Director Mr. Yutaka Matsuo has held various positions at the Company including General Manager of Kita-Kanto Branch, General Manager of Kansai Branch and Manager of the Western Japan Business Unit, and has contributed to sales growth at major domestic sales bases. He has also served in a wide range of fields including General Manager of Logistics Division, and most recently, he has promoted the strengthening of logistics functions through grouping SDS Corporation. He took office as General Manager of Business Division in charge of Domestic Interior Business, Space Solutions Business and Exterior Business in April 2025. With his extensive knowledge and experience in the domestic interior business and the logistics industry, as well as the Company’s circumstances, the Company deemed that he is well qualified to serve as a Director.	ー
Michiyo Hamada	Reasons for nomination as candidate for Outside Director serving as Audit and Supervisory Committee Member Ms. Michiyo Hamada possesses a wealth of experience and keen, specialist insight as a scholar of corporate law and ex-commissioner of the Japan Fair Trade Commission. In addition to actively providing opinions on corporate law and opinions regarding the Company’s efforts to promote women’s participation and advancement in the workplace at Board of Directors’ meetings and the like, she also plays a role in the supervision and auditing of management. The Company has deemed that Ms. Hamada’s insight can continue to be utilized in company management and requests that she be elected as an Outside Director serving as Audit and Supervisory Committee Member.	(14/14) 100%
Kenichi Udagawa	Reasons for nomination as candidate for Outside Director serving as Audit and Supervisory Committee Member Mr. Kenichi Udagawa has contributed to the establishment and expansion of various overseas businesses in addition to the establishment of the production and manufacturing business in a listed company, and possesses a wealth of experience and keen, specialist insight as an individual with experience as a representative director. In addition to actively providing opinions on overall corporate management and opinions regarding the Company’s overseas business operations at Board of Directors’ meetings and the like, he also plays a role in the supervision and auditing of management. The Company has deemed that Mr. Udagawa’s insight can continue to be utilized in corporate management at the Board of Directors’ meetings and the like, and thereby requests that he be elected as an Outside Director serving as Audit and Supervisory Committee Member.	(14/14) 100%
Osamu Terada	Reasons for nomination as candidate for Outside Director serving as Audit and Supervisory Committee Member Mr. Osamu Terada has contributed to the expansion of the construction business in Japan at a listed company (a major construction company). In addition, he possesses a wealth of experience and keen, specialist insight as an individual with experience as a representative director. In addition to actively providing opinions on overall corporate management as well as the construction industry as a whole at the Board of Directors’ meetings and the like, he also plays a role in the supervision and auditing of management. The Company has deemed that Mr. Terada’s insight can continue to be utilized in corporate management at the Board of Directors’ meetings and the like, and thereby requests that he be elected as an Outside Director serving as Audit and Supervisory Committee Member. [Supplementary explanation regarding independence] Mr. Osamu Terada served as Director of SHIMIZU CORPORATION until June2020. However, the amount of transactions between the Company and SHIMIZU CORPORATION is 0.0047% of the Company’s consolidated net sales for fiscal 2024 and, thus, he fulfills the Company’s Standards of Independence for Outside Directors. The Company therefore has deemed that there are no issues regarding his independence.	(14/14) 100%
Aki Ogane	Reasons for nomination as candidate for Outside Director serving as Audit andSupervisory Committee Member Ms. Aki Ogane joined a major bank as one of the first female employees in the career position after Equal Employment Opportunity Act came into effect. She has a wide range of work experience in capital markets, financing, administrative planning, location management, audit, etc. During her secondment (financial institution), she has engaged in the management as a director. In addition to actively providing opinions on overall corporate management and opinions on finance/accounting at the Board of Directors’ meetings and the like, she also plays a role in the supervision and auditing of management. The Company has deemed that Ms. Ogane’s insight can continue to be utilized in corporate management at the Board of Directors’ meetings and the like, and thereby requests that she be elected as an Outside Director serving as Audit and Supervisory Committee Member. [Supplementary explanation to the independence] Until March 2019, Ms. Aki Ogane worked at Sumitomo Mitsui Banking Corporation. However, over six years have passed since she resigned from said company. In addition, as of March 31, 2025, the Group’s borrowings from the bank were 1.904% of the Company’s consolidated total assets, and she therefore fulfills the Company’s Standards of Independence for Outside Directors and the Company has deemed that there are no issues regarding her independence.	(11/11) 100%
Yosuke Mine	Reasons for nomination as candidate for Director serving as Audit and Supervisory Committee Member Mr. Yosuke Mine has served in the wide range of fields including General Manager of Chugoku-Shikoku Branch and General Manager of Logistics Unit. He is well versed in the domestic interior business and the logistics industry, as well as the Company’s circumstances, and has abundant practical knowledge and experience, including serving as director of a subsidiary. In addition to the collection of daily information within the Company at the Audit and Supervisory Committee and regular hearings of business reports from the business departments and the like, he also plays a role in the supervision and auditing of management. The Company has deemed that Mr. Mine’s insight can continue to be utilized in corporate management at the Board of Directors’ meetings and the like, and thereby requests that he be elected as a Director serving as Audit and Supervisory Committee Member.	(11/11) 100%

Evaluation of the effectiveness of the Board of Directors

Sangetsu ensures the effectiveness of the decision-making, supervision, deliberation, and all other processes of the Board of Directors. Assessing the effectiveness of the Board of Directors once a year, each Director conducts a self-assessment of the Board of Directors, which is followed by an analysis and assessment of the effectiveness of the Board as a whole. The survey covers a broad range of assessment criteria, from the composition of the Board to the quality of discussions and dialogue with stakeholders. A questionnaire survey was administered to all Directors in May 2025 for FY2024, and the assessment results are being discussed by the Board of Directors. Through these surveys, we aim to improve the effectiveness of the Board of Directors.

Implementation Guidelines

Target	All Directors (7)
Implementation Method	1. Conduct a survey of the target group 2. Compile the survey results 3. Share issues at the Board of Directors meeting and consider future measures
Evaluation Items	Roles and responsibilities of the Board of Directors Composition of the Board of Directors Operation of the Board of Directors Evaluation of the role of Outside Directors Evaluation of the Nomination and Remuneration Committee (target group only)

Process

Evaluation results (conducted in May FY2025)

Themes	Evaluation results and measures
Roles and responsibilities of the Board of Directors	While the internal control system has been established and is being operated appropriately, it was recognized that there is insufficient continuous and in-depth discussion regarding medium- to long-term management strategies and business strategies. In formulating the next Medium-term Business Plan, which will be developed in FY2025, the Board of Directors will expand opportunities for broader and more active exchanges of opinions.
Operation of the Board of Directors	Although the Board of Directors holds active discussions, it was recognized that more constructive and systematic discussions (beyond individual agenda items) need to be further encouraged. To support these discussions, it was noted that early distribution of materials, improvements in the quality and volume of materials, and faster preparation of minutes are important. The secretariat will also work to make improvements in these areas.

Standards of independence for outside directors

For appointing outside directors, Sangetsu applies its own Standards of Independence in addition to independence criteria defined by the Companies Act of Japan and the Stock Exchange. The Company emphasizes advanced expertise and a wealth of experience to provide candid and constructive advice on company management.

1. Individuals for whom none of the following currently applies:

a shareholder who owns 5% or more of the voting rights of Sangetsu Corporation or an executive officer of that shareholder;
an executive officer of a company whose transactions with Sangetsu Corporation exceed 2% of Sangetsu’s consolidated sales or a subsidiary of said company;
an executive officer of a major lender of Sangetsu Corporation, whose lending to the Sangetsu Group exceeds 2% of Sangetsu’s consolidated total assets as of the most recent fiscal year end;
a certified public accountant who belongs to Sangetsu Corporation’s accounting auditor;
a consultant, accounting expert, or legal expert who receives an annual sum of 10 million yen or more in monetary or other benefits from Sangetsu Corporation in addition to remuneration paid by Sangetsu as well as in the event the recipient of such benefits is a corporation or organization or any individual who belongs to such a corporation or organization;
an executive officer of an organization that receives an annual sum of 1 million yen or more in donations from Sangetsu Corporation;
a second-degree relative of an individual who falls under any of the above-mentioned (1) to (6); and

2. An individual for whom none of the above-mentioned (1) to (7) applied at any point in the past three years.

Roundtable Discussion with Outside Directors

In 2015, Sangetsu transitioned to a company with an Audit & Supervisory Committee structure. In June 2019, the Company strengthened the audit and supervisory functions of the Board of Directors by appointing four outside directors to constitute a majority of the seven board members. The four outside directors engaged in discussion to share views on enhancing the effectiveness of governance and promoting long-term corporate value.

Outside directors discuss the governance framework and future strategy for achieving sustainable growth and entering the next phase of transformation and challenges

Training, etc. for Directors

On-site visit to the Kansai Branch, which was relocated in December 2021

In order to promote compliance management, opportunities for Directors and senior management to participate in internal and external training are provided, and the Company covers the costs of participating in training sessions hosted by third-party organizations.

Audit and Supervisory Committee

The Audit and Supervisory Committee consists of all independent outside directors and one full-time inside director, with more than half of its members meeting the independence criteria. These members primarily conduct audits using the internal control system and through on-site visits to business sites worldwide. The committee seeks to strengthen the effectiveness of its audits by gathering and sharing valuable information through the periodic exchange of views with the President and CEO, reports presented by Executive Officers and employees, liaison meetings of audit committee members at affiliated companies, and other means.

Main Items Reviewed in FY2024

Formulation of audit policies and plans
Preparation of audit report by Audit & Supervisory Committee
Evaluation of the accounting auditor (assessment of appropriateness)
Consent to audit fees charged by accounting auditor
Review of audit activities conducted by the Audit & Internal Control Department
Monitoring through on-site interviews regarding product procurement systems, quality control systems, etc.
Status reports on Group companies, identification of issues, etc.

Audit and Supervisory Committee meetings held in FY2024

Number of hostings	14
Attendance rate	100%

Activity status of the Audit and Supervisory Committee

Dialogue with management executives 40 meetings * Results for FY2024
Sangetsu has created opportunities for the Outside Directors to engage in a dialogue with Executive
Officers, Presidents of each Group companies, and General Managers.
Participation in 47 important meetings * Results for FY2024
Outside Directors participate in not only Board of Directors meetings but also Business Strategy Conferences and other important meetings to contribute to executive-level decision making.
Participation in 79 visiting audits * Results for FY2024
Outside Directors conduct on-site visiting audits to obtain real-world information on each site.

Nomination and Remuneration Committee

The Nomination and Compensation Committee consists of all independent outside directors who are audit committee members and the Representative Director, President and Chief Executive Officer, with more than half of its members meeting the independence criteria. This committee supervises the training plans for successor candidates, determines the specific amount of remuneration for officers, and transparently provides proposals and explanations to the Board of Directors. It devotes sufficient time and resources to the appointment and dismissal of the CEO, directors, and executive officers, and selects individuals who possess the necessary objectivity, transparency, and timeliness to recommend to the Board of Directors. In addition, if the committee recognizes that the CEO is not adequately fulfilling their role, it will recommend their dismissal to the Board of Directors in a timely manner. It also evaluates the performance of directors who will serve as executive officers and members of the Board of Directors for the next fiscal year, evaluates personnel and executive officers who do not serve as directors, and deliberates the state of the officer remuneration system, as well as the appropriateness of remuneration levels.

Activity status of the Nomination and Remuneration Committee

Name	Full-Time / Outside	Attendance Status (12 meetings in total)	Specific details of discussion
Michiyo Hamada	Outside	12	Review of the composition of Board of Directors Review of candidates for Directors Review of a new organizational structure and personnel based on the growth strategy Review of candidates for mid- to long-term executive officers and senior management Review of evaluation of executive officers and evaluation system
Kenichi Udagawa	Outside	12
Osamu Terada	Outside	11
Aki Ogane	Outside	8
Masatoshi Hatori	Outside	4
Yasumasa Kondo	Full-Time	12

Notes: Aki Ogane's attendance count is for the period since her appointment on June 19, 2024.
Masatoshi Hatori resigned as of the 72nd Ordinary General Meeting of Shareholders held on June 19, 2024.

Succession Plan

At Sangetsu, the Nomination and Remuneration Committee monitors the status of development of successors for the CEO and others based on our corporate philosophy and specific management strategies, and discusses candidates in light of criteria such as personality, reputation, insight, ability to conduct business, management perspective, and awareness of participation in management.
The Nomination and Remuneration Committee carries out deliberations concerning the appointment of directors and core management members, as well as succession plans for the CEO and other personnel (succession plan, required qualities, steps for selecting candidates, etc.). It also discusses the background for selection of CEO candidates, and provides explanations and proposals to the Board of Directors as necessary.

Development of Successors

In developing successors for senior management positions, we utilize internal selection systems such as leadership training and senior management (executive officer candidate) training. At the same time, outside directors not only participate in the Board of Directors, but also in other important meetings as they consider candidates for executive officers and core management members. We have established a system that provides many opportunities for external directors to understand the character and way of thinking of successor candidates through individual interviews with management executives. This all comes in handy during Nomination and Remuneration Committee discussions.

Important Matters Related to Successor Development

Consideration of medium- to long-term succession plan for the CEO
Revision of the requirements and qualities required of the CEO as appropriate
Consideration of medium- to long-term candidates for executive officers and core management members
Diversification of opportunities to check up on the development of successors within a certain timeline

Highly transparent compensation system linked to performance and shareholder value

[Graph 1] Multiplier by Positions (by Remuneration)

Our compensation system consists of: ① Base compensation, ② Performance-based compensation, and ③ Restricted stock compensation. We operate a highly transparent compensation system linked to performance and shareholder value. Directors who do not concurrently serve as executive officers and directors who are members of the Audit and Supervisory Committee receive only base compensation. For directors who concurrently serve as executive officers and for executive officers, base compensation is calculated based on the Nomination and Compensation Committee's evaluation of each individual's contribution to the business during the fiscal year. This evaluation determines a contribution assessment index ranging from 0.85 to 1.25. Performance-linked compensation is tied to consolidated net income, an indicator of business profitability and capital efficiency improvement. It is paid with the objective of achieving capital efficiency improvement on a single-year basis. Restricted stock compensation is granted with the purpose of promoting value sharing with shareholders and clarifying incentives for the sustainable enhancement of corporate value. The number of shares applicable during the current mid-term management plan period is determined and granted accordingly. The calculation formulas for each compensation type are as follows. The design ensures that the ratio of performance-based compensation to restricted stock compensation increases with higher executive rank.Furthermore, the Articles of Incorporation stipulate that revisions to the executive compensation system require resolution by the General Meeting of Shareholders. The results of the voting rights exercised at the General Meeting of Shareholders when restricted stock compensation was introduced are shown below.

Results of the Exercise of Voting Rights

Table 1: Details of each remuneration system

Base remuneration	(Calculation formula) Base remuneration = standard basic remuneration x contribution assessment scale factor x multiplying factor by position Standard basic remuneration = 15,600,000 yen/year Contribution assessment scale factor = determined within a range of 0.85 to 1.25 according to a contribution assessment of each fiscal year Executive Officer multiplying factor by position (basic remuneration) (Refer to Graph 1) For Directors (excluding Audit and Supervisory Committee Members) who do not hold a concurrent position as executive officer and directors who concurrently serve as Audit Committee Members, the amount supplied is determined according to factors such as their individual duties. Fixed remuneration is supplied monthly during the term of the position.
Performance linked remuneration	(Calculation formula) Performance-linked remuneration = standard amount per Executive Officer x multiplying factor by position Standard amount per Executive Officer (Refer to Table 1) Executive Officer multiplying factor by position (performance-linked remuneration) (Refer to Graph 1) Performance-linked remuneration is paid once annually on the day after the General Meeting of Shareholders held following the conclusion of each fiscal year. This remuneration is not provided if the consolidated net income has fallen below a specified standard.
Restricted share remuneration	(Calculation formula) Restricted share remuneration (number of shares) = standard number of shares of Executive Officers x multiplying factor by position Standard number of shares of Executive Officers = 2,000 shares Executive Officer multiplying factor by position (restricted share remuneration) (Refer to Graph 1) The transfer restricted period shall be 30 years from the date of allocation, and the transfer restriction shall be removed as of the completion of the term of the position of Director or Executive Officer, or in the event of resignation, etc. due to suitable reasons. The number of shares issued shall be determined according to position, and shares shall be issued during the term of the position.

Base remuneration

(Calculation formula)
Base remuneration = standard basic remuneration x contribution assessment scale factor x multiplying factor by position

Standard basic remuneration = 15,600,000 yen/year
Contribution assessment scale factor = determined within a range of 0.85 to 1.25 according to a contribution assessment of each fiscal year
Executive Officer multiplying factor by position (basic remuneration) (Refer to Graph 1)
For Directors (excluding Audit and Supervisory Committee Members) who do not hold a concurrent position as executive officer and directors who concurrently serve as Audit Committee Members, the amount supplied is determined according to factors such as their individual duties.
Fixed remuneration is supplied monthly during the term of the position.

Performance linked remuneration

(Calculation formula)
Performance-linked remuneration = standard amount per Executive Officer x multiplying factor by position

Standard amount per Executive Officer (Refer to Table 1)
Executive Officer multiplying factor by position (performance-linked remuneration) (Refer to Graph 1)
Performance-linked remuneration is paid once annually on the day after the General Meeting of Shareholders held following the conclusion of each fiscal year.
This remuneration is not provided if the consolidated net income has fallen below a specified standard.

Restricted share remuneration

(Calculation formula)
Restricted share remuneration (number of shares) = standard number of shares of Executive Officers x multiplying factor by position

Standard number of shares of Executive Officers = 2,000 shares
Executive Officer multiplying factor by position (restricted share remuneration) (Refer to Graph 1)

The transfer restricted period shall be 30 years from the date of allocation, and the transfer restriction shall be removed as of the completion of the term of the position of Director or Executive Officer, or in the event of resignation, etc. due to suitable reasons.
The number of shares issued shall be determined according to position, and shares shall be issued during the term of the position.

[Table 2] Amount of Performance-linked Remuneration for Executive Officers

Consolidated Net Income (ROE) ^*	Amount of performance-linked remuneration (X = consolidated net income)
¥5 billion or less (ROE 5.0% or less)	¥0
More than ¥5 billion and less than or equal to ¥10 billion (ROE of more than 5.0% and less than or equal to 10.0%)	(X - ¥5 billion) x 0.17%
More than ¥10 billion and less than or equal to ¥14 billion (ROE of more than 10.0% and less than or equal to 14.0%)	(¥10 billion - ¥5 billion) x 0.17% + (X - ¥10 billion) x 0.14%
More than ¥14 billion and less than or equal to ¥18 billion (ROE of more than 14.0% and less than or equal to 18.0%)	(¥10 billion - ¥5 billion) x 0.17% + (¥14 billion - ¥10 billion) x 0.14% + (X - ¥14 billion) x 0.10%

* Shareholders’ equity = calculate each consolidated Net Income according to each ROE with a base of ¥100 billion

Amount of remuneration and its proportion by title

Cross-shareholdings policy

As a business strategy, the Company determines its cross-shareholdings policy for shares held in the medium to long-term following comprehensive determinations made from perspectives such as companies with which we should strengthen new relationships and companies with whom we already have relationships that we should continue to strengthen. To determine whether or not we should continue to possess shares of a company, the company we invested in establishes a representative department to confirm the necessity for us to continue possessing the shares of the company with regards to business strategies, by considering factors such as changes in our relationship. Our policy is that the Finance & Accounting Department confirms the costs and returns associated with possessing the shares, and based on that information, a determination is made regarding the significance of possessing those shares in the medium to long term, and those shares are to be sold when there is not a significant reason to possess them. This is reported and discussed at the Board of Directors. If the sale has been determined, we will proceed in the sale following dialogue with the company that we invested in.
However, we are steadily decreasing the number of companies for which we possess shares and are promoting management that considers asset efficiency.

Trends in cross-shareholdings

Standard for exercising of voting rights

With respect for the management policies of the companies that we are invested in, we engage in meetings and communications through various channels to make comprehensive determinations based on the company’s medium- to long-term improvements in corporate value, status of shareholder returns, and initiatives regarding corporate governance and CSR. Also, we determine the pros and cons following individual close examinations about whether or not the proposed issues are compatible with our own goals and whether or not those issues would improve the corporate value of the company in question.

Our Approach to the Executive Officer System

We have introduced an executive officer system to further promote the Group’s growth and strengthen corporate governance. By separating management decision-making and supervisory functions from business day-to-day operation, the system clarifies execution responsibilities and enables more rapid business operations.

Strengthen IR and SR

Sangetsu, in order to achieve sustainable growth and improve corporate value over the medium to long term, aims to construct relationships of trust through constructive meetings with shareholders and investors. In order to increase transparency of our company management, our public disclosures are not limited to statutory disclosures in accordance with disclosure policies, but also include prompt and appropriate disclosure of information according to the expectations of an interest in the Company. Also, the Public & Investor Relations Section of the President’s Office functions as a department specializing in IR activities and coordinates with departments such as Finance & Accounting Department, Corporate Planning Section of the President’s Office, and ESG Promotion Section to make efforts to provide information in a more efficient manner, while the Representative Director and President, responsible Executive Officers, and other staff participate in interviews where necessary. These are part of our efforts to have society appropriately assess the corporate value of the Company.

FY2024 Dialogue Status

Content	Respondents	Participants	Number of Times Held
Shareholders' Meeting	President & CEO, Directors, Outside Directors (Audit & Supervisory Committee Members), Executive Officers	Shareholders	1
Company Briefing Session	President & CEO, Directors, Outside Directors (Audit & Supervisory Committee Members), Executive Officers	Stocks (mainly individual shareholders)	1
Accounting/Corporate Strategy Explanatory Seminar	President & CEO, Executive Officers, etc.	Analysts and Institutional Investors	2
Small Meeting	President & CEO	Analysts and Institutional Investors	1
IR/SR Interview	President & CEO, Executive Officers, etc.	Analysts, Institutional Investors, and Shareholders	Approx. 100

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