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Corporate Governance

Policy

Approach

The SG Holdings Group supports the concept of "Stakeholder Management" as the foundation of its management philosophy and promotes business activities which meet the expectations of our various stakeholders by 1) continuous improvement of our level of customer service, 2) stabilization and improvement of the foundation of living of our employees and their families, 3) contribution to local communities, their safety and environment through diverse business and social activities, 4) enhancement of corporate value for our shareholders and 5) equal and fair transactions with business partners. We have formulated the SG Holdings Basic Policy of Internal Control System as a statement of our internal control policies and work to strengthen all of our systems accordingly based on the firm conviction that creating a transparent management and administrative structure through strong and comprehensive corporate governance is a key requisite for realizing stakeholder management.

Systems

SG Holdings, as a pure holding company, strives to streamline the Group's management structure and achieve rapid management decision making. The Board of Directors, consisting of nine Directors, including two Outside Directors, oversees the overall management and business execution of the entire Group. SG Holdings has also introduced an Executive Officer System in order to separate the management oversight function and the business execution to ensure that authority and responsibilities are clear.
In addition, the Audit & Supervisory Board has been established consisting of four Audit & Supervisory Board Members, including three Outside Audit & SupervisoryBoard Members, to supervise and audit management. (The number of Directors and Audit & Supervisory Board Members is stated as of August 31, 2018.) We continually strive to strengthen the Company's business management structure and the foundations of our businesses to be prepared to respond to changes in the business environment and to manage with a high degree of transparency.

Systems

Board of Directors

The Board of Directors consists of nine Directors (two of whom are Outside Directors), and four Audit & Supervisory Board Members (three of whom are Outside Audit & Supervisory Board Members). It is responsible for making decisions on general Group business execution and reporting on the status of management execution of the individual directors in accordance with internal rules, including the Board of Directors' Regulations and the Duty and Authority Regulations.
In principle, regular meetings of the Board of Directors are held monthly, while extraordinary meetings are held when there are urgent matters to be decided.

Number of Meetings 22 in Fiscal 2017

Independence of Outside Officers

The Company determines the independence of Outside Directors and Outside Audit & Supervisory Board Members stipulated under the Companies Act by checking whether any of the following items apply based on the determination criteria set by Tokyo Stock Exchange, Inc., and deems them to be independent if none of the items apply.

  1. 1.A Major shareholder (a person directly or indirectly holding 10% or more of voting rights) of the Company, or a business executive thereof
  2. 2.A person whose major business partner is the Company and its subsidiaries (the "Group"), or a business executive thereof
  3. 3.A major client of the Group, or a business executive thereof
  4. 4.A person providing professional services such as a consultant, attorney or certified public accountant who obtains a large sum of money or other financial gain from the Group other than officer remuneration
  5. 5.A person who has received the donation of a large sum of money or other financial gain from the Group, or a business executive thereof
  6. 6.A Director (excluding Outside Directors), Audit & Supervisory Board Member (other than Outside Audit & Supervisory Board Members), Executive Officer or employee of the Group
  7. 7.A person to whom any of the items in 1 through 6 above have applied during the past three years
  8. 8.If a person to whom any of the items in 1 through 7 above applies is in an important position, the spouse and relatives within the second degree of kinship thereof
  9. 9.In addition to the preceding items, a person for whom there may be special circumstances preventing the fulfillment of duties as an independent outside officer, such as the possibility of a conflict of interest

Audit & Supervisory Board

SG Holdings' Audit & Supervisory Board is structured as a four-person board of which three members are Outside Audit & Supervisory Board Members. Audit & Supervisory Board Members continually audit and supervise the business execution by Directors and attend Board of Directors meetings, stating as necessary their opinions from their perspective. In addition, the full-time Audit & Supervisory Board Member attends committees and meetings other than Board of Directors meetings as an observer in order to deepen his/her understanding of internal conditions and management, actively works to maintain an effective auditing environment and collect internal information and, moreover, continually monitors, expresses an objective opinion and provides advice in regard to the development and operation the internal control system.

Number of Meetings 14 in Fiscal 2017

Committees and Meetings

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Name Primary Attendees Number of Meetings in Fiscal 2017
Management and Administration Enhancement Committee SG Holdings Directors, Executive Officers, Department Managers 4
Investment Committee SG Holdings Directors, Executive Officers, Department Managers 24
Budget Committee SG Holdings Directors, Executive Officers, Department Managers 8
Management Strategy Meetings SG Holdings Directors, Executive Officers, Department Managers and Group company presidents 12
Risk Management Meetings SG Holdings Directors, Executive Officers, Department Managers and Group company presidents 12
Administration Department Managers' Meetings SG Holdings Directors, Executive Officers, Department Managers and Group administration department Managers 11

*The full-time Audit & Supervisory Board Member participates as an observer in all of the above committees and meetings.

An Audit

Audit by Audit & Supervisory Board Members

In their audit work, SG Holding Company's Audit & Supervisory Board Members attend Board of Directors meetings and other important meetings as well as conduct site visits to Group companies and business locations to ensure effective monitoring. To perform their audit functions as efficiently as possible they collaborate closely with the Company's and its subsidiaries' internal audit units and Audit & Supervisory Board Members.
They also meet periodically with the Company's Accounting Auditor to discuss issues relating to the financial audit.

Internal Audit

The Company has established the Internal Audit Department as an independent unit to conduct the Company's internal audits and pursuant to the Comprehensive Internal Audit Regulations carry out the functions required for comprehensive internal auditing of the Group to ensure the conservation of its assets and promote efficient management. The Internal Audit Department reports the results of its audits to the President and COO, and the Audit & Supervisory Board Members and provides advice, proposals and directives for improvements to the units it audits. Sagawa Express and some other Group subsidiaries also have their own internal audit units which conduct audits as appropriate in addition to audit by the Internal Audit Department of the Company.

Accounting Audit

The Company has appointed Deloitte Touche Tohmatsu LLC as its Accounting Auditor. The Company has concluded an audit agreement with it under which that firm conducts an accounting audit in accordance with an annual audit plan and the Company pays the agreed upon compensation to it. The names of the certified public accountants who performed the audit in the consolidated fiscal year under discussion are listed below.

Names of Engagement Partners of the certified public accountants

Yasuhiro Onishi, Engagement Partner
En Yamada, Engagement Partner
Hideya Sudo, Engagement Partner

Persons assisting in the audit work:

36 persons (including 19 certified public accountants)

Officer Remuneration

Policy for Determining Remuneration

Officers' remuneration is decided by a resolution of the Board of Directors and Audit & Supervisory Board Members' remuneration is decided by deliberation of the Audit & Supervisory Board within the limit decided at a General Meeting of Shareholders and taking into account such factors as performance and economic conditions.
Additionally, in order to clearly link the remuneration of Directors to share price and augment their motivation to contribute to the improvement of performance and the increase of corporate value over the mid- to long-term, starting from July 1, 2018, we introduced a company performance-linked share-based remuneration program.

Performance-linked share-based remuneration program (the "Program")

Total number of shares scheduled to be granted to those eligible, and scope of beneficiary rights and other rights they are eligible to receive under the Program.

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(i) Personnel to which the scheme is applicable Director (excluding non-full-time directors, outside directors, and persons who do not reside in Japan; the same applies below.) and Executive Officers (excluding persons who do not reside in Japan) (the "Directors, etc.")
(ii) Period to which the scheme is applicable 3 business years (however, the initial period is 4 business years)
(iii) Impact of the Company's shares under the scheme on the number of shares issued and outstanding Method of calculation and upper limit of the Company's common shares granted to Directors, etc. (including the portion paid in cash in lieu of the Company's common shares)
  • 62,500 shares per business year and 187,500 shares for the applicable period (3 business years) (However, 250,000 shares for the 4 years of the initial applicable period)
  • Of the above upper limit on the number of shares, the upper limit on the number of the Company's common shares allotted when Directors, etc. actually make contributions in kind of their monetary remuneration claims is 175,000, which is 70% of the upper limit on the number of shares for the initial applicable period. In addition, the limit is 131,250 shares for each subsequent applicable period (3 business years).
  • The percentage of the upper limit of shares granted to Directors, etc. each business year (62,500 shares) in relation to the number of shares issued and outstanding (as of March 31, 2018; after deducting treasury shares) is 0.02%
(iv) Details of performance linkage Linked by a performance-linked coefficient determined according to the level of achievement of company performance indicators such as consolidated operating income each business year.
(v) Timing of share grants Upon retirement as Director, etc. (including retirement due to death)

As of the time of introduction of the scheme, whether or not to grant the company's common shares and cash, and the number of shares and amount of cash to be granted have not been determined because the company's common shares and cash will be granted according to the level of achievement of company performance indicators under the scheme.

* Please see the Annual Securities Report (for the year Ended March 2018) for details.

Disclosure

SG Holdings discloses the total amount of remuneration paid to Directors as a group, to Audit & Supervisory Board Members as a group and to outside officers as a group in its securities report and separately discloses the amount of remuneration of any individual whose total remuneration is 100 million yen or greater.

a. Total amount of remuneration, etc. by officer category of the submitting company, total amount by type of remuneration, etc. and number of officers subject to remuneration

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Officer category Total amount of remuneration, etc.
(millions of yen)
Total amount of remuneration, etc. by type (millions of yen) Number of officers subject to remuneration
Base remuneration Stock options Bonuses Retirement payments
Directors (excluding Outside Directors) 504 504 - - - 8
Audit & Supervisory Board Members (excluding Outside Audit & Supervisory Board Members) 16 16 - - - 1
Outside officers 63 63 - - - 5
  1. (Notes)
    1. 1.One of the Directors has received separate remuneration from Sagawa Express Co., Ltd., which is a subsidiary of the Company. The total amount of remuneration, etc. received from said subsidiary is 17 million yen.
    2. 2.Four of the Directors mentioned above have been paid a total of 8 million yen in company housing expenses in addition to the above amounts in accordance with the Company's Director Regulations.

b. Total amount of remuneration, etc. for persons whose total amount of remuneration is 100 million yen or more

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Name Officer category Company category Total amount of remuneration, etc. by type (millions of yen) Total amount of remuneration, etc. (millions of yen)
Base remuneration Stock options Bonuses Retirement payments
Eiichi Kuriwada Director Submitting company 216 - - - 216

As of March 31, 2018

Stock

Stock exchange Tokyo Stock Exchange, First Section
Date listed December 13, 2017
Securities code 9143
Fiscal year From April 1 to March 31 of the following year
General Meeting of Shareholders Within three months of the close of the fiscal year
Shareholder record date March 31
Record date for payment of dividends from surplus March 31 or September 30
Trading unit 100 shares
Our Thinking in Regard to the Acquisition and Holding of Shares (Cross-shareholding, etc.)

We hold shares of companies we do business with if we judge doing so necessary or reasonable from the perspective of the maintenance and development of midto long-term business relationships, the creation of synergies or other purposes. In exercising the voting rights of the shares held, we judge each proposal on its merits taking into consideration the rationale for our holding the stock and potential contribution to the increase of the company's value and its shareholders' profits.

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