Annual Securities Report

Annual Securities Report

(Report based on Article 24, Paragraph 1 of the Financial Instruments and Exchange Act of Japan)

(The 40th Fiscal Year)

From November 1, 2019 to October 31, 2020

H.I.S. Co., Ltd.

4-1-1 Toranomon, Minato-ku, Tokyo

(E04358)

Table of Contents

Page

Cover

Part I Information on the Company ................................................................................................................................... 1

I. Overview of the Company ............................................................................................................................................ 1

1. Key Financial Data and Trends .............................................................................................................................. 1

2. Corporate History ................................................................................................................................................... 3

3. Description of Business .......................................................................................................................................... 6

4. Information on Subsidiaries and Associates ........................................................................................................... 9

5. Employees ............................................................................................................................................................ 15

II. Business Overview .................................................................................................................................................... 16

1. Management Policy, Management Environment, and Issues to be Addressed, etc . ............................................. 16

2. Business and Other Risks ..................................................................................................................................... 17

3. Analyses of Financial Position, Business Results, and Cash Flows ..................................................................... 19

4. Material Business Agreements, etc ....................................................................................................................... 26

5. Research and Development Activities .................................................................................................................. 26

III. Equipment and Facilities .......................................................................................................................................... 27

1. Capital Expenditures ............................................................................................................................................. 27

2. Principal Facilities ................................................................................................................................................ 28

3. Plans for Additions and Disposals of Facilities .................................................................................................... 29

IV. Information on the Company .................................................................................................................................... 30

1. Information on the Company's Shares................................................................................................................. 30

(1) Total number of shares, etc . ............................................................................................................................ 30

(2) Information on share acquisition rights, etc . ................................................................................................... 30

(3) Information on moving strike convertible bonds, etc ...................................................................................... 39

(4) Changes in the total number of issued shares, share capital, etc . .................................................................... 39

(5) Composition of issued shares by type of shareholders .................................................................................... 40

(6) Major shareholders .......................................................................................................................................... 40

(7) Information on voting rights ........................................................................................................................... 41

(8) Details of stock ownership plan for officers and employees ........................................................................... 41

2. Information on Acquisition of Treasury Shares, etc . ............................................................................................ 42

3. Dividend Policy .................................................................................................................................................... 42

4. Corporate Governance, etc . .................................................................................................................................. 44

(1) Overview of corporate governance ................................................................................................................. 44

(2) Directors and other officers ............................................................................................................................. 47

(3) Status of audits ................................................................................................................................................ 52

(4) Executive remuneration, etc ............................................................................................................................ 57

(5) Information on shareholdings ......................................................................................................................... 59

V. Financial Information ................................................................................................................................................ 60

1. Consolidated Financial Statements, etc . ............................................................................................................... 61

(1) Consolidated Financial Statements ................................................................................................................. 61

(2) Others ............................................................................................................................................................ 111

2. Non-consolidated Financial Statements, etc . ...................................................................................................... 112

(1) Non-consolidated Financial Statements ........................................................................................................ 112

(2) Major Assets and Liabilities ......................................................................................................................... 124

(3) Others ............................................................................................................................................................ 124

VI. Stock-related Administration for the Company ...................................................................................................... 125

VII. Reference Information on the Company ............................................................................................................... 126

1. Information on the Parent Company, etc. of the Company ................................................................................ 126

2. Other Reference Information .............................................................................................................................. 126

Part II Information on Guarantors, etc. for the Company .............................................................................................. 127 [Independent Auditor's Report]

Part I Information on the Company

I. Overview of the Company

1. Key Financial Data and Trends

(1) Consolidated financial data

(Notes)

• 1. Consumption taxes, etc. are not included in net sales.

• 2. The Company introduced the E-Ship® trust-type employee stock ownership incentive plan. In the consolidated financial statements, it records the shares held by the H.I.S. Employee Stock Ownership Association Dedicated Trust (the "Trust") as treasury shares. Accordingly, in calculating the amount of net assets per share, "the number of common stock held as treasury shares at fiscal year-end" is calculated by including the shares held by the Trust. In calculating earnings (loss) per share and diluted earnings per share, "average number of shares of common stock during the period" is calculated by including shares held by the Trust in the treasury shares.

• 3. Although there were dilutive shares in the 40th fiscal year, diluted earnings per share are not stated due to recording of a loss per share.

• 4. In the 40th fiscal year, return on equity and price-earnings ratio are not stated due to recording of a loss attributable to owners of parent.

(2) Non-consolidated financial data

(Notes)

• 1. Consumption taxes, etc. are not included in net sales.

• 2. The Company introduced the E-Ship® trust-type employee stock ownership incentive plan. In the non-consolidated financial

  statements, it records the shares held by the H.I.S. Employee Stock Ownership Association Dedicated Trust (the "Trust") as treasury shares. Accordingly, in calculating the amount of net assets per share, the "number of common stock held as treasury shares at fiscal year-end" is calculated by including the shares held by the Trust. In calculating earnings (loss) per share and diluted earnings per share, the "average number of shares of common stock during the period" is calculated by including the shares

  held by the Trust in the treasury shares.

• 3. Although there were dilutive shares in the 36th, 37th, and 40th fiscal years, diluted earnings per share are not stated due to recording of losses per share.

• 4. In the 36th, 37th, and 40th fiscal years, return on equity, price-earnings ratio, and dividend payout ratio are not stated due to recording of net losses.

• 5. The highest and lowest share prices are those on the First Section of the Tokyo Stock Exchange.

2. Corporate History

3. Description of Business

The H.I.S. Group (H.I.S. Co., Ltd. and associated companies; hereinafter, the "H.I.S. Group" or the "Group") comprises H.I.S. Co., Ltd. (hereinafter, the "Company"), 191 subsidiaries and 26 associates. The main businesses operated by the Group and the positioning of the Company and associated companies in these businesses are shown below.

From the consolidated fiscal year ended October 31, 2020, the name of the reportable segment previously presented as the Huis Ten Bosch Group was changed to the Theme Park Business. This is only a change in name and has no impact on the segment data. Further, the segment data for the consolidated fiscal year ended October 31, 2019 have been adjusted to reflect the name change.

The six business groupings of Travel Business, Theme Park Business, Hotel Business, Kyushu Sanko Group, Energy Business, and Other herebelow are consistent with the reportable segments stated in the "Notes to Consolidated Financial Statements" in "(1) Consolidated Financial Statements, 1. Consolidated Financial Statements, etc." under "V. Financial Information, Part I: Information on the Company."

(1) Travel Business

The H.I.S. Group businesses undertake domestic and overseas travel and other ancillary businesses.

[Associated Companies]

The H.I.S. Group owns and operates theme parks located in Sasebo, Nagasaki Prefecture and Gamagori, Aichi Prefecture.

[Associated Companies]

Huis Ten Bosch Co., Ltd.

Laguna Ten Bosch Co., Ltd.

and 11 other companies

(3) Hotel Business

The H.I.S. Group operates hotels and other ancillary businesses in Japan, Taiwan, the U.S., Indonesia, etc.

[Associated Companies]

(4) Kyushu Sanko Group

The Kyushu Sanko Group, whose holding company is Kyushu Sangyo Kotsu Holdings Co., Ltd., operates businesses including automobile transport, real estate leasing, etc.

[Associated Companies]

Kyushu Sangyo Kotsu Holdings Co., Ltd.

and 18 other companies

(5) Energy Business

The H.I.S. Group engages in retail electricity sales, the development of new electric power including renewable energy, and other ancillary businesses.

[Associated Companies]

H.I.S. Energy Holdings Co., Ltd. HTB ENERGY CO., LTD.

H.I.S. SUPER Power Co., Ltd. and one other company

(6) Other businesses

H.S. Insurance Co., Ltd. handles property and casualty insurance, mainly for overseas travel.

SYS Inc. develops and manages guest room reservation systems, and operates other ancillary businesses.

[Associated Companies]

H.S. Insurance Co., Ltd.

SYS Inc.

and 19 other companies

The following table illustrates the H.I.S. Group's operating relationships.

Customers and agencies

Sells various travel products such as overseas and domestic air tickets, hotels, railways, and cruises, and provides ancillary products and services

• - Provides arrangements for overseas and domestic land travel

• - Provides agency services for property and casualty insurance

Consolidated subisidiaries Non-consolidated subsidiaries Equity method associates Non-equity method associates

148 (*)

43 (unmarked)

7 (+)

19 (unmarked)

Total

217

Subsidiaries & AssociatesTravel Business

• * HAWAII HIS CORPORATION

• * H.I.S. INTERNATIONAL TOURS (NY) INC.

• * H.I.S. GUAM, INC.

• * H.I.S. CANADA INC.

• * H.I.S. - MERIT TRAVEL INC.

• * H.I.S. SAIPAN, INC.

• * JONVIEW CANADA INC.

• * H.I.S. - RED LABEL VACATIONS INC.

• * H.I.S. KOREA CO., LTD.

• * H.I.S. Tours Co., Ltd.

• * PT. HARUM INDAH SARI TOURS & TRAVEL

• * HIS (HONG KONG) COMPANY LIMITED + H.I.S. TAIWAN COMPANY LIMITED

* H.I.S. INTERNATIONAL TRAVEL PTE LTD

• * H.I.S. AUSTRALIA PTY. LTD.

• * H.I.S. EUROPE LIMITED

• * H.I.S. INTERNATIONAL TOURS FRANCE SAS

• * H.I.S. Deutschland Touristik GmbH

• * H.I.S. EUROPE ITALY S.R.L.

• * HIS ULUSLARARASI TURIZM SEYAHAT ACENTASI LIMITED SIRKETI

• * GROUP MIKI HOLDINGS LIMITED

• * Orion Tour Co., Ltd.

• * QUALITA Co., Ltd.

• * Ohshu Express Ltd.

• * TOUR WAVE CO., LTD

• * Japan Holiday Travel Co., Ltd.

• * Cruise Planet Co., Ltd.

  and 116 other companies [84 (*); 1 (+); 31 (unmarked)]

Theme Park Business

* Huis Ten Bosch Co., Ltd.

* Laguna Ten Bosch Co., Ltd.

and 11 other companies [2 (*); 9 (unmarked)]

Hotel Business

• * H.I.S. Hotel Holdings Co., Ltd.

• * The Watermark Hotel Nagasaki Co., Ltd.

• * GUAM REEF HOTEL, INC.

• * PT. HARUM INDAH SARI INDONESIA

* Green World Hotels Co., Ltd.

* HIS DORAK TURIZM OTEL YATIRIMLARI VE DIS TICARET ANONIM SIRKETI

and 11 other companies [5 (*); 6 (unmarked)]

* Kyushu Sangyo Kotsu Holdings Co., Ltd.

Kyushu Sanko Group and 18 other companies [14 (*); 4 (unmarked)]

Energy Business

* H.I.S. Energy Holdings Co., Ltd.

* HTB ENERGY CO., LTD.

* H.I.S. SUPER Power Co., Ltd.

and 1 other company [1 (*)]

* H.S. Insurance Co., Ltd.

Other

* SYS Inc.

and 19 other companies [2 (*); 5 (+); 12 (unmarked)]

4. Information on Subsidiaries and Associates

(1) Consolidated Subsidiaries

H.I.S. Energy Holdings Co. Ltd.

HTB ENERGY CO., LTD. (Note 2)

H.I.S. SUPER Power Co., Ltd.

(Note 2)

H.S. Insurance Co., Ltd. (Note 3)

LocationMinato-ku, TokyoChuo-ku, Fukuoka, Fukuoka PrefectureMinato-ku, TokyoMinato-ku, Tokyo

And 104 other companies

382 million yen

95 million yen

50 million yen

1,612 million yen

Energy BusinessEnergy BusinessEnergy BusinessOther

Ownership of voting rights (%)

100.0 Three concurrent directors at said company

100.0 (100.0)

100.0 (100.0)

100.0

91.4

1) Concurrent Director

Three concurrent directors at said company

2) Capital Assistance

The Company provides paymentguarantees (up to 2,130 million yen) against notes and accounts payable - trade.

In addition, the Company loans 3,800 million yen in working capital

1) Concurrent Director

Three concurrent directors at said company

2) Business Transaction Purchasing and sales of travel products between the companies 3) Capital Assistance

The Company provides payment guarantees (up to 720 million yen) against notes and accounts payable - trade.

In addition, the Company loans 7,546 million yen in capital expenditure funding

1) Business Transaction The Company is a sales representative for travel insurance, etc.

1) Concurrent Director

Two concurrent directors at said company

2) Business Transaction The Company outsources development of accommodation reservation systems, etc.

3) Capital Assistance

The Company loans 1,356 million yen in working capital

(Notes)

• 1. The "Main business" column indicates segment names stated in "Segment information, etc."

  Relationship

  1) Concurrent Director

• 2. Figures in parentheses in the "Ownership of voting rights" column represent percentage of voting rights held indirectly by the Company.

• 3. These companies fall under the category of specified subsidiaries.

• 4. The company files an Annual Securities Report (Yukashoken Hokokusho).

(2) Entities accounted for using equity-method

(Note) The "Main business" column indicates segment names stated in "Segment information, etc."

5. Employees

(1) Consolidated Companies

As of October 31, 2020

(Notes)

• 1. "Number of employees" represents full-time employees only. An additional figure for the average number of temporary staff employed during the fiscal year is provided in square brackets.

• 2. The employees in "Corporate-wide (shared)" are those belonging to administrative departments and thus do not fall under any business segment.

(2) The Filing Company

As of October 31, 2020

(Notes)

• 1. "Number of employees" represents full-time employees only. An additional figure for the average number of temporary staff employed during the fiscal year is provided in square brackets.

• 2. Average annual salary includes bonuses and extra wages.

• 3. The employees in "Corporate-wide (shared)" are those belonging to administrative departments and thus do not fall under any business segment.

(3) Labor Unions

There are no applicable matters to report.

II. Business Overview

1. Management Policy, Management Environment, and Issues to be Addressed, etc.

• (1) Management Policy

  Guided by its corporate philosophy ("In accordance with the laws of the universe, we contribute to the creative development of humanity and world peace"), the H.I.S. Group aims to build new business models that allow it to contribute to world peace not only through travel but through a wide range of other businesses, as a company that consistently pursues change and advancement.

• (2) Medium- to Long-Term Corporate Management Strategy and Key Performance Indicators

  The H.I.S. Group actively undertakes challenges not only in its existing business fields, but also by continually pursuing fresh opportunities in new business domains. It aims to strengthen its earnings structure and further enhance its corporate value by pivoting away from a management organization centered on the existing Travel Business and by reinforcing and transforming its business portfolio. The Group believes sustainable business growth is essential to achieve this, and it focuses on growth in sales and operating profit in all its businesses. In the foreseeable future, it targets a shareholders' equity ratio of 20% or more as an indicator of financial stability, and ROE of 10% or more as an indicator of profitability. The Group is considering formulating a three-year medium-term management plan (starting from the consolidated fiscal year ending in either October 31, 2021 or October 31, 2022) that will provide more details, including about key performance indicators. However, the formulation of such a plan will be contingent on the Group's ability to ascertain changes in the business environment to a certain extent.

• (3) Issues to be Addressed

As for the operating environment going forward, the H.I.S. Group expects concerns over economic deterioration to linger as the COVID-19 pandemic continues to spread around the world. Because it is unclear when the pandemic will subside, the Group expects conditions to remain murky, making it difficult to project a recovery in economic activity in Japan and overseas. Amid such an environment, the Group will have to address the following issues.

• 1) Implement measures in response to COVID-19 pandemic

  The H.I.S. Group has suffered heavily from the COVID-19 pandemic, and its financial foundation has been eroded by the recent deterioration in earnings. Consequently, it regards the implementation of measures to mitigate the impact of the pandemic as an important issue, and will make this a top priority.

  〇 Increase financial soundness

  The H.I.S. Group regards the expansion of shareholders' equity and the establishment of a system that can generate free cash flow as pressing issues. While maintaining short-term liquidity in hand through measures such as raising funds and liquidizing accumulated asset holdings based on the circumstances, the Group will reinforce its financial structure by thoroughly reducing costs. Until the outlook on the operating environment improves, it will control cash outflows through initiatives such as adopting a cautious stance on investment plans, and accordingly aim to improve its cash position.

  〇 Management that takes into account life with and after the COVID-19 pandemic

  The H.I.S. Group will undertake management predicated on a new cost structure in response to the COVID-19 pandemic.

  It aims to achieve a rapid recovery in earnings by operating businesses that leverage its uniqueness and competitive edge.

  In addition, it will decisively pursue opportunities in the post-COVID world, including those stemming from potential industry realignment, and further accelerate its growth.

• 2) Adapt to various changes

  Against the backdrop of dramatic changes in society and business driven by technological innovation, the H.I.S. Group will seek out new opportunities without being constrained by preconceptions. The Group believes the ability to continuously adapt to various changes is what enables sustainable growth. It realizes improving productivity and profitability in various business spheres will be the challenge in the foreseeable future, and aims to promote digital transformation (i.e., the adoption of digital technologies to optimize business operations) to achieve solutions, overhaul its business structure to achieve greater efficiency, and establish a new business model.

• 3) Pursuit of customer satisfaction and provision of safe and secure products

  To become a global company trusted worldwide and supported by the customers, H.I.S. believes it is necessary to provide comfortable, safe, and secure services. Through optimized use of its global network and infrastructure, the Group intends to further provide products, services, and information that are safe, secure, and high-quality, by creating new experience-driven value and offering expanded services. An effort will also be made to please and gain the support of customers throughout the world by working to improve the level of Group's services in Japan and overseas.

2. Business and Other Risks

Risks that could have an impact on the business performance, share price, and financial position of the H.I.S. Group are outlined below. Being mindful of the possibility that these risks may occur, the Group will make every effort to avoid such risks and take appropriate action in the event of their occurrence.

All matters relating to the future in the sections below are based on the current views of the H.I.S. Group as of the date of filing this Securities Report in Japanese (January 28, 2021) and business risks are not limited to those discussed below.

1) Risk related to impact of COVID-19 pandemic

The H.I.S. Group analyzes the impact of the COVID-19 pandemic on its reportable segments as follows.

Segment

Main categories

Current conditions and outlook

Overseas travel

•  The business has suffered heavily as factors such as restrictions on emigration/immigration in various countries have resulted in continued lackluster demand.

  Inbound travel to Japan Overseas inbound travel

  Overseas outbound travel

•  The business is affected by factors such as restrictions on emigration/immigration in various countries. Despite signs of a partial relaxation of such restrictions, the Company expects demand will not recover to the 2019 level until 2022.

Travel Business

Domestic travel

•  Demand recovered gradually since the launch of the "Go To Travel" campaign, and at one point surpassed the 2019 level. However, this was followed by a sharp cooling due to the impact of the second state of emergency declared by the Japanese government and related factors.

•  The Company expects demand to rebound when the state of emergency is lifted and the "Go To Travel" campaign resumes (is extended).

  Theme Park Business

  Huis Ten Bosch Laguna Ten Bosch

•  Demand recovered since the launch of the "Go To Travel" campaign, and at one point surpassed the 2019 level. However, the number of visitors fell sharply after the Japanese government declared a second state of emergency.

•  The Company expects demand to rebound when the state of emergency is lifted and the "Go To Travel" campaign resumes (is extended).

•  Demand recovered steadily since the launch of the "Go To Travel" campaign, led by leisure demand. However, the number of hotel guests declined sharply due to the impact of the second state of emergency declared by the Japanese government and related factors.

•  The Company expects demand to rebound when the state of emergency is lifted and the "Go To Travel" campaign resumes (is extended).

•  The business may lose opportunities depending on the government's policy on holding the Tokyo Olympics.

•  The business has suffered heavily as factors such as restrictions on emigration/immigration in various countries have resulted in continued lackluster demand.

•  The business is highly dependent on external demand, and is affected by emigration/immigration restrictions in various countries. The Company expects demand will not recover to the 2019 level until 2022.

•  The number of bus passengers at one point recovered steadily from a temporary decline caused by voluntary restraint in travel. However, the number subsequently fell due to the impact of the second state of emergency declared by the Japanese government and related factors.

•  The Company expects demand to recover to the 2019 level in the second half of 2021.

  Retail electricity sales

•  In the wake of the first declaration of a state of emergency, the business saw a temporary decline in demand from major customers and a slowdown in sales activities. However, power demand subsequently recovered.

  Energy Business

•  Electricity prices on the Japan Electric Power Exchange have continued to surge to unprecedented levels since mid-December 2020, so cost rates may sharply deteriorate.

•  The first state of emergency declaration led to delays in the construction of power plants, but power generation started in November 2020.

  Power generation

•  Production of power generation fuel has stagnated due to sluggish economic activity. This may drive increases in fuel prices due to a depletion of inventories.

Based on a capital plan that assumes the impact of the COVID-19 pandemic will drag on, the H.I.S. Group is reducing fixed costs, deliberating with financial institutions, and building a structure to secure business funding.

By consistently undertaking related measures, the Group deems that there should be no uncertainty about its ability to continue as a going concern, and therefore does not present "Notes regarding Assumption of a Going Concern."

2) Risks related to travel demand and industry trends

The Travel Business accounts for 83.4% of Group net sales, and 59.4% of net sales are concentrated in Japan. Consequently, changes in the environment surrounding the Travel Business in Japan could affect the Group's financial position and operating results. Further, although the Group works to ensure sustainable competitiveness, its businesses face intense competition from other companies, prompted by such factors as business model changes of partner companies and market entries by companies from other industries. Future developments in the competitive landscape could therefore affect the Group's financial position and operating results.

3) Impact of natural and man-made disasters

The environment surrounding the Group's businesses is vulnerable to disruption of tourism and related infrastructure caused by natural disasters (such as typhoons, tsunamis, and earthquakes), outbreak of contagious diseases, airplane crashes, and political and social instability in various countries or regions caused by terrorist attacks, wars, and other factors. The occurrence of any of these could affect the Group's financial position and operating results.

4) Risks related to information leaks and system management

The Group makes use of computer systems for operations including reservation arrangements, and it accordingly manages personal information of a large number of its customers. It makes every effort to ensure sufficient security when building and operating such systems, but the occurrence of failures in communication networks/programs, problems caused by computer viruses, and other factors may lead to serious disruptions such as system failures, information leaks, and data falsification/alteration, which could gravely affect Group operations. In addition, depending on the scale of a system failure, services to customers may be interrupted or repair costs may increase, which could affect the Group's financial position, operating results, and public trust.

5) Risks related to provision of products and services

The Group provides restaurant recommendations under its travel products. It also operates restaurants in its other businesses, and compiles manuals for quality control standards and takes sufficient caution to ensure food safety. However, the occurrence of health problems such as food poisoning could lead to a loss of trust or other problems, affecting the Group's financial position and operating results.

6) Exchange rate and crude oil price fluctuations

The Group conducts business in foreign currencies, which results in income and expenses as well as assets and liabilities in foreign currencies. The Group hedges risk through forward exchange contracts and other instruments to mitigate the impact of exchange rate fluctuations. However, sharp fluctuations in exchange rates could affect the Group's financial position and operating results. Further, the Group converts figures in the financial statements of consolidated overseas subsidiaries into Japanese yen when preparing the consolidated financial statements, and changes in exchange rates could thus affect the Group's financial position and operating results. In addition, the Group adds a fuel surcharge to overseas travel fares in its Travel Business to reflect changes in crude oil prices, and a notable rise in this surcharge may dampen overall travel demand. Consequently, sharp changes in crude oil prices could affect the Group's financial position and operating results.

7) Fluctuations in the valuation of owned assets including securities

The Group holds both listed and unlisted stocks, bonds, and other instruments. Hence, sales or valuation losses could occur from fluctuations in stock and bond markets in the case of securities with determinable fair market value, and from changes in the financial status of investee companies in the case of securities without determinable fair market value, and the Group's financial position and operating results could be affected as a result.

• 8) Impairment of fixed assets

  The H.I.S. Group records property, plant and equipment, intangible assets, stocks, goodwill, and other items arising from investment activities or acquisitions in Japan or abroad as assets on its consolidated balance sheet, and amortizes these over reasonable periods during which future synergies from business value and business integration are expected to manifest. However, if the Group determines that expected effects cannot be obtained, it books impairment losses for the relevant assets, and this could affect the Group's financial position and operating results.

• 9) Compliance

  When conducting business activities, the Group is subject to various laws, regulations, business customs, and social norms in Japan and all countries where its sales offices are located, of which it strives to be in full compliance. However, there is a possibility that conditions considered to be in violation of compliance may arise due to the introduction of unexpected and new regulations, changes in policies of the enforcement authorities, or other causes such as differences in understanding and interpretation. The Group's financial position and operating results could be adversely affected if conditions that are in violation of compliance arise, resulting in expenses related to legal procedures and damage to the H.I.S. brand image.

3. Analyses of Financial Position, Business Results, and Cash Flows

The following is an overview, management perspective, analysis, and examination of the Company's financial position, business results, and cash flows in the consolidated fiscal year ended October 31, 2020.

(1) Business Results

In the consolidated fiscal year ended October 31, 2020, the operating environment remained challenging. Despite signs of a recovery in some areas, economic activity stagnated as the COVID-19 pandemic caused sharp declines in corporate earnings and a deterioration in employment conditions.

In this environment, the H.I.S. Group worked to thoroughly reduce costs through measures such as taking maximal advantage of government subsidies in various countries, and overhauled its organization while promoting work style reform in response to the pandemic. Guided by its corporate philosophy ("In accordance with the laws of the universe, we contribute to the creative development of humanity and world peace."), the Group aimed to build new business models that can help it contribute to world peace through travel and a wide range of other businesses as a company that consistently pursues change and advancement.

In the consolidated fiscal year ended October 31, 2020, business performance was as follows.

Net sales decrease 378.2 billion yen or 46.8% year on year to 430.2 billion yen. The decline was mainly attributable to sharply declined sales in the Travel Business, which was affected substantially by the COVID-19 pandemic.

Selling, general and administrative expenses decrease 25.5 billion yen or 20.2% year on year to 101.0 billion yen, mainly due to a reduction in personnel expenses, advertising expenses, rent, and other costs in response to the pandemic.

On the profit side, the Company reported an operating loss of 31.1 billion yen (versus an operating profit of 17.5 billion yen in the previous fiscal year) due to a sharp decline in gross profit despite efforts to optimize the allocation of management resources and reduce costs. It posted a loss before income taxes of 33.1 billion yen (versus a profit before income taxes of 20.3 billion yen in the previous fiscal year) as an extraordinary income of 11.0 billion yen for employment adjustment subsidies and other factors was offset by an extraordinary loss of 12.8 billion yen for losses stemming from the temporary suspension of operations and impairment losses on non-current assets. The Company reported a loss attributable to owners of parent of 25.0 billion yen (versus a profit attributable to owners of parent of 12.2 billion yen in the previous fiscal year), reflecting a decline in income taxes payable of 9.9 billion yen year on year and the booking of a 4.6 billion yen loss attributable to non-controlling interests.

The earnings by segment in the consolidated fiscal year ended October 31, 2020 are shown below. The name of the reportable segment previously presented as the Huis Ten Bosch Group was changed to the Theme Park Business from the fiscal year under review. This is only a change in name and has no impact on the segment data. For more information, see the "Segment information, etc." section in "Notes to Consolidated Financial Statements" under "(1) Consolidated Financial Statements, 1. Consolidated Financial Statements, etc., V. Financial Information." Figures in each segment reflect the amounts before offsetting and eliminating inter-segment transactions.

[Travel Business]

[Theme Park Business]

In the consolidated fiscal year ended October 31, 2020, the Theme Park Business was heavily affected by the suspension of operations at theme parks caused by the COVID-19 pandemic, and from voluntary restraint in outdoor activities during the state of emergency declared by the Japanese government, resulting in challenging conditions. After the state of emergency was lifted, conditions improved but only gradually as the effects of the "Go To Travel" campaign and other measures proved limited. At Huis Ten Bosch, the core theme park of the business, the Company undertook initiatives such as offering exclusive visitor plans for Nagasaki Prefecture residents in collaboration with local municipalities, while implementing measures to prevent infections. However, the park was closed for a total of 56 days, and many popular events had to be cancelled, which had an impact. As a result, the number of visitors to Huis Ten Bosch in the fiscal year under review declined a sharp 45.6% year on year to 1,386,000, net sales decrease 51.3% year on year to 13.6 billion yen, and the business posted an operating loss of 3.3 billion yen (versus operating profit of 5.0 billion yen in the previous fiscal year).

[Hotel Business]

In the consolidated fiscal year ended October 31, 2020, the COVID-19 pandemic spread around the world, and the Hotel Business was heavily affected as many countries continued to implement measures such as restrictions on immigration and travel, giving rise to challenging conditions. At the Henn na Hotel and other domestic hotel chains, the Company provided COVID-19 infection risk mitigation packages, and worked to strengthen measures to attract guests by taking advantage of the

"Go To Travel" campaign, but the recovery was limited. Overseas hotels, highly dependent on foreign demand, were hit hard by the pandemic as continued difficulties in international travel drove a decline in the number of guests. As a result, net sales declined 31.5% year on year to 8.6 billion yen, and the business posted an operating loss of 3.5 billion yen (versus a 0.2 billion yen loss in the previous fiscal year). EBITDA was also negative.

[Kyushu Sanko Group]

(Energy Business)

In the consolidated fiscal year ended October 31, 2020, electricity demand decrease visibly in April-June amid economic stagnation and voluntary restraint in going out driven by the COVID-19 pandemic. Although the decline was modest relative to the drop in GDP, it had a substantial impact on the electricity market (source: MPX). However, a downturn in crude oil prices contributed to a stable procurement environment. HTB ENERGY CO., LTD., which operates the retail electricity sales business, sharply increased promotion and other advertising activities ahead of the busy summer period, and worked to expand the number of contracts. As a result, net sales rose 29.0% year on year to 26.3 billion yen, but operating profit decrease 83.2% year on year to 0.1 billion yen.

(2) Cash Flows

The amount of cash and cash equivalents (hereinafter, "funds") at the end of the consolidated fiscal year ended October 31, 2020 was 80,445 million yen, a decrease of 112,096 million yen compared to the end of the previous fiscal year. Operating activities decreased funds by 57,718 million yen, investing activities decreased funds by 47,901 million yen, and financing activities decreased funds by 5,602 million yen.

The status of each cash flow item is presented in detail below.

[Cash flows from operating activities]

Funds from operating activities saw a decrease of 57,718 million yen in the fiscal year under review. This mainly reflected a decrease in funds from a decline in travel advances received (77,912 million yen) and the booking of a loss before income taxes (33,101 million yen), and an increase in funds from a decline in travel advance payments (44,113 million yen) and depreciation (12,880 million yen) as a non-cash item.

In the previous fiscal year, funds saw an increase of 39,344 million yen. This mainly reflected an increase in funds from the booking of 20,352 million yen in profit before income taxes, depreciation (8,850 million yen) as a non-cash item, and an increase in travel advances received (5,438 million yen).

As a result, in the fiscal year under review, cash flows from operating activities decreased 97,062 million yen compared to the previous fiscal year.

[Cash flows from investing activities]

Funds from investing activities saw a decrease of 47,901 million yen in the fiscal year under review. This was mainly due to a decrease in funds from purchases of property, plant and equipment and intangible assets (66,565 million yen) and payments into time deposits (18,941 million yen), and to an increase in funds from proceeds from withdrawal of time deposits (30,214 million yen), a gain on sales of investment securities (6,299 million yen), and proceeds from sales of property, plant and equipment and intangible assets (1,862 million yen).

In the previous fiscal year, funds saw a decrease of 52,116 million yen. This was mainly because purchases of property, plant and equipment and intangible assets (75,885 million yen), and purchases of investment securities (6,987 million yen) exceeded revenue from redevelopment projects (27,658 million yen).

As a result, in the fiscal year under review, cash flows from investing activities increased 4,214 million yen compared to the previous fiscal year.

[Cash flows from financing activities]

Funds from financing activities saw a decrease of 5,602 million yen in the fiscal year under review. This mainly reflected a decrease in funds from repayments of long- and short-term loans payable (86,777 million yen) and cash dividends paid (1.9 billion yen), and an increase in funds from proceeds from long- and short-term loans payable (75,126 million yen) and proceeds from a share issuance (7,728 million yen).

In the previous fiscal year, funds saw an increase of 15,362 million yen. This mainly reflected an increase in funds from proceeds from long- and short-term loans payable (218,391 million yen), and a decrease in funds from repayments of long- and short-term loans payable (169,737 million yen), and redemption of corporate and convertible bonds (30.0 billion yen).

As result, in the fiscal year under review, cash flows from financing activities declined 20,965 million yen compared to the previous fiscal year.

(3) Production, Orders Received, and Sales

1) Purchasing

Purchasing by segment during the consolidated fiscal year ended October 31, 2020 is as follows.

(Notes)

• 1. Intersegment transactions have been eliminated.

• 2. The businesses of the H.I.S. Group (H.I.S. Co., Ltd., and consolidated subsidiaries, hereinafter the same) are not operated based on production; as such, information on purchasing is stated in the place of production overview.

• 3. Figures do not include consumption taxes.

• 2) Orders received

  Information on orders received has been omitted as the H.I.S. Group's businesses are not operated based on orders received.

• 3) Sales

  Sales by segment during the consolidated fiscal year ended October 31, 2020 are as follows.

  Segment name	Year ended October 31, 2020 [November 1, 2019 to October 31, 2020] (millions of yen)	Versus previous fiscal year (%)
  Travel Business Theme Park Business Hotel Business Kyushu Sanko Group Energy Business	358,905 12,938 8,142 19,174 26,279	49.8 49.1 69.3 86.3 129.2
  Reportable segment total	425,439	53.1
  Other	4,844	65.8
  Total	430,284	53.2

  (Notes)

  • 1. Intersegment transactions have been eliminated.

  • 2. The H.I.S. Group calculates total transaction value (selling price) as net sales.

  • 3. Figures do not include consumption taxes.

(4) Analyses of Consolidated Business Results, Financial Position, and Cash Flows

Analysis of financial conditions, operating results, and cash flows during the consolidated fiscal year ended October 31, 2020 are as follows. All matters relating to the future in the sections below are based on the current views of the Group as of the end of the fiscal year under review.

1) Analysis of financial position

(i) Current assets

The balance of current assets at the end of the fiscal year under review was 139,223 million yen, a decrease of 209,056 million yen from the end of previous fiscal year.

This was mainly due to declines in cash and deposits (down 123,941 million yen from the end of the previous fiscal year), travel advance payments (down 44,848 million yen from the end of the previous fiscal year), and notes and accounts receivable - trade (down 29,823 million yen).

(ii) Non-current assets

The balance of non-current assets at the end of the fiscal year under review was 274,954 million yen, an increase of 46,002 million yen from the end of previous fiscal year.

This mainly reflected an increase in property, plant and equipment (up 55,112 million yen from the end of the previous fiscal year), and a decline in investment securities (down 5,676 million yen).

(iii) Current liabilities

The balance of current liabilities at the end of the fiscal year under review was 90,833 million yen, a decrease of 140,738 million yen from the end of previous fiscal year.

This was mainly due to declines in travel advances received (down 78,738 million yen from the end of the previous fiscal year), operating accounts payable (down 29,053 million yen), and accounts payable - other (down 17,297 million yen).

(iv) Non-current liabilities

The balance of non-current liabilities at the end of the fiscal year under review was 225,349 million yen, an increase of 3,430 million yen from the end of previous fiscal year.

This was mainly due to an increase in long-term loans payable (up 3,202 million yen from the end of the previous fiscal year).

(v) Net assets

The balance of net assets at the end of the fiscal year under review was 98,421 million yen, a decrease of 25,487 million yen from the end of previous fiscal year.

This mainly reflected decreases in retained earnings resulting from the booking of a loss attributable to owners of parent (down 25,037 million yen from the end of the previous fiscal year), foreign currency translation adjustments (down 3,531 million yen), and non-controlling interests (down 2,841 million yen), and an increase in share capital and capital surplus from a third-party allotment of new shares (up 8.0 billion yen).

2) Analysis of operating results

(i) Net sales

In the consolidated fiscal year ended October 31, 2020, net sales were 430,284 million yen, a decrease of 378,226 million yen (down 46.8%) from the previous fiscal year. By reportable segment, Travel Business net sales were 359,631 million yen (down 50.2%), Theme Park Business net sales were 13,684 million yen (down 51.3%), Hotel Business net sales were 8,685 million yen (down 31.5%), Kyushu Sanko Group net sales were 19,177 million yen (down 13.7%), and Energy Business net sales were 26,393 million yen (up 29.0%).

From the fiscal year under review, the name of the reportable segment previously presented as the Huis Ten Bosch Group was changed to the Theme Park Business. This is only a change in name and has no impact on the segment data. For more information, see the "Segment information, etc." section in "Notes to Consolidated Financial Statements" under "(1) Consolidated Financial Statements, 1. Consolidated Financial Statements, etc., V. Financial Information." Figures in each segment reflect the amounts before offsetting and eliminating inter-segment transactions.

(ii) Operating expenses

Operating expenses in the fiscal year under review were 461,413 million yen, a decline of 329,556 million yen (down 41.7%) from the previous fiscal year.

Within operating expenses, cost of sales was 360,387 million yen, a decline of 303,988 million yen (down 45.8%) from the - 24 -

previous fiscal year.

Selling, general and administrative expenses were 101,026 million yen, a decline of 25,567 million yen (down 20.2%) from the previous fiscal year. The ratio of selling, general and administrative expenses to sales rose 7.8 points compared to the previous fiscal year, to 23.5%.

• (iii) Operating profit or loss

  The Company reported an operating loss of 31,129 million yen in the fiscal year under review (versus an operating profit of 17,540 million yen in the previous fiscal year), a decline of 48,670 million yen from the previous fiscal year.

• (iv) Ordinary profit or loss

  The Company reported an ordinary loss of 31,283 million yen in the fiscal year under review (versus an ordinary profit of 17,089 million yen in the previous fiscal year), a decline of 48,373 million yen from the previous fiscal year.

  Main non-operating income included interest income (1,269 million yen) and subsidy income (547 million yen), and non-operating expenses included interest expenses (1,094 million yen) and foreign exchange losses (321 million yen).

• (v) Profit or loss attributable to owners of parent

  The Company reported a loss before income taxes of 33,101 million yen in the fiscal year under review (versus a profit before income taxes of 20,352 million yen in the previous fiscal year), a decline of 53,454 million yen from the previous fiscal year.

  Total income taxes in the fiscal year under review were -3,457 million yen (versus 6,477 million yen in the previous year), a decline of 9,935 million yen from the previous fiscal year.

  As a result, the Company reported a loss attributable to owners of parent of 25,037 million yen in the fiscal year under review (versus a profit attributable to owners of parent of 12,249 million yen in the previous year), a decline of 37,287 million yen from the previous fiscal year.

3) Analysis of cash flows and capital resources and liquidity of funds

For an analysis of cash flows, see the "(2) Cash Flows" section in "3. Analyses of Financial Position, Business Results, and Cash Flows; II. Business Overview; Part I Information on the Company."

The H.I.S. Group mainly needs funding for working capital, capital expenditures, and M&A. It secures funding for working capital through loans from financial institutions, and for capital expenditures and M&A through a combination of loans from financial institutions, the issuance of bonds and convertible bond-type bonds with share acquisition rights, and capital increases.

4) Significant accounting estimates and underlying assumptions

The consolidated financial statements of the Group are prepared in conformity with accounting standards that are generally accepted in Japan. In preparing the consolidated financial statements, estimates have been made in the calculation of allowance for doubtful accounts, provision for bonuses, and retirement benefit liability, etc. These estimates are rationally determined in consideration of past results; however, because of uncertainties characteristic of estimates, they may differ from the actual results. For more information, see the "Significant matters that serve as the basis for preparation of the consolidated financial statements" section of "Notes" under "(1) Consolidated Financial Statements, 1. Consolidated Financial Statements, etc., V. Financial Information."

For more information on the assumptions underlying significant accounting estimates in relation to the COVID-19 pandemic, see the "Additional Information" section of "Notes" under "(1) Consolidated Financial Statements, 1. Consolidated Financial Statements, etc., V. Financial Information."

• 4. Material Business Agreements, etc.

  The Company received approval to become a certified International Air Transport Association (IATA) passenger sales agent on December 31, 1990 (effective until cancellation of approval), and has entered into a passenger sales agency agreement.

  (Note) About the International Air Transport Association (IATA)

  Founded in 1945, this private institution is an affiliation mainly of airlines engaged in international flights. Headquarters are in Montreal, Canada, and Geneva, Switzerland. Determination of various measures associated with IATA certified agents and settlement of accounts is done in Geneva.

  The authority of IATA comprises determination of fares, conditions on transport, agency measures, and other flight-related rules as well as fare settlements.

  An approval as a certified IATA sales agent allows travel agents to issue international flight tickets in-house.

• 5. Research and Development Activities

There are no applicable matters to report.

III. Equipment and Facilities

1. Capital Expenditures

In the Travel business, the H.I.S. Group works to expand its sales network while saving labor and streamlining operations, and makes investments to improve profitability. In addition, the Group also focuses on investments in the Theme Park Business, the Hotel Business, the Kyushu Sanko Group, and the Energy Business, which are expected to grow over the long term.

The breakdown of capital expenditures during the consolidated fiscal year ended October 31, 2020 (based on the amounts recorded as property, plant and equipment, guarantee deposits, and hardware/software; figures do not include consumption tax, etc.) is as follows.

Amounts and purposes of major investments included in the above are as follows.

2. Principal Facilities

The Group's principal facilities are as follows.

(1) The Filing Company

(Notes)

• 1. Of the book value, "Other" comprises vehicles, works of art, and software, etc. The amounts do not include consumption tax, etc.

• 2. "Numbers of temporary employees" stated in parentheses refer to the annual average number of temporary workers, which is not included in the number of employees.

• 3. Of leased facilities, the leasing fees incurred during the fiscal year under review was 3,357 million yen.

(2) Domestic subsidiaries

(Notes)

• 1. Of the book value, "Other" comprises vehicles, vessels, machinery, equipment, structures, and software, etc. The amounts do not include consumption tax, etc.

• 2. "Numbers of temporary employees" stated in parentheses refer to the annual average number of temporary workers, which is not included in the number of employees.

• 3. Of leased facilities, leasing fees incurred by domestic subsidiaries during the fiscal year under review was 2,263 million yen.

• 4. Facility names of domestic subsidiaries are consistent with company names.

(3) Overseas subsidiaries

(Notes)

• 1. Of the book value, "Other" comprises machinery, equipment, and software, etc. The amounts do not include consumption tax, etc.

• 2. "Numbers of temporary employees" stated in parentheses refer to the annual average number of temporary workers, which is not included in the number of employees.

• 3. Of leased facilities, leasing fees incurred by overseas subsidiaries during the fiscal year under review was 1,910 million yen.

• 4. Facility names of overseas subsidiaries are consistent with company names.

3. Plan for Additions and Disposals of Facilities

The plan for addition of a major facility as of the end of the fiscal year ended October 31, 2020 is listed below. Amounts do not include consumption tax, etc.

IV. Information on the Company

1. Information on the Company's Shares (1) Total number of shares, etc.

1) Total number of shares

(Note) Partial changes to the Company's Articles of Incorporation were approved at the General Meeting of Shareholders held on

January 27, 2021, and the total number of shares authorized to be issued became 150,000,000 shares from that date.

2) Number of shares issued

(2) Information on share acquisition rights, etc.

1) Details of stock option program

Share acquisition rights issued under the provisions of Articles 236, 238, and 240 of the Companies Act for the purpose of granting stock options to Directors and employees of the Company and its subsidiaries are presented below.

Third Series of Share Acquisition Rights

Resolution date

January 29, 2020

Directors of the Company:

5

Employees of the Company: 1,541

Category and number of grantees

Directors of subsidiaries: 44

Employees of subsidiaries 200

Number of share acquisition rights (*)

9,005 units

Class, content, and number of shares subject to share acquisition rights (*)

Common shares, 900,500 (Notes 1, 2)

Amount payable on the exercise of share acquisition rights (*)

1,387 yen (Note 3)

Exercise period of share acquisition rights (*)

From April 1, 2023 to March 31, 2024

Share issue price and additional paid-in capital per share in the event of issuance of shares upon exercise of share acquisition rights (*)

Issue price: 1,678 yen

Additional paid-in capital per share: 839 yen

Conditions for exercise of share acquisition rights (*)

(Note 4)

Matters regarding transfer of share acquisition rights (*)

Approval of the Company's Board of Directors is required for the acquisition of any share acquisition rights by means of transfer.

Matters regarding grant of share acquisition rights accompanying corporate reorganization (*)

(Note 5)

(*) The information above is as of the end of the fiscal year under review (October 31, 2020). The information as of the end of the month preceding the filing date (December 31, 2020) has been omitted as it had not changed from the end of the fiscal year under review.

(Notes)

1. The number of shares to be granted upon exercise of each share acquisition right (hereinafter, "Number of Shares to be Granted")

shall be 100 shares.

• 2. If the Company implements a stock split (including gratis allotment of shares of common stock; items pertaining to stock split shall also apply to gratis allotment hereinafter) or stock consolidation with respect to common stock of the Company after the date of allotment of the share acquisition rights, the Number of Shares to be Granted with respect to the share acquisition rights not exercised at that time will be adjusted in accordance with the following formula.

  Number of Shares to be Granted post-adjustment =

  Number of Shares to be Granted pre-adjustment × Stock split or consolidation ratio

  In addition, if there is an unavoidable ground requiring an adjustment of the Number of Shares to be Granted, the Number of Shares to be Granted may be adjusted to the extent necessary, subject to a Board of Directors resolution.

  Any fractions of less than one share resulting from the adjustment will be rounded down.

• 3. If the Company implements a stock split or stock consolidation with respect to its common stock, the amount payable on the exercise of share acquisition rights (hereinafter, "exercise price") shall be adjusted in accordance with the following formula, with any fractional amounts under 1 yen rounded up.

  1
  Post-adjustment	＝Pre-adjustment
  ×
  exercise price	exercise price
  Stock split/consolidation ratio

  In the event of any new share issuance or treasury share disposals at less than market price (excluding any share issuance, treasury share disposals, or transfers of treasury share by share exchange associated with the exercise of share acquisition rights), the exercise price shall be adjusted in accordance with the following formula, with any fractional amounts under 1 yen rounded up.

Number of Number of newly issued shares × Amount payable per sharePost-adjustment ＝Pre-adjustment×exercise priceexercise priceshares already ＋ issuedMarket price per shareNumber of shares already issued + Number of newly issued shares

"Number of shares already issued" in the above formula shall equal the total number of shares outstanding, less the number of treasury shares owned by the Company. In the case of treasury share disposals, "Number of newly issued shares" in the above formula shall be taken to mean "Number of treasury shares disposed of," and "Amount payable per share" shall be taken to mean "Disposal value per share."

If the Company conducts a merger, or a demerger, or if other such situations occur, the Company reserves the right to adjust the exercise price within a necessary and reasonable range.

• 4. The exercise conditions of the share acquisition rights are as follows.

  • (1) Persons granted an allotment of the share acquisition rights (hereinafter, "Rights Holders") must be Directors or employees of the Company or one of its subsidiaries at the time the share acquisition rights are exercised. However, this restriction shall not apply if so approved by the Board of Directors in the case of resignations of Directors after their terms have expired, mandatory retirement for employees, transfers prompted by an administrative order, or based on other justifiable reasons.

  • (2) In the event of the death of a Rights Holder, rights may not be exercised by the corresponding heir.

  • (3) Other conditions are as stipulated in the share acquisition rights allotment agreement concluded between the Company and the Rights Holder.

• 5. In the event the Company engages in a merger (only if the Company is to be dissolved as a result of the merger), an absorption-type demerger or incorporation-type demerger (in each case, only if the Company is to be the demerged company), or share exchange or share transfer (in each case, only if the Company is to become a wholly-owned subsidiary) (hereafter all of which are collectively referred to as "Reorganization"), then the Rights Holders of share acquisition rights remaining in effect (the "Remaining Share Acquisition Rights") immediately prior to the effective date of the Reorganization (hereinafter respectively referring to an effective date of absorption-type merger in case of an absorption-type merger, a date of incorporation of a company incorporated through a consolidation-type merger in case of a consolidation-type merger, an effective date of absorption-type demerger in case of an absorption-type demerger, a date of incorporation of a company incorporated through an incorporation-type demerger in case of an incorporation-type demerger, an effective date of a share exchange in case of a share exchange, or a date of incorporation of a wholly owning parent company incorporated through a share transfer) shall be granted share acquisition rights of the relevant stock company specified under Article 236, Paragraph 1, Item 8 (a) through (e) of the Companies Act (such entity hereinafter referred to as the "Reorganized Company"). However, these share acquisition rights shall be granted only if provisions for issuing the share acquisition rights of the Reorganized Company in accordance with the following conditions are included in an absorption-type merger agreement, a consolidation-type merger agreement, an absorption-type demerger agreement, an incorporation-type demerger plan, a share exchange agreement, or a share transfer plan. (1) Number of share acquisition rights of the Reorganized Company to be issued

The number of share acquisition rights equal to the number of Remaining Share Acquisition Rights held by respective Rights Holders shall be issued.

• (2) Class of shares of the Reorganized Company subject to share acquisition rights Common stock of the Reorganized Company

• (3) Number of shares of the Reorganized Company subject to share acquisition rights

  The number shall be reasonably adjusted in consideration of the conditions of Reorganization, etc., and fractions less than one share resulting from the adjustment shall be discarded.

• (4) Amount of assets to be contributed upon exercise of share acquisition rights

  The amount shall be reasonably adjusted in consideration of the conditions of Reorganization, etc., and fractions less than one yen resulting from the adjustment shall be rounded up.

• (5) Exercise period of share acquisition rights

  The exercise period of share acquisition rights shall be from the latter of the first day of the aforementioned "Exercise period of share acquisition rights" or the effective date of the Reorganization, to the expiration date of the "Exercise period of share acquisition rights."

• (6) Increase in share capital and legal capital surplus in the case of issuing shares upon exercise of share acquisition rights Determined in accordance with aforementioned "Share issue price and additional paid-in capital per share in the event of issuance of shares upon exercise of share acquisition rights."

• (7) Restrictions on acquisition of share acquisition rights through transfer

  The acquisition of share acquisition rights through transfer shall be subject to the approval of the Reorganized Company's Board of Directors.

• (8) Conditions for the exercise of share acquisition rights

  Determined in accordance with aforementioned "Exercise conditions of the share acquisition rights."

• (9) Matters concerning the acquisition of share acquisition rights

  Determined in accordance with the following "Conditions for acquisition of own share acquisition rights and reason for acquisition."

Conditions for acquisition of own share acquisition rights and reason for acquisition  If the Rights Holder, prior to exercising his/her share acquisition rights, loses the eligibility to exercise such rights pursuant to the provisions prescribed in the above "Exercise conditions of the share acquisition rights," the Company reserves the right to acquire subject share acquisition rights gratis on a date separately determined by its Board of Directors.

 In the event proposals a, b or c below are approved at the Company's General Meeting of Shareholders (in the event a General Meeting of Shareholders resolution is unnecessary, approval by the Board of Directors), the Company may acquire share acquisition rights gratis on a date separately determined by the Board of Directors.

a: Proposal for approval of a merger agreement causing the Company to be dissolved b: Proposal for approval of a demerger agreement or demerger plan resulting in the Company becoming the demerged company c: Proposal for approval of a share exchange agreement or stock transfer plan in which the Company becomes a wholly owned subsidiary

2) Details of rights plans

There are no applicable matters to report.

3) Status of other share acquisition rights, etc.

Euro-Yen Denominated Convertible Bond-Type Bonds with Share Acquisition Rights due 2024

Resolution dateNumber of share acquisition rights (*)Of which, number of share acquisition rights held by the Company (*)

Class, content, and number of shares subject to share acquisition rights (*)

Amount payable on the exercise of share acquisition rights (*)Exercise period of share acquisition rights (*)Share issue price and additional paid-in capital per share in the event of issuance of shares upon exercise of share acquisition rights (*)

Conditions for exercise of share acquisition rights (*)Matters regarding transfer of share acquisition rights (*)Matters regarding grant of share acquisition rights accompanying corporate reorganization (*)

Description and value of assets contributed upon the exercise of the share acquisition rights (*)

Balance of bonds with share acquisition rights (*)

October 31, 2017

2,500 units

－

Common shares, 4,461,099 (Note 1)

5,604 yen (Note 2)From November 30, 2017 to November 1, 2024

(local time for reception of exercise request) (Note 3)Issue price: 5,604 yen

Additional paid-in capital per share: 2,802 yen (Note 4)

(Note 5)Subject share acquisition rights are attached to convertible bond-type bonds with share acquisition rights and cannot be transferred separately.

(Note 6)

(Note 7)

25,000 million yen

(*) The information above is as of the end of the fiscal year under review (October 31, 2020). The information as of the end of the month preceding the filing date (December 31, 2020) has been omitted as it had not changed from the end of the fiscal year under review.

(Notes)

• 1. The number of shares of the Company's common stock to be delivered upon the exercise of the share acquisition rights shall be the total of the par value of the bonds pertaining to the exercise request divided by the conversion price as described in (Note 2) below. However, fractions of less than one share resulting from the exercise shall be rounded down and no adjustment by cash shall be made.

• 2. (1) Initially, the conversion price will be 5,616 yen.

  (2) Regarding the conversion price, following the issuance of bonds with share acquisition rights, in the event the Company issues or disposes of shares of its common stock at a payment amount below the market price of the Company's common stock, the conversion price will be adjusted according to the formula below. In the formula below, "number of shares already issued" means the total number of outstanding common shares of the Company (excluding those owned by the Company).

Post-adjustment conversion price

=Pre-adjustment conversion priceNumber of shares already issued

＋

×Number of shares issued or disposed of×Amount payable per shareMarket priceNumber of shares already issued + Number of shares issued or disposed ofIn addition, in the event the Company implements a stock split or stock consolidation of its common stock, issues share acquisition rights (including those attached to bonds with share acquisition rights) for which issuance of Company's common stock can be requested at a payment amount below the market price of the Company's common stock, or pays dividends exceeding a certain limit, or upon occurrence of certain other events, the conversion price will be adjusted as appropriate. 3. The period during which share acquisition rights can be exercised shall be November 30, 2017 through November 1, 2024 (local time for reception of exercise request).

However, rights can be exercised (i) up to three business days before the redemption date in Tokyo in the event of early redemption due to a clean-up clause prescribed in the terms of subject bonds, changes in tax regulations, reorganization, delisting of shares, squeeze outs, etc. (this does not apply to share acquisition rights attached to bonds not selected for early redemption in the case of early redemption on changes in tax regulations as prescribed in the terms of subject bonds); (ii) until subject bonds are cancelled, in the event these bonds are purchased and cancelled; (iii) until the loss of the benefit of time, in the event subject bonds lose the benefit of time.

In all of the aforementioned situations, the exercise of subject share acquisition rights will not be possible after November 1, 2024 (local time for reception of exercise request).

Notwithstanding the above, in the event the Company reasonably determines it necessary not to permit the exercise of share acquisition rights in light of conducting a corporate reorganization, the exercise of subject share acquisition rights shall not be permitted during a period designated by the Company, the term of which shall be 30 days or less, and shall end within 14 days from the day following the effective date of the reorganization.

In addition, with regard to the period beginning two business days in Tokyo (or, in the event said date is not a business day in Tokyo, then three business days) preceding the record date determined by the Company, or preceding the date designated for confirmation of shareholders as per Article 151, paragraph (1) of the Act on Book-Entry Transfer of Company Bonds, Shares, etc. (hereinafter, "shareholder confirmation date") and ending on the said shareholder confirmation date (or, in the event the said shareholder confirmation date is not a business day in Tokyo, the next business day in Tokyo), in the event the date on which the exercise of subject share acquisition rights takes effect (or, in the event said date is not a business day in Tokyo, the next business day in Tokyo) falls within such period, the exercise of subject share acquisition rights will not be possible. However, in the event laws or practices related to the issuance of shares pertaining to the exercise of share acquisition rights through transfer systems based on the Act on Book-Entry Transfer of Company Bonds, Shares, etc., are amended, the limitation on the period during which the subject share acquisition rights can be exercised pursuant to this paragraph may be revised by the Company to reflect such changes.

• 4. The increase in share capital arising from the issuance of shares upon exercise of subject share acquisition rights shall equal one half of the maximum amount by which share capital can be increased as calculated in accordance with Article 17 of the Ordinance on Company Accounting; any fraction less than one yen arising therefrom shall be rounded up to the nearest one yen.

• 5. (1) Partial exercise of each share acquisition right is not possible.

  (2) Until August 15, 2024 (inclusive), if the closing prices of the Company's common shares over the 20 consecutive Trading

  Days ending on the last Trading Day (defined below) of any particular quarter (referring to the three-month periods that make up a calendar year; same herebelow within this item (2)) are each more than 130% of the conversion price in effect on the last Trading Day of such quarter, the holders of subject bonds may exercise the share acquisition rights on or after the first day of the immediately following quarter until the end of such quarter (or, in the case of the quarter starting from July 1, 2024, until August 15, 2024); provided, however, that the condition for the exercise of share acquisition rights specified in this item (2) shall not apply to the periods set forth in 1), 2), and 3) below.

  • 1) (i) periods during which the Company is assigned an issuer rating of BB+ or lower by the Japan Credit Rating Agency or its successors (hereinafter, "JCR"), (ii) periods during which the Company is no longer assigned an issuer rating by JCR, or (iii) periods during which the Company's issuer rating by JRC has been suspended or withdrawn.

  • 2) Period starting from the date on which the company announces an early redemption due to a clean-up clause prescribed in the terms of subject bonds, changes in tax regulations, reorganization, delisting of shares, squeeze outs, etc. (this does not apply to share acquisition rights attached to bonds not selected for early redemption in the case of early redemption on changes in tax regulations as prescribed in the terms of subject bonds).

  • 3) In the case of a reorganization, unless the exercise of the share acquisition rights is suspended by the Company as outlined in (Note 3) above, the period from the date on which the Company announces the reorganization to the holders of the subject bonds prescribed in the terms of subject bonds to the effective date of the reorganization. "Trading Day" means a day on which the Tokyo Stock Exchange, Inc. is open for business, but does not include days on which no closing price for shares is reported.

• 6. (1) In the event of corporate reorganization, the Company shall make the best effort to have the Succeeding Company (defined below) assume the position of the principal debtor of subject bonds based on the terms of the subject bonds, and issue new share acquisition rights in lieu of these share acquisition rights. However, succession and issuance will be executed based on the assumption that (i) it can be conducted based on applicable laws at the time of execution, (ii) a mechanism for execution has already been created or can be created, and (iii) the Company or Succeeding Company will not bear unreasonable (determined by the Company) costs (including taxes) from the perspective of overall reorganization. In such a case, the Company shall make the best effort to ensure that the Succeeding Company is a listed company in Japan at the effective date

of the reorganization. The Company's effort obligations as described in (1) is not applicable when the Company delivers to its financial agent a certificate prescribed in the clause pertaining to early redemption resulting from reorganization.

"Succeeding Company" refers to the other party in corporate reorganization, which undertakes the obligations of the Company concerning subject bonds and/or subject share acquisition rights.

• (2) The details of the Succeeding Company's share acquisition rights that are to be issued pursuant to the above provisions in (Note 6 (1)) are as follows.

  • 1) Number of share acquisition rights

    A number equal to the number of share acquisition rights attached to subject bonds that are outstanding as of the timing immediately before the effective date of reorganization.

  • 2) Class of shares subject to share acquisition rights Common stock of the Succeeding Company

  • 3) Number of shares subject to share acquisition rights

    The number of shares of the Succeeding Company's common stock delivered upon exercise of such company's share acquisition rights shall be determined by the Succeeding Company, taking into consideration the conditions of the reorganization. In addition to making decisions by referring to the terms of subject bonds, (i) or (ii) below shall be followed. The conversion price shall be subject to the same adjustment as in (Note 2 (2)) above.

    • (i) In the case of a merger, share exchange, or share transfer, the conversion price shall be determined so that the holder of the Company's common shares, the number of which amounting to the number of shares obtainable when subject share acquisition rights are exercised immediately before the effective date of reorganization, shall be able to receive the number of Succeeding Company's common shares the holder is eligible to receive from such reorganization by exercising the share acquisition rights immediately following the effective date of reorganization. If securities or other assets other than the common stock of the Succeeding Company are deliverable at the time of reorganization, the same number of shares of common stock of the Succeeding Company may be received as calculated by dividing the fair value of such securities or assets by the market price of the common stock of the Succeeding Company.

    • (ii) In the event of reorganization other than the above, the conversion price shall be determined so that the economic benefit received by exercising the Succeeding Company's share acquisition rights immediately after the effective date of reorganization will be equivalent to the economic benefit the holder of subject bonds would have received, had such holder exercised the subject share acquisition rights immediately prior to the effective date of such reorganization.

  • 4) Assets to be contributed upon exercise of share acquisition rights and their value

    Upon the exercise of the share acquisition rights of the Succeeding Company, the succeeded bonds shall be contributed; the value thereof shall be the same as the face value of the succeeded bonds.

  • 5) Exercise period of share acquisition rights of the Succeeding Company

    The exercise period of share acquisition rights of the Succeeding Company shall be from the effective date of the reorganization (or a specified date within 14 days after the effective date) until the expiration date of the exercise period of subject share acquisition rights as outlined in (Note 3) above.

  • 6) Other conditions for exercising share acquisition rights

    Partial exercise of each share acquisition right of the Succeeding Company is not possible. The exercise of share acquisition rights of the Succeeding Company is subject to the same limitations described in (Note 5 (2)) above.

  • 7) Increase in share capital and legal capital surplus in the case of issuing shares upon exercise of share acquisition rights The increase in share capital arising from the issuance of shares upon exercise of share acquisition rights of the Succeeding Company shall equal one half of the maximum amount by which share capital can be increased as calculated in accordance with Article 17 of the Ordinance on Company Accounting; any fraction less than one yen arising therefrom shall be rounded up to the nearest one yen. The increase in legal capital surplus shall be obtained by subtracting the amount of increase in share capital from such maximum amount by which share capital can be increased.

  • 8) In the event of corporate reorganization

    Even in the event the Succeeding Company undergoes reorganization, the same procedures as with the subject bonds shall apply.

  • 9) Other

    Any fractions less than one share resulting from the exercise of the share acquisition rights of the Succeeding Company shall be rounded down and no adjustment in cash shall be made. Share acquisition rights of the Succeeding Company cannot be transferred separately from the succeeded bonds.

• (3) In the event the Company has the Succeeding Company undertake or succeed the Company's obligations associated with subject bonds in accordance with the provisions of (Note 6 (1)) above, the Company shall abide by the terms of subject

bonds and also bear a guarantee in certain cases specified in such terms.

7. Upon the exercise of each share acquisition right, the bonds attached to the subject share acquisition rights shall be contributed,

and the price of the bond shall be the same as the par value thereof.

Fourth Series of Share Acquisition Rights

Resolution date

Number of share acquisition rights (*)Of which, number of share acquisition rights held by the Company (*)

Class, content, and number of shares subject to share acquisition rights (*)

Amount payable on the exercise of share acquisition rights (*)Exercise period of share acquisition rights (*)Share issue price and additional paid-in capital per share in the event of issuance of shares upon exercise of share acquisition rights (*)

Conditions for exercise of share acquisition rights (*)

Matters regarding transfer of share acquisition rights (*)Matters regarding grant of share acquisition rights accompanying corporate reorganization (*)October 2, 2020

87,003 units

－

Common shares, 8,700,300 (Note 1)

1,665.9 yen (Note 2) From October 20, 2020 to October 19, 2023

Issue price: 1,680.09 yen

Additional paid-in capital per share: 841 yenPartial exercise of each share acquisition right is not possible.

Not applicable

(Note 5)

(*) The information above is as of the end of the fiscal year under review (October 31, 2020). The information as of the end of the month preceding the filing date (December 31, 2020) has been omitted as it had not changed from the end of the fiscal year under review.

(Notes)

1. The type and total number of shares subject to the share acquisition rights shall be 8,700,300 common shares of the Company

(the number of shares to be issued per share acquisition right ["the Number of Allotted Shares"] shall be 100 common shares of the Company). However, if the Number of Allotted Shares are adjusted in accordance with items (1) or (3) below, the total number of shares subject to the share acquisition shall be adjusted based on the Number of Allotted Shares after adjustment. (1) If an adjustment is made to the exercise price in accordance with the provisions in "Note 2. Adjustment of exercise price"

below, the Number of Allotted Shares shall be calculated using the following formula. Any fractions less than one share resulting therefrom shall be rounded down. In addition, the pre- and post-adjustment exercise prices used in this formula shall be the pre- and post-adjustment exercise prices specified separately in the "Amount payable on the exercise of share acquisition rights" field.

Number of Allotted Shares post-adjustmentNumber of Allotted Shares pre-adjustment × Pre-adjustment exercise price

＝

Post-adjustment exercise price

• (2) The date on which the Number of Allotted Shares post-adjustment begins to be applicable shall be the same day as the application date of the post-adjustment exercise price in accordance with each item with regard to the adjustment of the exercise price specified in items (2) and (5) of "Note 2. Adjustment of exercise price" concerning the adjustment reasons.

• (3) If an adjustment is made to the Number of Allotted Shares, the Company shall notify the holders of the share acquisition rights ("the Rights Holders") in writing of such adjustment and the reason therefor, the Number of Allotted Shares pre-adjustment, the Number of Allotted Shares post-adjustment, and the first day when the adjustment becomes applicable, and other necessary information by the day that precedes the day when the adjustment begins to be applicable. In the case specified in item (2) 5) of "Note 2. Adjustment of exercise price" below or other cases where the Company is unable to give such notice by the day preceding the day when the adjustment begins to be applicable, the Company shall give notice as early as possible after the day when the adjustment begins to be applicable.

2. Adjustment of exercise price

(1) If, after issuing the share acquisition rights, a change is made or may be made in the number of issued common shares of the

Company for any of the reasons given in item (2) below, the Company shall use the following formula to adjust the exerciseprice ("the Exercise Price Adjustment Formula;" the exercise price after adjustment shall be referred to as "the Post- Adjustment Exercise Price" and the share price before adjustment as "the Pre-Adjustment Exercise Price").

Post-Adjustment Exercise Price

=Pre-Adjustment Exercise Price

Amount payable××

Market priceNumber of common shares already issued +

Number of common shares newly issued or disposed of

(2) The adjustment of the exercise price using the Exercise Price Adjustment Formula and the timing at which the Post-

Adjustment Exercise Price becomes applicable shall be subject to the following.

• 1) If the Company issues new common shares at a price lower than the market price specified in item (4) 2) below or disposes of treasury shares (including those by means of gratis allotment) (excluding the cases of [1] issuance of new common shares to Directors or employees of the Company or one of its subsidiaries, or disposals of treasury shares by the

  Company, based on the restricted stock compensation scheme introduced by the Company; or [2] acquisition, conversion, or exercise of securities that have been acquired or are subject to demand for acquisition by the Company in exchange of allotment of the Company's common shares, share acquisition rights under which Rights Holders can demand the issuance of Company's common shares [including those attached to bonds with share acquisition rights] and other securities and rights; or [3] issuance of new common shares of the Company based on the resolution by the Board of Directors on October 2, 2020), the Post-Adjustment Exercise Price shall be applicable from the day following the pay-in date (the final day of the payment period, if such a period is set), or from the day following the record date, if there is such a day for granting shareholders a right to allotment relating to such issuance or disposal.

• 2) If the Company issues common shares by means of a stock split or gratis allotment, the Post-Adjustment Exercise Price shall be applicable on and after the day following the record date for the relevant stock split or gratis allotment (if no record date is set for a gratis allotment, the day on which the allotment becomes effective).

• 3) If common shares are acquired from the Company at a payment price lower than the market price specified in Item 4 (ii)

  below as part of an exchange, if the Company issues securities (including through gratis allotment) that can request the Company to issue common shares at such a lower price, or if the Company issues share acquisition rights, bonds with share acquisition rights, or other securities or rights (including through gratis allotment) that can request the Company to issue common shares at such a lower price (excluding share acquisition rights issued as stock options to directors and employees of the Company or one of its subsidiaries by a resolution of the Board of Directors), the Post-Adjustment Exercise Price shall be calculated using the Exercise Price Adjustment Formula on the assumption that the issued securities, share acquisition rights, or rights were all acquired at the initial acquisition price or exercised at the initial exercise price, and that the common shares of the Company were issued accordingly. The Post-Adjustment Exercise Price shall be applicable from the pay-in date for the securities or rights, or on and after the day following the allotment date of the share acquisition rights (including those attached to bonds with share acquisition rights). If there is a record date for share subscriptions or for gratis allotment, the Post-Adjustment Exercise Price shall be applicable on and after the day following such date.

• 4) If the Company issues common shares at a price lower than the market price specified in item (4) 2) below in exchange for shares subject to call or share acquisition rights subject to call (including those attached to bonds with shares acquisition rights) issued by the Company, the Post-Adjustment Exercise Price shall be applied from the day following the acquisition date.

• 5) In each of the cases specified in 1) through 3) above, if a record date has been set and the entry into force is subject to approval of the General Meeting of Shareholders, the Board of Directors, or any other body of the Company on and after that record day, notwithstanding any of the cases specified in 1) through 3) above, the Post-Adjustment Exercise Price shall be applied on and after the day following the date when the approval is given. In this case, the Company shall issue common shares to the Rights Holders who request to exercise their share acquisition rights between the day following the record date and day of approval using the following calculation method.

Number of shares = ＝

Post-Adjustment Exercise Price

Any fractions less than one share resulting from the adjustment shall be rounded down.

• (3) If the difference between the Post-Adjustment Exercise Price calculated using the Exercise Price Adjustment Formula and the Pre-Adjustment Exercise Price is less than one yen, no adjustment shall be made to the exercise price. However, if any event occurs at a later date requiring an adjustment to the exercise price and therefore an adjustment is made to the exercise price, the Company shall use in place of the Pre-Adjustment Exercise Price used in the Exercise Price Adjustment Formula the amount that remains after deducting the above difference from the Pre-Adjustment Exercise Price.

• (4) 1) In using the Exercise Price Adjustment Formula, the Company shall calculate prices to their second decimal place and then round them down to the first decimal place.

  • 2) The market price used in the Exercise Price Adjustment Formula shall be the simple average of the closing prices of the common shares of the Company on the Tokyo Stock Exchange during the 30 trading days (not including days on which no closing price is quoted) starting from the 45th trading day preceding the day when the Post-Adjustment Exercise Price is applied for the first time. In this case, the simple average price shall be calculated to the second decimal place and rounded down to the first decimal place.

  • 3) The "number of common shares already issued" used in the Exercise Price Adjustment Formula shall be the total number of common shares issued as of the record date for granting shareholders the right to share allotment or, in the absence of any such record date, as of the day that is one month prior to the day when the Post-Adjustment Exercise Price is applied for the first time, less the number of common shares held by the Company as of such date. Further, in the case of item (2) 5) above, the "number of common shares newly issued or disposed of" used in the Exercise Price Adjustment Formula shall not include common shares that shall be allotted to the Company's common shares held by the Company on the record date.

• (5) In cases other than the cases where an adjustment to the exercise price in accordance with item (2) above is required, the Company shall make necessary adjustments to the exercise price upon discussion with the Rights Holders in the following cases.

  • 1) If the exercise price is required to be adjusted because of a stock consolidation, capital decrease, company split, share exchange, or merger;

  • 2) If the exercise price is required to be adjusted because any other event or situation occurs that requires or may require a change to the number of common shares outstanding of the Company;

  • 3) If multiple events that require the exercise price to be adjusted occur successively, and it becomes necessary to consider the effect of another event to determine the market price that shall be used for calculating the Post-Adjustment Exercise Price due to one event.

• (6) If an adjustment is being made to the exercise price, the Company shall notify the Rights Holders in writing of such adjustment and the reason therefor, the Pre-Adjustment Exercise Price, the Post-Adjustment Exercise Price, and the first day when the Post-Adjustment Exercise Price becomes applicable, and other necessary information by the day that precedes the day when the adjustment begins to be applicable. In the case specified in item (2) 5) above or other cases where the Company is unable to give such notice by the day preceding the day when the adjustment begins to be applicable, the Company shall give notice as early as possible after the day when the adjustment begins to be applicable.

• 3. Total share issue price for shares issued upon exercise of share acquisition rights 14,617,287,027 yen

  (Note) The total share issue price may be less than the amount indicated above if the share acquisition rights are not exercised during the exercise period, or if they are acquired and cancelled by the Company.

• 4. Share issue price and additional paid-in capital in the event of issuance of shares upon exercise of share acquisition rights

  • (1) Issue price per share in the event of issuance of shares upon exercise of share acquisition rights

    The issue price per common share of the Company to be delivered upon the exercise of the share acquisition rights shall be calculated by adding the total issue price for the share acquisition rights pertaining to the exercise request to the total amount of assets to be contributed upon exercise of each share acquisition right pertaining to the exercise request, and dividing that total by the number of shares subject to the share acquisition rights specified separately in the "Number of shares subject to share acquisition rights" field.

  • (2) Increases in share capital and legal capital surplus arising from issuance of shares upon exercise of share acquisition rights The increase in share capital arising from the issuance of shares upon exercise of share acquisition rights shall equal one half of the maximum amount by which share capital can be increased as calculated in accordance with Article 17 of the Ordinance on Company Accounting. (Any fractions less than one yen resulting therefrom shall be rounded up to the nearest one yen.) The increase in legal capital surplus shall be the amount obtained by deducting the amount of share capital to be increased from the maximum amount of increase in share capital.

• 5. In the event the Company engages in an absorption-type merger in which the Company will be the dissolved company, in a consolidation-type merger in which the Company will be the demerged company, in an absorption-type company split in which

the Company will be the company to be split, in an incorporation-type company split in which the Company will be the company to be split, in a share exchange in which the company will be the wholly owned subsidiary company, or in a share transfer in which the company will be the wholly owned subsidiary company (hereafter all of which are collectively referred to as "the Reorganization"), the new entity (company surviving the absorption-type merger, company incorporated in a consolidation-type merger, successor company in absorption-type split, company incorporated in incorporation-type split, wholly owning parent company resulting from share exchange, or wholly owning parent company incorporated in a share transfer; hereafter all of which are collectively referred to as "the Reorganized Company") shall deliver new share acquisition rights to the Rights Holders in exchange for share acquisition rights remaining in effect immediately prior to the effective date of the Reorganization in accordance with the conditions below.

• (1) Number of share acquisition rights of the Reorganized Company to be newly issued

  To be reasonably adjusted in consideration of the conditions, etc., of the Reorganization based on the number of share acquisition rights owned by the Rights Holders. Any fractions less than one right resulting therefrom shall be rounded down.

• (2) Type of shares subject to share acquisition rights to be newly issued

  The same type of shares of the Reorganized Company.

• (3) Calculation method of the number of shares subject to share acquisition rights to be newly issued

  To be reasonably adjusted in consideration of the conditions, etc., of the Reorganization. Any fractions less than one share resulting therefrom shall be rounded down.

• (4) Value of property invested for exercise of share acquisition rights to be newly issued

  To be reasonably adjusted in consideration of the conditions, etc., of the Reorganization. Any fractions less than one yen resulting therefrom shall be rounded down.

• (5) Exercise period, exercise conditions, and acquisition conditions for share acquisition rights to be newly issued, issuance of share acquisition rights in the event of a Reorganization, non-issuance of securities with share acquisition rights, and increase in share capital and legal capital surplus arising from issuance of shares upon exercise of share acquisition rights

• (3) Information on moving strike convertible bonds, etc.

  There are no applicable matters to report.

• (4) Changes in the total number of issued shares, share capital, etc.

(Note) 1. Capital increase through third-party allotment 2. Decrease due to retirement of treasury shares

(5) Composition of issued shares by type of shareholders

As of October 31, 2020

(Notes)

• 1. Of the 5,934,148 treasury shares, 59,341 units are included in the "Individuals and others" column, while 48 shares are included in the "Number of shares less than one unit" column.

• 2. Of the shares registered in the name of Japan Securities Depository Center, Incorporated, 18 units are included in the "Other corporations" column and 40 shares are included in the "Number of shares less than one unit" column.

(6) Major shareholders

As of October 31, 2020

(Note)

Of the shares owned by the above trust banks, the numbers of shares pertaining to trust services are as follows.

Custody Bank of Japan, Ltd.

The Master Trust Bank of Japan, Ltd.

5,546,000 shares 2,414,000 shares

(7) Information on voting rights

1) Issued shares

As of October 31, 2020

(Note) "Shares with full voting right (others)" and "Shares less than one unit" above include 1,800 shares and 40 shares, respectively, held under the name of Japan Securities Depository Center, Inc. (JASDEC). "Number of voting rights" above includes 18 voting rights from shares with full voting rights held under the name of this same institution.

2) Treasury shares

As of October 31, 2020

(Note) In addition to the above, the H.I.S. Employee Stock Ownership Association Dedicated Trust holds 55,100 shares of

Company stock as trust assets under the trust-type employee stock ownership incentive plan (E-Ship®); these shares are recorded in the consolidated and non-consolidated financial statements as treasury shares.

(8) Details of stock ownership plan for officers and employees

With the aim of providing Company employees with an incentive for enhancing corporate value over the medium to long term, the Company has introduced a trust-type employee stock ownership incentive plan (E-Ship®), hereinafter referred to as the "Plan."

1) Summary of the Plan

The Plan is an incentive plan for all employees joining the H.I.S. Employee Stock Ownership Association (hereinafter, the "Association"). Under the Plan, the Company establishes at a trust bank a dedicated trust for the H.I.S. Employee Stock Ownership Association (hereinafter, the "Trust"); over a period of five years after its establishment, the Trust acquires in advance the number of shares in Company stock that the Association is expected to acquire. Thereafter, the Trust sells the Company stock to the Association on an ongoing basis. If an amount equivalent to gains from the sale of stock remains in the Trust at the time it is terminated, such amount will be distributed to qualified beneficiaries as residual assets. Further, since the Company guarantees the bank loan obtained by the Trust to purchase Company stock, if the Trust accumulates losses from the sale of Company stock as a result of declining stock prices and an amount equivalent to such losses remains in the Trust as outstanding loans at the time the Trust is terminated, the Company will repay any remaining liabilities based on the terms of the loan guarantee agreement.

• 2) Total number of shares expected to be acquired by the Association 500,700 shares

• 3) Scope of individuals entitled to beneficiary rights, etc. under the subject employee stock ownership plan Association members who satisfy the beneficiary eligibility requirements

2. Information on Acquisition of Treasury Shares, etc.

[Class of shares] Acquisition of common stock under Article 155, Item 7 of the Companies Act

• (1) Acquisition by resolution at General Meeting of Shareholders

  There are no applicable matters to report.

• (2) Acquisition by resolution of the Board of Directors There are no applicable matters to report.

• (3) Acquisition not based on resolutions at General Meeting of Shareholders or of the Board of Directors

(Note) Fractional shares less than one trading unit purchased between January 1, 2021 and the filing date of this Annual Securities

Report are not included in the number of treasury shares acquired during the current period.

(4) Status of the disposition and holding of acquired treasury shares

(Notes)

• 1. Fractional shares less than one trading unit purchased between January 1, 2021 and the filing date of the Annual Securities Report are not included in the number of treasury shares held.

• 2. Company shares held by the H.I.S. Employee Stock Ownership Association Dedicated Trust in accordance with the introduction of a trust-type employee stock ownership incentive plan (E-Ship®) are not included in the number of treasury shares to be disposed of and the number of treasury shares held during the fiscal year under review and the current period.

3. Dividend Policy

The Group recognizes the return of profits to shareholders as one of its important management policies. While seeking to improve its corporate value, the Group intends to carry out stable and continuous distribution of profits in accordance with actual results, taking global conditions, travel industry trends, the strengthening of its corporate structure, and future business development into consideration. The Group has an interim dividend system, but since the ratio of its sales and earnings tends to be comparatively larger in the second half of each fiscal year, it provides only a year-end dividend to ensure fair dividends with respect to financial performance.

Based on the above dividend policy, the Company decided not to pay an annual dividend in the consolidated fiscal year ended October 31, 2020 as it believed it needed to urgently stabilize its financial condition while working to achieve a recovery in earnings.

As for the consolidated fiscal year ending October 31, 2021, the Company has yet to determine its dividend policy because it is - 42 -

difficult to reasonably assess the impact of the COVID-19 pandemic at this time.

The Company prescribes in its Articles of Incorporation that "except as otherwise provided by laws and regulations, matters concerning dividends of surplus listed under each item of Article 459, Paragraph 1 of the Companies Act, can be determined by a resolution of the Board of Directors." However, this does not mean that the option of resolution at a General Meeting of Shareholders is eliminated.

4. Corporate Governance, etc.

(1) Overview of corporate governance

Basic policy on corporate governance

Fully embracing its founding intention, the H.I.S. Group corporate philosophy, and the H.I.S. corporate philosophy, the Company seeks to achieve sustainable growth and enhance its corporate value over the medium to long term by providing products and services that are useful to the society. To realize this objective, the Company intends to make fair, transparent, quick, and decisive decisions with a sound awareness of the positions of its shareholders, customers, employees, business partners and local communities; fulfill accountability; and become a company appreciated and trusted by society.

The Company understands corporate governance to be a "mechanism for fair, transparent, quick, and decisive decision-making in recognition of the position of the company's shareholders, customers, employees, business partners and local communities" as defined in the Corporate Governance code formulated by the Tokyo Stock Exchange (hereinafter, "TSE CG code").

The 78 principles of the TSE CG code are replete with major principles contributing to the realization of "proactive governance" as a best practice employing a principles-based approach. H.I.S. will work to fully understand the purpose and essence of each of these principles, and comply with them to the best of its ability, while taking into consideration the industry and scale of its businesses, the business environment and characteristics, and its own institutional design and conditions.

• 1) Overview of corporate governance structure

  The Company has adopted a corporate governance structure with an Audit & Supervisory Committee, and has set up an HR & Nomination Committee, a Remuneration Committee, an Investment Committee, and a Finance & Management Committee as advisory committees to its Board of Directors.

  The Board of Directors comprises 10 Directors, including two External Directors, and is chaired by Representative Director, Chairman and President Hideo Sawada. Other members include Tatsuya Nakamori (Director), Masayuki Oda (Director),

  Atsushi Yamanobe (Director), Mutsumi Gomi (Director), Motoshi Yada (Director), Hidetaka Sawada (Director), Tsunekazu Umeda (Director and Audit & Supervisory Committee Member [External Director]), Atsushi Nabeshima (Director and Audit & Supervisory Committee Member [External Director]), and Sonoko Sekita (Director and Audit & Supervisory Committee Member). The Board of Directors makes decisions regarding matters provided by laws and regulations, basic operating policies, and important matters related to management, and oversees the execution of duties by its Directors and Corporate Officers. As a rule, it meets once a month.

  The HR & Nomination Committee comprises six Directors, including two External Directors, and is chaired by Representative Director, Chairman and President Hideo Sawada. Other members include Tatsuya Nakamori (Director), Masayuki Oda (Director), Motoshi Yada (Director), Tsunekazu Umeda (Director and Audit & Supervisory Committee Member [External Director]), and Atsushi Nabeshima (Director and Audit & Supervisory Committee Member [External Director]). The committee appoints and dismisses Directors and Corporate Officers, and meets whenever the need arises.

  The Remuneration Committee comprises six Directors, including two External Directors, and is chaired by Representative Director, Chairman and President Hideo Sawada. Other members include Tatsuya Nakamori (Director), Masayuki Oda (Director), Motoshi Yada (Director), Tsunekazu Umeda (Director and Audit & Supervisory Committee Member [External Director]), and Atsushi Nabeshima (Director and Audit & Supervisory Committee Member [External Director]). The committee makes decisions regarding individual remuneration for Directors, Corporate Officers, and Presidents of affiliated companies.

  The Investment Committee comprises six Directors, including one External Director, and is chaired by Representative Director, Chairman and President Hideo Sawada. Other members include Tatsuya Nakamori (Director), Masayuki Oda (Director), Motoshi Yada (Director), Hidetaka Sawada (Director), and Tsunekazu Umeda (Director and Audit & Supervisory Committee Member [External Director]). The committee assists the Board of Directors with decisions regarding investment projects.

  The Finance & Management Committee comprises six Directors, including one External Director, and is chaired by Representative Director, Chairman and President Hideo Sawada. Other members include Tatsuya Nakamori (Director),

  Masayuki Oda (Director), Motoshi Yada (Director), Tsunekazu Umeda (Director and Audit & Supervisory Committee Member [External Director]), and Sonoko Sekita (Director and Audit & Supervisory Committee Member). The committee assists the Board of Directors with decisions regarding procurement and management of material funds.

• 2) Reason for adoption of corporate governance structure

  In consideration of the scale and nature of the Company and H.I.S. Group's businesses, the Company had in place a governance structure of a company with Corporate Auditors and Board of Corporate Auditors until the 35th consolidated fiscal

year (ended October 31, 2015). The intent was to engage in fair, transparent, quick, and decisive decision-making regarding business management, and facilitate full accountability to the shareholders and other stakeholders.

The Corporate Auditors and Board of Corporate Auditors, in addition to conducting legality audits, conducted validity audits to the extent permitted by laws and regulations, and offered advice and recommendations at the Board of Directors meetings with respect to the execution of operational and professional duties by Directors. Factoring in such conditions, the Company reviewed the details pertaining to the Audit & Supervisory Committee structure created by the Law for Partial Amendment to the Companies Act (Act No. 90 of 2014, effective May 1, 2015), and determined that the latter structure was compatible with the actual circumstances of the Company and would help strengthen its corporate governance further, as the Company and Group pursued sustainable growth and enhancement of corporate value over the medium to long term.

Thus, the transition to a company with an Audit & Supervisory Committee was proposed at the 35th General Meeting of Shareholders held on January 27, 2016, and implemented by a resolution approved by the shareholders.

3) Other matters related to corporate governance

(I) Internal control system and status (including systems for ensuring appropriateness of business operations within the corporate group consisting of the Company and the Group subsidiaries)

As a company with an Audit & Supervisory Committee based on Article 399, Paragraph 13, Section 2 of the Companies Act, the Company determines, as basic policies and via resolution of the Board of Directors, those items required for the Audit & Supervisory Committee to execute its duties. It also determines those items necessary for systemic improvements that ensure appropriateness of business operations within the corporate group consisting of the Company and the Group subsidiaries. Such items include:

• a) System for ensuring that Directors and employees conduct their duties in compliance with laws, regulations, and the Company's Articles of Incorporation

• b) Rules and system for managing risk of loss to the Company and the Group (subsidiaries and associates)

• c) System for ensuring that duties of Directors are being conducted efficiently

• d) System for ensuring preservation and management of information in relation to Directors' execution of duties

• e) System for ensuring appropriateness of business operations within the corporate group consisting of the Company and the Group companies

• f) System for ensuring reliability of financial reporting

• g) Items required for the Audit & Supervisory Committee to execute its duties (system for ensuring that audits by the Audit & Supervisory Committee are conducted effectively, etc.)

In the fiscal year under review, the Company has maintained and operated its internal control system in line with the above basic policies; related efforts are as follows:

• i) To ensure thorough ethical compliance, the Company distributes a handbook that contains and explains the H.I.S. Group corporate philosophy, the H.I.S. corporate philosophy, the H.I.S. policy, the H.I.S. Charter of Corporate Behavior, and other guidelines, and promotes it as a source of reference during daily work. A passage from the handbook is also recited during the all-hands morning assembly and at other occasions as a constant reminder. In addition, the Company has formulated an H.I.S. Group Fair Trade Declaration to observe fair and transparent transactions with its business partners, and works to ensure sound transactions across the entire Group.

• ii) The "Refresh Hotline," an internal report window operated by outside experts: details of employee consultations are delivered anonymously to the Company with accompanying expert opinions based on consultation details. Acting as an intermediary between employees and the Company, this service functions as the Company's self-correcting system in terms of corporate ethics and compliance violations.

• iii) The Board of Directors makes important business execution decisions via Board resolution and in accordance with laws and regulations, the Articles of Incorporation, and internal regulations, and receives reports on the business execution status of each Director and the performance of major group Companies.

• iv) Important information such as resolutions by the Board of Directors is being appropriately retained, recorded, and managed by those departments with authority and responsibility in accordance with laws, regulations, and timely disclosure rules of the financial instruments exchange. In the event information is determined to be useful for shareholders and investors in making appropriate investment decisions, the Company makes an effort to provide appropriate disclosure.

• v) Systematic auditing by the Audit & Supervisory Committee utilizing the internal control system is being conducted effectively, with the Audit Department (Internal Audit Division) fulfilling its expected role.

The Company is also reviewing various procedures based on actual work conditions.

• (II) Risk management system and status

  Matters that may negatively impact business results, financial condition, stock price, and other aspects of the Company and Group businesses are described in the "2. Business and Other Risks" section in "II. Business Overview, Part I Information on the Company."

  The full-time Executive Directors working at the Group headquarters use opportunities, such as internal business meetings held several times a week, to identify risks that may occur, and strive to improve risk management based on the internal control framework.

• (III) Summary of agreement (limited liability agreement) between the Company and its Directors (excluding Executive

Directors, etc.) or its accounting auditor, stipulated in Article 427, Paragraph 1 of the Companies Act.

The Company has set forth in its Articles of Incorporation a stipulation based on the provision of Article 427, Paragraph 1 of the Companies Act and accordingly has concluded with the three non-Executive Directors (who are Directors serving as Audit & Supervisory Committee Members) and with the accounting auditor such agreements to limit their liability for damages as prescribed in Article 423, Paragraph 1 of the Companies Act. This limitation of liability is applied only in cases where the Director serving as Audit & Supervisory Committee member or the accounting auditor causing the damage performed his/her duties in good faith and without gross negligence; the limit of liability in such a case is the "minimum liability limit" amount stipulated in Article 425, Paragraph 1 of the Companies Act.

Furthermore, limited liability agreements the Company concluded with Corporate Auditors (including former Corporate Auditors) during the phase when it was a company with Board of Corporate Auditors (namely, the period prior to the conclusion of the 35th General Meeting of Shareholders held on January 27, 2016 regarding the fiscal year ended October 31, 2015) as defined in the Articles of Incorporation effective at that time, remain in effect at the present time with the same stipulations as the current limited liability agreement.

• IV) Number of Directors

  As stipulated in the Company's Articles of Incorporation, the number of Directors shall not exceed 16 people, of which no more than four shall be Directors serving as Audit & Supervisory Committee Members.

• V) Requirements for a Resolution to Appoint Directors

  As a company with an Audit & Supervisory Committee, Directors who serve as Audit & Supervisory Committee Members and other Directors are elected separately at the General Meeting of Shareholders. According to the Company's Articles of Incorporation, for both categories "a resolution of election shall be attended by shareholders holding shares representing one-third or more of total number of voting rights of shareholders who may exercise voting rights, and shall be adopted by a majority of the voting rights," and in addition, "election shall not depend on cumulative voting."

• VI) Year-end Dividend and Interim Dividend

  • a) Year-end dividend

    To enable the Company to maintain flexible capital and dividend policies, the Company's Articles of Incorporation prescribe that "matters specified in the items of Article 459, Paragraph 1 of the Companies Act, including those related to the payment of dividends, may be decided by the Board of Directors unless otherwise stipulated by laws and regulations." However, this provision does not exclude resolutions at the General Meeting of Shareholders.

  • b) Interim dividend

    Based on Article 454, Paragraph 5 of the Companies Act, the Articles of Incorporation stipulate that "through a resolution by the Board of Directors, shareholders listed on the final shareholders registry and registered pledgees as of April 30th each year are able to receive an interim dividend." The purpose of establishing this provision is to enable the return of profits to shareholders flexibly in accordance with profit levels.

• VII) Acquisition of Treasury Shares

Based on Article 165, Paragraph 2 of the Companies Act, the Articles of Incorporation stipulate that "through a resolution by the Board of Directors, treasury shares can be acquired through a market transaction, etc." The purpose of establishing this provision is to make it possible to flexibly carry out capital policies corresponding to changes in the business environment. The Board of Directors, in making a decision to acquire treasury shares, will comprehensively judge the status of business results including earnings trends, future performance forecasts, basic capital policies, etc., from the standpoint of continuous enhancement of corporate value and appropriate shareholder return.

• VIII) Director and Accounting Auditor's Partial Exemption from Liability for Damages

  Regarding Directors (including those who were Directors) and accounting auditor's (including those who were accounting auditors) liability for damages to the Company due to negligence, based on Article 426, Paragraph 1 of the Companies Act, the Articles of Incorporation stipulate that "subject to the resolution of the Board of Directors, exemption from liability is possible to the limit the laws and regulations allow." The purpose of this provision is to create an environment in which the Directors and the accounting auditor are able to make sufficient use of their capabilities and fulfill the role expected of them.

• IX) Special Resolution at the General Meeting of Shareholders

  In regard to the resolution requirement for special resolution at the General Meeting of Shareholders stipulated in Article 309, Paragraph 2 of the Companies Act, the Company stipulates in its Articles of Incorporation that "a special resolution of General Meeting of Shareholders shall be attended by shareholders holding shares representing one-third or more of the total number of voting rights of shareholders who may exercise voting rights, and shall be adopted by two-thirds or more of the voting rights." The purpose of this provision is to relax the requirements for a quorum for special resolutions of General Meeting of Shareholders so that these meetings can be operated smoothly.

(2) Directors and other officers

1) Status of Directors and other officers

Male: 9, Female: 1 (percentage of female directors 10.0%)

Title

NameDate of birth

Career summary

Term of officeShare ownership (thousands)

Dec. 1980

Established Company and became Representative Director and President

March 1999

Representative Director and President, Kyoritsu Shoken, Co., Ltd. (currently Sawada Holdings Co., Ltd.)

March 2003

Jun. 2004

Dec. 2009

Director and Chairman, Agricultural Bank of Mongolia (currently Khan Bank) (current) Director and Chairman of the Company Representative Director and Chairman of the Company

Representative Director, Chairman and President, Chief Executive Officer, Group Chief Executive Officer (CEO)

Mar. 2010

Representative Director and President of Huis Ten Bosch Co., Ltd.

Hideo Sawada

February 4, 1951

Sep. 2012

Nov. 2016

Chairman of Tokyo Symphony Orchestra (current) Representative Director, Chairman and President, Chief Executive Officer (CEO) of the Company Representative Director and Chairman of Sawada Holdings Co., Ltd. (current)

(Note 3)

17,943

Nov. 2017

Representative Director and Chairman of H.I.S. Hotel Holdings Co., Ltd.

Jan. 2018

Jan. 2019

Representative Director, Chairman and President; Chief Executive Officer of the Company; Group Chief Executive Officer (CEO) (current) Representative Director and Chairman of H.I.S. Hotel Holdings Co., Ltd. (current)

May 2019

Director and Chairman of Huis Ten Bosch Co., Ltd.

Nov. 1986

Joined the Company

Jan. 2010

Director of the Company; In charge of West Japan Area Sales; General Manager of Kansai Area Sales Division

Feb. 2014

Director of the Company; In charge of West Japan Area Sales

Director

Mar. 2014

Senior Managing Executive Officer; President of H.I.S. Japan, Chief Digital Officer (CDO)

Managing Director of the Company; In charge of Airline-related Purchasing/Arrangement, and Online Travel Business

Tatsuya NakamoriAugust 4, 1967

Apr. 2014

Managing Director of the Company; In charge of Airline-related Purchasing/Arrangement, and Online Travel Business; General Manager of HQ Procurement Division

(Note 3)

18

Nov. 2016

Managing Director of the Company; President of H.I.S. Japan

Jan. 2018

Aug. 2020

Director and Senior Managing Executive Officer of the Company; President of H.I.S. Japan Director and Senior Managing Executive Officer of the Company; President of H.I.S. Japan, Chief Digital Officer (current)

Director, Managing Executive Officer; In charge of Corporate Planning Division,

Global Business Strategy Division, Affiliate Management Division, Consolidated HR, CS & ES, General Affairs, and CSRDirector

Senior Executive Officer; Vice President & General Manager of Corporate Sales Division, H.I.S. Japan

Jun. 1996

Mar. 2014

Joined the Company

Jan. 2016

Corporate Officer of the Company; General Manager of Kansai Area Sales Division Director of the Company; In charge of Kansai, Chugoku, Shikoku, Kyushu Area Sales; In charge of Global Product Marketing; General Manager of Kansai Area Sales Division

Nov. 2016

Director of the Company; Vice President of H.I.S. Japan

Jan. 2018

Director and Managing Executive Officer of the Company; Vice President of H.I.S. Japan & General Manager of Domestic Travel Division

Masayuki

OdaJanuary 1, 1966

Feb. 2018

Director of the Company; Managing Executive Officer; In charge of Corporate Planning Division, Global Business Strategy Division, Global System Development Division; General Manager of Affiliate Management Division

Nov. 2018

May 2019

Director of the Company; Managing Executive Officer; In charge of Corporate Planning Division, Global Business Strategy Division; General Manager of Affiliate Management Division Director of the Company; Managing Executive Officer; In charge of Corporate Planning Division, Global Business Strategy Division, Affiliate Management Division, HQ HR Division, CS & ES, General Affairs, and CSR

January 2021

Director of the Company; Managing Executive Officer; In charge of Corporate Planning Division, Global Business Strategy Division, Affiliate Management Division, Consolidated HR, CS & ES, General Affairs, and CSR (current)

Apr. 1984

Aug. 1993

Joined Japan Ground Self-Defense Force Joined the Company

May 1998

May 2000

Assistant Manager of Kanto Sales Division Manager of HQ President's Office

July 25, 1961

Sep. 2001

Nov. 2004

Oct. 2005

Nov. 2005

Jan. 2020

Manager of HQ HR Division Manager of Kansai Sales Division Advisor to KYUSHU INDUSTRIAL TRANSPORTATION CO., LTD. (currently Kyushu Sangyo Kotsu Holdings Co., Ltd..) Representative Director and President of Kyushu Sangyo Kotsu Holdings Co., Ltd. (current) Director of the Company (part-time) (current)Apr. 1993

Mar. 2014

Joined the Company

Corporate Officer of the Company; Manager of Kanto Sales Division; Manager of Kanto Web Business Division; Manager of Kanto Corporate Sales and Group Travel Division

Jan. 2016

Director of the Company; In charge of East Japan Area Sales; General Manager of Kanto Area - Overseas Travel Division

Atsushi YamanobeMarch 18, 1970

Nov. 2016

Director of the Company; Vice President of H.I.S. Japan

Jan. 2018

Director and Senior Executive Officer of the Company; Vice President and General Manager of Kansai Area Sales Division, H.I.S. Japan

Mar. 2018

Director of the Company; Senior Executive Officer; Vice President & General Manager of Corporate Travel Sales Division, H.I.S. Japan

Nov. 2019

Director of the Company; Senior Executive Officer; Vice President & General Manager of Corporate Sales Division, H.I.S. Japan (current)

Term of office

Share ownership (thousands)

(Note 3)

3

(Note 3)

-(Note 3)

3

Name

Term of office

Jul. 1969

Jul. 1995

Jul. 2001

Joined Tokio Marine & Fire Insurance Co., Ltd. Director, Tokio Marine Medical Service Co., Ltd. Compliance Officer, Tokio Marine Anshin Life Insurance Co., Ltd.

Jun. 2003

Director, HABA Laboratories, Inc.

August 2, 1946

Dec. 2007

Director and President, Shinshu Pharmaceutical, Inc.

(Note 5)

Jul. 2011

Advisor, Unicolloid Co., Ltd. Advisor, Merci Daiki Co., Ltd.

Jun. 2019

Jan. 2021

Executive Director, Showa Kaikan (current) External Director serving as Audit & Supervisory Committee Member of the Company (current)

Feb. 1988

Joined the Company

May 2000

Assistant Manager, Accounting Department, Kanto Area Sales Division

Director, Full-time Audit & Supervisory Committee Member

Apr. 2008

Accounting Group Leader, HQ Accounting Division

Sonoko SekitaJuly 23, 1965

Dec. 2012

Seconded to H.I.S. MANAGEMENT SERVICES SDN.BHD. as Director and Manager of Accounting

(Note 4)

25

Jan. 2015

Jan. 2016

Full-time Corporate Auditor of the Company Director serving as Audit & Supervisory Committee Member of the Company (current)Total

18,675

(Notes)

• 1. Directors serving as Audit & Supervisory Committee Members Tsunekazu Umeda and Atsushi Nabeshima are External

  Directors.

• 2. Relative within the second degree of kinship of Representative Director, Chairman and President Hideo Sawada.

• 3. Term of office extends until the conclusion of the General Meeting of Shareholders for the last business year within one year from the conclusion of the General Meeting of Shareholders held on January 27, 2021.

• 4. Term of office extends until the conclusion of the General Meeting of Shareholders for the last business year within two years from the conclusion of the General Meeting of Shareholders held on January 29, 2020.

• 5. Appointed as a substitute to replace a resigning Audit & Supervisory Committee Member at the General Meeting of Shareholders held on January 27, 2021. In accordance with the provisions in the Articles of Incorporation, the term of office extends until the conclusion of the term of the preceding Audit & Supervisory Committee Member (two years beginning at the conclusion of the General Meeting of Shareholders held on January 29, 2020).

• 6. The Company has instituted a corporate officer system with the aim of enhancing the business execution structure.

  Names and positions of Corporate Officers (excluding Corporate Officers who concurrently serve as Director) are as follows.

2) Basic thinking on the number and appointment status of External Directors; standards and policies regarding independence of External Directors

• a) Basic thinking on the number and appointment status of External Directors

  At present, the Company has two External Directors, both of whom have been appointed as Audit & Supervisory Committee Members (Director serving as Audit & Supervisory Committee Member). In addition, provided there is a qualified candidate, the Company will consider the appointment of an External Director not serving as an Audit & Supervisory Committee Member.

  External Director and Audit & Supervisory Committee Member Tsunekazu Umeda, formerly a partner at Arthur Andersen and Company, representative partner of Eiwa Audit Corporation (currently KPMG AZSA LLC), and founder of the Umeda Certified Public Accountant Office, possesses a wealth of experience and knowledge as a certified public accountant regarding finance and accounting. In addition to being involved in corporate management, Mr. Umeda has experience with the Company as an external corporate auditor under the Board of Corporate Auditors structure, and continues to supervise the Company's management based on his accumulated experiences, knowledge and insight from an independent and objective perspective, fulfilling his duties as a member of the Audit & Supervisory Committee.

  External Director and Audit & Supervisory Committee Member Atsushi Nabeshima, appointed on January 27, 2021, has extensive experience and knowledge from taking part in the management of a large traditional company, Tokio Marine & Fire Insurance Co., Ltd., and a venture-type listed company, HABA Laboratories, Inc. He is expected to provide advice and suggestions related to the management of the Company from an independent and objective perspective, drawing on his deep insight in corporate ethics and corporate governance, and to fulfill the responsibilities of the Audit & Supervisory Committee. Accordingly, he was appointed as a Director and Audit & Supervisory Committee Member.

  The Company's current External Directors both satisfy the independence requirement stipulated by the Tokyo Stock Exchange (TSE) provision on independent directors. With the consent of the principals, the Company designated them as independent directors and submitted an Independent Director Notification to the TSE.

• b) Details on standards and policies regarding independence of External Directors

  Based on the requirements for external directors stipulated in the Companies Act and independence standards stipulated by the Tokyo Stock Exchange, the Company applies the following conditions (the amendment or elimination of which is based on a resolution of the Board of Directors) to determine whether the relevant External Directors is independent. At present, the Company has two External Directors, both of whom satisfy these conditions:

  • i) Principal is not at present, nor has never in the past been an executive director, executive officer, corporate officer, or employee (hereinafter, "Business Executor") of the Company, its subsidiaries or associates

  • ii) Principal is not a major shareholder (a shareholder listed among the top ten shareholders on the latest shareholder registry or a shareholder with a ratio of 10% or more of the total voting rights), nor does not currently belong to an organization that is a major shareholder

  • iii) Principal is not a Business Executor of a company, of which the Group is a major shareholder (a shareholder listed among the top ten shareholders on the latest shareholder registry or a shareholder with a ratio of 10% or more of the total voting rights)

  • iv) Principal is not a person belonging to a business partner engaged in transactions with the Group (totaling 2% of consolidated net sales of either party per year) in the three most recent fiscal years

  • v) Principal is not a Business Executor of a financial institution that is a major lender to the Group (lender of an amount equivalent to 2% or more of the Company's consolidated total assets)

  • vi) Principal is not a Business Executor of the Group's leading brokerage firm

  • vii) Principal is not a consultant, accounting expert, or legal expert who has obtained cash or other asset gains of 10 million yen or more on average in a single fiscal year other than officer remuneration from the Company, nor an accounting auditor or contracted adviser of the Company (if a corporation, association or group, the person belonging to said organization) in the last three fiscal years

  • viii) Principal is not a person currently belonging to a non-profit organization that has received from the Company a contribution amounting to 2% or more of its total income or ordinary profit in the last three fiscal years

  • ix) If the Principal has a history of belonging to an organization or business partner indicated in (ii) to (viii) above, he/she must be retired from said organization or business partner for three or more years

  • x) Principal is not a spouse or a relative within the second degree of kinship of (ii) to (ix) above

  • xi) In addition to the above, those with special circumstances preventing them from fulfilling their duties as external directors with independence, including possible conflicts of interest with the Company, etc.

3) Status of cooperation between External Directors and Internal Audit Division

The Company's two External Directors are both Directors serving as Audit & Supervisory Committee Members. As members of the Board of Directors, they supervise the execution of duties by Directors. As members of the Audit & Supervisory Committee, they exchange opinions and communicate with Directors, the Internal Audit Division, and the Internal Control Division in accordance with audit policies, standards, and plans defined by the Committee itself. Further, in addition to gathering information, they maintain mutual cooperation with the accounting auditor and engage in systematic auditing utilizing the internal control system.

4) Personal, capital, and trade relationships or other interests between External Directors and the Company

• a) Relationship of interest between Tsunekazu Umeda and the Company

  There are no personal, capital, or trade relationship, or other interests between Tsunekazu Umeda and the Company. The status of Company shareholdings by Tsunekazu Umeda is listed under "1) Status of Directors and other officers."

• b) Relationship of interest between Atsushi Nabeshima and the Company

  There are no personal, capital, or trade relationship, or other interests between Atsushi Nabeshima and the Company. The status of Company shareholdings by Atsushi Nabeshima is listed under "1) Status of Directors and other officers."