Corporate Governance

AS ONE has established Corporate Auditor Auditing Standards that are consistent with the auditing standards of the Japan Audit & Supervisory Board Members Association. One part of these standards requires our auditors to work as an independent organization and audit the performance of the directors on behalf of the
shareholders. In performing this audit, auditors are responsible for helping ensure the sound and sustainable
growth of AS ONE as well as its group companies along with the medium and long-term creation of corporate
value. These standards also pave the way to achieving another goal, namely maintaining a sound corporate
governance system that earns the trust of the public. All of AS ONE’ s auditors have a strong commitment to
fulfilling the obligations of the important job they have been tasked with.
Two key strengths of AS ONE are its powerful catalog sales business model backed by a management
philosophy that takes innovation and creation to heart along with the consistent growth and earnings this
business model generates. To build on these strengths, AS ONE is working as one to achieve the goals set in
its five-year medium-term management plan, Project NANA. This year marks the plan’ s final year, and we are
working with a focus on achieving faster growth and higher profitability as we maximize shareholder value.
Working against this backdrop and with an eye to the next five-year management plan, I will continue to leverage the experience and knowledge I’ ve gained in my career along with the information I’ ve gleaned while serving as a full-time corporate auditor in order to perform accurate audits that include avoiding risk factors in order to help AS ONE continue to grow.
I will continue to work with my peers on the Board of Auditors to carry out comprehensive audits. Mr. Matsuo
has experience in the banking industry and is a skilled manager while Mr. Mihara brings to the table his
expertise in finance and accounting as a certified public accountant and tax accountant.
I also plan to build even closer ties with outside directors, accounting auditors, the internal audit department,
and the Board of Auditors so that we can perform audits of even greater depth.
I am determined to contribute to the sustainable growth of AS ONE and its corporate value by diligently
performing my duties as a corporate auditor and, as one more way to meet the expectations of shareholders,
will also help build a sound corporate governance system.

Corporate Governance System

1. Outline of the Corporate Governance System

The Company’s basic policy on corporate governance is to pursue management efficiency in the aim of maximizing corporate value, thoroughly ensure corporate ethics, and strive to enhance management transparency. In these ways, we aim to bring the trust our stakeholders have in us to new heights.
We are a company with auditors that has general meetings of shareholders, Board of Directors, and Board of Auditors.
The Board of Directors is made up of eight directors (two of whom are outside directors). This small number is intended to encourage lively debate and swift decision-making. The Board of Directors makes decisions related to management policy, matters provided by laws and regulations and other important matters related to management.The board also supervises the execution of duties by directors. The Board of Auditors is composed of three auditors (two of whom are outside auditors). The board audits and supervises the status of the execution of duties by directors from an objective standpoint and seeks to enhance the management supervisory function.

Corporate Governance Structure

2. Reason for Employing a Corporate Governance System

We have appointed two outside directors and two outside auditors in the aim of reinforcing the oversight of the execution of operations and enhancing the fairness of corporate activities. We have adopted the above-mentioned corporate governance system because we believe it is appropriate given our company’s size and our operations.

3. Internal Control System

Our internal control system is intended to ensure that the execution of duties by directors complies with all relevant laws and regulations and our Articles of Incorporation, as well as to ensure the appropriateness of other corporate operations. This system is established by resolutions of the Board of Directors.
Executive directors oversee individual operating divisions while performing everyday duties or supervise individual business management divisions as assigned by the Board of Directors. Responsibility and authority over everyday operations are specified in internal regulations. The president and general managers receive monthly reports from each division as well as discuss and monitor progress of operations at the Management Strategy Committee meetings and general managers’ meetings.

4. Risk Management System

Our Risk Management Committee oversees overall risk management. Also our Information Security Committee implements various information security measures. In response to product quality risk, we have obtained ISO 9001 certification and created a quality management system. We have also signed an advisory agreement with a law firm so that we can get advice on compliance-related issues when necessary.

5. Systems Ensuring Appropriate Operations at the Reporting Company’s Subsidiaries

The Risk Management Committee oversees risk management operations at our subsidiaries and makes decisions on basic risk management policies, risk management structure, and other important matters.
The committee identifies, analyzes, and assesses the risks inherent in subsidiaries based on reports from their directors and implements appropriate countermeasures. It also overseas and regularly reviews risk management at subsidiaries.

6. Overview of Liability Limitation Agreements

As provided for in Paragraph 1, Article 427 of the Companies Act, we have signed liability limitation agreements with outside directors and auditors. The agreements limit their exposure to the liability specified in Paragraph 1, Article 423 of the Companies Act. The cap on liability for damages under the agreement is the amount prescribed by law. This limitation applies only to liability arising from duties performed by an outside director or auditor in good faith and without gross negligence.

Internal Audits and Audits by Auditors

The Internal Audit Department (consisting of three auditors) serves as the locus for promoting internal audits. The office conducts regular audits of each division based on the audit plan and performs follow-up audits of specified divisions, when necessary. Through this process, the office performs audits to determine the appropriateness of operations, strives to promote operational improvements, and works with the Administration Division (which provides an internal controlfunction) to verify the effectiveness of internal controls. A corporate auditor and two part-time auditors perform audits throughout the year based on a plan and in line
with the audit policy, assignment of duties, etc. specified by the Board of Auditors. All auditors attend Board of Directors meetings where they ask questions to clarify points and express opinions, as necessary. In particular, the corporate auditor conducts audits of individual divisions throughout the year and participates in important meetings, including those of the Management Strategy Committee and general managers,to obtain information from directors and employees,ask them for reports, and express opinions, as necessary. The Board of Auditors exchanges opinions with the accounting auditor and the Internal Audit epartment,as necessary, as they work together to improve the effectiveness of audits. One of the auditors,Hideaki Mihara, is a certified public accountant and tax accountant with a high level of expertise in
finance and accounting.

Outside Directors and Outside Auditors

< Conflict of Interest >
AS ONE has two outside directors and two outside auditors.
Joji Suzuki, Outside Director, holds 900 shares of company stock. There are no business relationships or other
special interests between Mr. Suzuki and the company.
Kazuhiko Odaki, Outside Director, holds no shares in the company. There are no business relationships or other
special interests between Mr. Odaki and the company.
Kazutaka Suzuki, Outside Auditor, holds 300 shares of company stock. He is a former employee of Resona
Bank, Limited, with which the company conducts business transactions. He resigned from the bank six years
ago. The company’s business relationship with Resona Bank includes the borrowing of funds. Resona Bank
holds 926,425 shares in the company.
Hideaki Mihara, Outside Auditor, holds 100 shares of company stock. There are no business relationships or
other special interests between Mr. Mihara and the company.

< Functions and Roles Outside Directors and Outside Auditors Play in Corporate Governance >
Joji Suzuki, Outside Director, has a background in global business management on the corporate executive
level. He utilizes his extensive experience and broad insights as a manager to provide effective advice on management.
Kazuhiko Odaki, Outside Director, has experience at the Ministry of Economy, Trade and Industry and as a university
economics professor. He utilizes this diverse experience and knowledge to provide effective advice on
Kazutaka Suzuki, Outside Auditor, utilizes his extensive experience and insights gained in the financial sector to
provide oversight and effective advice on management.
Hideaki Mihara, Outside Auditor, utilizes his specialized knowledge and extensive experience as a certified
public accountant and tax accountant to provide oversight and effective advice on management.

< Independence Criteria >
To ensure the levels of objectivity and transparency necessary for appropriate governance of the company, AS
ONE believes that outside directors and outside auditors (hereinafter, collectively referred to as “outside officers”)
should be as independent of the company as possible. Outside officers are deemed to be independent
when none of the descriptions below apply to them.

  1. A party who does not meet the requirements prescribed in the law
  2. A party whose major business partners include the AS ONE Group (with 2% or more of its annual consolidatednet sales for the most recent business year generated from payments made by the Group), or its parentcompany or major subsidiary or, if the party is a corporate entity, executive director, executive officer, executiveemployee, manager, or other employee of the entity
  3. A party who is a major business partner (excluding 4) of the AS ONE Group (with 2% or more of the Group’sannual consolidated net sales for the most recent business year generated from payments made by the party),or its parent company or major subsidiary or, if the party is a corporate entity, executive director, executiveofficer, executive employee, manager, or other employee of the entity
  4. A director, auditor, accounting advisor, executive officer, executive employee, manager, or other employee ofa financial institution or other large-scale lender indispensable to the Group’s raising of funds, on which theGroup’s dependence is so high as to preclude alternatives, or its parent company or major subsidiary
  5. A consultant, certified public accountant or other accounting professional, attorney or other legal professional,or other specialist who has received money or other assets averaging ¥10 million or more annually from theGroup over the past three years other than officer compensation
  6. A person who receives contributions or subsidies totaling ¥10 million or more annually from the Group
  7. A major shareholder (a shareholder directly or indirectly holding 10% or more of total voting rights) of ASONE, or if such major shareholder is a company, a director, auditor, accounting advisor, executive officer,commissioner, executive employee, manager, or other employee of such major shareholder or its parent companyor major subsidiary
  8. An accounting auditor of the Group or an employee, partner or other person belonging to a tax accountingfirm for the Group
  9. A director, auditor, accounting advisor, executive officer, or executive employee of a company, or its parentcompany or subsidiary for which the Group’s employee serves as a director (regardless of whether it isfull-time or part-time)
  10. A family member within two degrees of kinship with a director or auditor of the Group
  11. A person to whom any of the descriptions in 1 through 10 has applied in the last five years
  12. Any other person who could be construed as having a conflict of interest with any of AS ONE’s generalshareholders due to a reason other than those described in 2 through 11 above

AS ONE believes that the four outside officers, Joji Suzuki, Kazuhiko Odaki, Kazutaka Suzuki, and Hideaki Mihara, are capable of supervising conduct as well as objectively and neutrally monitoring and have no conflict of interest with the company’s general shareholders. Accordingly, the company has designated them as independent officers pursuant to the provisions of the Tokyo Stock Exchange and filed a notification to this effect.

< Cooperation >
In addition to gathering the necessary information at Board of Directors meetings and asking questions as needed, the outside directors exchange opinions and cooperate with outside auditors. The outside auditors gather information through exchanges of opinions with the Internal Audit Department and accounting auditor at Board of Auditors meetings. In addition, the outside auditors frequently exchange opinions and work closely with the corporate auditor and other Administration Division personnel.