(Translation)

Please note that this English version is not an official translation of the original Japanese document. In cases
where any differences occur between the English version and the original Japanese version, the Japanese version
shall prevail. This translation may be used only for reference purposes.

Corporate Governance Report
Last Update: November 10, 2020
YUSHIN PRECISION EQUIPMENT CO., LTD.
Mayumi Kotani, President and Representative Director
Contact: Kota Oda, Director, General Manager of General Affairs Dep.
Securities Code: 6482
https://www.ype.co.jp
The corporate governance of YUSHIN PRECISION EQUIPMENT CO., LTD. (the “Company”) is described below.

I.

Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other
Basic Information

1. Basic Views
The Company aims at achieving sustainable growth and maximizing the enterprise value for medium- andlong-term under the management philosophy with obtaining credibility from all stakeholders surrounding us
including shareholders. We strive to strengthen corporate governance with the basic policy of following fiveitems.
1.
2.
3.
4.
5.

The Company respects the rights of shareholders and ensures equality, as well as strives to improve theenvironment for executing rights appropriately and protect rights.
The Company strives to sincerely cooperate with stakeholders excluding our shareholders with good
sense.
The Company strives to ensure the transparency by appropriately making disclosure according to laws
and regulations and voluntarily providing information excluding the disclosure.
The Board of Directors strives to execute its roles and duties appropriately for transparent/fair andflexible decision-making.
The Company strives to positively communicate with shareholders after sharing the direction of its stable
growth for long-term.

[Reasons for Non-compliance with the Principles of the Corporate Governance Code]All principles are stated based on the code revised in June 2018.
[Supplementary Principle 4-1-3 Roles and Duties of the Board of Directors]
Regarding the training of successors, the Board of Directors will be involved actively, receiving advice from
Nomination and Remuneration Committee, and the Company will promote the clarification of necessary
requirements and the creation of an environment for training.
[Supplementary Principle 4-2-1 Roles and Duties of the Board of Directors]
Subjects of consideration include introduction of the compensation linked to medium- and long-term
performance and stock compensation, and the ratios of base salary and performance-linked compensation,and cash salary and stock compensation after the introduction.
The company held a study group on the stock compensation system for internal executives, and the Company
is working on concrete examination to design a compensation system based on objective and transparent
procedures.
Regarding the level of remuneration, the Company set up an amount that is enough to appoint talented
personnel, motivate them and retain them.

-1-

(Translation)[Disclosure Based on the Principles of the Corporate Governance Code]All principles are stated based on the code revised in June 2018.
[Principle 1-4: Strategic Shareholdings]
The Company may hold the shares of business partners for the purpose of sustainable increases in enterprisevalue, keeping and strengthening business relations, and stable business management. Among holding shares,
the main shares are verified in respect of economic rationality for medium- and long-term based on risk andreturn and future prospect. The results of verification are periodically reported to the Board of Directors. In
FY 2019, as a result of the verification, the Company confirmed that there is validity of possession of all theshares held.
In response to future changes in circumstances, the Company will review such as reducing the number ofshares held if it is not deemed adequacy of possession.
Regarding the exercise of voting rights of strategic shareholdings, the Company makes judgments based on
the following two points.
(1) Will it increase the corporate value of investee companies in the medium to long term and contribute tosustainable growth? (Financial soundness, no illegal acts done)(2) Will the corporate value of the Company improve and lead to shareholder's medium- and long-term
benefits?
[Principle 1-7: Related Party Transactions]
The Company’s “Regulations of the Board of Directors” provides that approval for competitive business andconflict-of-interest transactions by Directors require the resolution of the Board of Directors. The same isapplicable to the case where counterparty is a major shareholder.
[Principle 2-6: Fulfilling Function as the Asset Owner of Corporate Pensions]Regarding management of conflicts of interest that may arise between the beneficiaries of the corporate
pension and the Company, the Basic Policy on Investment is established based on the guidelines of the
Ministry of Health, Labor and Welfare to maximize the benefit of the beneficiaries. In addition, the Company
has in-house responsibilities regarding the operation of corporate pension funds, and a consultation system toexternal specialized agencies.
[Principle 3-1: Enhancement of Disclosure](1) Management philosophy, strategy and medium-term management plan is disclosed on “the Company’s
website,” “Securities Report,” “Investor Presentation Material” and others.
(2) The basic policy for corporate governance is disclosed on “the Company’s website” and “Corporate
governance report.”(3) The Company’s remuneration of executives consists of basic salary, which is not linked to performance,and performance-linked remuneration, which depends on degree of achievement of performance goals.
External Directors and Corporate Auditors, who are independent of business execution, receive only
basic salary. Regarding the procedures of the determinations for the remuneration, a resolution is adopted
on the gross amount of remuneration of Directors and Corporate Auditors at the General Meeting of
Shareholders, and then the compensation system, etc. for Directors are discussed by the Nomination andRemuneration Committee, and a report or opinion is given to the Board of Directors, and is determinedby the Representative Director whose discretion the Board of Directors leave the amount to.
(4) The Company has the policy for nominating candidates of Directors and Corporate Auditors andappointing Executive Officers that those qualified to perform the duties and responsibility of Directors
and Corporate Auditors shall be nominated/appointed sufficiently taking account of personality andinsights. The External Directors and Corporate Auditors are expected to perform the function and role ofobjective and appropriate oversight or audits based on technical knowledge, and they are appointed basedon the basic view that there are no threats of conflicts of interest with general shareholders. They aredisclosed on the “Notice of Convocation for General Meeting of Shareholders” and “Securities Report”.
The selection of candidates of Directors and Corporate Auditors is discussed by the Nomination andRemuneration Committee, and a report or opinion is given to the Board of Directors, and is determinedby the Board of Directors. The appointment of Directors and Corporate Auditors is subject to theresolution of the General Meeting of Shareholders. The policies and procedures for the appointment /dismissal of Directors and Corporate Auditors are stipulated in the "Regulations of the Board of
Directors".

-2-

(Translation)(5) For the appointment / dismissal of Directors and Corporate Auditors, and the nomination of Directors /Corporate Auditors’ candidates, explanation of each of appointment / dismissal and nomination will be
disclosed at the “Notice of Convocation for General Meeting of Shareholders.”[Supplementary Principle 4-1-1: Roles/Duties of Board of Directors]
The Company defines the matters determined by a resolution at the Board of Directors in “Regulations of theBoard of Directors provide.” The regulations provide that significant matters on the General Meeting of
Shareholders, the general management, stocks, organization and personnel affairs, Directors and businessexecution, other matters stipulated in laws and regulations including the Companies Act and significant
matters equivalent to these matters shall be decided by a resolution at the Board of Directors. Meanwhile, toaim at clarifying the system of management responsibility and accelerating decision-making through transferof the authority, the Company introduced the executive officer system on April 1, 2003, from a viewpoint of
separating the function of management monitoring from business execution. The Company now has 2 nonDirector Executive Officer.
[Principle 4-9: Criterion for Independence of and Qualification for Independent External Director]
The Independent External Directors of the Company are expected to perform the function and role of objective
and appropriate oversight, and give advice based on technical knowledge, and are appointed based on thebasic view that there are no threats of conflicts of interest with general shareholders. The Company has
established its own criterion for the independence, given the independence criterion established by thefinancial instruments exchange.
[Supplementary Principle 4-11-1: Preconditions for Ensuring Effectiveness of Board of Directors and Boardof Corporate Auditors]
Under rapidly changing business environment and advancement of globalization, the Company appoints
candidates of Directors with a focus on balance among knowledge, experience and expertise, diversity andglobal viewpoints. Now 10 Directors, including External Directors, take office. The Company will keep thenumber of the board members that immediate decision-making is conducted with each member providing his
or her expertise and exchanging opinions each other.
[Supplementary Principle 4-11-2: Preconditions for Ensuring Effectiveness of Board of Directors and Boardof Corporate Auditors]
Concurrent holding of positions of other companies by External Directors and Corporate Auditors is annually
disclosed at “the Notice of Convocation for the General Meeting of Shareholders,” “Securities Report” and“Corporate Governance Report.” No Executive Directors concurrently serve as an officer of other listedcompanies, excluding those of our group, and the system is established that Executive Directors can be
devoted on works of Directors. Full-time Corporate Auditor does not concurrently serve as an officer of othercompanies, and the system is established that they can be devoted to their work at all times.
[Supplementary Principle 4-11-3: Preconditions for Ensuring Effectiveness of Board of Directors and Boardof Corporate Auditors]
External Directors now analyze and evaluate whole of the Board of Directors. To further improve the functionsof the Board of Directors, analysis and evaluation of effectiveness of the whole Board including their methods
are currently examined.
[Supplementary Principle 4-14-2: Training of Directors and Corporate Auditors]
Given the roles and duties expected and qualification and knowledge required of Directors and Corporate
Auditors, the Company holds a training session for all Directors, Corporate Auditors and Executive Officers
once or more a year. The Company also gives explanations about the corporate profile and holds plant tours
for External Directors and Corporate Auditors when they take office as well as provides and arranges
opportunities to receive the training necessary for each Director or Corporate Auditor and owes the expenses
for the training.

[Principle 5-1: Policy for Constructive Communication with Shareholders](1) In the Company, the Representative Director governs the general communication with shareholders.
(2) The Corporate Planning Department, which is directly under the Representative Director, is in charge ofIR and cooperates with the relevant departments for reasonable and smooth communication fromshareholders.
-3-(Translation)(3) The Company holds briefings for analysts and institutional investors on financial results for a full year
and an interim period as well as makes individual visits to institutional investors, holds small-size
meetings and accepts telephone interviews as needed. The Company also participates in securities
companies- and consulting companies-hosting briefings for individuals once a year at least.
(4) Opinions received at communication with shareholders are appropriately fed back at the Board of
Directors meeting.
(5) Insider information is appropriately administrated according to the Disclosure Policy.
(Disclosure Policy: https://ir.ype.co.jp/en/governance/disclosurepolicy.html)

2. Capital Structure Updated
Foreign Shareholding Ratio

Less than 10%[Status of Major Shareholders] Updated
Name / Company Name
Yushin Industry Co., Ltd.

Number of Shares Owned
11,992,378

Percentage (%)
35.23

Takayo Oda
The Master Trust Bank of Japan, Ltd.
(Trust Account)
Miki Murata
Custody Bank of Japan, Ltd. (Trust Accounts)
The Kyoto Chuo Shinkin Bank, Ltd.

1,872,532

5.50

1,857,600

5.46

1,847,032
1,550,200
1,088,974

5.43

Mayumi Kotani

1,040,202

3.06

849,986
750,700
704,598

2.50

MUFG Bank, Ltd.
Custody Bank of Japan, Ltd. (Trust Accounts)
The Bank of Kyoto, Ltd.
Controlling Shareholder (except for Parent Company)-

Parent Company

None

Supplementary Explanation Updated
Foreign Shareholding Ratio and Status of Major Shareholders are stated as of September 30, 2020.

-4-

4.55
3.20

2.21
2.07

(Translation)

3. Corporate Attributes

Fiscal Year-End

Tokyo Stock ExchangeFirst Section
MarchType of Business

Machinery

Listed Stock Market and Market Section

Number of Employees (consolidated) as of the End of thePrevious Fiscal YearSales (consolidated) as of the End of the Previous Fiscal Year
Number of Consolidated Subsidiaries as of the End of thePrevious Fiscal Year

From 500 to less than 1000
From ¥10 billion to less than ¥100 billion
From 10 to less than 50

4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling
Shareholder
5. Other Special Circumstances which may have Material Impact on Corporate Governance--5-(Translation)

II. Business Management Organization and Other Corporate Governance Systems regarding
Decision-making, Execution of Business, and Oversight in Management
1. Organizational Composition and Operation
Company with Board of Corporate Auditors

Organization Form

[Directors]
Maximum Number of Directors Stipulated in Articles of Incorporation

10

Term of Office Stipulated in Articles of Incorporation

1 yearChairperson of the Board

President

Number of Directors

10

Appointment of External Directors

Appointed

Number of External Directors

3

Number of Independent Directors

2External Directors’ Relationship with the Company (1)NameAttribute

Relationship with the Company*
a

b

c

d

e

f

g

h

i

Yasuo Nishiguchi
From another company○△
Hiroshi Matsuhisa
Academic△
Reiko Nakayama
From another company* Categories for “Relationship with the Company”* “○” when the director presently falls or has recently fallen under the category;“△” when the director fell under the category in the past
* “●” when a close relative of the director presently falls or has recently fallen under the category;“▲” when a close relative of the director fell under the category in the past

j

k

○

a. Executive of the Company or its subsidiaries
b. Non-executive director or executive of a parent company of the Company
c. Executive of a fellow subsidiary company of the Company
d. A party whose major client or supplier is the Company or an executive thereof
e. Major client or supplier of the listed company or an executive thereof
f. Consultant, accountant or legal professional who receives a large amount of monetary consideration or otherproperty from the Company besides compensation as a director/Corporate Auditor
g. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is alegal entity)
h. Executive of a client or supplier company of the Company (which does not correspond to any of d, e, or f)(the director himself/herself only)
i. Executive of a company, between which and the Company external directors/Corporate Auditors aremutually appointed (the director himself/herself only)
j. Executive of a company or organization that receives a donation from the Company (the director
himself/herself only)
k. Others-6-

(Translation)

External Directors’ Relationship with the Company (2)Name

Designation as
Independent
Director

Yasuo
Nishiguchi

HiroshiMatsuhisa

Supplementary Explanation of
the RelationshipYasuo Nishiguchi had served
as the Representative Director of
KYOCERA Corporation which is
our client. The Company has
insignificant transactions withKYOCERA Corporation, andthere are no importance affecting
on the independence.
Currently, HANDY Co., Ltd.,
that he is the Representative
Director, and the Company haveentered into advisory agreements
to receive guidance and advice on
future management policies, etc.

○

The instruction contract
concerning R&D was entered into
between the Company andHiroshi Matsuhisa, but theCompany had insignificant
transactions with him and there
are no importance affecting on the
independence.

-7-

Reasons of Appointment
Yasuo Nishiguchi has held such
positions as the President andRepresentative Director, and the
Chairman and Representative Director
at KYOCERA Corporation. Based on
his knowledge and experience ingeneral management cultivatedthrough prominent corporate positions,
we asked him to give the Company
advice and supervision of operations
from an independent position. Thus,
because we can expect to strengthen
the function of the Company’s Boardof Directors, the Company appointed
Yasuo Nishiguchi as an External
Director of the Company.
The transaction with HANDY
Corporation and the Company falls
under the conflict of interest
transactions, and he is not designatedas an independent officer because hedoes not meet the independence
standards of external officers
determined by the Company, but hemeets the requirements of the external
director, the Company judged that heis appropriate as an External Director.
Based on the specialized knowledge
by the person with academic standing
in engineering of Kyoto University, we
asked him to give the Company advice
and supervision of operations from an
independent position. Thus, because
we can expect to strengthen thefunction of the Company’s Board of
Directors, the Company appointed
Hiroshi Matsuhisa as an External
Director of the Company.
He is appointed as an Independent
Officer of the Company because hemeets criteria of independence as anexternal officer established by theCompany and there are no risks inconflicts of interest with generalshareholders.

(Translation)

Reiko
Nakayama○

The Company had insignificant
transactions with Mandom
Corporation, that Reiko
Nakayama is the Outside Director,
and there are no importanceaffecting on the independence.

Based on her experience of
securities company underwriter, andmanagement executive officer andexternal officers of operatingcompanies, we asked her to give theCompany advice and supervision ofoperations from an independent
position. Because this will strengthen
the function of the Company’s Boardof Directors, the Company appointed
Reiko Nakayama as an External
Director.
She is appointed as an Independent
Officer of the Company because shemeets criteria of independence as anexternal officer established by theCompany and there are no risks inconflicts of interest with generalshareholders.

Voluntary Establishment of Committee(s) Corresponding to Nomination
Committee or Remuneration Committee

Yes

Establishment of optional advisory committees, committee composition, and attributes of the chairperson
UpdatedCommittee members

Optional committee equivalent toNomination Committee
Nomination and Remuneration
Committee
7

Optional committee equivalent toRemuneration Committee
Nomination and Remuneration
Committee
7

Full-time members

00Internal directors

22

Outside directors

33Outside experts

00

Others22Chairperson

External Director

External Director

Committee

Supplemental Remarks
The Nomination and Remuneration Committee has been established as an advisory body aiming to increase
the objectivity, appropriateness and transparency of the composition of the Board of Directors and thenomination and remuneration of Directors, etc. to link the medium- to long-term growth of the Company
group and increase its corporate value.

-8-

(Translation)

Two “other” members of the committee are Outside Corporate Auditors.
[Corporate Auditor]
Establishment of Board of Corporate Auditors
Maximum Number of Corporate Auditors Stipulated in Articles ofIncorporation

Established

Number of Corporate Auditors

44

Cooperation among Corporate Auditors, Accounting Auditors and Internal Audit Departments
Regarding the cooperation among Corporate Auditors and Accounting Auditors, Corporate Auditors receive
the explanation about the audit plan of Accounting Auditors as well as reports on a review at the end of thequarter and the proceedings of the audit at the year-end audit.
As for results of the audit by the Internal Audit Office, Corporate Auditors also inspect the internal audit
reports and exchange opinions as necessary.
Full-time Corporate Auditor is voluntarily present at internal auditing and attends a briefing to the president
held by Internal Audit Office.
Appointment of External Corporate Auditors

Appointed

Number of External Corporate Auditors

2

Number of Independent Corporate Auditor

2

External Corporate Auditors’ Relationship with the Company (1)NameAttribute

Relationship with the Company*
a

b

c

d

e

f

g

h

i

j

k

l

m

Hiroho Kamakura
CPA△
Michitoshi
Fromanother△Morimoto
company* Categories for “Relationship with the Company”* “○” when the director presently falls or has recently fallen under the category;“△” when the director fell under the category in the past
* “●” when a close relative of the director presently falls or has recently fallen under the category;“▲” when a close relative of the director fell under the category in the pasta. Executive of the Company or its subsidiaryb. Non-executive director or accounting advisor of the Company or its subsidiaries
c. Non-executive director or executive of a parent company of the Company
d. Corporate Auditor of a parent company of the Company
e. Executive of a fellow subsidiary company of the Company
f. A party whose major client or supplier is the Company or an executive thereof
g. Major client or supplier of the Company or an executive thereofh. Consultant, accountant or legal professional who receives a large amount of monetary consideration orother property from the Company besides compensation as a Corporate Auditor
i. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is alegal entity)
j. Executive of a client or supplier company of the Company (which does not correspond to any of f, g, or h)(the Corporate Auditor himself/herself only)
k. Executive of a company, between which and the Company external directors/Corporate Auditors aremutually appointed (the Corporate Auditor himself/herself only)
l. Executive of a company or organization that receives a donation from the Company (the Corporate Auditor
himself/herself only)-9-(Translation)

m. Others
External Corporate Auditors’ Relationship with the Company (2)Name
HirohoKamakura

Michitoshi
Morimoto

Designation as
Independent
Corporate
Auditor○○Supplementary Explanation of
the Relationship
Hiroho Kamakura is acertified public accountant andhad worked for the Company’s
Accounting Auditor Deloitte
Touche Tohmatsu LLC in thepast.
The Company has
insignificant transactions with
Deloitte Touche Tohmatsu
LLC, and there are noimportance affecting on the
independence.

The consulting contract
concerning ERP system wasentered into between
Michitoshi Morimoto and theCompany in the past.
The Company had
insignificant transactions withhim, and there are noimportance affecting on the
independence.

[Independent Directors/Corporate Auditors]
Number of Independent Directors/Corporate
Auditors

4

Matters relating to Independent Directors/Corporate Auditors[Incentives]
Incentive Policies for Directors

None

Supplementary Explanation- 10 -

Reasons of Appointment
Hiroho Kamakura was appointed
as an External Corporate Auditor of
the Company because the specialized
knowledge as a Certified Public
Accountant in finance and accounting
is expected to be put to effective use
for the auditing operation. The
Company believes that this must help
strengthen the Company’s audit
competence.
He is appointed as an Independent
Officer of the Company because hemeets criteria of independence as anexternal officer established by theCompany and there are no risks ofconflicts of interest with generalshareholders.
Michitoshi Morimoto was
appointed as an External Corporate
Auditor of the Company because thespecialized knowledge of corporate
information technology/systemstrategy is expected to be put toeffective use for the Company. Our
belief is that this must help
strengthen the Company’s audit
competence.
He is appointed as an Independent
Officer of the Company because hemeets criteria of independence as anexternal officer established by theCompany and there are no risks ofconflicts of interest with generalshareholders.

(Translation)

Directors’ bonuses are determined and Directors’ remuneration is revised in light of the performance of each
Director and business results of the Company.
Subjects of consideration include introduction of the compensation linked to medium- and long-term
performance and stock compensation, and the ratios of base salary and performance-linked compensation,and cash salary and stock compensation after the introduction.
Recipients of Stock Options
Supplementary Explanation[Director Remuneration]
Disclosure of Individual Directors’ Remuneration

No Individual Disclosure

Supplementary Explanation
The Company paid 177,490 thousand yen as remuneration to eight Directors for the fiscal year ended March
2020.
Policy on Determining Remuneration Amounts andCalculation Methods

Yes

Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods
A resolution is adopted on the gross amount of remuneration of Directors and Corporate Auditors at theGeneral Meeting of Shareholders, and then an amount of remuneration for each Director is discussed by the
Nomination and Remuneration Committee, and a report or opinion is given to the Board of Directors, and isdetermined by the Representative Director whose discretion the Board of Directors leave the amount to.
[Supporting System for External Directors and/or Corporate Auditors]
Regarding the information transfer to External Directors and Corporate Auditors, the system is establishedthat External Directors and Corporate Auditors can obtain information through reports filed with the monthlyheld Board of Directors meeting (monthly account settlement report, business reports from Directors andreports from senior staff) as necessary.
Full-time Corporate Auditor also informs External Corporate Auditors details of significant internal meetings.
The Corporate Planning Office, etc. respond as needed to assist External Directors and External Corporate
Auditors.

[Status of persons retired from Representative Director and President, etc.]
Names, etc., of advisors (“sodanyaku,” “komon,” etc.) who have formerly served as Representative
Director and President, etc.
Name―

Title/Position―――

Activity
Description

Working Arrangement /Conditions（Full-time / Part-time,
Compensation）

Date of Retirement
From President, etc.

Term of
Office

―――

――――

――――

――

- 11 -

(Translation)

Total number of advisors (“sodanyaku,” “komon,” etc.) who haveformerly served as Representative Director and President, etc.

0

Other Information-

2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration
Decisions (Overview of Current Corporate Governance System)(1) The Company has established a Nomination and Remuneration Committee, whose outline is describedin “1.Organizational Composition and Operation – [Directors]” in “II. Business Management
Organization and Other Corporate Governance Systems regarding Decision-making, Execution ofBusiness, and Oversight in Management” of this report.
(2) The Company’s Board of Directors, which consists of 10 Directors (including 3 External Directors),
determines the policy for business execution of the Company and oversees business execution by
Directors. The board monthly holds a meeting where all significant matters are submitted for discussion
and proceeding of business results is discussed to examine measures, etc.
External Directors offer opinions from an external and independent viewpoint and give useful advice
from a broad perspective at the meetings of the Board of Directors to manage and oversee generalmanagement while exchanging opinions with Corporate Auditors and Directors controlling the Internal
Control Department.
(3) In addition to the regular Board of Directors meeting, an executive meeting is weekly held. As a result,the information is shared by all executives about all significant matters on the Company and the systemis established to sufficiently discuss and immediately make decisions on significant management matters.
(4) The Company’s Board of Corporate Auditors consists of 4 members (including 2 External Corporate
Auditors). Each Corporate Auditor audits the business execution by Directors by attending significant
meetings, including the Board of Directors meetings and surveying the work and property according to
the audit policy and plan made by Board of Corporate Auditors. All Corporate Auditors attend the regular
Board of Directors meeting and full-time Corporate Auditor attends significant internal meetings,
including executive meetings and management meetings. The information is shared about significant
matters on the Company, and the system is established that Board of Corporate Auditors can accurately
audit business execution by Directors.
(5) From a viewpoint of the separation of management oversight function from business execution, theexecutive officer system was introduced on April 1, 2003. The Company has 2 non-Director Executive
Officers.
(6) Internal Audit Office, which is directly under the president, is in charge of internal audits. According to
the internal audit plan made at the beginning of the year, the department visits headquarters and all
domestic sales offices of the Company once a year and overseas representative offices and subsidiariesof the Company once a year to audit the general business activities and directly provides the president
with the internal audit report. To warrant effectiveness of internal audit, the department instructs audited
departments to improve business activities based on the audit results and requires them to report
proceedings of improvement without delay.
(7) As for Corporate Auditors’ audit, all Corporate Auditors attend the regular meetings of the Board of
Directors and the full-time Corporate Auditor attends significant internal meetings, including executive
meetings, to mainly audit violation of laws and regulations and the Articles of Association and facts that
could potentially hurt the interests of shareholders and the Company. And, in order to ensure theeffectiveness of the audit, Corporate Auditors attend the Board of Directors Meetings and required
significant meetings including management conference as well as read major approval documents andother significant documents concerning business execution and receives explanation from Directors andemployees of the Company and Directors of subsidiaries as necessary.

- 12 -

(Translation)(8) As for accounting audits, the Company have concluded an audit contract with Deloitte Touche Tohmatsu
LLC so they conduct audits. The CPA, Mitsuhiro Takasaki and Hideki Yasuda executed accounting audit
activities. 13 CPAs and 9 others were engaged in audit activities as an assistant.

3. Reasons for Adoption of Current Corporate Governance System
The system is established where determination of the policy for business execution by the Board of Directors,
which consists of members with a high degree of expertise and abundant experience, makes it possible toexecute all businesses appropriately and smoothly. Given a single business of the Company and current
business scale, the Company thinks the current system reasonable where a small number of Directors canconduct immediate decision-making and flexible business execution. In addition to this, strict audit of theBoard of Corporate Auditors including External Corporate Auditors with abundant expertise builds the system
to completely oversee management. The Company thinks that our corporate governance system sufficiently
works due to the above current systems.

- 13 -

(Translation)

III. Implementation of Measures for Shareholders and Other Stakeholders
1. Measures to Vitalize the General Shareholder Meetings and Smooth Exercise of Voting Rights
Early sending out of convocation notices forthe general meeting of shareholders
Scheduling AGMs Avoiding the Peak Day
Electronic voting

Participation in the Electronic Voting
Platform system and other efforts to improvean environment in which institutional
investors can exercise their voting rights
Providing Convocation Notice in English
Other

Supplementary Explanations
YUSHIN is working to send out the notice of convocation forthe ordinary general meeting of shareholders earlier than thelegal fixed date.
AGMs are held avoiding the Peak Day.
Shareholders can exercise their voting rights via the Internetby accessing from their computer, smartphone or mobile
phone.
YUSHIN uses a voting platform for institutional investors.

The convocation notice in English is available at theCompany’s website in English.
The convocation notice is delivered to shareholders and isposted on the Company’s website. At the general meeting ofshareholders, a presentation using a video projector is given
along with an explanation of the documents attached to the
convocation notice.

2. IR Activities
Supplementary Explanations

Explanation byRepresentative

Preparation and Publicationof Disclosure Policy

Regular Investor Briefings
for Individual Investors
Regular Investor Briefings
for Analysts andInstitutional Investors
Regular Investor Briefings
for Overseas Investors
Posting of IR Materials on
WebsiteEstablishment of
Department and/orManager in Charge of IR

The Company establishes and states the basic policy for
information disclosure, manner of timely disclosure, silent
period, third-party disclosure and financial forecast andpositioning of information disclosure at IR information siteon the website.
The Company participates in securities companies- andconsulting companies-hosting briefings for individuals oncea year at least
The Company holds briefings on financial results of a fullyear and an interim period as well as makes individual visits
to institutional investors, holds small-size meetings in Japanand accepts telephone interviews as needed.
The Company individually visits overseas investors mainlyin the United States, the United Kingdom and other areas.
Materials on briefings of financial results of a full year
(written in Japanese and English) and an interim period(written in Japanese and English), Business reports for
Shareholders (written in Japanese) and Annual Reports(written in English) are posted on the website.
Corporate Planning Office, which department is directly
under the Representative Director, is in charge of IR.

- 14 -

Yes

Yes

Yes

(Translation)

3. Measures to Ensure Due Respect for Stakeholders
Stipulation of Internal Rules for
Respecting the Position of Stakeholders
Implementation of Environmental
Activities, CSR Activities etc.

Supplementary Explanations
It is included in the management philosophy.
These activities are implemented as activities of ISO14001.

IV. Matters Related to the Internal Control System
1. Basic Views on Internal Control System and the Progress of System Development
The Company has established the basic policy of Internal Control System for the development of a system toensure that the execution of duties by Directors conforms to laws and regulations, and the Articles of Association
as well as other systems that ensure the properness of operations of the Company, as follows. (Board of Directors
Resolution on June 12, 2015) The main points of the basic policy are as follows.
1.

System to ensure that business execution of Directors and employees complies with laws and regulations
and the Articles of Association.
The Company raises the awareness for and holds training on legal compliance to increase awareness ofcompliance as well as establishes “Whistle-Blowing Regulations” providing the procedure for reporting
violations.

2.

System for keeping and managing the information on business execution of the Company’s Directors.
Information is kept and managed according to laws and regulations, and internal regulations (including“Document Regulations,” “Internal Information Management Regulations” and “Information System
Management Regulations”)

3.

Regulations on and other systems for risk management of losses of the Company and its subsidiaries.
Risk of currently estimated losses is managed by setting a committee and making discussion according
to degree of its significance. Events delivering losses to the Company would be reported to Directors
and Corporate Auditors by the Executive in charge and discussed and managed by all executives.

4.

System to ensure effective business execution by Directors of the Company and its subsidiaries.
Effective business execution by Directors is ensured by followings:(1) The Board of Directors determines significant matters and oversees business execution by
Directors.
(2) Information is shared among Directors, Executives, and Corporate Auditors at executive meetings.
(3) Notice of significant matters on management, understanding of status and business instructions are
conducted at management meetings and YSM management conference.
(4) At the subsidiaries conference, the information is shared on the Company and our subsidiaries andsignificant matters are discussed and determined.

5.

The systems to ensure appropriate works of the corporate group consisting of the Company and its
subsidiaries, and to make reports to the Company on matters concerning business execution by Directorsof subsidiaries.
The Internal Control System is developed as we as “Subsidiaries Management Regulations” obligate
subsidiaries to make periodic reports relating to business results, fiscal conditions and other significant
information of subsidiaries.
Significant matters are discussed to solve issues at the Board of Directors

6.

System to ensure effective Corporate Auditors’ audit.
Corporate Auditors attend the Board of Directors Meetings and required significant meetings including
management conference as well as read major approval documents and other significant documents
concerning business execution and receives explanation from Directors and employees of the Company
and Directors of subsidiaries as necessary.

7.

System on employees assisting works of the Company’s Corporate Auditors when Corporate Auditors
require allocation of the assisting employees.
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(Translation)

Employees assisting the work of the Company’s Corporate Auditors can be allocated as staff asnecessary. Corporate Auditor has the authority to give instructions and orders to the staff.
8.

System to ensure that those reporting to Board of Corporate Auditors and Corporate Auditors, etc. are
not unfavorably treated for the reason of the report.
The Company ensures that executives and employees reporting to Board of Corporate Auditors andCorporate Auditors are not treated unfavorably because of the report and thoroughly inform the whole
company of this. In the “Whistle-Blowing Regulations,” it is prescribed to prohibit dismissal and giveother unfavorable treatment for the reason of the report.

9.

Matters on the policy for dealing with expenses or debts resulting from business execution of theCompany’s Corporate Auditors.
The Company, when Corporate Auditors require the Company to make advance payment in respect ofbusiness execution according to Article 388 of the Companies Act, immediately deals with the relevant
expenses and debts unless it is considered unnecessary to make advance payments.

In order to improve the effectiveness and efficiency of operations, to ensure reliability of financial reports,
and to expansively develop the operations of the internal control system aimed at securing assets andcompliance to laws and regulations pertaining to business activities according to the Basic Policy for Internal
Control System, The Internal Control Regulations and the Committee of Internal Control Operations
Regulations have been enacted.
The scope of responsibility of the Board of Directors and Corporate Auditors as well as the system for
implementation and details of activities for executives and employees, and the procedures for evaluation andreporting were clarified in the internal control Regulations. Furthermore, basic policy on the maintenance andoperation of Internal Control is formulated. The structure of the committee aimed at facilitating internal
control as well as how to promote its mission and activities were clarified in the Committee of Internal Control
Operations Regulations, and the activities are promoted.

2. Basic Views on Eliminating Anti-Social Forces
The Company assumes a resolute attitude to anti-social forces threatening order and security of civil society
as well as closely exchanges information and cooperates with the relevant specialized agencies including
police against anti-social forces and thoroughly informs employees of the above policy.

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(Translation)

V. Other
1. Adoption of Anti-Takeover Measures
Adoption of Anti-Takeover Measures

Not Adopted

Supplementary Explanation-

2. Other Matters Concerning to Corporate Governance System<Timely Disclosure System>
1. Basic Policy on Information Disclosure
The Company strives to maintain its established system of proactive and fair disclosure of information toshareholders, investors, and other stakeholders.
2. Information Disclosure Policy and Internal System
The Company adopts the following policies and internal system as the basis for information disclosure.
(1) Company information to be discloseda) Information required to be disclosed in accordance with the Financial Instruments and Exchange Act
and the Timely Disclosure Regulations set by the Tokyo Stock Exchange (decisions, incidents andfinancial information)b) Information other than a) above considered to have a significant influence on investment decisions(2) Disclosure procedurea) Procedure concerning decisions and incidents
For decisions and incidents, the Accounting Department, General Affairs Department, or otherdepartment in charge prepares the materials necessary for disclosure. Upon completion of internal
procedures, including approval by the Board of Directors, the disclosure of information will be carriedout by the Information Manager or the Disclosure Manager.
b) Procedure concerning financial information
For financial information, the Accounting Department prepares the materials necessary for disclosure.
Upon completion of internal procedures, including approval by the Board of Directors, the disclosure of
information will be carried out by the manager of corporate management department.
(3) Methods of disclosure
Information will be disclosed through registration with the TDnet Company Announcements
Distribution Service of the Tokyo Stock Exchange as well as through the Company’s website and via
other applicable means.
(4) Inquiries following disclosure
Disclosure-related inquiries will be handled by the Information Manager or the Disclosure Manager.
3. Improvements on Monitoring of the Timely Disclosure System
Through periodically implemented audits by corporate auditors, internal audits, and external audits, theCompany aims to ensure the appropriateness of information disclosure contents, information disclosure
procedures, and other related aspects.

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(Translation)

Corporate Governance Structure- 18 -

(Translation)

System for Timely Disclosure of Information<Decisions, Incidents and Financial Information>- 19 -