Corporate GovernanceOptorun Co., Ltd.

Last updated: April 8, 2022

Optorun Co., Ltd.

Bin Fan,Representative Director and President/CEO
Contact: Corporate Management Department, +81-(0)3-6635-9487
Securities code: 6235
http://www.optorun.co.jp/

The state of corporate governance of Optorun Co., Ltd. (hereinafter, the Company) is as described below.

I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information
1. Basic Views
The Company regards the strengthening of corporate governance as vital for the consistent growth of corporate value in order to earn the trust
and meet the expectations of shareholders, customers, employees and all other stakeholders. Our basic policy is to accomplish this goal while
maintaining the soundness and transparency of management, facilitating quick decision-making to adapt to changes in the business climate,and clearly defining responsibilities.

[Reasons for Non-compliance with the Principles of the Corporate Governance Code] Updated[Supplementary Principle 2.3.1] Approach of the Board of Directors to Issues Concerning Sustainability
The Company has a Risk Management Committee, whose chairperson is the Representative Director and President/CEO and members are
full-time directors, executive officers, and general managers of all the departments of the headquarters. The Committee meets every threemonths to examine and deal with matters concerning sustainability. From FY2022, onwards, the Board of Directors will also engage moredeeply in dealing with the issues concerning sustainability.
[Supplementary Principle 2.4.1] Ensuring Diversity
It is the policy of the Company to actively hire excellent talents regardless of attributes such as gender, nationality, or whether they are newgraduates or mid-career workers, and to assign the right person in the right place. Therefore, we do not set numerical targets for each attribute.
Our approach to human resource development is disclosed on our web page.(URL: http://www.optorun.co.jp/sustainability/index.html)[Supplementary Principle 4.10.1] Use of Optional Approach
Of the Company’s seven (7) directors, three (3) are independent outside directors. We seek adequate involvement of and advice fromindependent outside directors on the proposals for electing candidates for directors presented to the Board of Directors.
In addition, the Company has in place a voluntary compensation committee, a majority of whose members are independent outside directors, toensure the appropriateness and transparency of remuneration.
We will also examine the necessity of a voluntary nomination committee or other body with the same function.

[Disclosure Based on the Principles of the Corporate Governance Code]Updated[Principle 1.4] Cross-Shareholdings
The Company does not, in principle, hold cross-held shares of other companies except where it is determined that a stable and continuous
relationship with a business partner, etc., is beneficial to our business strategy and contributes to increasing the corporate value of Optorun
Group (hereinafter, the Group) in the medium to long term.
We hold cross-held shares when it is determined that doing so is economically rational and necessary in the medium and long term, taking into
consideration the risks and returns of holding such shares. Whether to continue, increase, reduce or discontinue such shareholdings are
examined and decided by the Board of Directors.
With regard to the exercising of voting rights of such shares, we make a comprehensive decision, taking into account the policies and strategiesof the business partner, etc., concerned, and checking for each proposal whether it will contribute to increasing our corporate value from themedium- to long-term viewpoint, or to adding to our medium- to long-term economic earnings.
[Principle 1.7] Related Party Transactions(i) Basic policy on the execution of related party transactions
The Company’s policy regarding related party transactions, etc. is to pay particular attention to checking whether or not such transaction impairs
the soundness of the Group’s management, whether it is effective in light of rational assessment, or whether the terms and conditions of suchtransaction are appropriate in comparison to those of other external transactions, and to execute such transactions by resolution of the Board of
Directors.
(ii) System to ensure the appropriateness of related party transactions, etc.
The Group requires all officers, including those of group companies, to answer a questionnaire asking whether or not there are any related party
transactions. In addition to this, we confirm with the audit corporation.
When newly conducting a transaction that constitutes a related party transaction, we carefully examine the validity, reasonability (need forbusiness), etc., pursuant to the Company’s resolutions of the Board of Directors and rules and regulations before obtaining approval. Thus, wehave in place a system to ensure the adequacy of transactions.
Of the related party transactions, those stipulated below are subject to the resolution of the Board of Directors, while those that do not fall underthe below are subject to approval according to the list of approval authorities.
1) Those that constitute transactions involving conflict of interest stipulated in the Companies Act2) Those that are stipulated in the list of approval authorities to be subject to the resolution of the Board of Directors3) Other transactions that are judged by the director in charge of administrative sections, who is responsible for the department that submitted

proposal for endorsement, to be referred to the Board of Directors according to the significance of the transactions concerned.
[Principle 2.6] Roles of Corporate Pension Funds as Asset Owners
The Company does not have a defined benefit corporate pension plan but has instead established a defined contribution corporate pension
plan, in which funds are invested according to the choice of each individual and partially subsidized by the Company. To deepen theemployees’ understanding of asset building, we provide guidance on this system at the time when they join the Company.
[Principle 3.1] Full Information Disclosure(i) Company objectives (e.g., business principles), business strategies, and business plans
The Company’s corporate vision is as shown below. These items are published on our website: “Mission--We are dedicated to theadvancement of today’s information-dependent society by taking on the challenge of further extending the boundaries of thin film technologies;
Philosophy--Our goal is to advance with our customers as we capitalize on our management team and workforce with a global mindset for thecreation of a company driven by the constant creation of new knowledge; Business--We supply our customers with total solutions that are
centered on our core field of opto-nanotechnology.”(ii) Basic views and policies on corporate governanceAs stated in “I. 1. Basic Views” of this report.
(iii) Policies and procedures for determining the remuneration of the senior management and directors
As stated in [Remuneration of Directors] in “II. 1. Organizational Composition and Operation” of this report.
(iv) Policies and procedures for the nomination of senior management, directors, and auditors
When nominating candidates for directors and corporate auditors, the Company selects persons who have the ability to make swift andappropriate decisions, the risk management ability, the knowledge and understanding of our industry, and good judgement, in addition to highethical standards as a director, corporate auditor, or a member of the senior management.
When nominating candidates for outside directors and outside corporate auditors, the Company attaches importance to the candidate’s
independence from the Company, and selects persons who have high ethical standards, expert knowledge, good judgement, and experience,
among others. Candidates are decided by the Board of Directors.
(v) Explanations on the election/nomination of individual members of the senior management, directors and auditors
Reasons for nominating directors and corporate auditors are stated in the notice of the Annual General Meeting of Shareholders.
[Supplementary Principle 3.1.3] Initiatives on Sustainability
The Company’s initiatives on sustainability is disclosed on our web page.(URL: http://www.optorun.co.jp/sustainability/in dex.html)
Matters on investments in human capital and intellectual property are also stated in the Annual Securities Report, under IV. Information About
the Reporting Company, 4. Corporate Governance and Other Matters.
[Supplementary Principle 4.1.1] Roles and Responsibilities of the Board of Directors
The Company’s Rules of the Board of Directors set down matters to be decided and resolved by the Board of Directors. The Rules of the Boardof Directors stipulate that important decision-making matters, in addition to matters provided for by laws and the Articles of Incorporation, shallbe decided and resolved by the Board of Directors. For matters other than the above, the Company delegates decision-making to the President
and CEO and other executives according to the Approval Authority Rules, so as to conduct swift decision making in the execution of duties.
[Principle 4.8] Effective Use of Independent Directors
The Company appoints three (3) independent outside directors, who provide advice and opinions at the meetings of the Board of Directors froman independent viewpoint and play the role in protecting the interests of shareholders and other stakeholders.
[Principle 4.9] Independence Criteria and Qualification for Independent Outside Directors
When appointing independent outside directors, the Company makes comprehensive decision based on the independence criteria of
independent officers set by the Tokyo Stock Exchange, Inc., the candidates’ expertise, and prospective contribution to promoting our business.
[Supplementary Principle 4.11.1] Views on Diversity, Size, and the Balance of Knowledge, Experience and Abilities of the Board of Directors asa WholeIt is our policy to select the members of the Board of Directors irrespective of gender or nationality, taking into consideration the person’s
knowledge, experience in the relevant duties, experience of being involved in corporate management, and other matters, so that the Board may
engage in multi-angled discussions and effectively fulfill its responsibility. Therefore, we believe that the diversity, size and the balance ofknowledge, experience and abilities of our Board as a whole are adequate. Our independent outside directors include persons with experiencein managing another company.
The set of skills, etc. of directors is disclosed on the notice of the Annual General Meeting of Shareholders.
[Supplementary Principle 4.11.2] Concurrent Office-holding by Directors and Corporate Auditors
The state of concurrent office-holding by our officers are stated in the Annual Securities Report and other documents.
[Supplementary Principle 4.11.3] Analysis and Evaluation of Effectiveness of the Board of Directors as a Whole
In order to secure the effectiveness of the Board of Directors and to improve its function, the Company’s Board regularly conducts selfassessment of the Board of Directors involving all directors and corporate auditors, including outside directors and outside corporate auditors,
the results of which are reported to and discussed at the meeting of the Board of Directors. The Board of Directors also formulates andimplements measures to address issues identified from the assessments as needed. The self-assessments have shown that our directors rate
the effectiveness of the Board to be generally high.
[Supplementary Principle 4.14.2] Training of Directors and Corporate Auditors
To further improve the insights required to carry out the duties as directors and corporate auditors, the Company invites external experts to
conduct officer trainings and encourages corporate auditors to become a member of external organizations so as to deepen their understandingof audit work and enhance their professional skills.
[Principle 5.1] Policy for Constructive Dialogue with Shareholders
Our policy for promoting constructive dialogue with our shareholders are as stated below.
‐
At the General Meeting of Shareholders, we give earnings presentations, and the Representative Director and President/CEO answers
the questions from the shareholders wherever possible, in our effort to help shareholders deepen their understanding of our business and

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‐
‐
‐
‐
‐
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achievements.
At the earnings presentations, the Representative Director and President/CEO and the Director and Executive Officer, General Manager
of Corporate Management Department explain in person the Company’s performance to institutional investors and give account of thestate of the Company.
We hold briefing for individual shareholders every year to explain our performance and details of our business in a manner that is easy tounderstand so as to promote their deeper understanding.
For overseas IR, even under the COVID-19 situation, we are making use of web meetings to explain about the Company to ourshareholders who are institutional investors as well as potential/prospective shareholders.
Corporate Management Department is in charge of the Company’s IR, with the Director and Executive Officer, General Manager ofCorporate Management Department being designated as the person responsible for IR.
The Company has established IR & Public Relations Office in the Corporate Management Department, which serves as a window for
dialogue with shareholders. We have a structure that enables the gathering of information needed for explanations to shareholders.
Regarding views and opinions heard in the dialogues with shareholders, the Corporate Management Department submits them as
feedback to the Board of Directors so that the shareholders’ opinions can be applied to the management.
With rules regarding confidential information and insider trading in place, the Company’s staff and management work to ensure
appropriate management of information, while staff in charge of IR exercise thorough management of information to prevent the leakage
of insider information in the course of shareholder dialogue.

2. Capital Structure
Foreign Shareholding Ratio[Status of Major Shareholders]

30% or more

Updated

Name/Company name

Zhejiang Crystal-Optech Co., Ltd.
The Master Trust Bank of Japan, Ltd. (Trust Account)
Custody Bank of Japan, Ltd. (Trust Account)
Daiyu Son
JSR Corporation
ULVAC, Inc.
THE BANK OF NEW YORK MELLON 140044
BNP PARIBAS SECURITIES SERVICES LUXEMBOURG/JASDEC SECURITIES/UCITS ASSETS
Ihei Hayashi
Xiao Lianfeng

Controlling shareholder (excluding parent company)––––

Parent company

None

Supplementary Explanations

Number of shares held Percentage (%)
6,507,700
5,390,300
4,262,100
2,503,400
2,310,000
1,038,000
933,100

15.08
12.47
9.86
5.79
5.35
2.40
2.16

917,600

2.12

774,000
618,000

1.79
1.43

Updated(Note) 1. The Company holds 1,141,000 shares of treasury stock but is excluded from the above list of major shareholders.
(Note) 2. The shareholding ratios are calculated by exempting the treasury stock.
(Note) 3. It is written in the Change Report No. 4 made available for public inspection on March 4, 2021, that Sumitomo Mitsui Trust AssetManagement Company, Limited and Nikko Asset Management Co., Ltd., its joint shareholder, each held the shares stated below asof February 26, 2021. However, the Company was unable to confirm the effective number of shares held by these companies as ofDecember 31, 2021. Therefore, these companies are not included in the above list of major shareholders.
The content of the Change Report No.4 is as follows:
Name/Address/Number of stocks, etc. held (1,000 shares)/Holding ratio of share certificates, etc. (%)‐ Sumitomo Mitsui Trust Asset Management Company, Limited/1-1-1 Shibakoen, Minato-ku, Tokyo/2,780/6.27‐ Nikko Asset Management Co., Ltd./9-7-1 Akasaka, Minato-ku, Tokyo/360/0.81(Note) 4. It is written in the Change Report No. 1 made available for public inspection on June 7, 2021, that Mizuho Securities Co., Ltd. andAsset Management One Co., Ltd., its joint shareholder, each held the shares stated below as of May 31, 2021. However, theCompany was unable to confirm the effective number of shares held by these companies as of December 31, 2021. Therefore, thesecompanies are not included in the above list of major shareholders.
The content of the Change Report No.1 is as follows:‐ Mizuho Securities Co., Ltd./1-5-1 Otemachi, Chiyoda-ku, Tokyo/1,009/2.28‐ Asset Management One Co., Ltd./1-8-2 Marunouchi, Chiyoda-ku, Tokyo/1,052/2.37(Note) 5. It is written in the Change Report No. 1 made available for public inspection on October 14, 2021, that BNY Mellon Investment
Management Japan Limited and Mellon Investments Corporation, its joint shareholder, each held the shares stated below as of
October 11, 2021. However, the Company was unable to confirm the effective number of shares held by these companies as ofDecember 31, 2021. Therefore, these companies are not included in the above list of major shareholders.
The content of the Change Report No.1 is as follows:‐ BNY Mellon Investment Management Japan Limited/Marunouchi Trust Tower Main, 1-8-3 Marunouchi, Chiyoda-ku,
Tokyo/2,726/6.15‐
Mellon Investments Corporation/BNY Mellon Center, One Boston Place, 201 Washington Street, Boston, MA 02108/71/0.16

3. Corporate Attributes
Stock exchange listing and category

UpdatedTokyo Stock Exchange (Prime Market)

Fiscal year end

DecemberIndustry

Machinery

Number of employees as of the latest fiscal year end(consolidated)

500 or more but less than 1,000

Net sales in the latest fiscal year (consolidated)

10 billion yen or more but less than 100 billion yen

Number of consolidated subsidiaries as of the latest
fiscal year end

Less than 10

4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder––––

5. Special Circumstances which may have Material Impact on Corporate Governance––––

II. Business Management Organization and Other Corporate Governance Systems Regarding Decision
Making, Execution of Business, and Oversight
1. Organizational Composition and Operation
Type of Organization

Company with Company Auditor(s)[Directors]
Number of directors stipulated in the Articles ofIncorporation

10

Term of office of directors stipulated in the Articles ofIncorporation

one year

Chairperson of the Board of Directors

Chairman (except where the Chairman concurrently serves as President)

Number of directors

UpdatedUpdated7

Appointment of outside directors

Yes

Number of outside directors

4

UpdatedNumber of outside directors who are designated as
Updatedindependent officer

Relationship with the Company (1)

Name

3

UpdatedAttribute

Min Rin

Originally from another company

Takeshi Higuchi

Originally from another company

Naoko Yamazaki
Tadashi Takiguchi

Originally from another company
Originally from another companyaRelationship with the Company (*)
b c d e f g h i
j
○

○
△
○

○

k

*
*
*
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.

Categories for “Relationship with the Company”“○” when the director presently falls or has recently fallen under the category, and “△” 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, and “▲” when a close relativeof the director fell under the category in the past.
Executive of the listed company or its subsidiaryNon-executive director or executive of the parent company of the listed company
Executive of a fellow subsidiary of the listed company
A party whose major business partner is the listed company, or an executive thereof
Major business partner of the listed company, or an executive thereof
Consultant, accounting expert or legal expert who receives large amounts of cash or other property from the listed company, in addition to
officer remuneration
Major shareholder of the listed company (if the said shareholder is a corporation, an executive of the corporation)
Executive of a business partner of the listed company (who is neither d, e, or f above) (applies to self only)
Executive of a company with which the listed company has a relationship of cross-directorship/cross-auditorship through outside officers(applies to self only)
Executive of an entity receiving a donation from the listed company (applies to self only)
Other

Relationship with the Company (2)NameUpdatedIndependent Supplementary explanations of theofficer
Relationship

Min LinTakeshi Higuchi○

Naoko Yamazaki○

Reasons for appointment

Mr. Lin has a wealth of experience inmanaging overseas companies andMr. Min Lin, the director, is the Chairman of possesses great insight. The Company has
the Board of Zhejiang Crystal-Optech Co., appointed him as an outside director in theLtd., which is a major shareholder and an belief that he would provide appropriate
advice to the Company’s management. As
other associated company of the
Mr. Lin is the Chairman of the Board ofCompany, which makes him a “major
business partner of the listed company or Zhejiang Crystal-Optech Co., Ltd., which is amajor shareholder and an other associatedthe executive.”company of the Company, he is notdesignated as an independent officer.
Mr. Higuchi has a wealth of experience incorporate management on a global scale andpossesses great insight. The Company has
appointed him as an outside director in the
Mr. Higuchi, the director, has previously
belief that he would provide appropriate
served as an outside director of theadvice to the Company’s management.
Musashino Bank, Ltd.
Mr. Higuchi has previously served as a
The Company holds an account in the
Director and Senior Vice President of Fujifilm
Musashino Bank, but our businessCorporation. Many years have passed since
relationship with the bank is small in scale.
he retired from the position and he isConsidering our business relationship withcurrently not related to the company, so wemegabanks and other leading banks thatassume that he is able to make management
are larger than the Musashino Bank, we
decisions from an objective viewpoint as thebelieve that it does not constitute any
Company’s outside director.
problem.
As of the time he assumed office, there wasno relationship of interests between Mr.
Higuchi and the Company. Therefore, he isappointed as an independent officer.
Ms. Yamazaki possesses a broad knowledge
and insight in aerospace engineering. The
Company has appointed her as an outside
director in the belief that she would contributeto the Company’s management from theviewpoint of aerospace engineering and––––business management.
As of the time she assumed office, there wasno relationship of interests between Ms.
Yamazaki and the Company. Therefore, she
is appointed as an independent officer.

Independent Supplementary explanations of theofficer
Relationship

Name

Tadashi Takiguchi○

Reasons for appointment

Mr. Takiguchi is a representative of a venture
capital firm and possesses extensive
experience and a high level of knowledge incorporate management. As a visiting
professor of Waseda University, he teaches
students with an eye to developing businessventures. The Company has appointed him
as outside director in the belief that he would
contribute to the Company’s management
Mr. Tadashi Takiguchi is the President andwhen carrying out M&As or business tie-ups
Representative Director of WERU
and in boosting hiring power.
Investment Co., Ltd., an unlimited liability
Mr. Tadashi Takiguchi is the President andpartner of the Waseda Investment Limited
Representative Director of WERU Investment
Partnership, in which the Company invests.
Co., Ltd., an unlimited liability partner of the
However, the amount of investment isWaseda Investment Limited Partnership, ininsignificant, and we believe that it does
which the Company invests. However, thenot constitute any problem.
Partnership is one of the multiple investment
In the past, the Company has entrusted
partnerships that WERU Investment
services related to venture investment tooperates, and WERU Investment does not
WERU Investment Co., Ltd. However, it
depend on the transactions with thewas only for a short period and a
Company.
considerable time has passed since theIn the past, the Company has entrusted
transaction ended, and the total amount ofservices related to venture investment tofees paid was insignificant. Therefore, we
WERU Investment Co., Ltd., of which Mr.
believe that it does not constitute any
Takiguchi is the President andproblem.
Representative Director, and the Company
The Company makes donations to Waseda
makes donations to Waseda University,
University, where Mr. Takiguchi serves as
where Mr. Takiguchi serves as Visiting
Visiting Professor. However, the amount ofProfessor, but these are of no significance,
donation is insignificant.
as stated on the left column. For the reasonsstated above, the Company believes that Mr.
Takiguchi is able to make management
decisions from an objective viewpoint as an
outside director of the Company.
As of the time he assumed office, there wasno relationship of interest between Mr.
Takiguchi and the Company. Therefore, he isappointed as an independent officer.

Voluntary establishment of committee(s) equivalent
to Nomination Committee or Remuneration
Committee

Established

Status of Voluntarily Established Committee(s), Attributes of Members Constituting the Committee and the Chairperson(Meeting Chair)

Name of committee

Total
committee
members(number)Full-timemembers(number)

InsideDirectors(number)

OutsideDirectors(number)

OutsideExperts(number)

Committee
Chairperson(meetingchair)

Other(number)

Voluntary committee
equivalent tonominationcommittee

––

––

––

––

––

––

–– ––

Voluntary committee
equivalent toremunerationcommittee

Compensation
Committee

3

0

1

2

0

0

InsideDirectors

Supplementary Explanations
The Compensation Committee has the Representative Director, President and CEO as its chairperson and the members are directors who
were selected at the meeting of the Board of Directors. A majority of the members are outside directors. The Compensation Committee
deliberates, resolves and regularly reports to the Board of Directors on matters regarding compensation including proposals on the
remuneration of officers for each fiscal year, according to the “Rules of the Compensation Committee” that stipulate its operations and mattersto be brought for discussion, among others.

[Corporate Auditors]
Establishment of a Board of Corporate Auditors

Established

Number of corporate auditors stipulated in the Articles
of Incorporation

5

Number of corporate auditors

3

Cooperation among Corporate Auditors, Accounting Auditors and Internal Audit Section
The Internal Audit Department, corporate auditors and the accounting auditors meet once every three months to share information andexchange opinions.

Appointment of outside corporate auditors

Yes

Number of outside corporate auditors

2

Number of outside corporate auditors who aredesignated as an independent officer

2

Relationship with the Company (1)Name
Hironobu Sasada

Attribute
Certified Public Accountant

aRelationship with the Company (*)
b c d e f g h i j k l△mRitsu Katayama
Attorney at law
Categories for “Relationship with the Company”“○” when the director presently falls or has recently fallen under the category, and “△” when the director fell under the category in thepast.
*“●” when a close relative of the director presently falls or has recently fallen under the category, and “▲” when a close relative of thedirector fell under the category in the past.
a.
Executive of the listed company or its subsidiaryb.
Non-executive director or accounting advisor of the listed company or its subsidiaryc.
Non-executive director or executive of the parent company of the listed companyd.
Corporate auditor of the parent company of the listed company
e.
Executive of a fellow subsidiary of the listed companyf.
A party whose major business partner is the listed company, or an executive thereofg.
Major business partner of the listed company, or an executive thereofh.
Consultant, accounting expert or legal expert who receives large amounts of cash or other property from the listed company, in addition to
officer remunerationi.
Major shareholder of the listed company (if the said shareholder is a corporation, an executive of the corporation)j.
Executive of a business partner of the listed company (who is neither f, g, or h above) (applies to self only)k.
Executive of a company with which the listed company has a relationship of cross-directorship/cross-auditorship through outside officers(applies to self only)l.
Executive of an entity receiving a donation from the listed company (applies to self only)
m. Other**Relationship with the Company (2)NameUpdatedIndependent Supplementary explanations of theofficer
Relationship

Hironobu Sasada○

Mr. Sasada, the Corporate Auditor,
belonged to Deloitte Touche Tohmatsu
LLC until August 2020, but is now retired
from the firm and has no relationship withthe firm.
The Company is receiving consulting
service on internal audits from Deloitte
Touche Tohmatsu LLC, but it is from the
Risk Advisory section of the firm, not the
Audit and Assurance section to which Mr.
Sasada belonged. Moreover, the fees
paid to Deloitte Touche Tohmatsu LLC is
insignificant. Therefore, we believe that it
does not constitute any problem.

Ritsu Katayama

○

––––

Reasons for appointment
Mr. Sasada possesses expert knowledge
and a wealth of experience as a certified
public accountant. The Company has
appointed him as an outside corporate
auditor in the belief that he would be able toexecute the audits of the Company’s
management.
Although Mr. Sasada belonged to Deloitte
Touche Tohmatsu LLC until August 2020,
he does not share common interests with
the Risk Advisory section of the firm, as
stated on the left column, so we assume
that he is able to make management
decisions from an objective viewpoint theaudits of the Company.
In addition, as of the time he assumed
office, there was no relationship of interest
between Mr. Sasada and the Company.
Therefore, he is appointed as anindependent officer.
Mr. Katayama has a wealth of experience inthe legal field and possesses great insight.
The Company has appointed him as an
outside corporate auditor in the belief that
he would be able to execute the audits of
the Company’s management.
As of the time he assumed office, there wasno relationship of interest between Mr.
Katayama and the Company. Therefore, heis appointed as an independent officer.

[Independent Officers]
Number of independent officers

5

Other Matters Related to Independent Officers
The Company designates as independent officers all of the outside directors who qualify as an independent officer.

[Incentives]
Implementation Status of Measures related toIncentives Granted to Directors

Introduced performance-linked remuneration plan, stock option plan,othersSupplementary Explanations on Applicable Items
We pay attention to the changes in performance and where there is an improvement, we promptly determine the annual compensations andmake monthly payments accordingly. We also pay compensations for the granting of share acquisition rights and restricted shares, with the aimof motivating the directors to improve performance and raising their morale.

Persons eligible for stock options

Internal directors, employees, employees of a subsidiary, other

Supplementary Explanations on Applicable Items
Aiming to motivate the Company’s directors and employees and to raise their morale, we grant them share acquisition rights.

[Remuneration of Directors]
Status of Disclosure (of Individual Directors’
Remuneration)

Disclosure for selected directors

Supplementary Explanations on Applicable Items
The remuneration of individuals whose total amount of remuneration is 100 million yen or above is stated in the Remuneration of Officers, etc.
section of the Annual Securities Report.
As for the others, we disclose the aggregate amount of remuneration, etc., for each officer category (directors [excluding outside directors],
corporate auditors [excluding outside directors], outside directors, and outside corporate auditors) and the aggregate amount of remuneration,etc. for each type of remuneration, etc.

Policy for Determining Remuneration Amounts and the
Calculation Methods Thereof
UpdatedEstablished

Disclosure of the Policy for Determining Remuneration Amounts or the Calculation Methods
Details of the Policy for Determining the Amounts of Remuneration, etc., of Officers and the Calculation Methods, and the Methods ofDetermination(A) Outline of the Company’s Officer Remuneration
The Company’s remuneration for full-time directors consists of base compensation, bonuses, and the granting of restricted shares. The basecompensation is determined by resolution of the Compensation Committee within the limit set by resolution of the General Meeting of
Shareholders, considering factors such as each director’s position, performance of the Company, etc., in a comprehensive manner, and inaccordance with the Company’s Rules on the Officers’ Remuneration and the Rules of the Compensation Committee. Remuneration in
restricted shares is determined by resolution of the Board of Directors in accordance with the Rules on the Officers’ Stock Remuneration.
Base Compensation consists of fixed compensation and performance-linked bonuses. Bonuses are paid as an incentive for the officers to becommitted to achieving the business year’s performance target, in order to make it clear that officer remuneration is paid relative to the link to
performance. Fixed compensation is set as the fixed amount determined by the Rules on the Officers’ Remuneration. Performance-linked
bonus is calculated by multiplying the past five years’ average for the ratio (%) of [aggregate amount of bonus/consolidated ordinary income] by
the estimated consolidated ordinary income for the business year. The resulting figure becomes the aggregate amount of bonus and distribution
among the officers is approved and decided by the Compensation Committee.
Regarding the payment method of officers’ remuneration, the basic compensation (the total of fixed compensation and bonus) is paid on amonthly basis as a fixed amount periodical compensation. In case an adjustment is required due to the divergence between estimated andactual consolidated ordinary income, we either pay a bonus in lumpsum separately or deduct from the fixed amount periodical compensation in
the following business year.
Remuneration in restricted shares was introduced by approval of the 20th Annual General Meeting of Shareholders held on March 27, 2019,and is given as an incentive for our officers, etc., to work to continuously increase the Company’s corporate value and also to let them share thevalues with our shareholders more closely. The details of allotment are decided by resolution of the Board of Directors in accordance with theRules on the Officers’ Stock Remuneration.
Remuneration for part-time directors is a fixed compensation and is determined in comprehensive consideration of the social position, degree ofcontribution to the Company, circumstances of appointment, and other matters regarding the officer concerned. Adjustments are made asnecessary, however, depending on the changes in social situation, the trends of business, the degree of contribution to business, changes in
the circumstances of the officer concerned from the business point of view, and other factors.
The compensation of the Company’s corporate auditors are the fixed compensation only, in light of their independent position that comes with
an authority to audit the execution of duties.
(B) Matters Related to the Policy for Determining Remuneration Amounts, etc. for Individual Directors
The Company decides the policy for determining the content of remuneration, etc. of individual directors and executive officers, etc., byresolution of the Board of Directors.
The Board of Directors has judged that the method for determining the content of remuneration, etc., and the determined content of
remuneration etc., for individual directors for the current business year are consistent with the determination policy concerned and in line withthe determination policy concerned.
The policies for determining the remuneration, etc. of individual directors are as shown below.
(Full-time directors)a.
Officer’s remuneration (fixed compensation + performance-linked bonus) is discussed and approved by the Compensation Committee foreach officer, based on the amount and coefficient for each position.
b.
Policy regarding non-monetary compensation
To be determined by resolution of the Board of Directors according to the number of shares set by the Company for each position.
(Part-time directors)
Officer’s compensation is a fixed compensation and is decided by approval of the Compensation Committee and the Board of Directors.
(C) Upper Limit for Remuneration
The upper limit for the remuneration of directors has been decided by resolution of the Annual General Meeting of Shareholders held on March
29, 2017, to be 800 million yen or less per year (excluding the employee’s salary portion).
The upper limit for the compensation of corporate auditors has been decided by resolution of the Annual General Meeting of Shareholders heldon March 29, 2017, to be 35 million yen or less per year. The compensation of corporate auditors is determined within the limit stated above
through discussion among corporate auditors.
The upper limit for the remuneration in restricted shares for directors has been decided by resolution of the 20th Annual General Meeting of
Shareholders held on March 27, 2019, to be 100 million yen or less per year, separately from the upper limit set for directors’ remuneration.

[Support System for Outside Directors (Outside Corporate Auditors)]
The administration section is in charge of supporting the work of outside directors by providing briefing on the agenda items prior to themeetings of the Board of Directors. The full-time corporate auditor and Internal Audit Department is in charge of supporting the work of outside
corporate auditors by reporting to them on the state of execution of duties by the directors and providing briefing on the state of implementationof internal audits.

[Status of Persons who have Retired from the Positions of Representative Director and President, etc.]
Names of former representative directors/presidents, etc., holding advisory positions

Name

Daiyu Son

Title/position

Honorary
Chairman

Responsibilities
Corporate management; M&A;
sales; R&D; quality management
and advice on subsidiaries, etc.;
advice on the establishment ofstructure for R&D work; duties
specially commanded by the
President, etc.

Total number of former representative
directors/presidents, etc. holding advisory positions

Terms and working
arrangements(Full-time/part time, withor without compensation)

Date ofretirement as
President, etc.

Part-time, with compensation

March 27, 2019

Term in
officeAnnual contract

1

Other Matters
The Company’s internal rules provide for various positions including honorary chairman, who are appointed by resolution of the Board of
Directors.

2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination, and Compensation Decisions(Overview of Current Corporate Governance System) Updated
The Company’s corporate governance system is built around the Board of Directors and the Board of Corporate Auditors. With the executive
officer system in place, the Board of Directors play the role of checking the execution of duties by the executive officers from the corporate
management point of view, while corporate auditors check on the functions of the Board of Directors. This system has allowed us to make quick
decisions and to clarify where the management responsibility lies. Of the executive officers, two (2) are internal directors who concurrently serveboth roles and three (3) are dedicated executive officers.
(1) Board of Directors
The Board of Directors consists of seven (7) directors, of which four (4) are outside directors (of which three (3) are independent outside
directors). The Board of Directors meets once every month and as needed to deliberate and resolve on matters of significance, including thoseregarding management plans. The meetings of the Board of Directors are attended by three (3) corporate auditors, thus providing a situation
where significant decision-making is kept under check.
(2) Board of Corporate Auditors
The Board of Corporate Auditors consist of three (3) corporate auditors (of which two (2) are outside corporate auditors). Audit policies andaudit plans are discussed and decided at the meetings of the Board of Corporate Auditors. The Board of Corporate Auditors meet once every
month to perform its audit function on the directors and the Board of Directors according to matters stipulated in the Rules of the Board of
Corporate Auditors.
(3) Executive Committee
The Executive Committee consists of full-time directors and executive officers, and regularly meets twice every month as a rule. Various
members of the senior management and the full-time corporate auditor attend the meetings as observers. The agenda for the meeting includes
reports on the resolutions of the Board of Directors and deliberation, resolution and report on significant management matters.
(4) Other Meetings
In addition to the above, the Company has in place the Compliance Committee, the Risk Management Committee, and the Compensation
Committee, which work to effectively run our corporate governance system. The Compliance Committee meets every three months. Itschairperson is the Representative Director and President/CEO, and the members are appointed by the Representative Director andPresident/CEO and must meet the requirements, such as that they possess certain knowledge of the law and strong ethical consciousness. The
Committee works to raise and spread awareness for compliance among the employees. In case of any breach of law, the Committee examines
the facts, identifies the cause, and discusses measures to prevent it from happening again. Thus, the Committee works to enhance theeffectiveness of compliance.
The Risk Management Committee meets every three months. Its chairperson is the Representative Director and President/CEO, and themembers are full-time directors, executive officers, and general managers of all the departments of the headquarters. The Committee works todiscuss and attend to matters such as reviewing risk measures, searching and identifying new risks, and when a risk comes to light, coping withthe situation in a quick and accurate manner to minimize the damage and prevent it from happening again. Thus, our system works to enhancethe effectiveness of risk management.
The Committee Chair of the Compensation Committee is the Representative Director and President/CEO and its members are directors
selected by the Board of Directors. A majority of the members are independent outside directors. The Compensation Committee deliberates,
resolves and regularly reports to the Board of Directors on matters regarding compensation including proposals on the remuneration of officers
for each fiscal year, according to the “Rules of the Compensation Committee” that stipulate its operations and matters to be brought for
discussion, among others.

3. Reasons for Adopting the Current Corporate Governance System
Our Board of Directors is sufficiently capable of auditing the Company’s business execution, and our Board of Corporate Auditors have theobjectivity and neutrality to perform audit function on corporate management. For these reasons, we have adopted the current system.

III. Implementation of Measures for Shareholders and Other Stakeholders
1. Efforts to Vitalize General Meeting of Shareholders and Facilitate Exercise of Voting Rights
Supplementary Explanations
Early Posting of the Notice of General Meeting of
Shareholders

We make every effort to send the notice as early as possible.

Scheduling of the General Meeting of Shareholders
Outside of the Peak Days

Since the Company’s fiscal year ends in December, we believe that our
General Meeting of Shareholders do not fall on a common peak day.

Exercise of voting rights via electronic means

Since the Annual General Meeting of Shareholders held in March 2020,
exercise of voting rights has been available by accessing the voting rights
exercise site designated by the Company using a PC, smartphone ormobile phone.

Participation in a Platform for Electronic Exercise of
Voting Rights and Other Initiatives to Enhance
Environment for Institutional Investors to Exercise
Voting Rights

The Company has introduced a platform for electronic exercise of voting
rights, and has been using electronic exercise system since the Annual
General Meeting of Shareholders in March 2020. We also post the Noticeof General Meeting of Shareholders on our website to make information
readily available.

Provision of Notice (or Summary of Notice) of theGeneral Meeting of Shareholders in English

We prepared the English version (summary) of notice of General Meetingof Shareholders and posted it on our IR webpage.

2. IR Activities

UpdatedSupplementary Explanations

Explanation inperson by the
representative

Formulation and publication of disclosure policy

We have formulated and posted our disclosure policy on
our website.

Regular briefing for individual investors

We held a briefing for individual investors on December
4, 2021.

None

Regular briefing for analysts and institutional investors

In FY2021, we held an earnings presentation every
quarter. We plan to hold these briefings in FY2022.

Established

Posting of IR materials on website

Materials are posted on our website.

Establishment of a department (appointment of
personnel) regarding IR

Corporate Management Department is in charge of IR.

Other- Individual meetings with domestic and overseas
institutional investors: held every quarter using web
conferencing system- The Representative Director and President and othermembers of the Company’s top management hosted an
online meeting inviting sell-side analysts.

3. Status of Measures to Ensure Due Respect for Shareholders
Supplementary Explanations
Establishment of internal rules stipulating respect forthe position of stakeholders

The Company is aware of the social responsibility of a corporation, hasestablished corporate philosophy and the Code of Conduct, and isensuring that all of the Group’s staff and management are committed tocarrying out business activities with a high level of corporate ethics, not tomention in compliance with the laws.

Implementation of environmental preservation
activities, CSR activities, etc.

The Company has established the Rules on Environmental Management
and is carrying out environmental management activities on a Group-widebasis. In addition to the thorough implementation of environmental
management at the headquarters and overseas subsidiaries, the Risk
Management Committee conducts a status check of environmental
management once every three months.

Formulation of policies, etc. on the information
provision to stakeholders

The Company believes that timely and accurate disclosure of information
to all stakeholders is the duty of a listed company. To fulfill this duty, theCompany will make efforts to enrich the content of its website, etc., anddisclose corporate information such as news releases and IR information
with speed and accuracy.

IV. Matters Related to Internal Control System
1. Basic Views on Internal Control System and Status of Development of the System
The Company has in place rules and manuals related to internal control, and are working to ensure that operational rules are taught andthoroughly understood by all. In addition, the corporate auditors and the Internal Audit Department are continuously monitoring the status ofoperation. Thus, the Company is well equipped to develop an effective internal control system. Details of the internal control system are statedbelow.
(1) Systems to ensure that the execution of duties of directors and employees complies with laws and regulations and the Articles ofIncorporation
The Company shall set the Rules on Compliance to establish a system for compliance, and follow these rules to promote compliant business
management.
Compliance Committee shall be established to raise awareness of compliance across the Group, identify the laws and regulations applicable to
the Company’s business, develop an infrastructure for compliance with statutory requirements, and conduct training and enlightening activities,
as necessary.
An internal reporting system covering the entire Group shall be established to secure compliance business management. If a serious event
occurs at the Company or its subsidiary, etc., that threatens the securing of compliance business management, the Compliance Committee
shall promptly discuss and put into practice measures to cope with such event.
With regard to internal control over financial reporting, internal responsibility structure shall be clarified in order to secure the reliability offinancial reporting. Corporate auditors shall check the directors’ execution of duties, including on the status of development and operation ofinternal control system, from an independent viewpoint.

Internal audit section shall conduct audit of the evaluation of internal controls and the appropriateness and effectiveness of business operation.
Rules, etc. regarding measures against antisocial forces shall be established to create a system to block any relationship with antisocial forces
and to reject unreasonable requests.
(2) Systems regarding retention and management of information in relation to the execution of duties of directors
Information on the Board of Directors’ decision-making and on important matters approved by the Representative Director shall be stored andmanaged in an appropriate condition suited to the storage medium, in accordance with laws, regulations, the Articles of Incorporation andinternal rules, and shall be kept in a condition that allows access to it, as necessary.
(3) Rules and other systems related to management of the risk of loss
To establish a sound foundation for corporate management and to secure a stable income, Risk Management Policy defining basic views andaction guidelines shall be laid down as the supreme policy for risk management, based on which definition of risks and the supervising section
shall be determined.
The Risk Management Committee, whose Committee Chair is the Representative Director and President, shall develop the Risk Management
Policy and promote risk management activities according to the Rules on Risk Management and in a smooth and appropriate manner.
If a risk becomes notable, or is feared to become notable, an emergency response headquarters shall be established according to the
Response Manual for Disasters and Other Emergency Situations and prompt response shall be made.
Corporate auditors and internal audit section shall conduct audits of the effectiveness of integrated risk management readiness.
(4) Systems to ensure that the execution of the duties of the directors are performed efficiently
The “Board of Directors” makes decision on the overall management, while the “Executive Committee” decides on matters related to the day to
day execution of business. The “Board of Directors” checks the operations of the “Executive Committee” to ensure from the management pointof view that the day to day execution of business of the executive officers are appropriately conducted.
The “Rules of the Board of Directors” and the “Rules of the Executive Committee” are established to define each body’s operations and mattersto be brought for discussion, among others.
Medium-term Business Plan is decided after discussion at the Executive Committee and the Board of Directors, and business strategies andvarious measures are carried out in accordance with the plans.
To clearly define the internal chain of command and establish the system of responsibility, various rules regarding the division of roles andresponsibilities and the scope of approval authorities have been set.
(5) Systems to ensure proper business activities in a business group comprised of the Company and the subsidiary companies
According to the Guideline for the Operations of Subsidiaries based on the Rules on the Administration of Subsidiaries established by theCompany, the Company requests its subsidiaries to submit relevant documents, as necessary, in order to accurately grasp the affairs ofbusiness of the subsidiaries.
The Company has established the Rules on Risk Management, which lay down rules regarding risk management of the Group as a whole.
Under the rules, the Company requires that subsidiaries perform risk management, while it manages the overall risk of the Group.
Operations Report Meetings are held every month to facilitate cooperation, coordination, and exchange of information within the Groupconsisting of the Company and its subsidiaries, and to monitor the status of execution of duties of the senior management.
The Company’s corporate auditors and internal audit section examines the appropriateness of subsidiaries’ business.
(6) Systems to ensure the reliability of financial reporting
With regard to the Group’s system to ensure the internal control regarding financial reporting, evaluation, maintenance and improvement shallbe conducted according to the Financial Instruments and Exchange Act and other applicable domestic and international laws and regulations.
The Company’s departments and subsidiaries shall take measures in their performance of business to separate duties to avoid wrongdoing,
conduct monitoring on a daily basis, and thereby strive to secure the accuracy of financial reporting.
(7) If a corporate auditor of the Company has requested that an employee be appointed to assist with the duties of the corporate auditor,
particulars related to such employee
If the Board of Corporate Auditors requested that an employee be appointed to assist with its duties, the Company shall appoint such employee.
The number of the employees, selection of suitable person, etc. shall be discussed, taking into full consideration the opinion of corporate
auditors.
(8) Particulars regarding independence of the employee of the preceding item from the directors
The employee appointed to assist with the duties of the corporate auditors shall obey, exclusively, the directions and orders of corporate
auditors.
The employee appointed to assist with the duties of the corporate auditors shall not belong concurrently to other divisions.
(9) Particulars related to ensuring the effectiveness of instructions given to an employee appointed to assist in the duties of the corporate
auditor
The Company ensures that all officers and employees are fully informed that the employee appointed to assist in the duties of the corporate
auditors shall obey the directions and orders of corporate auditors.
(10) Systems for the directors and employees of the Company and its subsidiaries to report to the corporate auditor, and other systems related
to reporting to the Company’s corporate auditor
Systems for the directors and employees of the Company and its subsidiaries to report to the corporate auditor
Directors and executive officers shall report the status of their execution of duties to the corporate auditors at major meetings such as those of
the Board of Directors, as necessary, and without delay.
Directors, executive officers, and employees shall, when requested by corporate auditors to report on business or when corporate auditors
examines the Group’s business and state of finance, respond in a prompt and appropriate manner.
Directors shall, upon finding any fact that has caused, or may cause, significant damage to the Company, report to the corporate auditor
immediately.

(11) Systems for ensuring that persons who make a report to the corporate auditors are not treated disadvantageously due to making the report
The Company prohibits any disadvantageous treatment of officers or employees who make a report to the corporate auditors for the reason of
their having made the report, and ensures that all officers and employees of the Group are fully informed to that effect.
(12) Particulars related to policies concerning the procedure for advance payment or reimbursement of expenses that arise with regard to
execution of duties of the corporate auditors or any other processing of expenses or obligations that arise with regard to execution of the duties
When corporate auditors make a claim to the Company for advance payment, etc., of expenses for their execution of duties, the section in
charge shall deliberate such claim and promptly make payment, save to the extent that such claimed expenses or debt are proven to have been
not necessary for the execution of duties of the corporate auditor.
(13) Other systems to ensure that audits by the corporate auditors are performed effectively
When appointing outside corporate auditors, the independence of candidates shall be considered in addition to their specialist knowledge, inorder to improve the audit function of corporate auditors. Corporate auditors shall hold meetings with the Representative Director, accounting
auditors, internal audit section, etc., as necessary, in order to conduct audit and develop a system for auditing of the execution of duties of
directors.
Corporate auditors shall exchange information and opinion and cooperate closely with accounting auditors, internal audit section, etc.
(14) Status of the development of risk management systems
The Company has a risk management system in which the Risk Management Committee monitors the risk management system of each section
and provide advice and suggestions such as measures for improvement, in accordance with the Rules on Risk Management. The Company
has a system in which the Compliance Committee promotes thorough practice of compliance at each section, in accordance with the Rules on
Compliance.

2. Basic Views on Measures to Exclude Antisocial Forces and Status of Development of the Measures
The Group, its special interest parties, business partners, or other parties have no relationship whatsoever with antisocial forces.
In view of the Act on Prevention of Illegal Acts by Organized Crime Group Members (Act No. 77 of 1991) and ordinances for eliminatingorganized crime groups enforced by the prefectural governments, the Company has built an organizational system to exclude any relationshipwith antisocial forces in accordance with the Rules on the Exclusion of Antisocial Forces.
We have designated administrative departments as the sections in charge of work concerning antisocial forces, and established Manual for the
Exclusion of Antisocial Forces in addition to the rules.
Moreover, in order to avoid having any relationship or transactions with antisocial forces, we check about our shareholders, officers, employees,
or business partners, using newspaper archive search, internet search, interview and other research methods, to confirm the nature of theirbusiness, the state of transactions with them, circumstances or situation in which the transactions commenced, the need of the Group for suchtransaction, the fairness and reasonableness of transaction prices. At the same time, when making payment for a business transaction, we pay
attention to ensure that the payee is not a part of antisocial forces.

V. Other

1. Adoption of Anti-takeover Measures
Adoption of Anti-takeover Measures

None

Supplementary Explanations on Applicable Items––––

2. Other Matters Concerning Corporate Governance System––––

[Process for the Timely Disclosure of Information Concerning Decisions by or Facts which Occurred for the Company]

[Process for the Timely Disclosure of Information Concerning Financial Results]