29

CHORI CO., LTD.

Tsumugu Report 2020

Management Foundation Tailored to Sustainable Growth

Chori’s Sustainability Initiatives
Environment
We understand the importance of respecting the environment when conducting our businessactivities and that it is our responsibility to address environmental issues in a proactive manner.

Basic Principle
With a view to generating substantive value and helping to realize a moreenriched society, Chori strives to provide accurate information and exceptional
products tailored to the needs of its customers. As the environment continues togarner global attention, we believe the role we play in contributing to environmental conservation is essential to establishing a solid management foundation.

Basic Policies
1.Consideration for the global
environment
2.Compliance with environmental
laws and regulations
3.Establishment and continuous
improvement of environmental
management system

Environmental Management Structure (As of June 16, 2020)
We have established the following structure in pursuit of our environmental initiatives.
President
Propose EMS* revisions/improvements
Report EMS results

Environmental Management Secretariat

Appoint

Environmental Management Officer

Report internal audit resultsAppoint

Internal Environment Auditors
Textile DivisionCorporate Management Division

Chemicals Division

Division Head

Division Head

Division Head

Division Environmental Manager

Division Environmental Manager

Division Environmental Manager

EMS Facilitator
Synthetic Fiber
Business Dept.

Technical Material &Garments Business Dept.

Apparel & Sportswear
Business Dept.

Logistics Dept.
(Textile)

EMS Facilitator

EMS Facilitator
Chemical & Materials Life & Fine Chemicals
Business Dept.
Business Dept.
Logistics Dept.
(Chemicals)* EMS: Environmental management system
Note: EMS Facilitators serve concurrently as Internal Environment Auditors and conduct internal audits inother divisions.

Corporate
Management Dept.

Human Resources &General Affairs Dept.

Information System
Dept.

Internal Auditing
Dept.

Pharmacovigilance &Quality Assurance Office

Health InsuranceSocietyBusiness Anchor
Corporation

Chori MachineryCo., Ltd.

At Chori, we handle a wide range of environment-friendly products. Twice a year, we hold the CHORI Exhibition to showcase ourdiverse line of products, including our originally developed materials and environment-friendly materials that are paired with various
other materials. While the number of products on display was significantly low compared with previous years due to the impact of
COVID-19, we held our 2021 spring/summer product expo in June 2020, where we featured such products as MILLENNIUM
ORGANICTM and ISRAEL GIZA COTTON.

ECO BLUETM
To help resolve the issue of plastic pollution, which has been gaining
greater attention in recent years, and realizing the importance of plastic
bottles, Chori has been expanding its lineup of recycled materials derived
from these resources. While ECO BLUETM recycled polyester has been apart of our product lineup for some time, in 2019 we established traceability for this brand, which will be essential to ensuring the stable supply andmanaging the quality of these ultra-white, high-quality pellets. ECO BLUETM
is also certified with the Global Recycled Standard as it generates lesscarbon dioxide during production compared with virgin polyester.

Domestic Recycling System of ECO BLUETM

Plastic bottles are recycled into
new, completely different products

Natural Dye
Conventional plant dyes are said to be sensitive to sweat and lighting, and to easily fade when washed.
Natural Dye, on the other hand, is a dyeing method that utilizes natural coloring derived from plants, vegetables, and coffee, and offers improved results. Currently, it can create roughly 3,000 types of coloring andcan be used on synthetic fiber. Also, due to its extremely low amount of residue dye remaining in wastewater,
Natural Dye helps prevent water and soil contamination. In addition to Japan, this environment-friendly naturaldyeing technology is sold in Europe and other environment-friendly countries.

New Products
MILLENNIUM ORGANICTM
MILLENNIUM ORGANICTM is a rare, long-fiber cotton cultivated in the Fergana Valley located 600 meters
above sea level in Uzbekistan. Developed in climates known for extreme temperature variations andsnowmelt in mountainous regions, MILLENNIUM ORGANICTM is a 100% organic, non-genetically modified cotton derived from ultra-white raw cotton.
While Europe and certain countries in Asia have strengthened regulations on harmful substances inrecent years, MILLENNIUM ORGANICTM has received the OEKO-TEX® STANDARD 100 Class 1 certification, the world’s highest safety standard for textile products, and is a highly trusted product for babies
and toddlers.

Environment-Friendly Business Activities
Since its acquisition of the ISO 14001 international standard for environmental management
systems in 2000, Chori has continued to conduct and engage in environmental conservation activities. We adopted the 2015 standard in December 2017, acquired ISO 14001
certification for our Hokuriku Branch and Okayama Liaison Office in December 2019, andcontinue to engage in Groupwide efforts with Chori Machinery Co., Ltd., Business Anchor
Corporation, and other subsidiaries in our aim to help preserve the environment.

ISRAEL GIZA COTTON

CHOI-Katsu Initiatives
We instill the importance of respecting the environment when conducting our businessactivities in our employees through the combination of ISO 14001 and Chori Innovation
Activities (“CHOI-Katsu”), Chori’s original Companywide initiative. Through the selectionof themes for CHOI-Katsu 2019 (as shown in the diagram on the right), we engage invarious initiatives such as the advancement of digitalization to reduce overtime work,
which will lead to lower energy use.
In fiscal 2020, we began utilizing digital tablets in place of documents at executive
meetings to reduce the use of paper. Such digitalization efforts have led to reductions inenvironmental burden and improved work efficiency.

Chori’s Environment-Friendly Products

CHOI-Katsu 2019 Themes

Think Smart! Work Smart!
1

Digital & Data

3

Global2

Cleanliness & Compliance4

HealthWhile it is said that the longer the fiber, the more premium the cotton, Giza cotton is a high-quality ultralong cotton that is deficient in quantity. Chori handles and has acquired BCI* certification for ISRAEL GIZA
COTTON, which stems from seeds grown in Israel. As Israel is mostly a dry region, we have been utilizing
high-tech and environment-friendly agricultural technology for our cultivation of ISRAEL GIZA COTTON inorder to minimize our daily water consumption through AI. Moving forward, we will expand our lineup ofenvironment-friendly materials and help realize a sustainable society.
* Better Cotton Initiative: An international certification standard that promotes the sustainable growth of cotton production andcotton industries worldwide.

Consumers

Collect

Produceplastic pellets

Generate
product

Weave/knit

Create
yarn

30

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CHORI CO., LTD.

Tsumugu Report 2020

Management Foundation Tailored to Sustainable GrowthBusiness Partners

Occupational Safety Management

Our suppliers are essential partners for our business activities and play a critical role in our contributions to society. With this in mind, we put forth every effort to ensure compliance in our CSR
procurement, export management, and other activities.

At Chori, we understand the significance of minimizing risks in the workplace environment andensuring the safety of our employees. In view of this, we have devised a business continuity plan
(BCP) and instituted a safety management system for our employees overseas.

CSR Procurement

Ensuring the Safety of Our Employees Overseas
Results of Fiscal 2019 Questionnaire

In accordance with the Toray Group’s “Operating Rules
Regarding CSR Procurement” (revised in 2017), in principle
Chori conducts a CSR procurement questionnaire once every
two years. The primary goal of the questionnaire is to verify theexistence of a CSR promotion system as well as legal
compliance, environmental conservation, risk management,
and human rights measures.

Target: 188 companies (comprising approx. 70% of amountof purchases, excluding TORAY INDUSTRIES, INC.
and affiliated companies)
Respondents: 166 companies (approx. 88.3%)
Confirmed the use of conflict minerals with primary suppliers

Ensuring Strict Compliance
Recognizing the importance of complying with the laws and social norms when engaging in business activities with our suppliers, weundertake the following measures to ensure rigorous compliance throughout our operations.

Security Trade Control
With the objective of maintaining peace and security around the world, Chori has formulated its “Internal Regulations on Compliance withExport-Related Regulations” and “Regulations on Fair Reporting and Management of Imports and Exports.” We undertake strict export
controls to prevent countries in possession of weapons of mass destruction and conventional weapons from getting access to the highlysophisticated equipment and technology of developed countries.

Export Control Process and Training
Once applications for list control and catch-all control are filed by Chori’s Sales Department, the Corporate
Management Department will conduct final approval. In October 2020, we will implement a system that
integrates the management of information on export products and transactions, and by means of this
digital management, we will ensure rigorous security trade control and strengthen compliance.
In addition, Chori encourages its employees to obtain the STC Associate certificate and holds internal
workshops and training sessions to enhance their understanding of export control. In fiscal 2019, 35
employees acquired the STC Associate certificate.

In accordance with product safety management regulations, Chori establishes a Product Safety Inspection Committee whenever a
product is launched, sold, or used externally for the first time.
President
ArrangeRequest for product safety inspection
and use of company name, etc.

Product Safety Inspection Committee

Chair: Deputy General Manager of Corporate Planning
Division (Human Resources & General Affairs Department
and Information System Department)
Inspection committee members
Held: As necessary
Inspect product safety

Product Safety Management Manager
Managers of business administration sections

Aggregate
and analyze
Deliberate
on importantissuesproduct safety matters
Comply with relevant laws
and compile information
ReportSecretariat (Human Resources &General Affairs Department)Secretariat of productsafetyStore and manage
relevant documents
Cooperatewith TORAY
INDUSTRIES’ affiliateddivisions (reports, consultations, etc.)

Provisional point of contact
in the event of accidents
Product liability insurance
coverage
Reportto and consult with
relevant and supervising
ministries, National Instituteof Technology and
Evaluation (NITE), etc.

Command

Instruct and provide information

Departments
Prepare productmanagement procedureManage product safety
Respond to andresolve accidents

Store and manage relevant
documents
Provide advice to andcooperate with subsidiaries and affiliates

abroad and of the employees of overseas offices, and identifies
the location of each employee at a particular point in time.
In the event of an accident or illness while abroad, our overseas
healthcare support program provides medical assistance byphone in Japanese to employees dispatched overseas and theirfamilies as well as to employees on business trips outside ofJapan. The program helps to minimize employee concerns
regarding overseas healthcare due to its differences from Japan.

Business Continuity Plan (BCP)
Chori’s business continuity plan (BCP) has been designed to place
the utmost priority on the safety of its directors and employees
and to enable swift recovery of business operations after serious
disasters. We have implemented a safety confirmation system,
which verifies the safety of all directors and employees and theirfamilies in a timely manner, and we examine the system regularly.
A BCP training is also held once a year.
Chori’s BCP manual calls for a swift recovery of business
operations by the sales divisions. For the corporate divisions, we haveestablished a core operations manual to maintain systems, finances,and other basic business functions. Moreover, we have established a
response headquarters and operational procedures in preparation for
major disasters and pandemics such as novel influenza.

BCP Response Headquarters
Incident
Primary Recipient ofInformation

Primary Members
for Response Measures

ConveneEmployees of
Human Resources &General Affairs Dept.

Department Manager
of Human Resources &General Affairs Dept.
Deputy General
Manager of Corporate
Planning Division

ReportInstruct andprovide information

Cooperate(Human Resources &General Affairs Dept.)

DivisionsManager of Corporate
Management Dept.

President

Relevant
Companies

Supervisor ofOverseas Stores

Response to COVID-19

Product Safety Initiatives

Report results

In the event of a natural disaster or a terrorist attack, whether inJapan or overseas, we must be fully prepared to immediately identify the whereabouts of our directors and employees, confirm theirsafety, and respond appropriately in a timely manner. Chori has inplace a proprietary system dubbed Overseas Business Trip Inquiry(OBTI), which manages the overseas business trips of domestic
employees as well as the business trips of employees dispatched

Legal Compliance Committee

Chair: President
Members: Officers and department managers ofcorporate planning divisions and managers ofbusiness administration sections ofsales divisions
Supervisor: Audit & Supervisory Committee

Propose productmanagement procedure
Report accidents andsubmit detailed report

Approve productmanagement
procedure

To prevent the spread of COVID-19, Chori has been implementing
various measures that correspond to the requests made by theJapanese government, with the safety of its employees as its toppriority. These measures include the prohibition of business trips
overseas, the provision of alcohol-based hand sanitizers, and the
supply of masks to each employee. We also held our Chori Exhibition,a major trade convention for textile products held annually, at a later
date and in a much smaller scale compared with previous years.
In terms of workstyle reform, we encourage our employees tocome to work at staggered work hours under our flex-time systemand to work from home (including on a provisional basis), in addition to employing an online conferencing system at our overseas
bases and our Tokyo and Osaka head offices.
Japan is currently suffering from a shortage of antibacterial materials, which are an essential component of mask production. Leveraging
its long-cultivated business relationships with nonwoven fabric manufacturers in China, Chori has acquired antibacterial materials from
China as a new line of business and supplied them to mask manufacturers in Japan. Chori also donated the masks and protective garments(listed on the right) that were stockpiled in the aftermath of the Great
East Japan Earthquake to protect against radioactive contamination.

Donated Items
2,000 sets of masks from the Hokuriku Branch (Kanazawa City) tohealthcare facilities in Fukui Prefecture
500 sets of N95 masks to healthcare facilities in Osaka Prefecture
Donation of the following items to healthcare facilities in Chiba
Prefecture• 660 sets of Tyvek protective garments• 290 sets of raincoats• 720 sets of N95 masks• 380 sets of disposable hazmat
hoods• 100 sets of goggles

32

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CHORI CO., LTD.

Tsumugu Report 2020

Management Foundation Tailored to Sustainable Growth

Human Resources
The Chori Group regards people as its most valuable management resource, founded on its vision
for human resources, “Utilize people, and be useful to them. Nurture people, and develop with them.
Connect people, and join together with them.” We will utilize, nurture, and connect people tocontinue to grow as an organization and cultivate our next generation.

Human Resource Development
As globalization continues to spread on a rapid scale, employees will be expected to utilize their full capabilities. We cultivate our
employees to be able to respond quickly to changes, to think and act at their own will with a sense of curiosity and a broad
perspective, and to become an integral part of carrying the Group forward into the future.

Personnel We Seek
1. Always act responsibly as a member of Chori and keep the company charter close to their heart
2. Have a spirit of independence
3. Constantly work hard and come up with creative ideas as results-focused professionals
4. Expect the best and prepare for the worst
5. Respect the values and cultures of people from around the world

Promoting Diversity
Creating a Comfortable Workplace Environment
We regard people as our most valuable management resource and for that reason, it is essential that we provide employees with workplace environments that allow them to work in a healthy and active manner. We conduct the following initiatives with this in mind, particularly with the aim of providing employees with a healthy work–life balance. Moreover, we have been working to improve our employees’
operational efficiency through our Companywide CHORI Innovation Activities (“CHOI-Katsu”), established in fiscal 2013 with the aim ofachieving department- and division-specific goals.

Eliminate Long Work Hours

Encourage Employees to Take
Annual Paid LeaveIn principle, designate one day of the week as
a no-overtime day
All staff must leave their workplace by 9 p.m.
every dayRestrict the number of overtime hours
Automate work processes with robotic
process automation (RPA)
Improve the efficiency of meetings

Mandatory use of annual paid leave (five days)
Encourage employees to take seasonal
holidaysMaintain records of paid leave taken indepartment-specific systems
Eliminate restrictions on the number of halfday leaves that can be taken due to childcare,nursing care, or hospital visits

Promote Flexible Workstyles
Improve flextime system (no core hours)
Introduce work-at-home system (temporarily)
and teleconferencing system
Encourage male employees to take childcare leaveConduct one-on-one meetings between
employees and their superiors
Provide option to relocate to otherlocations (transfer to other branches
domestically and regionally)

Supporting the Balance of Work Life and Childcare

New Employee Training

Career Development Support

Development of Overseas Staff

At the Natural Dye plant coloring event,which is held in support of recovery from theGreat East Japan Earthquake, our new
employees take part as representatives ofChori with the aim of cultivating their awareness of being a Company employee.
Upon joining the Company, new employees receive orientation to acquire the basic
knowledge and proper etiquette to becomea responsible working adult as well as
attend 30 lecture sessions and take certification exams twice a year.

At Chori, we hold level-specific training for
directors and employees, invite instructors fromoutside of the Company, and conduct lectures
led by our employees. To speed up the pace of
globalization, we dispatch trainees overseas
and conduct our in-house training program,provide English-language training, and offer a
Chinese-language study abroad and dispatch
program. In fiscal 2020, we plan to dispatch
employees from various departments to conduct external training programs, in addition toholding selective training sessions.

For the purpose of developing theemployees of its overseas offices, Choriprovides training to acquire basic knowledgeof its Corporate Philosophy, information
security, credit management, overseas
business management, and financial reporting through lectures provided by employeesof corporate planning divisions. We arealso striving to enhance the interactions
between our employees at our head offices
and overseas.

Chori has various childcare systems in place to promote thebalance of work and family life. In fiscal 2019, the rate of employees who had taken childcare leave and returned to work was
100%. The number of male employees taking childcare leave has
also been on the rise with six of them taking time off in fiscal 2019.

 orkforce Fluidity and Support forW
Self-Development

FY2017FY2018

Number of Employees
Taking Childcare Leave

1

Number of Employees
Working Shorter Hours
Due to Childcare

9

FY20195

17(1 of whom is male)(6 of whom are male)11

11

Number of Recipients of Self-Development Subsidy

We promote workforce fluidity within the Group by assigning
employees to affiliates in Japan and overseas and facilitating
the exchange of personnel. We also support our employees’
self-development by subsidizing the tuition and fees necessary
to acquire Company-designated certification, which was utilized
102 times in fiscal 2019.

120

97

96

106

102
80

80

40

0

2015

2016

2017

2018

2019

(FY)

Recruiting Diverse Human Resources
Nurturing Our Human Resources by Embracing the Willingness to Grow
on One’s Own

Director, Executive Officer

SatokoNakayama

While the “Personnel We Seek” philosophy set forth under the Human Resources Policy represents the basis of
Chori’s human resource development, the Company exceptionally values those who “keep the company charter
close to their heart.” I truly hope that as members of Chori who will continue to carry on its tradition of nearly
160 years, our employees will keep the company charter close to their heart while continuing to fulfill their duties
to both society and the Company.
I am always the first to speak at our training sessions for young employees. The intention behind this is toenhance the motivation for and the outcomes of the training by having the management team directly express their
expectations of the employees early on. During the session, we monitor the demeanor of each employee while
requesting support from the human resource department when necessary. In our harassment training, we explain
the circumstances openly to employees in order for them to build a relationship of trust with the Company.
Both society and Chori are undergoing drastic changes at the moment and I hope every one of our employees
will adapt to these changes and continue to develop for their own benefit. Career development is about understanding the fundamentals and acting on one’s own accord. The reason why we discontinued our in-house
English-language training is because we embrace the willingness to grow on one’s own. Going forward, we willcontinue to recruit and develop employees who possess that willingness and help them elevate their potential.

As a part of its action plan based on the Act on Promotion of
Women’s Participation and Advancement in the Workplace,
Chori established the goal of raising the percentage of womenamong new graduates to 20% between fiscal 2016 and fiscal
2020. In fiscal 2019, women accounted for 32.8% of our entire

workforce. In addition, we have been making proactive efforts
to promote the hiring of people with disabilities.
Chori’s initiatives to increase the number of senior employees
are also making strides with various programs in place for retirees
looking to reenter the workforce and leverage their knowledge
and experience, network of contacts, and other strengths.

Number of New Graduates

Ratio of People with Disabilities(Number of employees)

(%)

30

3.0
17

20

10

0

Male

9
1

6

20

21

9

8
11
3

8

11

11

8

2015

2016

2017

2018

Female

2.6

2.7

2.0

2.0

2.0

2.0

2015

2016

2017

2018

2.4

2.0

2.9
2.2

1.0

13
2019

2.6

(FY)

0

Company employment rate

2019

Statutory employment rate

Note: Results as of March 31 of each fiscal year

(FY)

34

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CHORI CO., LTD.

Tsumugu Report 2020

Management Foundation Tailored to Sustainable Growth

Local Communities and Society

Promotion of Health and Productivity Management

For a company to realize sustainability, it must be fully committed to coexisting withlocal communities. As a member of these local communities, Chori will continue to engage invarious initiatives in its mission to grow together with society.

Recognizing the importance of the health of our employees and their families to achieving soundcorporate management, we formulated our Health Declaration in 2018 to promote efforts toward
health and productivity management.

Corporate Sponsor of WFP Walk the World 2019

Health Declaration

Chori has been a corporate sponsor of WFP Walk the World, a charity walk organized by theUnited Nations World Food Programme (WFP), since 2016. In May 2019, WFP Walk the World
2019 saw participation from 204 Group employees and their family members and raised ¥163,840
for charity. These funds will be donated toward the provision of school lunches for approximately
5,400 children.

1. Enhancement of Awareness of the Health of Employees
Chori believes that the health of its employees and their families is significant to the success of its business and that the vitality of
its employees translates into the vitality of the Company. Based on this belief, we strive on an ongoing basis to enhance awarenessof the health of our employees.
2. Approach to Health and Productivity Management
Chori actively supports and promotes initiatives that help maintain and improve the health of its employees and their families withthe goal of realizing health and productivity management.
3. Responsibility to Society and the Future
Chori will do what is necessary to ensure the health of its employees and achieve sound corporate management. In so doing, we
will make a difference to society and realize sustainable growth. February 14, 2018

Special Sponsor of 7th Japan Dance Convention
In June 2019, the Japan Sports Agency held its 7th Japan Dance Convention. The Japan Dance
Convention is an educational dance contest in which high school club teams compete under thetheme of “watch and learn.” Chori is a strong advocate of the contest and its aims and has been a
special sponsor since its inaugural event in 2013. As we move ahead, we will continue to help develop
a healthy future for our next generation and a society that embraces communication, enjoyment,
and happiness.

Health and Productivity Management Promotion Structure
We established our Health Promotion Committee in April 2018 andhave since been promoting efforts to realize health andproductivity management. Chaired by Director Nakayama, thecommittee consists of industrial physicians and nurses from
Chori’s internal health clinics as well as the employees of the
Human Resources & General Affairs Department and members ofthe Health Insurance Society. Through the initiatives of the Health
Promotion Committee, Chori aims to maintain and improve thehealth of its employees and their families and fulfill its Health
Declaration. In addition, a debriefing session on White Paper for

Support for Disaster-Afflicted Areas of the Great East Japan Earthquake
Chori has held its Natural Dye plant coloring event every year since 2013 in support of areas
affected by the Great East Japan Earthquake. The event was held in September 2019 in Sendai
City, Miyagi Prefecture, where children and their families from local communities were able torejoice in coloring their hands with dye made from fruits and vegetables through the assistance ofChori’s newly recruited graduates.

Mangrove Planting Activity in Thailand
In May 2019, THAI CHORI CO., LTD. held a mangrove planting activity in Thailand. Mangrovesplay the vital role of functioning as a natural seawall against tsunamis and tidal waves as well as acradle for the cultivation of marine life. However, because mangroves grow along coastal waters,
they are vulnerable to pressure from exploitation and are therefore diminishing at exponential
speeds. Chori will continue to engage in this mangrove planting activity as a part of its efforts toimprove the global environment and increase environmental awareness.

Chair: Deputy General Manager of Corporate Planning Division(In Charge of Human Resources & General Affairs Department)

Human Resources &General Affairs Department

Chori Health InsuranceSociety
Health Promotion
Committee

Internal Health Clinics

Chori Labor Union

Ensuring the Health of Employees
We conduct oral and dental checkups and flu vaccinations on a
yearly basis. In addition, employees aged 30 and 35 years andover are eligible to receive a comprehensive medical checkup
once a year at the expense of the Company, while dependents
aged 35 years and over of the insured party are entitled toreceive up to ¥32,000 in subsidies for medical checkups.
We also conduct stress checks to prevent the possibility of
our employees suffering from mental illnesses. Employees who
work over 40 hours of overtime in a month are required toSupplying Food to Africa throughProduction of Chemical Fertilizers
Since fiscal 2019, Chori has participated in a chemical fertilizer production project in Nigeria. Nigeria boasts the largest
population in all of Africa with roughly 190 million people andrelies on agriculture as one of its major industries. With the
expectation that increased demand for crops fueled bypopulation growth will continue in Africa, the need for chemical fertilizers to enhance agricultural efficiency is projected to
grow. The establishment of a chemical fertilizer blending
plant, which was partially financed by Chori, has enabled the
production of effective fertilizers in Nigeria that improve soil
quality and expand the range of crops. Through the sale ofchemical fertilizers, we will contribute to stable food supply
and higher agricultural efficiency in Africa.

Chori’s Health Management is held once a year to assess thecurrent state of health management and to discuss any issues.

Partially finance construction and supply raw materials
for chemical fertilizers

consult with an industrial physician in the following month. In
these ways, we work to ensure the health of our employees
through the support of medical experts.

Rate of Employees and Family Members Who Undergo
Regular Health Checkups
FY2017FY2018FY2019

Employees

100.0%

100.0%

100.0%

Family Members

59.3%

70.3%

72.0%

Establishment of Internal Health Clinic

Chemical fertilizer blending plant(Construction site: Suburbs of Lagos, Nigeria)

At its Tokyo and Osaka head offices, Chori has established internal health clinics where employees
can receive medical treatment twice a week and seek advice on their health checkup results.
Additionally, employees are able to receive personal guidance on specific insurance-related mattersfrom a nurse or public health nurse on duty.

Enhance agricultural
efficiency through fertilizers

Chori conducts an array of activities to promote healthy lifestyles for its employees, such as support to quit
smoking and yoga classes during lunchtime. In January 2020, we held “CHOI-Aruki,” in which 16 teams
totaling 177 employees participated. In this walking event, a smartphone app tallies the number of steps
taken by each participant and calculates the average for each team or department. Members of the top
three teams are awarded a complimentary meal to enjoy together with the colleagues in their department.
We will continue to engage in a variety of initiatives to promote the health of our human resources, our most valuable management resource.

Activities to Promote the Health of Employees

Sell chemicalfertilizers in Nigeria

Provide stable
food supply

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CHORI CO., LTD.

Tsumugu Report 2020

Management Foundation Tailored to Sustainable Growth

Corporate Governance

Composition and Overview of the Board of Directors, Executive
Committee, and Other Principal Committees

Basic Policy
Chori has established systems to ensure appropriate operations with the aim of achieving sound management and sustainable growth.
The Company strives to strengthen corporate governance by complying with laws and social norms, conducting operations efficiently
and effectively, and ensuring the credibility of its financial reports, while positioning the Board of Directors as a body for conducting
strategic decision-making and business oversight. Moreover, as a Company with an Audit and Supervisory Committee system, Chori hasestablished its Audit & Supervisory Committee in which the majority of the members are outside directors. Chori also aims to further
strengthen the management transparency and oversight function of the Board of Directors through the exercise of voting rights at theBoard of Directors' meetings by the directors who are Audit & Supervisory Committee members
General Meeting of Shareholders

Name

Description

Number of
Meetings Heldin Fiscal 2019

Board of Directors

The Board of Directors consists of directors, including those who are Audit & Supervisory Committee
members, and is responsible for conducting strategic decision-making and business oversight.

15

Executive
Committee

The Executive Committee consists of executive officers and those who were approved by the Boardof Directors and was established as an organization for conducting discussions and exchanging
important information and opinions on matters related to business execution.

25

Audit &
Supervisory
Committee

The Audit & Supervisory Committee convenes regularly once a month to discuss matters related to
management conditions and audit results upon the exchange of information with outside directors.
In addition to attendance at important meetings of the Board of Directors, directors who are Audit &Supervisory Committee members conduct individual meetings with those in charge of the Sales
Department and corporate planning divisions to make decisions on important management-related
matters (including on their process) and sufficiently audit and monitor the appropriateness of the execution of duties by each director (excluding those who are Audit & Supervisory Committee members) and
executive officer. The attendance rate for the Audit & Supervisory Committee in fiscal 2019 was 100%.

14

GovernanceCommittee

The Governance Committee aims to enhance the Company’s corporate governance structure in order tostrengthen the independence and objectivity of the functions and accountability of the Board of Directors
regarding director nomination, remuneration, etc., and to protect the interests of minority shareholders.

Legal Compliance
Committee

The Legal Compliance Committee consists of directors (excluding those who are Audit & Supervisory
Committee members) and executive officers. The committee deliberates on important compliance-related
issues and reports the results to the Board of Directors and the Executive Committee as necessary.

6

Business
Investment
Committee

Under the supervision of the president and representative director, the Business Investment
Committee discusses and deliberates the appropriateness of risk—return assessments and plans
and the feasibility of important investments and financing.

4

M&A Promotion
Committee

The M&A Promotion Committee consists of the general manager of the Corporate Planning Division
who also serves as a director, general managers of business divisions, and other members. The
committee deliberates and decides on important matters pertaining to business direction and growthstrategies toward the promotion of consolidated management, such as M&A and the Group’s
medium- to long-term management plan.

5

Election/dismissal

Election/dismissal

Submitting Company[Decision-making]Board of Directors

Inquiry

GovernanceCommittee

Audit/supervision

Non-Audit & Supervisory Committee Directors
ReportAudit & Supervisory
Committee

Audit & Supervisory Committee Directors
Appointment/removal

Legal Compliance
Committee
Supervision[Business execution]

Representative Director
Supervision

Cooperation

Cooperation

Cooperation

Internal Auditing
Department

ReportExecutive Committee

Election/
dismissal

Internal
audit

Sales Divisions/Administrative Divisions

Accounting
Auditor

Audit
Internal
audit

Cooperation and support—(Established in
March 2020)

Committee Members

Group Companies

Overview of Corporate Governance Structure and Reasons for Its Adoption
Chori has adopted the Company with an Audit and Supervisory Committee system with the aim of strengthening themanagement transparency and oversight function of the Board of Directors. The Company pursued further reinforcement of its
corporate governance structure by establishing its new Governance Committee in March 2020 to protect the interests ofminority shareholders, and by strengthening the independence and objectivity of the functions and accountability of the Boardof Directors pertaining to directors' nomination, remuneration, etc.
Company with an Audit andAt the Board of Directors' meetings, the directors (including
Organizational Structure
Supervisory Committee
those who are Audit & Supervisory Committee members) engage in Number of Directors
7lively and sufficient discussions and deliberations from a free and	Term of Office of Directors
According to the Articles of
1 yearindependent perspective in regard to the supervisory status of
Incorporation
decision-making and business execution. The Board also consists
Number of Directors Who Are Audit 3 (of whom, 2 are outside& Supervisory Committee Members directors)of two outside directors who are Audit & Supervisory Committee	Term of Office of Directors Who Are
members that audit the legitimacy and appropriateness of the
Audit & Supervisory Committee
Members According to the Articles 2 years
status of business execution from an external perspective in anof Incorporation
objective and rational manner. The Company therefore believes that
Number of Independent Officers
2
it is sufficiently fulfilling its management supervisory function.
Executive Officer System
Yes
Moreover, to ensure the prioritization of results, the Company has
Performance-Linked Remuneration Yes
Systemset the term of office of directors (excluding those who are Audit &Accounting Auditor
Deloitte Touche Tohmatsu LLC
Supervisory Committee members) and executive officers to one
https://www.chori.co.jp/csr/pdf/
year, and has established a management structure that can
Corporate Governance Report
governance-report.pdf(in Japanese only)
respond to changes in business conditions in a timely manner.
*

Position

Name

President, CEO & COO /President and Executive
Officer

Kazuo
Sakihama

Director / Managing
Executive Officer

Shigemasa
Yabu

Director / Senior
Executive Officer

Hiroshi
YoshidaDirector / Executive
Officer

Yoshihiro
Teratani

Director / Executive
Officer

Kazuhiro
Tohge

Director / Executive
Officer

SatokoNakayama

Director (Part-Time)

MitsuoOhya

Director / Full-Time Audit& Supervisory
Committee Member

Jun
FuruyaOutside Director / Audit& Supervisory
Committee Member

Masaaki
SawanoOutside Director / Audit& Supervisory
Committee Member

NorikoMorikawa: Committee chair: Committee member

Board ofDirectors

Executive
Committee: Non-member attendee

Audit &
Supervisory
Committee

GovernanceCommittee

Legal
Compliance
Committee

Business
Investment
Committee

M&A
Promotion
Committee

38

39

CHORI CO., LTD.

Tsumugu Report 2020

Management Foundation Tailored to Sustainable Growth

Reason for Nomination of Outside Directors

Evaluation of the Effectiveness of the Board of Directors

The Company’s outside directors were nominated for the reasons outlined below and their dedication to strengthening the audit andsupervisory function through the proactive exchange of opinions and advice at the Board of Directors' and other important meetings.

With the objective of enhancing the effectiveness of the Board of Directors, Chori conducted an evaluation of the effectiveness of theBoard of Directors for fiscal 2019. The evaluation procedure entailed conducting a questionnaire with all directors and collecting theirindividual opinions regarding the agenda of the Board of Directors' meetings, composition and operation of the Board of Directors, andthe systems that support the Board of Directors.

(Since the Annual General Meeting of Shareholders held on June 16, 2020)

Independent
OfficerName

MitsuoOhya

Director (Part-Time)

Masaaki
SawanoDirector(Audit & Supervisory
Committee Member)
NorikoMorikawa

Reason for Nomination

Since joining TORAY INDUSTRIES, INC., he has worked mainly in sales operations related
to its Fibers & Textiles Division. In addition to his wealth of experience and extensive expertise in the Fibers & Textiles Division, he was appointed as a director due to his abundant
track record and insight in all areas of management acquired through his positions aspresident and representative member of the Board of Toray International, Inc., and senior
vice president (member of the Board & member of the Executive Committee), executive
vice president, and representative member of the Board of TORAY INDUSTRIES, INC.
He has been appointed as an outside director as he is expected to provide accurate
advice regarding the management of the Company and on the grounds that he isdeeply familiar with corporate legal work as a lawyer and has sufficient insight tosupervise corporate management. In addition, it has been deemed that he has nomaterial conflict of interest with the Company and that no conflict of interest will arise
with general shareholders.
She has been appointed as an outside director as she is expected to provide accurate
advice regarding the management of the Company and on the grounds that she is wellversed in finance and accounting and has broad insight based on her abundant achievements as a corporate manager and experience working overseas. In addition, it has been
deemed that she has no material conflict of interest with the Company and that no conflict of interest will arise with general shareholders.

Respondents

All 10 directors (including those who are Audit & Supervisory Committee members) in fiscal 2019
(registered questionnaire)

Method of
Evaluation andAnalysis

The secretariat of the Board of Directors (Corporate Management Department) gathers the questionnaire results,
which are evaluated and analyzed by the Governance Committee and the Board of Directors upon the ensuring ofconfidentiality.

Questionnaire
Content

The questions are based on the following four main items:• Agenda of the Board of Directors' meetings• Composition of the Board of Directors• Operation of the Board of Directors• Systems supporting the Board of Directors

Overview of
Evaluation
Results

The evaluation results of effectiveness confirmed that the composition of the Board of Directors, including outside
directors, is appropriate, and that the Board of Directors' meetings are held in a free and open environment thatfacilitates constructive discussions and the exchange of opinions. As a result, the Board of Directors is operating
appropriately on the whole and its effectiveness has been ensured. Meanwhile, the main points raised were conducting more in-depth discussions on the succession plans for representative directors, the appointment and dismissal ofmanagement executives, and executive remuneration. It was confirmed that the Governance Committee will conduct
further discussions and deliberations on these matters.

Based on these results and our continuous efforts toward their improvement, we will work to further enhance the effectiveness of theBoard of Directors.

History of Chori’s GovernanceDirector Remuneration

Chori recognizes that the enhancement of its corporate governance is a matter of priority for management and has taken and willcontinue to take the following measures. We have expanded our profit margin through the introduction of a performance-linked
remuneration system and the efforts of directors to instill the same level of awareness for profits in all shareholders in order tostrengthen the Company’s performance over the medium to long term.

Director remuneration consists of three types: monthly basic remuneration, yearly bonuses, and restricted stock compensation. The
remuneration for directors (excluding directors who are Audit & Supervisory Committee members) is decided by the Board of
Directors upon discussions held by the Governance Committee and consideration of opinions of the Audit & Supervisory Committee.
Meanwhile, the remuneration for directors who are Audit & Supervisory Committee members is determined through discussions heldby the Audit & Supervisory Committee.

Separation ofManagement andExecution

Revision of Remuneration
SystemDiscontinues the Directors’
Retirement Benefits System

Introduces the Executive
Officer System

Strengthening of Audit
FunctionTransitions to a Company with
an Audit and Supervisory
Committee

Management
Transparency and Fairness

Promotion of Compliance
Establishes the Legal
Compliance Committee, withthe president as the chairman

Institutes the GovernanceCommittee

Revision of Remuneration
SystemIntroduces the Restricted
Stock Transfer Remuneration
SystemConducts questionnaires toevaluate the effectiveness of
the Board of Directors

Monthly Remuneration

Monthly basic
remuneration

Fixed

Performance-Linked
BonusesYearlybonuses

Performancelinked

Stock-BasedRemuneration

Restricted
Performancestock
linkedcompensation

Classification

Appoints a female director and afemale outside director (who isalso an Audit & Supervisory
Committee member)

Ordinary
income2002

Maximum Amount of Remuneration

Resolution of the General
Meeting of Shareholders

The remuneration for directors (excluding those
who are Audit & Supervisory Committee members) is deemed to be no more than ¥300 million
annually. (However, this does not include theportion of employee salary for directors who
concurrently serve as employees.)

69th General Meeting of
Shareholders held on
June 15, 2016

Restricted stock compensation is deemed to be no
more than ¥100 million annually. (However, thisdoes not include the portion of employee salary fordirectors who concurrently serve as employees.)

70th General Meeting of
Shareholders held on
June 15, 2017

Total Amount of Remuneration by Type (Millions of Yen)
Basic
Remuneration

Restricted Stock
Compensation

Bonuses

Retirement
Benefits

Number of
Directors
Eligible

Directors*

217

133

19

65

—

6

Directors Who Are Audit &Supervisory Committee
Members

18

18

—

—

—

1

14

14

—

—

—

2

(excl. Outside Directors)

Outside Directors (Audit &Supervisory Committee Members)

2001

Total Amount of
Remuneration(Millions of Yen)

Promotion of Diversity

Begins complying with the
Corporate Governance Code

Details

The total amount of remuneration, the total amount of remuneration by type, and the number of directors eligible, according to eachdirector position are as follows:

Effectiveness of theBoard of Directors

Realization of Effective
Corporate Governance

Fixed /
Performance-Linked

Remuneration Type

2003

2004

2005

2012

2015

2016

2017

2018

2019

2020

* Excludes one director who did not receive any remuneration.

40

41

CHORI CO., LTD.

Tsumugu Report 2020

Management Foundation Tailored to Sustainable Growth

Cross-Shareholdings
The Company and its subsidiaries may acquire and hold sharesof listed companies (hereinafter “cross-shareholdings”) in orderto maintain, expand, and sustainably develop their businesses.
In such cases, the Board of Directors and other bodies decideon acquisitions after determining the department in charge ofthe acquisition and considering the business conditions of theinvestees and the profitability of the investment. The Board of
Directors verifies the significance of the cross-shareholdings
each year and considers the sale or reduction of shares that are
deemed to be of no significance.
Those shares that are held are verified each year for their economic rationality from the perspectives of the significance of eachacquisition and holding, profitability of the investment, transaction
scale, and relevant profits, and are either held or replaced upon
resolution of the Board of Directors and other bodies.

The Company appropriately exercises the voting rights ofcross-shareholdings from the perspective of whether or not theCompany and the investee company can expect increases intheir corporate value over the medium to long term, while
respecting the management policies of investee companies.

Directors, Audit & Supervisory Committee
Members, and Executive Officers(As of July 1, 2020)

Holding of Shares for Purposes Other Than Pure
Investment (Cross-Shareholding)
FY2017FY2018FY2019

Shares Held

35

32

30

Total Amount (Billions of Yen)

4.7

4.0

3.4

Note: The shareholdings of CHORI CO., LTD. for which the largest monetaryamount is recognized on the balance sheets in relation to investment in equity
securities (the monetary amount of equity securities recognized) have been stated.

Internal Audit
In regard to internal audits, the Company has established the Internal
Auditing Department (consisting of four members) directly under thepresident and representative director. The Internal Auditing Department
conducts audits on the appropriateness and efficiency of the Company’sbusiness activities from a fair and independent point of view. The Internal
Auditing Department also evaluates the status of implementationand operation of internal controls concerning financial reporting inaccordance with the Financial Instruments and Exchange Act.

Ensuring Thorough Compliance
Rules concerning compliance systems such as the Guidelines
for Corporate Behavior shall be established to set compliancewith laws and regulations and social ethics as a code of conduct of our business. In order to make all directors, executive
officers, and employees of the Group fully aware of the initiatives
for compliance, corporate divisions shall collaborate to holdcompliance training and other training programs. The Legal
Compliance Committee, with the president and representative
director as the chairman, shall be established to discuss

important matters regarding compliance of the Group and report
the results to the Board of Directors and the Executive
Committee as necessary. In the event of a significant legal
violation or compliance violation on the part of a management
executive, in accordance with the laws and regulations and the
Articles of Incorporation, the Governance Committee shall deliberate on the dismissal of the management executive in question
and the Board of Directors shall adequately discuss and consider his or her dismissal based on those results.

President, CEO & COO,
President and Executive Officer

Director, Managing Executive
Officer

Kazuo Sakihama

Shigemasa Yabu

Number of shares held: 19,883
CEO & COO

Number of shares held: 13,226
General Manager of Corporate Planning
Division and Executive Chief
Representative for China of the Company

Director, Senior Executive Officer

Director, Executive Officer

Hiroshi Yoshida

Yoshihiro Teratani

Number of shares held: 5,891
General Manager of Textile Division,
Senior Manager of Synthetic Fiber
Business Department, General Manager
of Logistics Department (Textile) of theCompany and General Manager of
Hokuriku Branch

Number of shares held: 6,461
General Manager of Chemicals Division,
Senior Manager of Life & Fine Chemicals
Business Department, and General
Manager of Logistics Department(Chemicals) of the Company

Director, Executive Officer

Director, Executive Officer

Kazuhiro Tohge

Satoko Nakayama

Number of shares held: 3,434
Special Appointee of the President (inrelation to the Textile Division)

Number of shares held: 7,712
Deputy General Manager of Corporate
Planning Division (Human Resources &General Affairs Department, Information
System Department), General Manager of
Pharmacovigilance & Quality Assurance
Office, and General Manager of CHORI
Innovation Activities of the Company

Director (Part-Time)

Director (Full-Time Audit &Supervisory Committee Member)

Mitsuo Ohya
Number of shares held: 0
Significant concurrent positions• Executive Vice President andRepresentative Member of the Board of
TORAY INDUSTRIES, INC.

Policies Regarding Constructive Dialogues with Shareholders“ Number of shares held”
indicates the numberof CHORI CO., LTD.
shares held.

Jun Furuya
Number of shares held: 4,730

The Company promotes constructive dialogues with shareholders based on the following five policies.
(1) The executive officer in charge of information handling oversees
matters related to IR and public relations, cooperates with the
Corporate Planning Division and relevant departments, andcommunicates information to shareholders and investors.
(2) The relevant internal departments proactively cooperate toward theachievement of constructive dialogues with shareholders through the
preparation of disclosure materials and the sharing of important
information, while conducting their business activities.
(3) Methods of dialogue other than individual meetings•G eneral meeting of shareholders

The Company regards the general meeting of shareholders as
an opportunity to fulfill its responsibility of providing explanations to shareholders, and accordingly works to carefully
address their questions and understand the intent of theiropinions. In the event of important announcements regarding
management information, such as the medium-term management plan, the Company reports on its current status andcollects the opinions of shareholders through such measures
as the holding of briefings on the management plan upon the
conclusion of the general meeting of shareholders.

• Individual investors
The Company promotes dialogues with its individual shareholders byholding company briefings exclusively for such investors, which areattended by the president and representative director of the Company.
• Institutional investors
The Company holds financial briefings through the attendance ofthe president and representative director and management executives upon the conclusion of its six-month and full-year financial
results announcements. At these financial briefings, the Company
reports on the details of its financial performance, addresses thevarious questions, and collects the opinions of its shareholders. In
addition, the departments in charge of IR and public relations
conduct individual visits and briefings for institutional investors.
(4) Feedback
The Company promotes the sharing and use of information obtained
from dialogues through the reporting of opinions of shareholders to
the respective committees and their disclosure to the directors,
management executives, and relevant departments as necessary.
(5) The Company takes appropriate measures to ensure thoroughinformation management through compliance with theInsider Trading Prevention Regulations.

Outside Director(Audit & Supervisory
Committee Member)*• Outside Auditor of Japan Federation of
Certified Public Tax Accountants'
Associations• Member of Kanto Regional Government
Asset Council, Kanto Local Finance
Bureau, Ministry of Finance• Chairperson of Tokyo Metropolitan
Government Election Administration
Commission

Independent
Director

Outside Director(Audit & Supervisory
Committee Member)*Independent
Director

Masaaki Sawano

Noriko Morikawa

Number of shares held: 0
Significant concurrent positions• Member of the Selection Committee forSummary Court Judges of the Supreme
Court• Member of Advisory Council on
Fundamental Issues in Corporate
Management and Chairman of Rent
Council of Urban Renaissance Agency• Member of Advisory Council on
Fundamental Issues in Corporate
Management of Urban RenaissanceAgency• Member of Business Evaluation
Monitoring Committee of Urban
Renaissance Agency

Number of shares held: 0
Significant concurrent positions• Outside Director of Showa Denko K.K.
• Outside Director of Mitsubishi Heavy
Industries, Ltd.

* Outside director as stipulated in Article 2, Item 15 of the Companies Act.

Executive Officer

Tatsuyuki Sakoda
Number of shares held: 2,796
President & CEO of Miyako Kagaku
Co., Ltd.

42