Management Foundation Tailored to Sustainable Growth

Sustainability

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.

Chori’s Sustainability Initiatives
Founder Riichiro Ohashi founded Chori as a raw silk wholesaler in 1861 andsteered the business for nearly six decades. The spirit of coexistence andco-prosperity that Ohashi maintained, which is “to develop our business for the
benefit of the world and people and to always strive to grow together with ourcustomers,” and the integrity, dignity, and compassion that has continued tosupport this spirit, have been passed down to this present day.
As a trading company that handles fibers, textiles, and garments, as well as
chemicals and machinery, Chori not only builds relationships with its clients but
also engages in capital investments and production on the strength of its semiindustrial/semi-commercial business scheme. Underscoring the value of its
relationships with various stakeholders around the world, the Company strives
to address poverty, health, resource waste, climate change, water shortages,
and a range of other global concerns. In the face of our radically changing
social and economic environments, we are advancing our business in pursuitof not only the growth of the Company but also the sustainability anddevelopment of the world as a whole.
As declared in our corporate philosophy, at Chori we engage in business withsustainability at the forefront of our minds by developing environment-friendly
products, conducting procurement and export control activities that ensurecompliance, and establishing a system to optimize operations so that we cancontribute to the realization of a better society as global citizens.

Basic Principle

Basic Policies

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
to garner global attention, we believe the role we play in contributing to environmental conservation is essential to establishing a solid management foundation.

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

Environmental Management Structure (As of June 16, 2022)
We have established the following structure in pursuit of our environmental initiatives.
President, CEO & COO
Propose EMS* revisions / improvements
Report EMS results
Environmental Management Secretariat

Appoint

Environmental Management Officer
Report internal audit results

Internal Environment Auditors

Textile Division

Chemicals DivisionCorporate Management 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.

EMS Facilitator
Chemical & Materials
Business Dept.

Logistics Dept. (Textile)

EMS Facilitator

Life & Fine Chemicals
Business Dept.

ClimatechangeChori’s countermeasures• Importance placed on reducing
companies’ financial risk throughmeasures to address climate change• Disclosure of information in accordancewith the recommendations of the Task
Force on Climate-related Financial
Disclosures (TCFD)

P.41

Marineplastic
pollution

Escalationof humanrights issues

Changes in
consumerawareness• Need to ensure traceability anddevelop a recycling system• Development and deployment ofBLUE CHAINTM• Expansion of initiatives forbiodegradable resin

P.21 and 34•G lobal need to improve working
conditions and respect human rights
along the supply chain• Formulation of human rights policy• Emphasis on CSR for
procurement activities

P.45• Increasing ethical consumption•E mphasis on the story behindeach productCorporate Management
Dept.

Human Resources &General Affairs Dept.

Information System Dept.

Internal Auditing Dept.

Affiliate Business Dept.

Pharmacovigilance &Quality Assurance Office

Health Insurance Society

Business Anchor
Corporation

Logistics Dept. (Chemicals)

Business Environment and Chori’s Countermeasures
Business environment

Appoint* EMS: Environmental management system
Note: EMS facilitators concurrently serve as internal environment auditors and conduct internal audits in other divisions.

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 Branchand Okayama Liaison Office in December 2019, and continue
to engage in Groupwide efforts with Business Anchor
Corporation and other subsidiaries in our aim to help preserve
the environment.

Close Up
In Pursuit of the SDGs
Chori’s initiatives in pursuit of the Sustainable Development
Goals (SDGs) are featured on its official YouTube channel.
The channel offers viewers an illustrated look into Chori’s
involvement in the world of environment-friendly, plant-based
foods and its participation in the lithium compound
production project in Chile.

https://www.youtube.com/watch?v=EfGtYiJVL0E• Growing demand for environmentfriendly products, including those basedon the BLUE CHAINTM concept andplant-based foods (plant-derived
alternative meat)

P.21 and 34

39

CHORI CO., LTD.

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Management Foundation Tailored to Sustainable Growth

Chori’s Sustainability Initiatives

World Views of the below 2°C and 4°C Scenarios 
Based on our assumptions and the projected business environment in fiscal 2030, we conducted scenario analyses using thefollowing flowchart, which summarizes the impacts of the identified climate-related risks and opportunities on our businessand our measures in response to these impacts.

Information Disclosure Based on the TCFD Recommendations

Risks andopportunities

In 2015, the Financial Stability Board (FSB) established the Task Force on Climate-related Financial Disclosures (TCFD) at therequest of the G20. As the world strives to limit the increase in the earth’s average temperature to below 2˚C above pre-industrial
levels as stipulated in the Paris Agreement in 2015, the aim of the TCFD is to encourage companies to disclose climate-related
financial information to enable investors to make appropriate investment decisions. At Chori, we will work to appropriately
disclose information on the recommended disclosure items in accordance with the Recommendations of the Task Force on
Climate-related Financial Disclosures, the final report released by the TCFD in June 2017.

Mandates andregulations on
existing products
and services

The Company’s response to climate change and other environmental issues is reported twice a year at Board of Directors’
meetings and discussions are held based on the details of these reports. Ultimately, it is the responsibility of the Board of
Directors to assess, respond to, and disclose details of the Company’s risks and opportunities related to climate change.
With the general manager of the Corporate Planning Division, who also serves as a director, in charge and the Corporate
Management Department as the responsible division, the Company manages and promotes organization-wide measuresagainst climate change, including the TCFD recommendations, and other environmental issues as well as compiling importantCompanywide policies and measures, which are reported and proposed to the Board of Directors for discussion at Board meetings.
With regard to business-specific strategies, etc., on climate change and other environmental issues, the general managersof the respective sales departments, in cooperation with the general manager of the Corporate Planning Division and the
Corporate Management Department, report summaries of such strategies, etc., to the Board of Directors, which are thenassessed and discussed at Board meetings.
We will continue to discuss every aspect of our sustainability strategies and initiatives, including the TCFD recommendations, while considering the establishment of an expert committee, etc., as necessary.

2°C
Shifts in consumer
preferences

Changes inprecipitation
patterns
Frequent
occurrence of
unseasonable
weather

Temporary declines
in trading volume
due to reduced
production

Costs associatedwith regulatorycompliance

Increase inpurchasing prices /Transfer to selling
pricesIncreasing
consumerconcerns over CO2
emissions

Reluctance to buy
petrochemical
products

Declining demandfor petrochemical
products

Temporary decline
in trading volume
arising from the shift
to environmentfriendly products

Strengthening of
decarbonization
measures

Shift to lowemission products

Growing demandfor virgin polyester

Increasing demandfor ECO BLUETM
recycled polyester
fiber

Water shortages

Restrictions onelectricity use

Number of days for
restricted use ofelectricity

Temporary declines
in trading volume
due to reduced
production

Large-scale natural
disasters

Frequent
occurrence offloods due totorrential rainfall

Number of days
with torrential
rainfall

Rising sea levels

Flood damage inlow elevation areas

State of flood
damageLonger lead times

Rising averagetemperatures

Less desire topurchase fall andwinter apparel

Reduced demand
for fall and winterapparelReduced trade offall and winterapparelStrengthening ofenvironmental
regulations in China

Rising sea levels

In the scenario analyses, climate-related risks and opportunities are analyzed using the following process based on the below
2°C and 4°C scenarios as envisioned by specialized organizations such as the Shared Socioeconomic Pathways of theIntergovernmental Panel on Climate Change and the World Energy Outlook 2020 of the International Energy Agency.

Impact on the
Company’s business

Establishment of
reduction targets
by localgovernments

4°C

Short-, medium-, and long-term climate-related risks and opportunities identified by the organizationand the impact thereof on the organization’s business, strategies, and financial plan
Strategy

Influential factors(parameters)

Strengthening of
regulations on the
manufacture ofhigh-energy
consuming
products and on
manufacturers ofhighly contaminated products

2°C

The Board of Directors’ system for monitoring climate-related risks and opportunities andmanagement’s role in assessing and managing such risks and opportunities
Governance

Assumptions andprojected businessenvironment in fiscal 2030

Rising averagetemperatures

Response tobusiness impact
Low impact

Reduced sales

Strengthening of
supply chain

No impact

Low impact

Reduced sales

Expansion of lineup
of environmentfriendly products

Medium impact

Increased sales

Low impact

Reduced sales

Low impact

Temporary declines
in trading volume
arising from supply
chain disruptions

Increases in costs
and selling, generaland administrative
expensesStrengthening of
supply chain

Low impact

Reduced sales

Expansion of lineup
of functional
clothing

Analysis Process
Establish a governance structure
Assess significance of risk

Establish a governance structure to oversee, assess, and manage climate-related risks and opportunities
Compile a list of risk items, qualify their potential impact on business, and assess their significanceDefine scenario groups

Select scenarios, obtain forward-looking information on parameters (variables), and assemble world views

Assess business impact

Conduct qualitative assessments of the impact of highly significant risks and opportunities on our business foreach scenario

Define countermeasures

Assess the progress of the Company’s response, consider countermeasures, and establish a specific course ofaction and an internal system

The analyses cover the period through to 2030. The world views of the scenarios to limit the increase in average temperature
to below 2°C and 4°C by fiscal 2030 are assumed as follows. Under the Company’s below 2°C scenario, we expect theincrease in physical risk to be moderate and opportunities to develop and expand the sale of environment-friendly products,
such as ECO BLUETM and Natural Dye, to increase. Meanwhile, under the 4°C scenario, we expect an even greater increasein physical risks, including unseasonable weather.

41

CHORI CO., LTD.

While the impact of each risk item on our business was assessed to be very minimal, we will continue to carry out risk assessments to ensure that risks are managed appropriately and seek to increase profits by capitalizing on the higher demand forenvironment-friendly products and other business opportunities.
Moving ahead, we will look into the possibility of conducting scenario analysis based on the world view of the below 1.5°C
scenario and assumptions for 2030 and beyond, as necessary.

The process for identifying, assessing, and managing climate-related risks and the approach to
RiskManagement

integrating this process into the organization’s overall risk management
Formulation of Risk Management Regulations 
At Chori, we have established and operate risk management regulations with the aim of identifying potential risks in our business activities, reducing risks and preventing crises from occurring during the course of normal business conditions, establishing a system for responding to crises that may pose a significant impact on our business activities, and responding promptly
and appropriately to prevent the situation from deteriorating and recover and normalize the situation as swiftly as possible.

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Management Foundation Tailored to Sustainable Growth

Chori’s Sustainability Initiatives

Risk Management under Normal Business Conditions 
Under the guidance of the Risk Management Deputy Officer (the president, CEO & COO of the Company), the Risk Management
Promotion Officer (the deputy general manager of the Corporate Planning Division, in charge of the Human Resources & General
Affairs Department) and the Human Resources & General Affairs Department (the organization responsible for risk management)
identify material issues within the organization; formulate various measures to mitigate, prevent, and promptly detect risks that may
exist within the Company; and implement the necessary educational and training programs in a voluntary and systematic manner.
They also follow up on the results of crisis response measures, verify their impact, identify issues, and seek measures toward
improvement. Our risk management regulations define the Company’s risks individually based on the following major classifications.
Risks Related to Our Business
Categories
1. Legal compliance

4. Business continuity plan

2. Management and internal control

5. Human resources and occupational healthand safety

7. Information, communication, and systems

3. E
 xternal business environment, including
society, the economy, and politics

6. Transactions

Climate-related risks are defined as risks that relate to either “3. External business environment, including society, the economy,
and politics” or “4. Business continuity plan” above, and are addressed by the Corporate Management Department in cooperation
with the Risk Management Promotion Officer and the Human Resources & General Affairs Department.
As demonstrated by the results of the aforementioned scenario analyses, ensuring a stable supply chain is extremely
important to the continuation of our business. With respect to risks related to “6. Transactions” above, in order to address
the risk of supply chain disruptions that stem from various supplier-inflicted issues and to fulfill our social responsibilities for
procurement activities in Japan and overseas, the Company has established CSR procurement guidelines and conducts CSR
procurement surveys regularly with its major suppliers to ensure the soundness of its supply chain and to verify risks.
Crisis Response Measures 
In the event of a crisis, placing the highest priority on ensuring the safety and protecting the lives of each individual, the following measures must be taken in accordance with Company regulations: communicate and report details of the crisis based on
the crisis communication system; establish a crisis response headquarters under the direction of the Risk Management Deputy
Officer; and execute tasks, communicate the emergency, report the results of investigations, and implement measures toprevent recurrence through the crisis response headquarters.

Indicators
and Targets

Indicators used to assess climate-related risks and opportunities in accordance with the organization’s
strategies and risk management processes, targets used by the organization to manage these risks
and opportunities, and progress toward the achievement of these targets
In pursuit of reducing its environmental impact, the Chori Group has identified the actual amount of greenhouse gas (GHG)
emissions produced by its business activities in fiscal 2020.
GHG Emissions 
Targets for reducing GHG emissions have not been establishedat this time due to the limited amount of emissions generated inrelation to the Group’s business scale. Aiming to continue to reduce
our GHG emissions, we will regularly monitor the amount of GHG
emissions from our business activities and consider switching to
the use of renewable energy and vehicles that pose minimal impact
on the environment for our Company-owned vehicles.
Moreover, while our Scope 3 emissions only consist of GHG
emissions from the commutes and business trips of the Group’s
employees, we will look into the possibility of calculating the actual
amount of GHG emissions from our entire supply chain in line with
future developments.

43

CHORI CO., LTD.

GHG Emissions in Fiscal 2020
(Consolidated Basis)
Actual Amount
Scope 1385 (t-CO2)

Scope 2956 (t-CO2)

Scope 3(from employee commutes and business trips)

364 (t-CO2)

Total

1,705 (t-CO2)

Scope 1: Direct emissions
Scope 2: Indirect emissions
Scope 3: Supply chain emissions (the actual amountspecified above consists solely of GHG emissions
from employee commutes and business trips)

Occupational Safety Management
At Chori, we understand the significance of minimizing risks in the workplace environment
and ensuring the safety of our employees. With this in mind, we devised a business continuity
plan and instituted a safety management system for our employees overseas.

Ensuring of the Safety of Our Employees Overseas
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 their safety, and respond appropriately in a timely manner.
Chori has in place a proprietary system dubbed Overseas
Business Trip Inquiry (OBTI), which manages the overseas business trips of domestic employees as well as the business tripsof employees dispatched abroad and of the employees ofoverseas offices and helps to identify the location of each
employee at a particular point in time.
Employees dispatched overseas and their families as well as
employees on business trips outside of Japan are also enrolled in
Chori’s overseas healthcare support program, which provides
medical assistance in Japanese in the event of an accident or illness
while abroad. The program helps to minimize employee concerns
regarding healthcare overseas due to its differences from Japan.

Business Continuity Plan
Chori’s business continuity plan has been designed to place theutmost priority on the safety of its directors and employees andto enable the 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 business continuity plan training course is also held once a year,
ensuring that we are fully prepared in the event of an emergency.
Chori’s business continuity plan manual calls for a swift recoveryof business operations by the sales divisions. For the corporate
divisions, we have established a core operations manual to maintainsystems, finances, and other basic business functions. Moreover,
we have established a response headquarters and operational
procedures in preparation for major disasters and pandemics.

Safety and Health Management
Each month, a Safety and Health Committee member visits ourhead offices in Tokyo and Osaka to assess the workplace environment. The committee comprises employees of the Human
Resources & General Affairs Department, nurses of our inhouse health clinics, and representatives from the Chori Labor
Union who regularly monitor the humidity, temperature, andCO2 concentration levels to ensure a safe workplace environment for all of our employees.
In terms of preventive measures for COVID-19, staggered
work hour and telework systems have been established, plexiglass barriers and alcohol disinfectants are available for use, andbody temperatures are measured at the entrance of the reception and office areas of our facilities. Moreover, our Tokyo andOsaka head offices, Hokuriku Branch, and Okayama Liaison
Office operate in compliance with the Building Sanitation Lawof the Ministry of Health, Labour and Welfare, with the facilities
constantly ventilated at a rate of 30 m3/h or more per person.

Crisis Response Headquarters
Incident

Primary Members for
Response Measures

ConvenePrimary Recipientof Information

Employees of Human Resources &General Affairs Dept.

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

President, CEO & COO

One

Point

ReportEstablish contact /share information

Cooperate

DivisionsManager of Corporate
Management Dept.

Relevant
Companies

Supervisor ofOverseas Stores

Internal Whistleblower System

Office etiquette has undergone drastic changes in the current
COVID-19 era. Chori has established an internal whistleblower
system called KIITE through which employees can anonymously
report legal or regulatory violations and other matters. Employees
are constantly reminded to wear masks and talk quietly within work
facilities, and through such measures, Chori strives to ensure a
comfortable workplace environment (please see page 56 for details).

Reception area of Tokyo Head Office

Meeting area

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Management Foundation Tailored to Sustainable Growth

Chori’s Sustainability Initiatives

Ensuring of Strict ComplianceBusiness Partners

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

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

Supply Chain Management
At Chori, we strive to develop a supply chain that ensures the stable supply of raw materials and products that are of consistently
high quality and deemed essential by customers.


Fibers, Textiles, and Garments Business

Chemicals Business

Machinery BusinessBusiness Environment and Issues to Address• Water and resource shortages arising from climate change• Food shortages stemming from the increasing global population• Conflict between Russia and Ukraine• Country risk associated with coups d’état and economic crises inemerging countries

Specific Measures to Address Issues• Expand portfolio ofenvironment-friendly products• Ensure thoroughrisk management• Strengthen supply chain• Maintain appropriate sales prices• Global supply chain disruptions• Surging prices of raw materials and oil and drastic exchange
rate fluctuations• Prolonged impact of the COVID-19 pandemic

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 highly sophisticatedequipment 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
conducts final approval. In October 2020, we began implementinga system that integrates the management of information on export
products and transactions, ensuring rigorous security trade control
and stronger compliance measures. This system is also designed
to improve work efficiency and eliminate the use of paper.
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
2021, 31 employees acquired the STC Associate certificate.

Report results• Decline in consumer sentiment due to rising prices

ArrangeRequest product safety inspection
and use of company name, etc.

Product Safety Inspection Committee
Chair: D eputy General Manager ofCorporate Planning Division(Human Resources & General Affairs Department
and Information System Department) andinspection committee members
Held: As necessary• Inspect product safety

CHORI CO., LTD.

Export Control Officer
Manager of Corporate Management Department(approval of transaction screening)

Export Control Representative
Corporate Management Department(transaction screening / consultation)

Logistics Department (Textile) / Logistics Department (Chemicals)(transaction screening)

Sales Department(application for transaction screening)

President, CEO & COO• Delays in collecting receivables from business partners due to foreign
currency restrictions• Disruptions in production and supply systems and the establishmentof an alternative supply chain• Deteriorating profitability due to increasing raw material costs anddelays in reflecting these higher costs in product prices

45

General Manager of Corporate Planning Division

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.

• Increasing need for a wider lineup of environment-friendly products

In order to fulfill its social responsibilities for procurement
activities in Japan and overseas, Chori has established its CSR
Procurement Guidelines and promotes procurement activities
that underline the importance of corporate ethics, legal
compliance, safety, disaster prevention, environmental
protection, product safety, quality assurance, human rights, andworking conditions. Within these guidelines, the Company hasprescribed its 11 Guidelines for Corporate Behavior in order toensure that employees are fully aware of its social mission andthe ways in which they must act at all times.

Regulatory Trade Control Officer

President, CEO & COO

Product Safety Initiatives

Impact on the Group’s business

Operational Rules Regarding
CSR-Based Procurement

Chief Export Control Officer

Product Safety
Management Manager
Managers of business administration sections• Aggregate and analyze issues• Comply with relevant laws andcompile information• Deliberate on important product safety
matters

CSR-Based Procurement Surveys
In an effort to promote procurement activities that focus on
corporate ethics, legal compliance, safety, disaster prevention,
environmental protection, product safety, quality assurance,
human rights, and working conditions, Chori conducts a CSRbased procurement survey once every two years, in principle, toperiodically check the status of the CSR-based promotion
activities of each supplier. The fiscal 2021 survey consisted of
25 questions in total, including five new questions regarding
preparedness for COVID-19, human rights issues, conflictminerals, and other topics. Of the companies taking part in thesurvey, 9.3% responded that their suppliers were not meeting CSR
procurement standards, and therefore, by working collectively withthe sales departments, we will identify the specific reasons for not
meeting these standards and seek improvements as necessary.

ReportSecretariat(Human Resources &General Affairs Department)• Secretariat of product safety• Store and manage relevant documents• Cooperate with TORAY INDUSTRIES’affiliated divisions (reports, consultations, etc.)• Provisional point of contact in the event ofaccidents• Product liability insurance coverage• Report to and consult with relevant andsupervising ministries, the National Institute ofTechnology and Evaluation (NITE), etc.

Command

Legal Compliance Committee
Chair:
President, CEO & COO
Members:	
Officers and department
managers of corporate
planning divisions and managers of the business administration sections of sales divisions
Supervisor: Outside directors, Audit &Supervisory Committee

Instruct and provide
information

Departments

Propose productmanagement
procedure
Report accidents
and submit
detailed report

Approve productmanagement
procedure• Prepare product management procedure• Manage product safety• Respond to and resolve accidents• Store and manage relevant documents• Provide advice to and cooperate withsubsidiaries and affiliates

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Management Foundation Tailored to Sustainable Growth

Chori’s Sustainability Initiatives

Promotion of Diversity

Human Resources

Creating a Comfortable Workplace Environment

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 to continue to grow as an organization and cultivate our next generation.

Human Resource Development

We regard people as our most valuable management resource,
and for that reason it is essential that we provide employees withworkplace environments that allow them to work in a healthy
and active manner. We conduct the following initiatives with thisin mind, particularly with the aim of providing employees with ahealthy work–life balance.
Eliminate Long Work Hours As globalization continues to spread at a rapid rate, 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 on 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.

In principle, designate one day of the week as a no-overtime day
All staff must leave their workplace by 9 p.m. every dayRestrict the number of overtime hours
Automate work processes with robotic process automation
Improve the efficiency of meetings

Personnel We Seek

1.

2.

3.

4.

5.

Always act responsibly asa member of Chori andkeep the Company
charter close to their heart

Have a spirit ofindependence

Constantly work hard andcome up with creativeideas as results-focused
professionals

Expect the best andprepare for the worst

Respect the values andcultures of people fromaround the world

Encourage Employees to Take Annual Paid Leave will set the stage for Chori’s future generations throughComment We
the growth of each and every employee.

Satoko Nakayama
Senior Executive Officer

47

CHORI CO., LTD.

Chori is a company that has experienced both times of success and hardship throughout the courseof its over 160 years in business. With respect to human resource development, I believe it is more
important to learn from the past and enable our employees to respond quickly to changes in thetimes and society by openly sharing information on past issues, rather than focusing on examples ofbest practices. Chori offers a range of training programs for all employees, from new graduates who
have just joined the Company to executive officers. In every training program, I convey to theemployees what I would like them to gain the most so that they are able to acquire information andknowledge that are not readily accessible in their day-to-day work.
In addition to compliance and anti-harassment measures, the theme for training in fiscal 2022 isdigital transformation. As digitalization continues to gain momentum worldwide, we will home in on
the development of digital experts, and we plan to formulate a human resource development policy
in line with Chori's vision for a digital future in the new medium-term management plan. Moreover, toensure Chori’s continuous global development, we will resume our executive training program, which
we experimented with at Group headquarters prior to the emergence of COVID-19, and promote theadoption of our human resource development policy at our subsidiaries in Japan and overseas.
The effectiveness of our training programs depends on the level of enthusiasm of the instructors
and participants. While our training programs are now conducted online rather than face to face asa result of COVID-19, we will continue to educate our employees according to their needs with theutmost levels of energy.

CHORI Innovation Activities (“CHOI-Katsu”) 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 of achieving
department- and division-specific goals. Fiscal 2022 marks the10th year of CHOI-Katsu, and to commemorate, we initiated aCompanywide business transformation project for the first time in
25 years.

Four Action Policies
1. Compliance and cleanliness
2. Health and communication
3. Learning
4. Digitalization

19

22(9 of whom are
male)(9 of whom are
male)

10

9

12

Number of Recipients of Self-Development Subsidy
120

106

102
89

80

40

 rovide option to relocate to other locations (transfer to otherP
branches domestically and regionally)17

We support our employees’ self-development by subsidizing
the tuition and fees necessary to acquire Companydesignated certification.

 liminate restrictions on the number of times half-day leave can beEtaken for the purpose of childcare, nursing care, or hospital visits

 onduct one-on-one meetings between employees andCtheir superiors

FY2021

Supporting Self-Development

80

Introduce work-at-home system (temporarily) andweb-conferencing system

FY2020(6 of whom
are male)

Number of Employees
Working Shorter Hours Due
to Childcare

Encourage employees to take seasonal holidays

Improve flextime system (no core hours)

Career Development Support 
At Chori, we hold level-specific training for directors and employees, invite instructors fromoutside of the Company, and conduct lectures led by our employees. In fiscal 2021, these
programs were held online as a measure to prevent the spread of COVID-19. Moreover, tospeed up the pace of globalization, we have implemented a system for the dispatch oftrainees overseas while continuing to conduct our in-house training program.

Number of Employees
Taking Childcare LeaveMandatory use of annual paid leave (five days)

Promote Flexible Workstyles 

New Employee Training Upon joining the Company, new employees receive orientation to acquire the basic
knowledge and proper etiquette to become a responsible working adult and attend 30
lecture sessions and take certification exams twice a year. In fiscal 2021, these programs
were held online as a measure to prevent the spread of COVID-19.

FY2019

0

2017

2018

2019

78

2020

2021

(FY)

Recruiting Diverse Human Resources
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 addition, we have been making proactive efforts topromote the hiring of people with disabilities.
Number of New Graduates(Number of employees)
30

20

10

0

Male

20

21

9

8

4

13

14

2019

2020

2021

2.9

2.3

2.3

2.2

2.3

2.3

2019

2020

2021

18
11
3

11

8

2017

2018

12
4
8
(FY)

FemaleRatio of People with Disabilities(%)

Supporting the Balance of Work Life and Childcare
Chori has various childcare systems in place to promote thebalance of work and family life. While the period of leave isrelatively short, the number of male employees taking childcare
leave has been on the rise, with nine taking time off in fiscal
2021. We also have a support system in place as a part of ouremployee benefit program that provides employees with financial assistance for childbirth, self-development, and childcare.

3.0

2.7

2.4

2.0

2.0

2017

2018

2.0

1.0

0

Company employment rate

(FY)

Statutory employment rate

Note: Results as of March 31 of each fiscal year

Tsumugu Report 2022

48

Management Foundation Tailored to Sustainable Growth

Chori’s Sustainability Initiatives

Local Communities and Society

Promotion of Health and Productivity Management

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

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

Cooperation with the Hokuriku Region
The Hokuriku region (Fukui Prefecture, Ishikawa Prefecture,
and Toyama Prefecture) boasts an extensive track record in the
manufacture of yarn and textiles spanning over 400 years andthrives on the production of synthetic fiber fabric. Since theestablishment of branch offices in Fukui Prefecture in 1929 and
Ishikawa Prefecture in 1934, Chori has worked to develop ayarn and textile business that is deeply rooted in this region.
In cooperation with synthetic fiber manufacturers, Chori began
wholesaling raw yarn to the textile industry (textile manufacturers)
and producing textiles with the industry. After the end of WorldWar II, Chori took sole responsibility for the sale of woolly nylon,
a raw material used in stockings, and grew in step with the
Hokuriku region during a period of high economic growth inJapan. The COVID-19 pandemic has had a major impact on
the yarn and textile industry in recent years. However, we haveseen increasing demand for stretchable fabrics made of false
twist yarn produced in the Hokuriku region, owing to the highlevel of comfort they offer for clothes worn indoors. On thestrength of our high quality and footwork that can only berealized through domestically made products, we will continue
to work with local companies to provide products that fulfill
the needs of each customer and communicate the value of
made-in-Japan quality to the rest of the world.

Health Declaration

Activities of the Hokuriku Chori Committee
Chori has been able to maintain its presence in yarn andtextiles in the Hokuriku Region because of the cooperation ofits local business partners. The Fukui Chori Committee andthe Kanazawa Chori Committee were established by thesebusiness partners as support groups for Chori’s business in theregion. These committees were combined and renamed as the
Hokuriku Chori Committee in 2001 and it continues to operate
to this day. Chori works alongside its member companies tohold annual meetings, cross-industrial exchanges, and lectures,
as well as publish newsletters to facilitate member interaction
and share information.

Selection as SDGs Promotion Coordinator
Compliance with various laws and regulations related to industrial
waste disposal and rising costs are major challenges that must
be overcome by companies. Chori is promoting initiatives tocollect fiber scraps and remnants from yarn processing plants
and fabric manufacturers to then utilize them to make products,
rather than disposing them as industrial waste. In addition to
engaging in the supply of raw materials used in reinforced sheet
materials that absorb water along river embankments, we are
currently developing sound-absorbing materials that will be
used on electric vehicles. In recognition of our efforts in these
BLUE CHAINTM recycling schemes, in August 2021, we wereselected as an SDGs Promotion Coordinator by the Fukui Textile
Association. The Company is vigorously working to identify
the issues and needs of textile companies in Fukui Prefecture
and introduce a wider range of environment-friendly products
to the market.

1. Enhancement of Awareness of the
Health of Employees

2. Approach to Health andProductivity Management

3. Responsibility to Society andthe Future

Chori believes that the health of its employees andtheir families is significant to the success of its
business and that the vitality of its employeestranslates into the vitality of the Company. Basedon this belief, we strive on an ongoing basis toenhance awareness of the health of our employees.

Chori actively supports and promotes initiatives
that help maintain and improve the health of its
employees and their families with the goal of
realizing health and productivity management.

Chori will do what is necessary to ensure the healthof its employees and achieve sound corporate
management. In so doing, we will make a difference to society and realize sustainable growth.

Health and Productivity Management Promotion Structure
We established our Health Promotion Committee in April 2018 andhave since been promoting efforts to realize health and productivity
management. Chaired by the deputy general manager of the
Corporate Planning Division (in charge of the Human Resources &General Affairs Department and the Information System Department),
the Health Promotion Committee consists of industrial physicians
and nurses from Chori’s in-house health clinics as well as theemployees of the Human Resources & General Affairs Department
and members of the Chori Health Insurance Society. Through theinitiatives of the Health Promotion Committee, Chori aims to maintainand improve the health of its employees and their families and fulfill its
Health Declaration. In addition, a debriefing session on White Paper
for Chori’s Health Management is held once a year to assess thecurrent state of health management and to discuss any issues.
President, CEO & COO
Health Declaration

Deputy General Manager of the Corporate Planning Division

Until 2019, Chori sponsored WFP Walk the World, a charity walk event organized by theUnited Nations World Food Programme (WFP), in which a number of employees and theirfamily members volunteered each year. The emergence of COVID-19 made it difficult tocontinue holding the event, encouraging us instead to hold our own charity walk eventfrom April 2022 by utilizing an internal walking app, keeping track of the number of steps
taken together by each department and the Group as a whole, and donating funds in theamount equivalent to the number of participants who achieved a certain number of steps
within a specific amount of time. The event, which aims to promote healthier lifestyles for
employees of both Chori and its domestic subsidiaries and contribute to the bettermentof society, attracted a record-high 260 participants in fiscal 2021. Chori will continue toengage in such activities to help realize a better society.

Ensuring the Health of Employees
We conduct oral and dental checkups and flu vaccinations on a
yearly basis. As part of the regular health examinations, employees
aged 30 and 35 years and over can undergo 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
to receive 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 toconsult 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(in charge of the Human Resources & General Affairs Department and the Information System Department)

Health Promotion Committee

CHOI-Katsu

White Paper for Chori’s Health Management(analyze, set targets, and examine effectiveness)(Companywide activities)

Health Management Meeting

Health Promotion Subcommittee

Prevention of serious lifestyle-related diseases
Promotion of health checkups

In-house health clinic

Companywide Charity Walk Event

February 14, 2018

Health seminars, yoga classes, etc.
Specific events and internal education

Health insurance association

FY2019FY2020

FY2021

Employees

100%

100%*

100%

Family Members

72.0%

52.9%

61.5%

* Excludes expatriates who were unable to return to Japan due to COVID-19

Labor union

Comment We offer a health support system that is attuned to changes in lifestyles.

Yuya Fujishima
Supervising physician at Chori’s
in-house health clinic inside Osaka
Headquarters

At Chori, we have internal health clinics in place at both headquarters in Tokyo and Osaka where
employees can receive medical care and health guidance after receiving the results of their medical
checkups. This enables the early prevention and treatment of serious illnesses.
In recent years, we have seen a decline in the percentage of male smokers as well as a reduction inexcessive alcohol consumption due to the effects of COVID-19. However, I have the impression that theconditions of employees with preexisting lifestyle-related diseases, such as diabetes and dyslipidemia, andmental health issues have worsened due to a lack of exercise and fewer opportunities to engage inworkplace communication. In order to address the changes in lifestyles triggered by COVID-19, we must
consider implementing measures that address the health-related needs of each individual. Our clinics willcontinue to do everything possible to help maintain the health of each employee and provide informationand support that contributes to the realization of healthier lives by adapting to changes in our lifestyles.

For more details, please refer to the “Health Promotion Activities” page (in Japanese only) of our corporate website.
https://www.chori.co.jp/sustainability/social/health/activity.html

49

CHORI CO., LTD.

Tsumugu Report 2022

50

Management Foundation Tailored to Sustainable Growth

Corporate Governance
Chori has established systems to ensure appropriate operations with the aim of achieving sound management and sustainablegrowth. 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.

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

Corporate Governance Structure (As of June 16, 2022)
General Meeting of Shareholders
Election / dismissal

Audit /
supervision

Election / dismissal
Cooperation

Election / dismissal

Board of Directors

Audit & Supervisory Committee

Directors Who Are Not Audit &Supervisory Committee Members

Audit & Supervisory
Committee Members

1 internal director

4 internal directors

Governance Committee

director

Report on the status ofimportant businessexecution and other matters

ReportSupervision

Direct control
Supervision
Business
execution

Executive Committee

Internal Auditing
Department

President, CEO & COO

Executive Officers

Business Execution Organization (Business Departments / Administrative Departments) /Group Companies

The Board of Directors consists of all directors and has been positioned as the committee
responsible for making strategic decisions and overseeing the Company’s operations.
The Board of Directors meets at least once a month, in principle, to make decisions onimportant management matters and to supervise the directors' execution of duties.

16

97.8%

100%

Executive
Committee

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

25

99%

—

Audit &
Supervisory
Committee

The Audit & Supervisory Committee convenes regularly once a month to discuss mattersrelated 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 executionof duties by each director (excluding those who are Audit & Supervisory Committee
members) and executive officer.

14

100%

100%

GovernanceCommittee

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

6

100%

100%

Legal
Compliance
Committee

The Legal Compliance Committee is chaired by the president, CEO & COO and consistsof the general manager of the Corporate Planning Division, the heads of corporate
divisions, and other members. The committee deliberates on important compliancerelated issues and reports the results to the Board of Directors and the Executive
Committee as necessary.

6

—

—

Business
Investment
Committee

Chaired by the president, CEO & COO, the Business Investment Committee discusses
and deliberates the appropriateness of risk–return assessments and plans and thefeasibility of important investments and financing.

1

—

—

M&A Promotion
Committee

The M&A Promotion Committee is chaired by the general manager of the Corporate
Planning Division and consists of the general manager of the Sales Department and othermembers. The committee deliberates on and examines matters pertaining to the businessportfolio of Group companies, including M&A and the Group’s medium- to long-term
management plan, from the perspective of improving consolidated management.

2

—

—

Cooperation

directors

ReportLegal Compliance
Committee

Board ofDirectors

Cooperation

2 outside

Inquiry

Number ofmeetings heldin fiscal 2021

Accounting Auditor

1 internal

2 outside directors

1 outside director

Description

Name

Internal audit

Accounting
audit

Attendance rate of Attendance rate
all directors andof outside
executive officers
directors

Overview of Corporate Governance Structure and Reasons for Its Adoption
To strengthen the management transparency and oversightfunction of the Board of Directors, Chori has an Audit &Supervisory Committee in place, the majority of which
consists of outside directors.
At the Board of Directors’ meetings, the directors(including those who are Audit & Supervisory Committee
members) engage in lively and sufficient discussions anddeliberations from a free and independent perspective inregard to the supervisory status of decision-making andbusiness execution. The Board also consists of two outside
directors who are Audit & Supervisory Committee membersthat audit the legitimacy and appropriateness of the statusof business execution from an external perspective in an
objective and rational manner. The Company therefore
believes that it is sufficiently fulfilling its management
supervisory function. Moreover, to ensure the prioritization of
results, the Company has set the term of office of directors(excluding those who are Audit & Supervisory Committee
members) and executive officers to one year and has
established a management structure that can respond tochanges in business conditions in a timely manner.

51

CHORI CO., LTD.

Organizational Structure

Company with an Audit andSupervisory Committee

Number of Directors(excluding those who are Audit &Supervisory Committee members)

5(of whom,
1 is an outside director) Term of Office of Directors
According to the Articles ofIncorporation

1 yearNumber of Directors Who Are
Audit & Supervisory Committee
Members3(of whom,
2 are outside directors) Term of Office of Directors Who
Are Audit & Supervisory
Committee Members According
to the Articles of Incorporation

2 years

Number of Independent Officers

3

Executive Officer System

Yes

Performance-Linked
Remuneration System

Yes

Accounting Auditor

Deloitte Touche Tohmatsu
LLC

Committee Members: Committee chair: Committee member: Nonmember attendee

Fiscal 2022 Committees and Committee Members
Name

Position

Kazuo
Sakihama

President, CEO & COO,
President and Executive Officer

Tatsuyuki
SakodaDirector,
Managing Executive Officer

Kazuhiro
Tohge

Director, Executive Officer

Mitsuo Ohya

Director

Hiroko Noda

Outside Director

Shigemasa
Yabu

Director, Full-Time Audit &Supervisory Committee Member

Masaaki
SawanoOutside Director, Audit &Supervisory Committee Member

Hiromasa
Suzuki

Outside Director, Audit &Supervisory Committee Member

Board ofDirectors

Executive
Committee

Audit &
Legal
GovernanceSupervisory
Compliance
Committee
Committee
Committee

Business
Investment
Committee

M&A
Promotion
Committee

Tsumugu Report 2022

52

Management Foundation Tailored to Sustainable Growth

Corporate GovernanceDiversity of the Board of Directors
The Board of Directors must decide on matters in a transparent, fair, prompt, and decisive manner, and therefore consists of memberswith a diverse range of views, experience, and skills. To strengthen corporate governance by ensuring the objectivity andappropriateness of decisions made by the Board of Directors, at least one-third of the members are independent outside directors.

compensation based on a consideration of their position within the Company, individual performance, and other factors. Meanwhile,from the perspective of their role and independence, remuneration of directors who are Audit & Supervisory Committee members andoutside directors consists solely of fixed remuneration, determined based on their role within the Company.

Overview of Executive Remuneration System

Directors
Name

Fixed remuneration

Length ofService*1

GenderKazuo Sakihama

9 years

Tatsuyuki Sakoda

Newlyappointed

Kazuhiro Tohge

4 years

Mitsuo Ohya

2 years

Hiroko Noda

Newly
appointed

Area of Expertise and Experience
Independent Director(Outside)

Corporate
Management

Global Business

Finance & Accounting

55%

Length ofService*1

GenderShigemasa Yabu*2

Newly
appointed

Masaaki Sawano

4 years

Hiromasa Suzuki*3

Newly
appointed

Medium- to long-term incentive compensation
Linked to degree of achievement of medium-term
management plan

• Directors who are not Audit &Supervisory Committee members• Directors who are not Audit &Supervisory Committee members

Eligible Recipients• Directors who are not Audit &Supervisory Committee members• Directors who are Audit &Supervisory Committee members• Outside directors

Grant Method

CashArea of Expertise and Experience
Global Business

Finance & Accounting

Legal & Compliance

Maximum Amountof Remuneration*1 Indicates number of full years of service as of June 30, 2021
*2 Shigemasa Yabu served as a director of the Company for six years prior to concurrently serving as an Audit & Supervisory Committee member.
*3 Hiromasa Suzuki served as a director of the Company for one year prior to concurrently serving as an Audit & Supervisory Committee member.

Reason for Nomination of Outside Directors

Performance-Linked Stock Compensation

Short-term incentive remuneration
Linked to performance in relevantbusiness year

Cash

Restricted stock compensation• Consolidated ordinary
income results• Progress of medium-term
management plan, etc.

• Consolidated ordinary income over three-year period•P rogress of medium-term management plan, etc.

Directors who are not Audit &Supervisory Committee members:
No more than ¥300 million annually

Directors who are not Audit &Supervisory Committee members:
No more than ¥300 million annually

Directors who are not Audit &Supervisory Committee members:
No more than ¥100 million annually(However, excludes the portion of employee
salary of directors who concurrently serve
as employees)(However, excludes the portion of employee
salary of directors who concurrently serve
as employees)(However, excludes the portion of employee salary of directors who
concurrently serve as employees)(Resolution passed at the 69th General Meetingof Shareholders held on June 15, 2016)(Resolution passed at the 69th General Meetingof Shareholders held on June 15, 2016)(Resolution passed at the 70th General Meeting of Shareholders
held on June 15, 2017)

Fixed amount paid monthly based on roleand position within the Company• Paid at a certain time of theyear according to position within the
Company• Amount calculated according to theprogress of the medium-term management plan and consolidated ordinary
income in the given business year•L evel of remuneration determined based on position
within the Company

Evaluation Index(Variable
Remuneration)

Corporate
Management

Bonuses

Fixed remuneration

Remuneration Type

Independent Director(Outside)—

Directors who are Audit & Supervisory
Committee members: No more than¥100 million annually

Grant andCalculation Method

The Company’s outside directors were nominated for the reasons outlined below as well as their ability to supervise managementfrom an external point of view, such as through the proactive exchange of opinions and advice at the Board of Directors’ and otherimportant meetings. In June 2022, Ms. Hiroko Noda, who has extensive knowledge and experience as a certified public accountant,
was newly appointed as an outside director.
Name
Hiroko Noda
Newly appointed

Reason for Nomination
She has been appointed as an outside director based on her knowledge, experience, and abilities as a certified public accountant as well as
her sufficient expertise in management gained through her years of experience as an outside director and a management consultant. As an
outside director, she is expected to provide appropriate advice to the Company’s management. 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.

Masaaki Sawano

He has been appointed as an outside director as he is expected to provide appropriate advice regarding the management of the Company and on
the grounds that he is deeply familiar with corporate legal work as a lawyer and has sufficient insight to supervise corporate management. In addition,it has been deemed that he has no material conflict of interest with the Company and that no conflict of interest will arise with general shareholders.

Hiromasa Suzuki

He has been appointed as an outside director based on his many years of involvement in the management of Fujirebio Inc. and his wealth ofexperience in group management as a top executive of a company, which involved orchestrating the establishment of Miraca Holdings Inc. Asan outside director, he is expected to provide appropriate advice regarding the management of the Company. In addition, it has been deemedthat he has no material conflict of interest with the Company and that no conflict of interest will arise with general shareholders.

to long term)

Note: Percentages apply in the caseof full achievement of targets

Basic Remuneration

Directors Who Are Audit & Supervisory Committee Members

10% (medium

35% (single year)

Legal & Compliance*1 Indicates number of full years of service as of June 30, 2022

Name

Variable remuneration• Payment made upon determining the annual base compensation for each position and, in principle, by dividing the amountequivalent to compensation for the execution of director duties
over the same three-year period as the medium-term
management plan by the standard stock price and determining
the number of shares to grant for each position.
Condition subsequent:
Withdrawn in accordance with the degree of achievement of consolidated ordinary income targets under the medium-term management
plan and work performance

Director Remuneration in Fiscal 2021
Total Amount of Remuneration by Type (Millions of Yen)

Classification

Total Amount of
Remuneration(Millions of Yen)

Basic
Remuneration

Restricted Stock
Compensation

Bonuses

Non-Monetary
Remuneration, etc., ofAmounts Shown on the Left

Number of
Directors
Eligible

Directors (Excluding Audit &Supervisory Committee Members)(Excluding Outside Directors)

143

100

17

25

17

6

Directors (Audit & Supervisory
Committee Members)(Excluding Outside Directors)

18

18

—

—

—

1

Outside Directors

23

23

—

—

—

3

Executive Remuneration
Executive remuneration consists of three types: monthly basic remuneration, yearly bonuses, and restricted stock compensation.
Remuneration of directors (excluding directors who are Audit & Supervisory Committee members) is based on a compensation
structure that aligns with returns to shareholders to ensure that it functions effectively as an incentive toward the sustainable increaseof corporate value. When determining the remuneration of each director, our basic policy is to provide an appropriate level of

53

CHORI CO., LTD.

Measures to Strengthen Corporate Governance
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

Tsumugu Report 2022

54

Management Foundation Tailored to Sustainable Growth

Corporate Governanceremuneration 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.
2001

2005

2012

2016

2017

2018

2020

2021

Separation ofManagementand Execution

Promotion ofCompliance

Revision of
Remuneration
SystemStrengtheningof Audit
Function

Revision of
Remuneration
SystemPromotion ofDiversity

Management
Transparency
and Fairness

Strengtheningof GovernanceDiscontinues the
Directors’
Retirement
Benefits System

Transitions to a
Company with
an Audit andSupervisory
Committee

Introduces the
Restricted Stock
Transfer
Remuneration
SystemIntroduces the
Executive Officer
SystemEstablishes theLegal Compliance
Committee, withthe president,
CEO & COO as
the chairman

Effectivenessof the Boardof Directors

Appoints a
female director
and a female
outside director(who is also an
Audit &
Supervisory
Committee
member)Institutes theGovernanceCommittee

Increases theratio of outside
directors on the
Board ofDirectors to morethan one-third

Conducts
questionnaires toevaluate theeffectiveness of
the Board of
Directors

Risk Management
At Chori, we take measures under normal circumstances to
identify potential risks in our business activities so we can mitigate such risks and prevent crises before they occur. We haveestablished a system for taking appropriate measures in theevent of a crisis that could have a significant impact on our business and formulated our Risk Management Rules to enable swift
and accurate responses to such emergencies while maintaining
control of the situation and regaining a state of normalcy as
quickly as possible. Under the direction of the president, CEO &COO, who assumes overall responsibility of the Company’s risk
management activities, measures are taken to identify material
issues pertaining to potential risks, mitigate such risks, and prevent such risks from occurring while formulating various methods
to detect risks in advance and providing the necessary educationand training in a voluntary and systematic manner. In addition,
efforts are made to follow up on the results of our crisis response,
verify its effectiveness, and uncover and improve on any issues.
The management team at Chori has classified the major risks
that are believed to have a significant impact on the financial

Evaluation of the Effectiveness of the Board of Directors

Ensuring of Thorough ComplianceWith the aim of enhancing the effectiveness of the Board of Directors, in fiscal 2021 Chori conducted the evaluation of theeffectiveness of the Board of Directors through a third-party institution for the first time. The Board of Directors is composed of suitably
qualified members that include outside directors, and the Board of Directors’ meetings are held in a free and open environment thatfacilitates constructive discussions and the exchange of opinions. Accordingly, it has been deemed that the Board of Directors is
operating appropriately on the whole and that its effectiveness is ensured.

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 conductof our business. In order to make all directors, executive officers,
and employees of the Group fully aware of the initiatives forcompliance, corporate divisions shall collaborate to hold compliance training and other training programs. The Legal Compliance
Committee, with the president, CEO & COO as the chairman,
shall discuss important matters regarding the compliance of theGroup 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 andthe Articles of Incorporation, the Governance Committee shalldeliberate on the dismissal of the management executive inquestion and the Board of Directors shall adequately discussand consider his or her dismissal based on those results.
A system of contact has been established throughout Chori
whereby executives and employees (including contract, temporary, and other employees) can receive consultation and reporton compliance violations and other matters. In this way, we

Respondents

All eight directors (including those who are Audit & Supervisory Committee members) in fiscal 2021 (registered questionnaire)

Method of
Evaluation andAnalysis

Evaluation and analysis conducted by the Governance Committee and the Board of Directors upon aggregation of results by a third-party institution and ensuring confidentiality

Questionnaire
Content

Questions are based on the following nine major themes
Composition of the Board of Directors
Operation of the Board of Directors
Discussions of the Board of Directors
Monitoring function of the Board of Directors Support system for directors (including those who are Audit & Supervisory Committee members)
Training
Dialogue with shareholders (investors)
Individual initiatives
General overview

Overview of
Evaluation Results

Regarding the enhancement of training opportunities for directors, which was identified as an issue in fiscal 2020, it was confirmed that
improvements have been made through participation in web-based training programs.
Meanwhile, opinions were shared in regard to decisions on management strategies and management plans, as a result of which it wasdeemed that further improvements must be made to discussions and deliberations by being observant of profitability, capital efficiency, and otherfactors. Opinions were also shared concerning dialogue with shareholders and investors, through which it was deemed that further improvements
must be made to the feedback provided to the Board of Directors.
We will continue to improve the effectiveness of the Board of Directors by increasing discussions on medium- to long-term policies and plans at
the Board of Directors’ meetings and by improving feedback to the Board of Directors on the status of dialogue with shareholders and investors.

Maintenance of a Certain Level of Independence from Our Parent Company
As of March 31, 2022, Chori’s parent company TORAY
INDUSTRIES, INC. held 52.76% of voting rights in the Company. We
constantly work to strengthen the combination of our ability to selland collect information on textiles and chemicals, which represent
our core business, in Japan and overseas and TORAY INDUSTRIES'
ability to develop materials in order to generate synergies andenhance corporate value for both companies. By operating undera parent company, Chori is able to gain a better understanding ofmarket trends and the business environment, enhance its credibility,and enjoy other benefits that come with being a Group company.

With the exception of one director who does not executebusiness, the executives and employees at Chori do not concurrently
serve as executives or employees at the parent company or Group
companies and the Company does not accept employees throughtransfers from other companies. In addition, at Chori we have ourown management plan in place, through the execution of which
we have developed and will continue to develop our business.
Transactions between Chori’s parent company TORAY
INDUSTRIES, INC. and its corporate group are assessedand verified annually by the Governance Committee.

position, business results, and cash flow of the consolidated
company according to the risks listed below, each of which will
be assigned a committee or division responsible for preventing
their occurrence.

Business and Other Risks• External business environment / country risk
• Exchange and interest
rate fluctuations• Concentration on specificregions and markets• Risk associated withfluctuations in raw material
prices• Inventory risk

• Business investment risk
• Risk of impairment on
securities• Risk of natural disasters
and contagious diseases• Risk associated withinformation systems andsecurity• Compliance risk
• Risk associated withsecuring of personnel• Bad debt risk

have established a framework for reporting incidents by ensuring the full confidentiality of whistleblowers, who are able toreceive consultation either in-house or through an external pointof contact depending on the nature of the incident.

Internal Whistleblower System
Consultant
KIITE (Fully confidential)
A system of contact through which whistleblowers can receive consultation
and request warnings to be given to the person being reported while maintaining full confidentiality and without undergoing an in-depth investigation.

Human Resources & General Affairs Department
KOTAETE (Confidentiality possible at the request of the whistleblower)
A system of contact through which requests for consultation and investigation
involving both the whistleblower and the person being reported can be madeand matters such as workplace harassment and serious compliance violations
requiring investigation can be reported.

Legal Compliance
Committee
Internal
hotlineAudit & Supervisory
Committee

Law firm
External
hotline()Advisory office /external firm

Internal Control
Our Basic Policy on Internal Control System was formulated in
May 10, 2006 to serve as a set of fundamental guidelines forthe establishment of a framework for ensuring the appropriate
execution of business toward realizing sound corporate
management and sustainable growth.
Since then, this policy has been amended to reflect changes

in the Group’s business environment and business activities.

For details on our internal control system, please refer to our Corporate Governance Report (in Japanese only).
https://www.chori.co.jp/sustainability/governance/

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CHORI CO., LTD.

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Management Foundation Tailored to Sustainable Growth

Corporate Governance

Messages from Outside Directors on the
Audit & Supervisory Committee

Internal Audit

While fiscal 2021 was a turbulent year marked by rising raw
material prices, surging logistics costs, and the increasingly
disastrous conflict between Russia and Ukraine, Chori achieved
substantial increases in both revenue and profit as well as its
highest ever results for net income attributable to owners of theparent. Following the success of our steady efforts in each of
our businesses in fiscal 2021, we will strive to further improve
our governance in the final year of our medium-term
management plan and ride this tailwind while working to avoid
risks. It must be noted in particular that fiscal 2022 isalso the year in which our new medium-term
management plan will be formulated. In order torealize sustainable growth, we must not only achieve
our ordinary income target but also take the initiativein fulfilling our social responsibilities as a company.
As a listed company on the Prime Market of theTokyo Stock Exchange, Chori is working to strengthen
its governance through efforts such as the centralizationof consolidated subsidiaries and other organizations incharge of conducting business audits under the Internal
Auditing Department in fiscal 2021. Moreover, theGovernance Committee, which was established in
2020, discusses specific matters, such as the selection
and dismissal of directors and succession planning,based on medium- to long-term projections.
Throughout our years in business, we have earned
a high level of trust in the Hokuriku region and otherIn regard to internal audits, the Company has established theInternal Auditing Department (consisting of seven members)
directly under the president, CEO & COO. The Internal Auditing
Department conducts audits on the appropriateness and efficiency of the Company’s business activities from a fair andindependent point of view. The Internal Auditing Department
also evaluates the status of the implementation and operationof internal controls concerning financial reporting in accordancewith the Financial Instruments and Exchange Act.

Outside directors and the Audit & Supervisory Committee
receive reports regularly on audits conducted by the Internal
Auditing Department and verify the status of business execution of each department and subsidiary. The Audit &Supervisory Committee reports the results of audits to andexchanges opinions with the Internal Auditing Department. The
Audit & Supervisory Committee requests the Internal Auditing
Department to provide information or conduct investigations
when necessary, thereby working closely together to ensurethat audits are carried out efficiently.

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 areverified each year for their economic rationality from the perspectives of the significance of each acquisition and holding,
profitability of the investment, transaction scale, and relevant
profits, and are either held or replaced upon resolution of theBoard 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.
Holding of Shares for Purposes Other than Pure
Investment (Cross-Shareholding)
FY2019FY2020

FY2021

Shares Held

30

30

31

Total Amount (Billions
of Yen)

3.4

4.1

4.6

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

Policies Regarding Constructive Dialogues with Shareholders
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.

• Individual investors
The Company promotes dialogues with its individual shareholders byholding company briefings exclusively for such investors, which areattended by the president, CEO & COO of the Company.

(2) The relevant internal departments proactively cooperate toachieve constructive dialogues with shareholders through the
preparation of disclosure materials and the sharing of important
information while conducting their business activities.

• Institutional investors
The Company holds financial briefings through the attendance ofthe president, CEO & COO and management executives upon the
conclusion of its six-month and full-year financial results announcements. At these financial briefings, the Company reports on thedetails of its financial performance, addresses various 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.

(3) Methods of dialogue other than individual meetings• General meeting of shareholders
The Company regards the general meeting of shareholders as anopportunity to fulfill its responsibility of providing explanations toshareholders and works accordingly to carefully address theirquestions and understand the intent of their opinions. In theevent of important announcements regarding management
information, such as the medium-term management plan, theCompany reports on its current status and collects the opinionsof shareholders through such measures as the holding of briefings on the management plan upon the conclusion of the general
meeting of shareholders.

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CHORI CO., LTD.

(4) Feedback
The Company promotes the sharing and use of information
obtained from dialogues through the reporting of opinions ofshareholders 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 the Insider
Trading Prevention Regulations.

areas of the world, particularly through the Fibers, Textiles,
and Garments Business. We have also steadily improved our
performance in the Chemicals Business and the Machinery
Business, firmly establishing a foothold in each market. Goingforward, Chori will look to step up its business expansion in not
only China but also Southeast Asia, the Middle East, Africa, andSouth America. To this end, we will draw on our longstanding
relationships with partner companies to put forward plans toreshape our business in line with the changing times.

Masaaki Sawano
Outside Director,
Audit & Supervisory Committee Member

In fiscal 2021, Chori’s business results exceeded initial forecasts
on the whole, despite the impact of drastic changes in thebusiness environment such as rapid inflation and supply chain
disruptions stemming from COVID-19. This is the result ofChori firmly fulfilling its basic function as a trading company,
which involves understanding customer needs and delivering
products as necessary. Meanwhile, with regard to the recordingof provision of allowance for doubtful accounts for the second
straight year, the Company must reassess the risks of doing
business with overseas companies and establish a framework
to prevent such risks from arising.

It is said that the purpose of corporate governance is to achieve
a company’s sustainable growth and increase corporate value.
As a company with an Audit & Supervisory Committee, Chori has
increased the number of independent outside directors to threemembers, and its Board of Directors is on the verge oftransitioning to the so-called monitoring board. Chori must fully
utilize this structure to quickly make executive decisions and fulfill
its responsibility of assessing and explaining the risks associatedwith its business with a high degree of transparency and thereby
increase corporate value from both offensive and defensive
perspectives. In order to enhance its audit function, in 2021
the Company integrated the Internal Auditing Department andcentralized the audit function for the entire Group,
including its subsidiaries. Going forward, it is imperativethat the Company strengthens the functions of boththe Internal Auditing Department and the Risk
Hiromasa Suzuki
Management Department in a balanced manner.
Outside Director,
Today, society is undergoing rapid changes.
Audit & Supervisory Committee Member
Companies are being called on even more thanever to fulfill their social responsibilities, including
environmental issues and trading regulations related
to geopolitical conflicts, and while actively discussingthese matters, I will bring a fresh new perspective as
an outside director by drawing on my years ofexperience in corporate management.

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Management Foundation Tailored to Sustainable Growth

Directors, Audit & Supervisory Committee Members,
and Executive Officers (As of June 16, 2022)

Directors

President, CEO & COO,
President and Executive Officer

Director, Managing Executive
Officer

Director, Executive Officer

Director (Part-Time)

Kazuo Sakihama

Tatsuyuki Sakoda

Kazuhiro Tohge

Mitsuo Ohya

Number of shares held: 33,917

Number of shares held: 8,506

Number of shares held: 9,351

Number of shares held: 0

CEO & COO

General Manager of Corporate Planning
Division, Executive Chief Representative
for China of the Company, and General
Manager of Pharmacovigilance & Quality
Assurance OfficeSpecial Appointee of the President(in relation to the Textile Division)

Significant concurrent positions
Executive Vice President andRepresentative Member of the Board of
TORAY INDUSTRIES, INC.

Outside Director*

Director, Full-Time Audit &Supervisory Committee Member

Outside Director,* Audit &Supervisory Committee Member

Outside Director,* Audit &Supervisory Committee Member

Hiroko Noda

Shigemasa Yabu

Masaaki Sawano

Hiromasa Suzuki

Number of shares held: 0

Independent Director“Number of shares held” indicates the number of CHORI CO., LTD. shares held.

Number of shares held: 22,793

Number of shares held: 0

Significant concurrent positions• Registered as a certified public accountant, Representative of Noda Certified
Public Accountant Office• Established Probity Consulting Co., Ltd.,
Representative Director• Part-time lecturer, Graduate School of
Asian and International Business
Strategy, Asia University• External Director of MODEC, Inc.,• Outside Director (Audit & Supervisory
Committee Member) of Okabe Co., Ltd.
• Outside Director of S.T. CORPORATION

Independent Director

Significant concurrent positions• Establishment and foundation partner of
CITY-YUWA PARTNERS• Member of Advisory Council on Fundamental
Issues in Corporate Management of Urban
Renaissance Agency• Member of Advisory Council on
Fundamental Issues in Corporate
Management and Rent Council of Urban
Renaissance Agency• Member of Business Evaluation Monitoring
Committee of Urban Renaissance Agency• 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• Director of Japan Bar Association

Number of shares held: 0

Independent Director

Executive Officers (Excluding Those Who Concurrently Serve as Directors)

Managing Executive Officer

Managing Executive Officer

Senior Executive Officer

Executive Officer

Hiroshi Yoshida

Yoshihiro Teratani

Satoko Nakayama

Masao Nakamura

Number of shares held: 13,391

Number of shares held: 14,010

Number of shares held: 14,329

Number of shares held: 2,765

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

General Manager of Chemicals Division,
Senior Manager of Life & Fine Chemicals
Business Department, and General
Manager of Logistics Department(Chemicals) of the Company

Deputy General Manager of Corporate
Planning Division (Human Resources &General Affairs Department andInformation System Department), andGeneral Manager of CHORI Innovation
Activities of the Company

Senior Manager of Chemical & Materials
Business Department

Executive Officer

Executive Officer

Naohiko Ashida

Satoshi Shiragami

Number of shares held: 2,765
Senior Manager of Technical Material &Garments Business Department,
Chairman of CHORI (DALIAN) TRADING
CO., LTD., and Chairman of CHORI(DALIAN) COMMERCIAL IMPORTEXPORT CO., LTD.

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CHORI CO., LTD.

Number of shares held: 0
Deputy General Manager of the
Corporate Planning Division(Corporate Management Department andAffiliate Business Department)* Outside director as stipulated in Article 2, Item 15 of the Companies Act.

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