Corporate Governance
December 23, 2021
SUNCORPORATION
Representative Director and President Ryusuke Utsumi
Contact： 052-756-5981
Security Code：6736
https://www.sun-denshi.co.jp/
The status of the Company's corporate governance is as follows.
I.
Corporate Governance Basic Policy on Corporate Governance, Capital
Structure, Corporate Attributes and Other Basic Information
１．Basic Policy
We believe it is important to enhance corporate governance in order to meet the wide
range of trust and expectations of our shareholders, customers, and all segments ofsociety.
To do so, we are implementing various measures based on the following basic ideas.
(1) Ensure soundness and transparency of management(2) Compliance with laws and regulations(3) Clarification of the decision-making process(4) Appropriate business execution(5) Timely and appropriate information disclosure(6) Group-wide risk management【Reasons for not implementing the following principles of the Corporate GovernanceCode】
The information below is based on the revised Code of June 2021.
Supplemental Principle 1-2 ④
Although the Company has translated the convocation notice of the General Meeting of
Shareholders into English, it has not introduced a system to enable electronic exercise of
voting rights.
The Company is aware of the need to create an environment to enable the electronic exercise
of voting rights, taking into account the situation of institutional investors and overseas
investors, and will continue to study the issue in response to changes in the composition ofshareholders and other circumstances.
Supplemental Principle 2-4 ①
The Company recognizes that ensuring the diversity of its human resources will lead to theenhancement of its corporate value over the medium and long term, and appoints employees
to management positions based on a comprehensive assessment of their skills andexperience, regardless of gender, nationality, or whether they were hired mid-career.
However, we have yet to set measurable numerical targets for securing diversity in our corehuman resources.
In addition, we have not yet been able to disclose our human resource development policy
and internal environment improvement policy and their implementation status. We will workon these issues in the future.
Supplemental Principle 2-5 ①

1

The Company has designated the department in charge of internal audit as the point ofcontact for internal reporting and has established rules to prohibit confidentiality anddisadvantageous treatment of those who provide information through the internal reporting
system operation rules. In the future, we will consider establishing a contact system
independent of management.
Supplemental Principle 3-1 ③, 4-2 ②
The Company recognizes that the 21st century is the "Environmental Century" and has
established "Environmental Management Regulations" to promote business growth andreduce the burden on the global environment. (https://www.sun-denshi.co.jp/csr/)
However, the Board of Directors has not yet formulated a basic policy on sustainability, which
is currently under consideration.
In addition, the Company is considering how to appropriately disclose and provide
information on investments in human assets and intellectual property, and will proactively
disclose such information when it formulates new management plans.
Supplemental Principle 4-10 ①
The Company has established a voluntary Nomination Advisory Committee for thenomination of Directors, but has not established a voluntary committee for the determinationof remuneration, and the specific amount of remuneration to be paid to each Director isdetermined by the Board of Directors (or the Audit Committee for Directors who are Audit
Committee members).
Four of our nine directors are outside directors (three of whom are independent external
directors), and since they participate in deliberations and express their opinions at the Boardof Directors meetings from a standpoint independent of the management team, we believethat the current system is functioning appropriately. However, the Company will consider amechanism to further enhance the objectivity and transparency of the procedures, including
obtaining appropriate involvement and advice from the perspective of the diversity and skillsof directors at the Nomination Advisory Committee.
Principle 4-11
The Company appoints as Directors those individuals who are considered most suitable toserve as Directors of the Company, regardless of nationality, race, gender, age, or otherfactors. At present, all of the Company's directors are male and no female directors havebeen appointed. However, if there are suitable candidates, the Company will consider
nominating them as candidates for directors.
In terms of internationality, we have appointed several foreign directors, and we believe thatthe current Board of Directors can appropriately manage the Company. As for the Directors
who are members of the Audit Committee, one certified public accountant and one attorneyat-law have been appointed as External Directors as they have considerable knowledge offinance, accounting or legal affairs.
Supplemental Principle 4-11 ①
As an industrial company with multiple businesses, the Company recognizes the importanceof appointing a well-balanced group of directors with expertise in each business, corporate
management, financial accounting, legal and risk management, and global skills in order tobalance important decision-making and supervision of business execution.
In the future, we will promote the selection and concentration of businesses, establish
specific decision criteria and policies according to the Company's business characteristics
and management environment in order to consider M&As and business structure reforms for
new businesses, and build a system that is more conscious of the balance of knowledge,
experience and ability, diversity and scale of the Board of Directors as a whole. In addition,2

the Company will consider disclosing the skill matrix of directors as early as possible.
The policies and procedures for the election of directors are as described in Principle 3-1(iv).
Supplemental Principle 4-11 ③
The Company will continue to examine the effectiveness of the Board of Directors, including
evaluation methods, from the perspective of improving the functioning of the Board of
Directors.
Principle 5-2
The Company does not currently publish a medium-term management plan because it istaking time to analyze the impact of Cellebrite, a consolidated subsidiary, on the Company's
business performance. However, the Company makes public its business performancetargets and medium-term vision for each fiscal year, and strives to provide shareholders witheasy-to-understand explanations of the qualitative and quantitative rationale for achieving
these targets through IR activities and other means.
【Disclosure based on the principles of the Corporate Governance Code】
The following is based on the revised code of June 2021
Principle 1-4
The Company may hold shares of listed companies as policy holdings if such holding willcontribute to the enhancement of corporate value over the medium to long term through themaintenance and strengthening of stable business relationships with the companies in which
the Company holds such shares.
Each year, the Board of Directors examines the rationality of the purpose of holding eachstock and the related income and benefits of holding the stock, and decides whether or not
to hold the stock in comparison with the case where the stock is not held.
This year, as a result of the verification, we have confirmed that all of the shares currently
held for policy purposes are held in accordance with the holding policy.
In addition, when exercising voting rights for shares held for policy purposes, we will make acomprehensive judgment as to whether the exercise of voting rights for shares held for policy
purposes will not damage the corporate value of the Company and whether it will lead to theenhancement of the value of the company in which the shares are held.
When there is a possibility of damage to shareholder value, such as the occurrence of illegal
activities, or when there are serious concerns about corporate governance, we will voteagainst.
Principle 1-7
When conducting transactions with related parties such as directors and major shareholders,the Company shall explain the rationality of the transaction and the terms and conditions of
the transaction in advance to the Board of Directors from the perspective of preventing
conflicts of interest with the Company and ensuring the fairness and impartiality of thetransaction, in accordance with laws and regulations and internal rules. In the event that suchtransactions are implemented, the details of the transactions are reported to the Board of
Directors.
The Company confirms whether or not there are any transactions between the Company andrelated parties by conducting a written survey of the Company's directors every year.
Principle 2-6
The Company does not have a defined-benefit corporate pension plan, but as part of its
welfare program, the Company has established a defined-contribution pension plan thatallows employees to select their own investments. In cooperation with the administrative
management organization, we use videos and other means to inform employees of the3system and encourage them to use it.
In addition, the division in charge of the pension plan is the human resources division, which
appoints employees with basic knowledge of public and private pension plans in general,
including defined contribution pension plans. In addition to the above, the Company also
provides investment education to its subscribers.
Principle 3-1(i) Based on the following "Slogan," "Corporate Philosophy" and "Basic Strategy," theCompany strives to plan, develop and continue to provide high value-added products andservices with superior merchantability and quality.
Slogan: "Dream, Challenge, Create"
Corporate philosophy: To improve the quality of social life through "Information Technology,
Digital Technology & Entertainment
Basic Strategy: To become a growing company**"Becoming a growth company" means turning into a growth company (a company that
continuously generates good earnings).
The Company's basic strategy, medium-term vision, and other financial explanatory materials
are available on the Company's website. https://www.sun-denshi.co.jp/(ii) Please refer to "I 1. Basic Policy" in this report.
(iii) The amount of remuneration to Directors (excluding Directors who are members of the
Audit Committee) is determined by the Board of Directors within the limit of the amount of
remuneration approved by a resolution of the General Meeting of Shareholders, taking into
consideration the business performance and other factors.
The amount of remuneration for Directors who are Audit and Supervisory Committee
members is determined by the Audit and Supervisory Committee within the limit of theamount of remuneration approved by a resolution of the General Meeting of Shareholders.
With respect to the remuneration of Directors, the Company places importance on the linkage
with business performance and medium- to long-term corporate value, and the Board of
Directors determines the policy for determining the details of remuneration for each individual
Director in order to create a remuneration system that is linked with shareholder interests.
The remuneration for Directors consists of monetary remuneration (fixed remuneration) andstock remuneration (stock options).
The monetary remuneration for Directors is fixed monthly remuneration, and the specificamount of remuneration to be paid to each Director, excluding Audit Committee members, isdetermined by the Board of Directors after a draft is prepared by the Representative Director
based on the standards established for each position, and is determined by the Audit
Committee for Directors who are Audit Committee members.
The number of stock options (stock acquisition rights) to be granted to each Director isdetermined by the Board of Directors (or the Audit Committee in the case of Directors who
are Audit Committee members), taking into consideration such factors as businessperformance, responsibilities, management details, and economic conditions.
(iv) The Board of Directors selects candidates for executive directors (directors who are notmembers of the Audit Committee or external directors) based on the results of mutual
evaluations of executive directors, taking into consideration the balance of knowledge,

4experience, ability, and the Nomination Advisory Committee, whose main members are
independent (external) directors, deliberates on the appropriateness of the nominees and,based on the opinions of the committee, decides the agenda for their appointment by aresolution of the Board of Directors.
With the consent of the Audit and Supervisory Committee, the Company selects directors
who have sufficient expertise, experience and insight to conduct appropriate audits andsupervision.
With regard to external directors, in accordance with the requirements of the Companies Act
and the independence standards stipulated by the Tokyo Stock Exchange, the Company
selects as independent outside directors those who are not likely to have a conflict of interest
with general shareholders.
In addition to cases of violations of laws and regulations and the Articles of Incorporation, if
a member of the management team, including representative directors, does not meet thecriteria for such selection or is judged to be unable to perform his or her duties, theNomination Advisory Committee will deliberate on the matter and, based on its opinion, theBoard of Directors will decide on a proposal for the dismissal of the relevant director to besubmitted to the General Meeting of Shareholders.
(v) With respect to the individual election and dismissal and nomination of candidates for
Directors, the brief personal history of each individual and the reasons for their appointment
are provided in the reference materials for the General Meeting of Shareholders in the noticeof the General Meeting of Shareholders.
https://www.sundenshi.co.jp/ir_info/notes/2021/50thNoticeGeneralMeetingShareholders.pdf
Supplementary Principle 4-1 ①
The Company has established the separation of management decision-making and businessexecution by establishing the Board of Directors as the decision-making and supervisory
body of management, and the Executive Committee as the business execution system basedon the decisions made by the Board of Directors, as well as executive officers and meetingbodies for each business field.
In addition, the scope of delegation to management is clearly defined in the Board of Directors
Regulations and the Table of Duties and Authorities, which sets out the decision-making
bodies, such as the Board of Directors, executive officers and executives, as well as theauthority of decision-makers in relation to decisions, deliberations and approvals.
Principle 4-9
The Company has not established any standards or policies regarding the independence ofthe selection of independent outside directors. However, in making the selection, theCompany takes into account the independence standards established by the Tokyo Stock
Exchange and selects as independent outside directors those who are judged to have norisk of conflict of interest with general shareholders.
Supplemental Principle 4-11 ②
The status of important concurrent positions held by the Company's directors is disclosed
annually through the notice of convocation of the General Meeting of Shareholders and theAnnual Securities Report. The four external directors of the Company do not concurrently
hold positions at other listed companies outside the Group, and are able to concentrate on
their duties as directors of the Company.
Supplementary Principle 4-14 ②

5

Upon assuming office, the Company provides and mediates various training opportunities for
Directors to acquire and appropriately update the knowledge necessary to properly assign
and deepen their understanding of their roles and responsibilities. In addition, even after
assuming office, the Company provides opportunities necessary for Directors to fulfill theirroles, such as providing knowledge and information necessary for supervising management,
and the Company bears these costs.
Principle 5-1
In order to promote constructive dialogue with shareholders, the Company has establishedthe following systems and measures for dialogue with shareholders.
(i) The Company has appointed a director in charge of IR from among its directors.
(ii) The director in charge of IR organically collaborates with other departments related to IR
activities, such as corporate planning, human resources and general affairs, accounting, andlegal departments, by holding meetings as needed, and shares information with otherdepartments related to IR activities.
(iii) The department in charge of IR receives telephone interviews and other IR interviews
from shareholders and investors.
(iv) The opinions of shareholders and investors obtained through IR activities areappropriately and effectively fed back to the Management Committee and the Board of
Directors.
(v) In dialogue with shareholders and investors, we pay attention to the management of
insider information in accordance with the insider trading rules.
2. Capital Structure
Foreign shareholding ratio

30% or more

Major Shareholders
Name or Company name
Tokai Engineering Co.Ltd.
UBS AG LONDON A/C IPB SEGREGATED CLIENT ACCOUNTINTERACTIVE BROKERS LLC
Fujishoji Co., Ltd.
NOMURA CUSTODY NOMINEES LIMITED OMNIBUS-FULLY PAID
(CASHPB)GOLDMAN SACHS INTERNATIONAL
Michie Utsumi
Yasue Watanabe
OASIS INVESTMENTS II MASTER FUND LTD.
BNY GCM CLIENT ACCOUNT JPRD AC ISG (FE-AC)
Name of controlling shareholder━.

Parent company

None

3. Company Attributes
Listed Stock Market and Market Section
Fiscal Year-end
Type of Business
Number of employees (consolidated) as of the endof the previous fiscal year
Sales (Consolidated) in the previous fiscal year
Number of consolidated subsidiaries as of the endof the previous fiscal year

6

Number ofshares held
(shares)
4,267,600
1,171,350
1,142,900
940,000
909,467

Percentage(%)

802,475
680,000
680,000
678,220
550,402

3.34
2.83
2.83
2.82
2.29

Tokyo JASDAQ
MarchElectronic equipment
More than 1000
Between ¥10 billion and ¥100 billion
Between 10 and 50 companies

17.78
4.88
4.76
3.91
3.79

4. Guidelines on measures to protect minority shareholders in transactions with controllingshareholders━.
5. Other special circumstances that may have a significant impact on corporate governance
None
II. Status of the management control organization and other corporate governance systems for
management decision-making, execution and supervision
1. Matters relating to the composition and management of the organisation
Form of organization
Company with Audit Committee
Directors
Number of directors under the articles ofassociation
Term of office of directors under the articles ofassociation
Chairman of the Board of Directors
Number of directors
Appointment of outside directors
Number of outside directors
Number of outside directors designated as
independent directors
Relationships with the company (1)Full name12
1 yearPresident
9existent
4
3CategoryaAkira Iwata
Yaniv Bardi
Akihiko Kawakami
Kazunori Shibata

Relationship with the company (*1)
b c d e f g h i jkScholarfrom another company
LawyerCertified Public Accountant

Selections about the relationship with the company
If the person corresponds to each item in the "present and recent", "○"; if the person corresponds to each item in the"past", "△".
If a close relative is applicable to each item in the "present and recent" period, the item is marked with "●"; if the item isapplicable to the "past" period, the item is marked with "▲".
a. Business executors of listed companies or their subsidiaries
b.Executive or non-executive directors of the parent company of the listed company
c.Executives of sibling companies of listed companies
d. A person who has a listed company as a major business partner or an executive of such a person
e.Major business partners of the listed company or their business executors
f. Consultants, accounting experts, and legal experts who receive a large amount of money or other property from listedcompanies other than remuneration for their services as directors.
g.Major shareholders of the listed company (if the major shareholder is a corporation, the executive person of thecorporation)h. Business executors (in person only) of listed companies' business partners (not falling under any of d, e and f)
i.Executives of parties with whom the external director has a relationship of mutual appointment (in person only)
j. Executives of companies to which listed companies have made donations (in person only)
k. Others

7

Relationships with the company (2)Full name
Audit
Independence
Committee
Board
members
members
and othercommittee
members
Akira Iwata〇

Yaniv Bardi

AkihikoKawakami

Supplementary
information on
applicable
items

━.

━.

〇

〇

━.

8

Reasons for appointment

Mr. Iwata has a high level oftechnical expertise in the fields
of artificial intelligence (AI),neural networks, deep learningand information security, as well
as a wealth of consulting
experience in the planning,development and manufactureof IOT sensor systems. He
provides objective and expert
advice and recommendations
on the Company's managementfrom an independent standpoint
as an outside director of theCompany, and is expected tocontribute to the growth anddevelopment of the Group.
In addition, he has no special
interest in the Company, does
not fall under any of the
independence criteria set out by
the Tokyo Stock Exchange(Guideline III 5.(3)-2 for listing
management, etc.), and has
been designated as anindependent director because
there is no risk of a conflict ofinterest with generalshareholders.
Mr. Bardi is expected tocontribute to the growth anddevelopment of the Group by
providing objective and expert
advice and recommendations
on the Company's managementfrom an independent standpoint
as an outside director. As such,
he is judged to be suitable forthe position of Outside Director
and has been elected.
Mr. Kawakami was appointed as
an outside director because hehas a wealth of expertise andexperience as a lawyer and is
expected to strengthen thefunctions of the Board of
Directors.

Kazunori
Shibata〇〇

In addition, he has no special
interest in the Company, does
not fall under any of the
independence criteria set out by
the Tokyo Stock Exchange(Guideline III 5.(3)-2 for listing
management, etc.), and has
been designated as anindependent director, as there isno risk of conflict of interest withgeneral shareholders.
Mr. Shibata has a wealth ofexpertise and experience as acertified public accountant, andis expected to strengthen thefunctions of the Board of
Directors, and was therefore
judged suitable for appointment
as an outside director.
In addition, he has no special
interest in the Company, does
not fall under any of the
independence criteria set forth
by the Tokyo Stock Exchange(Guideline III 5.(3)-2 for listing
management, etc.), and has
been designated as anindependent director because
he is judged to have no risk of
conflict of interest with generalshareholders.

━.

The Audit and Supervisory Committee
Composition of the committee and attributes of the chairman
All
Full-time
Internal
committee
members
directors
members(Name)(Name)(Name)
Audit
and
3
1
Supervisory
Committee
Directors and employees
Committee in its duties

toassistthe Audit

Outsidedirectors(Name)
1

Chairman of thecommittee(Chairman)
2

Internal directors

existent

Matters concerning the independence of the directors and employees concerned from the executive
directors
As described in "IV. 1. Basic policy on the internal control system and the status of its development",
employees of the department in charge of internal audit assist the Audit Committee in its duties.
Decisions on matters relating to the personnel rights of employees in the Internal Audit Department require
the prior consent of the Audit Committee, thereby maintaining independence from the executive directors.
Cooperation between the Audit and Supervisory Committee, the Accounting Auditor and the Internal
Audit Department
The Internal Audit Department also carries out audits at the direction of the Audit Committee.
In addition, at the request of the Audit and Supervisory Committee, the Audit and Supervisory Committee,
the Accounting Auditor and the Internal Audit Department hold liaison meetings and cooperate with each9other by reporting and explaining.
[Voluntary committees
Whether there is a voluntary committee equivalent toa nomination committee or a remuneration committee

Yes

Status of voluntary committees, composition of members and attributes of the chairman(chairperson)
Name of All
Full-time
Internal Outside Extern
Othe Chairman
thecommitte committe director director alrofthecommittee eessexperts
committee
members members (names (names (names(Chairma(Name)(names))))n)Committees
Nominatio 3
1
1
2
0
0
Internal
equivalent to n Advisory
directorstheCommitte
nominationecommittee
A voluntary ―
―
―
―
―
―
―
―
committee
equivalent totheRemuneration Committee
Supplementary information
The Nomination Advisory Committee consists of three directors (including two outside directors) who aremembers of the Nomination Advisory Committee. The Nomination Advisory Committee, which is anadvisory body to the President, was established for the purpose of ensuring transparency and fairness inthe process of nominating candidates for the Board of Directors and selecting representative directors andofficers attached to the Board of Directors, as well as ensuring that outside directors who are members of
the Audit Committee have sufficient information to formulate their opinions on the nomination of officers
and other matters and have a forum for discussion. When proposals concerning the nomination, etc. of
directors are submitted to the Board of Directors, the Committee's report is taken into full consideration.
Relationship with independent directors
Number of independent directors

3

Other matters relating to independent directors
The Company has designated all outside directors who meet the qualifications for independent directors as
independent directors and has notified the Tokyo Stock Exchange of this designation.
Incentive-related
Status of implementation of measures to provide Introduction of stock option scheme
incentives to directors
Supplementary information on relevant items
The Company has introduced a share-based remuneration stock option scheme (excluding directors who
are members of the Audit Committee and outside directors).
[Total]The number of shares to be granted will be determined by taking into account the Company's businessenvironment, share price and other factors at the time of grant.
[Individual payment levels]
The decision is based on a comprehensive consideration of each director's role, performance andcontribution to improving performance.
Persons to whom stock options have been Internal directors, external directors, employees andgrantedDirectors of subsidiaries, employees of subsidiaries
Supplementary information on relevant items
We believe that the growth of a company can be achieved not only through the work of a few senior
executives, but also through the work of the entire Group's workforce, which is why not only senior

10executives but also the entire Group's workforce are eligible for grants.
Directors' remuneration
Status of disclosure (of individual directors' Individual remuneration is not disclosed.
remuneration)
Supplementary information on relevant items
The total amount of directors' remuneration paid in the year ended on March 31, 2021 was as follows
Directors (excluding directors who are members of the Audit and Supervisory Committee) (excluding
outside directors),4 persons 50,210 thousand yen
Directors (Audit and Supervisory Committee Members) (excluding Outside Directors),
2 persons 11,320 thousand yen
Outside directors: 6 persons 17,210 thousand yen
The total amount of Directors' remuneration is also stated in the Business Report and the Annual
Securities Report, which are also available on the Company's website.
Whether there is a policy for determining the Yesamount of remuneration or its calculation method
Details of the disclosure of the policies for determining the amount of remuneration or its calculation
methodIn order to establish a remuneration system that emphasizes the linkage between remuneration and businessperformance and medium- to long-term corporate value, as well as with the interests of shareholders, theCompany's Board of Directors resolved on a draft policy for determining the content of individual remuneration
for Directors, at its meeting of February 12, 2021.
(1) Basic policy
The basic policy shall be having the remuneration of directors of the Company paid within the limit of theamount of remuneration approved by a resolution of the General Meeting of Shareholders, taking into
consideration their performance and responsibilities.
Specifically, the payment shall be made in the form of fixed remuneration and share remuneration (stock
options).
(2) Policy on the determination of the amount of remuneration, etc. for each individual in basic remuneration(monetary remuneration) (including policy on the determination of the timing or conditions for granting
remuneration, etc.)
The basic remuneration (monetary remuneration) for the Directors of the Company shall be fixed monthly
and shall be determined by the Board of Directors in accordance with their respective positions.
(3) Details of non-monetary remuneration, etc. and policy regarding the determination of the amount or
number of such remuneration, etc. (including policy regarding the determination of the timing or conditions
for granting remuneration, etc.)(4) Policy on the determination of the ratio of the amount of monetary and non-monetary remuneration, etc.,
to the amount of individual remuneration, etc., of Directors
The proportion of remuneration paid to executive directors by category is based on the level of remuneration
paid by companies of a similar size.
The amount of individual remuneration shall be decided by the Board of Directors, with the weight of nonmonetary remuneration increasing for higher positions.
(5) The reasons why the Board of Directors has determined that the individual remuneration, etc. of Directors
for the relevant fiscal year is in line with the relevant policy.
In order to ensure the fairness and transparency of the deliberative process, the Company has established aremuneration system within the limits of the remuneration approved by the General Meeting of Shareholders.
The representative director prepares individual remuneration proposals for directors in accordance withregulations, and the Board of Directors deliberates and decides on them.
The content of this policy is in line with the decision-making policy and, in the light of the above basic policy,
is considered to be in conformity with it.
Support system for outside directors
There is no full-time staff to support the outside directors, but each department, led by the full-time director,
provides the necessary materials and information and other necessary support.

11Matters relating to functions such as business execution, auditing and supervision, nomination andremuneration decisions (overview of the current corporate governance system)
・The Board of Directors
In addition to the regular monthly meetings of the Board of Directors, the Board of Directors meets asnecessary to resolve, deliberate and report on matters relating to the overall management of the Group.
・Audit and Supervisory Committee
In addition to the regular monthly meetings of the Audit Committee, meetings are held as necessary toreceive reports from the full-time Audit Committee members on the status of the execution of their duties
and from the selected Audit Committee members on the status of the audit.
The Board of Directors receives reports and deliberates on the results of investigations and surveys, andreports and proposes resolutions and discussion results to the Board of Directors as necessary.
・Management Meetings
Meetings attended by the directors (excluding outside directors), executive officers, and full-time Audit
Committee members are held once a month, at which the general managers of each division report on
the progress of the management plan.
The Board is responsible for reporting and discussing management issues.
・Independent auditors
The Company has engaged KPMG AZSA LLC to perform the accounting audit. The two certified public
accountants who performed the accounting audit were Naofumi Ohkita and Takaya Nakano.
The number of assistants for the accounting audit is six certified public accountants and eight others. The
number of assistants for the accounting audit is six certified public accountants and eight others.
・Limited liability contract
The Company has entered into agreements with non-executive directors to limit their liability under Article
423, Paragraph 1 of the Companies Act, and the maximum amount of liability under such agreements is
stipulated in Article 425(1) of the Companies Act.

12

3. Reasons for choosing the current corporate governance system
The Company has adopted a corporate governance system with an Audit Committee for the following
reasons
1. Enhanced monitoring
As Audit Committee members have voting rights at meetings of the Board of Directors, they are able toexercise a monitoring function over management by opposing inappropriate proposals by executive
directors.
In addition, the Audit and Supervisory Committee members appointed by the Audit and Supervisory
Committee have the right to express their opinions on the election, dismissal and remuneration of
directors (excluding directors who are Audit and Supervisory Committee members) at the General
Meeting of Shareholders. The Audit and Supervisory Committee members, who are selected by the
Audit and Supervisory Committee, also have the right to express their opinions on the election,
dismissal, remuneration, etc. of directors (excluding directors who are Audit and Supervisory Committee
members) at the General Meeting of Shareholders.
2. Speeding up decision-making in the execution of businessIn the case of a company with an Audit and Supervisory Committee, if the majority of the directors areoutside directors, or if the articles of incorporation so stipulate, certain important business execution
decisions may be delegated to directors (excluding directors who are Audit and Supervisory Committee
members). This enables the Board of Directors to make quick decisions on important business
operations. This allows the Board of Directors to concentrate on monitoring the executive directors.
III. Status of implementation of measures concerning shareholders and other interested parties
1. Efforts to revitalise the General Meeting of Shareholders and to facilitate the exercise of voting
rightsSupplementary information
Early
dispatchof Every year, we try to send out the mail earlier than the legal deadline.
notices of general This year, due to the effects of the Corona disaster, themeetings
of It was sent out on the legal date (9 June).
shareholders
Setting up shareholder The date of the Ordinary General Meeting of Shareholders is set to avoid
meetings to avoid concentrated days.
concentration days
This year the meeting was held on 24 June, avoiding the intensive day of 29
June.
Exercise of voting We recognise that this is an issue that needs to be considered in the future.
rightsbyelectromagnetic
means
Participation in the We recognise that this is an issue that needs to be considered in the future.
electronic
votingplatform and efforts toimprove the voting
environment for otherinstitutional investors
Provision of the noticeof
convocation(summary) in English
Other

The English version will be available from the Notice of Convocation of theGeneral Meeting of Shareholders in June 2020.
In the interests of early disclosure of information to shareholders, theinformation will be posted on the Company's website and on TDnet, sevenworking days prior to the dispatch of the notice of convocation.
In addition, the "Notes to Consolidated Financial Statements" and "Notes to
Non-Consolidated Financial Statements" among the documents to be provided
in the notice of convocation are provided only on the Company's website inaccordance with laws and regulations and Article 14 of the Articles ofIncorporation.
In previous years, at the Company's shareholders' meetings, we have included
explanatory slides with graphs when presenting the business report andconsolidated financial statements in order to allow shareholders to better
understand our business.
The narration of the business report and the consolidated financial statements
are used to provide shareholders with a clear understanding of the report.

13

Other shareholder newsletters are published on the Company's website
immediately after the General Meeting of Shareholders.
2.Activities related to investor relations
Supplementary information
Preparation
andpublicationofadisclosure policy
Regular briefings forindividual investors

Regular briefings foranalysts
andinstitutional investors
Regular briefings foroverseas investors
IR materials posted on
websiteEstablishment of adepartment (or person)in charge of IR

In light of the Fair Disclosure Rules, which came into effecton 1 April 2018, the Company will consider preparing andpublishing a disclosure policy.
We do not currently hold these meetings on a regular basis.
In the future, we will consider holding such sessions
complying with the purpose and the significance of the Fair
Disclosure Rules, as a means to ensure a proper
understanding of our corporate value, reducing theinformation gap between institutional and individual
investors.
Due to the impact of the Corona disaster, the financial
results presentation for the year ending 31 March 2021 wasposted on the Company's website and questions were dealt
with by individual conference calls.
We do not currently hold regular meetings, but we do
respond to enquiries on an individual basis.
Various reports, explanatory materials for financial results,
notices of convocation of general meetings of shareholders,shareholder newsletters, etc. are posted on the Company's
website, and explanatory materials for financial results andnotices of convocation of general meetings of shareholders
are also posted in English.
In addition, in light of the Fair Disclosure Rules that will
come into effect on 1 April 2018, we will continue toconsider expanding the provision of information on our
website, including the translation of the convocation notice
into English.
At present, investor relations is handled by the Public
Relations and Investor Relations department.

Whether the
representatives
themselves give
explanations

None

None

None

3.Efforts to respect the position of stakeholders
Respect for the positionofstakeholders
ininternal
rules
andregulations
Implementationofenvironmental
protection
activities,
CSR activities, etc.
Formulation of policies
and
other
matters
relating to the provisionofinformation
tostakeholders
Other

Supplementary information
A number of internal rules and regulations are in place to raise awareness within
the company.

Recognising that the 21st century is the "Environmental Century", we haveestablished the "Environmental Management Regulations" and are committed
to the growth of our business and the reduction of our impact on the global
environment.
In addition, we have obtained the "Privacy Mark" and are promoting activities toprotect personal information.
A number of internal rules and regulations are in place to raise awareness within
the company.

We do not yet have any female directors, but we do have three female
managers.
We see the promotion of female executives and managers as an issue that wemust continue to address.

14IV. Matters relating to internal control systems, etc.
1.Basic policy on internal control system and its development
1. Systems to ensure that the execution of duties by directors and employees complies with laws andregulations and the Articles of Incorporation
・Directors and employees shall strive to engage in legitimate and fair business activities that meet theneeds of society in accordance with the Directors' Regulations and the Employees' Employment Regulations.
・In order to ensure compliance with laws, regulations and internal rules in our business activities, we haveestablished compliance regulations and appointed a compliance officer.
・We will identify the laws and regulations that apply to our business, establish a basis for compliance withlegal requirements, and provide education and awareness from time to time.
・The Internal Audit Department, which reports directly to the Audit Committee, shall audit compliance andreport to the Board of Directors and the Audit Committee.
・The Company has introduced an internal reporting system to prevent violations of laws, regulations, theArticles of Incorporation and internal rules, and in the event of a violation, the Company will promptly
ascertain information and take action.
・The Company shall resolutely exclude and block antisocial forces and groups, and the General Affairs
Department shall deal with them in close cooperation with the police and other external specialized agencies.
2．System for the storage and management of information relating to the execution of duties by directors
・In accordance with laws, regulations, the Articles of Incorporation, and internal rules, the Company shallpreserve and manage information related to decision-making at the Board of Directors, the Executive
Committee, and other important meetings, information related to important decisions made by the President
and Representative Director, executive officers, and other persons, and information related to finance, otheradministrative operations, risk, and compliance. The information shall be stored and managed in accordancewith laws, regulations, the Articles of Incorporation and internal rules.
3. Regulations and other systems for managing the risk of loss
In accordance with the Risk Management Rules, the Company aims to minimize losses by preventing theoccurrence of risks and responding appropriately to any risks that may arise.
4. System to ensure the efficient execution of duties by directors
・In order to achieve swift and highly efficient corporate management, an executive officer system will be
introduced to clarify the roles of directors (excluding directors who are members of the Audit Committee) and
executive officers. The roles of directors (excluding directors who are members of the Audit Committee) and
executive officers will be clarified.
・The Board of Directors, which meets once a month in principle, makes decisions on importantmanagement matters in accordance with relevant laws and regulations, the principles of business judgment,
and the duty of care of a good manager, and regularly reports on the status of the execution of duties.
・The responsibilities and authorities for the execution of business are set out in the Rules of Division of
Duties and the Rules of Authority.
・Important business operations are deliberated in the Management Committee, which consists of directors
and executive officers, in order to conduct a multifaceted review.
・Matters relating to the operation of the Board of Directors are set out in the Regulations of the Board of
Directors, and basic matters relating to directors are set out in the Regulations of the Directors.
5. The following systems and other systems to ensure the appropriateness of business operations of thecorporate group consisting of the Company and its subsidiaries (hereinafter referred to as the "Group")a． A system for reporting to the Company on matters relating to the performance of duties by directors,
executive officers, employees who execute business, persons who are required to perform duties under
Article 598, Paragraph 1 of the Companies Act, and other persons equivalent to these persons (referred toas "directors, etc." in C and D) of subsidiaries. Systems for reporting to the Company on matters relating to
the execution of duties by directors, executive officers, employees, persons who are to perform duties under
Article 598, Paragraph 1 of the Companies Act, and other persons equivalent thereto (referred to as"directors, etc." in (c) and (d))
・The Company requires its subsidiaries to submit to the Company monthly financial statements, quarterly
financial statements, and other relevant materials as necessary, in order to obtain an accurate understandingof the management of the subsidiaries, in accordance with the Company's Regulations for the Managementof Affiliated Companies.
・The Company requires its subsidiaries to hold meetings of the Board of Directors, attended by theCompany's directors, on a quarterly basis in principle and to report to the Company on the operating results,financial position and other important information of the subsidiaries.
b． Rules and other systems for managing the risk of loss in subsidiaries
・In accordance with the Company's risk management regulations, the Company requires its subsidiaries

15

to prevent the occurrence of risks and to take appropriate measures to deal with any risks that may arise, inorder to minimize the Company's losses.
・The Company requires its subsidiaries to establish a system whereby any violation of laws and regulations,or any other fact that may cause significant damage to the Group, is immediately reported to the department
in charge of managing the subsidiary as soon as it is discovered.
c. System to ensure the efficient execution of duties by directors, etc. of subsidiaries System to ensure thatthe execution of duties by directors, etc. of subsidiaries is carried out efficiently
・The Company shall respect the autonomy and independence of the management of its subsidiaries, andshall require its subsidiaries to formulate basic policies and rules necessary for the execution of theirbusiness operations in order to contribute to the proper and efficient management of its subsidiaries.
・The Company shall, in principle, hold a meeting of the Board of Directors with the participation of theCompany's Directors on a quarterly basis to make decisions on important management matters inaccordance with relevant laws and regulations, the principles of business judgment, and the duty of care ofa good manager, and shall require the Directors to report periodically on the status of the execution of theirduties.
d. System to ensure that the execution of duties by directors and employees of subsidiaries complies withlaws and regulations and the Articles of Incorporation Systems to ensure that the execution of duties bydirectors, etc. and employees of subsidiaries complies with laws and regulations and the Articles ofIncorporation
・The Company requires its subsidiaries to establish a system whereby its directors, etc. and employees
strive to conduct legitimate and fair business activities that meet the needs of society in accordance with thebasic policies established by the subsidiaries.
・The Company shall require its subsidiaries to be assessed by a member of the Audit Committee selectedby the Audit Committee of the Company and the department in charge of internal audit in order to confirm
the status of compliance and the development and operation of internal control systems.
・The Company requires its subsidiaries to introduce and use an internal reporting system for the early
detection and correction of legal violations and other compliance issues.
6. Matters concerning employees who are to assist the Audit Committee in its duties
・Employees of the Internal Audit Department shall assist the Audit Committee in its duties (hereinafterreferred to as "Audit Assistants"). Employees of the Internal Audit Department assist the Audit Committee inits duties (hereinafter referred to as "Audit Support Staff").
7. Independence of audit support staff from directors (excluding directors who are members of the audit
committee)
・Audit assistants are subject to the direction and orders of the Audit Committee and Audit Committee
members selected by the Audit Committee.
・The prior consent of the Audit Committee is required for decisions on matters relating to the appointmentof audit support staff.
8. Matters relating to ensuring the effectiveness of instructions given by the Audit Committee to employees
who assist the Audit Committee in its duties
・Directors (excluding directors who are members of the Audit and Supervisory Committee) and employees
shall cooperate in the development of the audit environment so that the work of the audit support staff, who
are to assist the Audit and Supervisory Committee, can be carried out smoothly. Directors (excluding
Directors who are members of the Audit Committee) and employees shall cooperate in the development of
the audit environment so that the work of the audit support staff who are to assist the Audit Committee in its
duties can be carried out smoothly.
9. The following systems and other systems for reporting to the Audit and Supervisory Committee of theCompany
a. System for reporting to the Audit Committee by the Company's directors (excluding directors who aremembers of the Audit Committee) and employees b. Systems for reporting by the Company's directors(excluding directors who are members of the Audit Committee) and employees to the Audit Committee of
the Company
・Directors (excluding Directors who are members of the Audit Committee) and employees shall immediately
report to the Audit Committee any fact that may cause significant damage to the Company. Directors(excluding Directors who are Audit & Supervisory Board Members) and employees shall immediately reportto the Audit & Supervisory Board any facts that may cause significant damage to the Company.
・The Audit Committee members selected by the Audit Committee shall attend meetings of the Board of
Directors and other important meetings in order to gain an understanding of the important decision-making
process and the status of business execution.
・The Audit and Supervisory Committee members selected by the Audit and Supervisory Committee may
inspect major approval documents and other important documents related to the execution of business, and16

may request explanations from directors (excluding directors who are Audit and Supervisory Committee
members) or employees as necessary. The Audit and Supervisory Committee members selected by the
Audit and Supervisory Committee may inspect major approval documents and other important documents
concerning the execution of business, and may request explanations thereof from directors (excluding
directors who are Audit and Supervisory Committee members) or employees as necessary.
b. The Company's subsidiaries’ Directors, corporate auditors, executive officers, employees who executethe business of the Company's subsidiaries, persons who are required to perform duties under Article 598(1)of the Companies Act, and other persons equivalent to these persons.
(referred to as "Directors, etc." in this item) (in this item, "Directors, etc.") and employees, or persons who
receive reports from these persons, to the Audit Committee of the Company.
・Directors, etc. and employees of subsidiaries shall promptly and appropriately report to the Audit
Committee of the Company on matters related to the execution of business when requested to do so by the
Audit Committee members selected by the Audit Committee.
・Directors, etc. and employees of subsidiaries shall immediately report to the department in charge ofmanaging subsidiaries as soon as they discover any violation of laws and regulations, etc., or any other facts
that may cause significant damage to the Group, and the department in charge shall report to the Audit
Committee.
・The department in charge of the management of the Company's subsidiaries and the department in chargeof internal audit regularly report to the Audit Committee of the Company on the current status of internal
control audit, compliance, risk management, etc. in the subsidiaries.
10. System to ensure that those who report to the Audit Committee of the Company are not subjected todisadvantageous treatment by reason of such reporting
・The Company shall clearly stipulate in its Internal Reporting System Operation Rules that it shall prohibit
any disadvantageous treatment of directors, corporate auditors and employees of the Group who havereported to the Audit Committee of the Company on the grounds that they have made such a report.
11. Matters relating to the policy regarding the prepayment of expenses incurred in the execution of duties
by members of the Audit Committee of the Company
・When a member of the Audit & Supervisory Board of the Company makes a request to the Company foradvance payment of expenses in connection with the performance of his/her duties, the Company shallpromptly dispose of such expenses or debts after deliberation by the department in charge of accounting,unless it is proved that the expenses or debts relating to such request are not necessary for the performanceof the duties of the Audit & Supervisory Board member.
12. Other systems to ensure that the audits of the Audit Committee of the Company are conducted effectively
・Regular exchange of opinions between the Representative Director and the Audit and Supervisory
Committee shall be held.
・In addition to holding liaison meetings between the Audit Committee, the accounting auditor and thedepartment in charge of internal audit at the request of the Audit Committee, the Company shall establish asystem to ensure that the Audit Committee's audits are conducted effectively by ensuring the attendance ofAudit Committee members at various meetings.
2. Basic approach to the elimination of antisocial forces and the status of its development
1. Basic approach towards antisocial forces
・The Company shall not provide any benefits to antisocial forces, nor shall it be involved with antisocial
forces in any way.
・The Company's employees (all those who work for the Company) must be committed to social justice,and to winning the trust of customers, the market and society, they must not tolerate unjustified intervention
by anti-social forces, and must show their determination to eliminate them.
2. System for the elimination of antisocial forces
・In order to cope with antisocial forces, the Company will describe such forces in the Compliance Rules
and the Rules for Dealing with Antisocial Forces, and under the supervision of the officer in charge ofcompliance, the entire company will work together to ensure that all employees are aware of and thoroughly
understand how to deal with such forces.
・Organizationally, the director in charge of compliance, the head of the division in charge of general affairs,
the head of the division in charge of legal affairs, and the legal counsel will take the lead in seeking guidancefrom external organizations such as the police to deal with the situation.
V.1. Others
1. Introduction of anti-takeover measures
Introduction of takeover defense measures
Supplementary information on relevant items

None

17

━.
2. Other matters relating to corporate governance systems, etc.
Schematic diagram of the corporate governance system" and "Outline of the timely disclosure system".

18