Corporate Governance Report
Last Update: December 15, 2022
KAGA ELECTRONICS CO., LTD.
Ryoichi Kado,
Representative Director,
President & COO
Contact: +81-3-5657-0111
Securities code: 8154
URL: https://www.taxan.co.jp
The status of corporate governance by the Company is described below.
I. Basic approach to corporate governance, capital structure, corporate attributes, and other basic Information
1. Basic Approach(1) The Company is cognizant that enhancing corporate governance is a key management issue and takes
measures to ensure total compliance with corporate ethics and laws and regulations and to reinforce
internal control systems while making ensuring the soundness, efficiency and transparency of business
operations and raising corporate value its fundamental policies and objectives.
(2) In view of the importance of corporate governance, we have established the CSR Promotion Committee,
SDGs Committee, and Nomination and Compensation Committee to strengthen our corporate
governance system.
(3) The Company strives to increase corporate value while maintaining good relationships with stakeholders(interested parties).
(4) The Board of Directors holds monthly regular meetings and holds extraordinary meetings on a flexible
basis as needed. The Board makes decisions on matters specified by laws and regulations and otherimportant matters relating to management and oversees the status of the performance duties by eachdirector. The Company has 11 directors (of which four are outside directors) and has established astructure that enables adequate deliberation and appropriate and timely decision-making. The Company
instituted an employment-based executive officer system on April 1, 2005, and instituted a delegationbased executive officer system on April 1, 2022, to further improve corporate governance. In this way,
the Company segregated management decision-making and supervisory functions from businessexecution functions and clarified each role, and has established structures that enable timely response tochanges in the external environment while enhancing the functions of the Board of Directors andbusiness execution functions.
(5) Through the activities of the Information Disclosure Committee, we are working to ensure that
corporate information about the Company is disclosed in an easy-to-understand, fair, timely, andaccurate manner, and we are also working to enhance our IR and public relations staff as an organization
to implement this further.
(6) In light of the increasing emphasis placed on internal controls, the Audit office was placed under the
direct authority of the Representative Director, President & COO and works in collaboration with
Administration Headquarters, etc to conduct audit operations regarding the appropriateness of businessactivities including Group companies, the status of use of company resources, and the status ofcompliance with laws, regulations, and internal rules. In addition, the Company strives tocomprehensively operate internal control systems in response to enforcement of the Financial
Instruments and Exchange Act.
(7) The Supervisory Board comprises four members including two outside members. Supervisory Board
members attend all meetings of the Board of Directors and carry out their duties by actively attending
other important internal meetings and through other means. There are no interests between the－ 1 －Company and the outside Supervisory Board members including personal relationships or capital
relationships. Note that although, with respect to Yoichi Sato, an agreement is entered into between the
Company and the law firm of which the said individual is a member, for the provision of legal services,
etc., Yoichi Sato is not a partner of that law firm and is not involved in the management of that firm.
Reasons for Non-compliance with the Principles of the Corporate Governance Code
The Company implements all the principles established in the Corporate Governance Code.

Disclosure Pursuant to the Principles of the Corporate Governance CodePrinciple 1-4: So-called strategic stockholdings●Stockholding policy
The company holds publicly traded shares with the aim to build, support, and develop businesses relationships
beneficial to increasing its shareholder value. Regarding stock held, business relations with the company, equitymethod net earnings, dividend payouts, book value and market value comparisons, and other matters arereported to the board of directors once a year, and the board of directors periodically confirms whether or not tocontinue to hold the shares (including decreases in the number of shares held). Information concerning thenumber of shares for each issue of specified shares and the amount recorded in the balance sheet, etc. can befound in the Annual Securities Report.
●Regarding the use of voting rights relating to strategic stockholdings
The company will use its voting rights with its stockholding objectives in mind, after careful examination of theother companyʼs management policy and the content of individual agenda items, and based on whether or not
an item will contribute to the expansion of both companiesʼ medium- and long-term shareholder value.
Principle 1-7: Related-Party Transactions
In cases where Company officers conduct transactions with related parties, the transactions are approved byresolution of the Board of Directors in accordance with the Rules on Corporate Officers and other rules. In
addition, all officers are obligated to submit a written Confirmation of Transactions with Related Parties withregard to their transactions with related parties at the end of each year. In cases where the Company conducts
transactions with major shareholders and others, the Board of Directors discusses the particulars of thetransactions in accordance with the Detailed Table of Authority.
Principle 2-4: Ensuring Diversity, Including Active Participation of Women
Supplementary Principle 2-4-1<Approach to Ensuring Diversity>
1. Appointment of Women to Managerial Positions
The Company aims to achieve a ratio of female managers of around 25% during the 2030s. Accordingly,
based on a mid- to long-term perspective, the Company will promote the creation of an environment where
women can actively participate as a matter of course and support the autonomous growth of our employees.
At the same time, we will also continuously work to ensure that our female employees accumulate experience,develop a career mindset, etc., and thereby steadily increase the proportion of women among core humanresources.
2. Appointment of Foreign Nationals and Mid-career Hires to Managerial Positions
Regarding foreign nationals and mid-career hires, the Company is not aware of any particular differences
arising as a result of nationality or the time when employees were hired when appointing employees tomanagerial positions. As such, our target is to maintain the current level of such appointments.
<Voluntary and Measurable Goals for Ensuring Diversity>
1. Appointment of women to managerial positions
Current: 13.3% During 2020s: 17.0%/ During 2030s: 25.0%

2. Appointment of foreign nationals to managerial positions
Current: 28.4% Maintain current level－ 2 －3. Appointment of mid-career hires to managerial positions
Current: 42.5% Maintain current level
Principle 2-6 Function as asset owner of corporate pensions
In order to provide retirement benefits to its employees, the company uses both a defined benefit corporate
pension plan and a defined contribution pension plan.
The management of the defined benefit corporate pension reserve is relegated to an asset management entitythat has declared its acceptance of the Stewardship Code, and the company appropriately supervises said
management, e.g. via regular reports to its relevant internal department.
Principle 3-1: Enhancement of Information Disclosures
1. The Companyʼs vision (corporate principles and so on), management strategies, and management plans areposted on the Companyʼs website as the Kaga Electronics Corporate Philosophy and Action Guidelines athttps://www.taxan.co.jp/en/company/vision/, and information on our medium-term management strategy canbe found at https://www.taxan.co.jp/en/ir/management/management_07.html.
2. With regard to the Companyʼs fundamental approach and policies on corporate governance, refer to thisreport, Section I: Basic approach to corporate governance, capital structure, corporate attributes, and otherbasic information, Part 1: Basic approach.
3. With regard to policies and procedures for the determination of the remuneration of management executives
and directors by the Board of Directors, refer to this report, Director Remuneration under Section II:
Management decision-making, management organizations for execution and supervision, and other elements ofthe corporate governance system.
4. At Kaga Electronics, our policy when nominating director candidates is to “nominate persons with characterand insight, who will contribute to the sustainable growth of the Group and corporate value over the mid tolong term as director candidates.” When selecting corporate auditors, our policy is to select “persons ofappropriate character for corporate auditors, with advanced specialist knowledge and abundant experience.”
When nominating director candidates, first, the Nomination and Compensation Committee, an advisory body to
the Board of Directors, deliberates the nominations and makes a report to the Board of Directors, then uponreceiving this report, the Board of Directors deliberates and decides on the nominations.
When nominating corporate auditor candidates, after the Nomination and Compensation Committee hasdeliberated the matter and the consent of Board of Auditors has been obtained, a report is made to the Boardof Directors. Upon receiving this report, the Board of Directors deliberates and decides on the nominations.
The Nomination and Compensation Committee consists of four outside directors and three internal directors.
In addition, the Board of Directors decides on the selection and dismissal of upper-level management based on
the employment-based and delegation-based executive officer regulations and criteria of each type of
qualification, and after evaluation by the Group Management Headquarters Meeting and the Nomination andCompensation Committee.
5. The company will provide explanations regarding the naming and selection and dismissal of board directors
and corporate auditors at appropriate times via means such as news releases and convocation notices forgeneral shareholder meetings.
Supplementary Principle 3-1-3<Sustainability Initiatives>
In order to strengthen unity within the Group with regard to SDGs initiatives and promote sustainability
management, on April 1, 2022, the Company established the SDGs Promotion Office, under the direct authorityof the President. Also on April 1, 2021, the Company established the SDGs Committee, which is chaired by the
Representative Director, President & COO, and whose members are the officers overseeing each division, etc.,
and created working groups with the themes of “Environment,” “Society,” and “Governance” that report directly
to the SDGs Committee. In this way, the Company have established systems, and the Company are formulating
policies, measures, and goals relating to ESG issues, and monitoring the status of progress, etc.

－ 3 －Thus far, the SDGs Committee has met five times, and, in principle, each working group meets once eachmonth, thereby providing numerous opportunities for active discussion and consideration of each theme.
As one of the results of these efforts, on November 25, 2021, the Company formulated its “Medium- to LongTerm Sustainability Management Plan.”<Disclosure Based on the TCFD or Equivalent Frameworks>
Led by the Environment Working Group, and giving reference to the TCFD recommendations framework, thematters the Company consider to be the major physical risks as well as the transition risks and opportunities
relating to climate change, and our response policies, can be found on the sustainability information page of our
website. Sustainability page: https://www.taxan.co.jp/en/csr/sdgs.html<Investment in Human Capital, Intellectual Property, etc.>
The aforementioned social working group plays a central role in ensuring diversity in terms of “promoting theactive participation of women” and “appointing women, foreign nationals, and mid-career hires to managerial
positions,” based on the theme of “promoting diversity.” In addition, the social working group also considers
revisions to work styles relating to the COVID-19 and post-COVID-19 eras and the creation of conditions andsystems targeted at raising children and caring for relatives, based on the theme of “balancing work–lifemanagement with productivity improvements.”
Principle 4-1: Roles and Responsibilities of the Board (1)Supplementary Principle 4-1-1
The Company established Board of Directors Rules, clarifying matters for resolution by the Board. The Company
also established Rules on Work Authority, clarifying the authority entrusted to and scope of duties of the
management team.
Principle 4-9: Independence Standards and Qualifications for Independent Outside Directors
In accordance with the Tokyo Stock Exchange standards on independence, the Company requires that there
be no special interests with the Company with regard to the election of outside directors. In addition, toreinforce the functions of the Board of Directors, outside directors are required to have extensive experienceand broad powers of judgment as corporate managers and the like.
Principle 4-10: Use of Optional Approach
Supplementary Principle 4-10-1<Approach to the Independence of the Composition of the Nomination and Compensation Committee, as well as
its Rights, Roles, etc.>
The Company has a Board of Auditors, and although outside directors do not make up a majority of members of
the Board of Directors, it has established the Nomination and Compensation Committee as a discretionary body.
Independent outside directors make up a majority of the members of the Nomination and Compensation
Committee, and an independent outside director serves as chair of the Committee. With regard to the
independence, objectivity, accountability, etc., of the functions of the Board of Directors concerned with thenomination and compensation of directors and delegation-based executive officers, as well as succession plans,
the Board of Directors receives appropriate advice and involvement from the Nomination and Compensation
Committee and respects the Committeeʼs reports. In this way, the independence, objectivity, and accountabilityof the functions of the Board of Directors are appropriately strengthened.
Principle 4-11 Preconditions for Ensuring the Effectiveness of the Board of Directors and Supervisory Board
Supplementary Principle 4-11-1
The Company emphasizes ensuring diversity on the Board of Directors as a whole with different specialized
knowledge, experience, and so on with regard to nominating candidate directors so that the Board candemonstrate maximum effectiveness and efficiency.

－ 4 －The Company discloses a skill matrix for each director along with the career summaries of independent outside
directors and other information on our website and in the Notice of the 53rd Ordinary General Meeting of
Shareholders.
https://www.taxan.co.jp/en/ir/management/management_03.html#page1

Supplementary Principle 4-11-2
The Company discloses the materials regarding the concurrent positions of directors and Supervisory Board
members in its notice of convocation of the regular ordinary General Shareholders Meeting and securities
reports.
Further, directors and Supervisory Board members spend the time and perform the work necessary toappropriately fulfill their roles and responsibilities.
Supplementary Principle 4-11-3
Every year, the Company analyzes and evaluates the effectiveness of the Board of Directors as a whole.
In terms of the method of analysis and evaluation, the Company administers self-assessment questionnaires toall officers (including outside officers) with questions related to the effectiveness of the Board of Directors (suchas the composition, operation, and functions of the Board of Directors, the provision of information to outside
officers, and governance systems). The results of the questionnaires are then analyzed and evaluated.
In the questionnaire conducted in March 2022, all officers replied that performance exceeded expected levels
across all areas. As a result, the Company has judged that the effectiveness of the Board of Directors as a whole
has been ensured.
Principle 4-14: Director and Supervisory Board Member Training
Supplementary Principle 4-14-2
The Company provides necessary opportunities and supports the cost of acquiring knowledge relating to the
management, compliance, and so on necessary for directors and Supervisory Board members to fulfill their roles
and perform their responsibilities.
Principle 5-1: Policy on Constructive Dialogue with Shareholders● Fundamental Approach
The Company undertakes measures to engage in dialogue and other interactions with shareholders and investors
in order to achieve continuous growth and raise corporate value in the medium to long term.
(1) Investor relations structures
Under the leadership of the president, CFO and Investor Relations and Public Relations Office handle dialogues
with shareholders and investors.
(2) Methods of dialogue
The Company holds financial briefings for mass media, analysts, and institutional investors twice annually (inMay and November), as well as briefings on its business and strategy, and responds appropriately to requests forindividual visits and for information. For our shareholders and individual investors, information on management
policies, business details, results, videos of financial briefings for institutional investors, and other information are
posted on the Companyʼs website and the Company strives to enhance information disclosures. In addition, theCompany participates in large-scale briefings for individual investors and responds appropriately to individual
inquiries.
(3) Internal feedback
Feedback regarding the details of dialogues with shareholders and investors is provided by the officers
responsible for management divisions and the Secretarial and Public Relations Office to the Board of Directors
and other relevant divisions as necessary.
(4) Insider trading and quiet periods－ 5 －The Company does not divulge insider information during dialogues with shareholders and investors. The
Company has established Rules on Internal Information Management and Restriction of Insider Trading andstrives to manage insider information. The periods from the last day of each quarterly financial period until theannouncement of financial results for that period are designated quiet periods and dialogue and information
disclosures are restricted during those periods.

2. Capital Structure
Foreign shareholding ratio

At least 20% and less than 30%

Status of Major Shareholders
Name

Number of Shares Held

Ratio (%)

The Master Trust Bank of Japan, Ltd.( Trust Account)

3,019,400

11.50

OKOZE CO., LTD

1,840,000

7.01

Custody Bank of Japan, Ltd.(Trust Account)

1,781,000

6.78

KAGA ELECTRONICS Employee Shareowners Association

1,505,812

5.73

SANKYO CO., Ltd.

1,299,500

4.95

The Bank of Mitsubishi UFJ, Ltd.

1,137,634

4.33

Mizuho Bank, Ltd.

950,334

3.62

Isao Tsukamoto

731,445

2.79

Mitsubishi Electric Corporation

500,300

1.90

Nippon Life Insurance Company

459,394

1.75

Existence of controlling shareholder (other than parent―――

company)
Existence of parent company

None

Supplementary Explanation
1) Numbers of shares held are as of September 30, 2022.
2) The Company holds 2,438,520 shares of treasury stock, but the Company is not included in the major
shareholders listed above.
3) Shareholding ratios are calculated with treasury stock excluded.

3. Company Attributes
Listing stock market and market section

Prime Market

Fiscal year-end

March

Business type

Wholesale

Number of Employees (consolidated) as of the end of

1,000 or more

the previous fiscal year
Sales (consolidated) as of the end of the previous

100 billion yen to less than 1 trillion yen

fiscal year
Number of consolidated subsidiaries as of the end

50 to less than 100of the previous fiscal year

4. Policy on Measures to Protect Minority Shareholders when Conducting Transactions and the like with
Controlling Shareholder

－ 6 －

―――

5. Other Special Circumstances which may have a Material Impact on Corporate Governance
None.

－ 7 －

II. Management Decision-Making, Management Organizations for Execution and Supervision, andStatus of other Corporate Governance Systems
1. Matters Relating to Organizational Structure, Operations, etc.
Organizational format

Company with an Audit &Supervisory Board

Directors
Number of directors specified in Articles of Incorporation

20

Term of office of directors specified in Articles of Incorporation

2 years

Chairperson of the board

President

Number of directors

11

Appointment of outside directors

Outside directors are appointed

Number of outside directors

4

Number of outside directors designated as independent directors

4

Relationships with the Company (1)Name
Susumu Miyoshi
Akira Tamura
Noritomo Hashimoto
Hirokazu Nishiyama

Affiliation
Formerly affiliated withanother company
Formerly affiliated withanother company
Formerly affiliated withanother company
Formerly affiliated withanother company

Relationship with the Company*
a

b

c

d

e

f

g

h

i

j

△
△
△
△

* Categories for Relationship with the Company* Marked with ○ if the director currently falls or has recently fallen under the categoryMarked with △ if the director fell under the category in the past
* Marked with ● if a close relative of the director currently falls or has recently fallen under the categoryMarked with ▲ if a close relative of the director fell under the category in the pasta. Executive of the Company or subsidiary of the Company
b. Executive or non-executive director of the parent company of the Company
c. Executive of a fellow subsidiary of the Company
d. Person with the Company as a major client or supplier or an executive thereof
e. Major client or supplier of the Company or an executive thereof
f. Consultant, accountant, or legal professional who receives a large amount of monetary consideration orother property from the Company other than compensation as an officer of the Company
g. Major shareholder of the Company (or an executive of a major shareholder if the shareholder is a legal entity)
h. Executive of a client or supplier of the Company (which does not correspond to any of d, e, or f) (thedirector himself/herself only)
i. Executive of a company with which the Company mutually appoints outside officers (the director
himself/herself only)
j. Executive of a company or organization that receives donations from the Company (the director
himself/herself only)
k. Other－ 8 －kRelationships with the Company (2)Name

Independent

Supplementary Explanation

Officerof Applicable Items
The Company executed anadvisory agreement with Susumu
Miyoshi in August 2010, but theagreement was terminated when
he was The Company requests
that Mr. Miyoshi be elected as an
outside director so that he canreinforce the functions of theBoard of Directors by reflecting his
extensive appointed director.

Susumu Miyoshi○

Akira Tamura○

The Company executed anadvisory agreement with Akira
Tamura in July 2011, but theagreement was terminated when
he was appointed director.
The Company engages inpurchase and sale transactions
and other transactions with
Sohgo Security Services Co., Ltd.,of which Mr. Tamura was an
executive until June 2011, but
the amounts of the transactions
account for a very small
percentage of each companyʼssales (less than 0.01% in thefiscal year ended March 2022).

－ 9 －Reasons for Appointment
Mr. Miyoshi has a wealth ofexperience and a wide range ofknowledge as a top management,
and the Company requests that
he be elected as an outside
director in the expectation that hewill reinforce the functions of theBoard of Directors by providing
supervision and advice on overallmanagement based on thisknowledge.
Mr. Miyoshi was formerly an
executive of a trading partner of
the Company, but he has
resigned from that position, andthe Company has determinedthat there is no risk of affecting
the determinations ofshareholders and investors or
conflicts of interests with generalshareholders. Accordingly, he has
been designated as anindependent officer.
Mr. Tamura has a wealth ofexperience as a top management
and a high level of knowledge
cultivated in several companies,
and the Company requests that
he be elected as an outside
director in the expectation that hewill reinforce the functions of theBoard of Directors by providing
supervision and advice on overallmanagement based on thisknowledge, particularly on
management strategy andbusiness administration.
Mr. Tamura was formerly an
executive of a trading partner of
the Company, but he has
resigned from that position andthe transaction amounts are verysmall(less than 0.01%), and theCompany has determined that
there is no risk of affecting thedeterminations of shareholders
and investors or conflicts ofinterests with generalshareholders. Accordingly, he has
been designated as anindependent officer.

Name
Noritomo

Independent

Supplementary Explanation

Officerof Applicable Items
The Company executed anadvisory agreement with
Noritomo Hashimoto in July
2016, but the agreement was
terminated when he wasappointed director.
The Company engages inpurchase and sale transactions
and other transactions with
Mitsubishi Electric Corporation ofwhich Mr. Hashimoto wasan executive until June 2016,
but the amounts of thetransactions account for a verysmall percentage of eachcompanyʼs sales (less than
0.06% in the fiscal year ended
March 2022).

○

Hashimoto

Hirokazu Nishiyama○

The Company executed anadvisory agreement with
Hirokazu Nishiyama in July 2019,
but the agreement was
terminated when he wasappointed director.
The Company engages inpurchase and sale transactions
and other transactions with Sharp
Corporation of which Mr.
Nishiyama was an executive until
June 2019, but the amounts ofthe transactions account for avery small percentage of eachcompanyʼs sales (less than 0.3%
in the fiscal year ended March
2022).

－ 10 －

Reasons for Appointment
Mr. Hashimoto has a wealth ofexperience and a high level ofknowledge as a top
management , and the Company
requests that he be elected as an
outside director in the
expectation that he will reinforce
the functions of the Board of
Directors by providing supervision
and advice on overallmanagement based on thisknowledge, particularly on
management strategy andpersonnel affairs.
Mr. Hashimoto was formerly an
executive of a trading partner of
the Company, but he has
resigned from that position andthe transaction amounts are verysmall(less than 0.06%), and theCompany has determined that
there is no risk of affecting thedeterminations of shareholders
and investors or conflicts ofinterests with generalshareholders. Accordingly, he has
been designated as anindependent officer.
Mr. Nishiyama has a wealth ofexperience as a corporate
manager and a high level ofknowledge in various fields, andthe Company requests that he beelected as an outside director in
the expectation that he willreinforce the functions of theBoard of Directors by providing
supervision and advice on overallmanagement based on thisknowledge, particularly on theGroupʼs business fields.
Mr. Nishiyama was formerly an
executive of a trading partner of
the Company, but he has
resigned from that position andthe transaction amounts are verysmall(less than 0.3%), and theCompany has determined that
there is no risk of affecting thedeterminations of shareholders
and investors or conflicts ofinterests with generalshareholders. Accordingly, he has
been designated as anindependent officer.

Existence of a discretionary committee correspondingYes

to a nominating or remuneration committee
Status of establishment of discretionary committees, composition of committee members, and attributes of thecommittee chairman (chairperson)

Name of thecommittee
Discretionary
committee
equivalent to
the Nomination
Committee
Discretionary
committee
equivalent totheCompensation
Committee

All
Full-timecommittee committee
members members(persons) (persons)Internal
directors(persons)

outsidedirector(persons)

External
experts(persons)

Others(persons)

Committee
chairman(chairperson)

Nomination
andCompensation
Committee

7

3

3

4

0

0

outsidedirector

Nomination
andCompensation
Committee

7

3

3

4

0

0

outsidedirector

Supplementary Explanation
Overview of the Nomination and Compensation Committee
・Purpose of establishment
The voluntary-based Nomination and Compensation Committee has been established for the purpose ofstrengthening the supervisory function of the Board of Directors and enhancing corporate governance systems
by ensuring transparency and objectivity of evaluation and decision-making processes relating to nomination andcompensation, etc., of directors, auditors, and delegation-based executive officers.
・Roles and Activities of the Nomination and Compensation Committee
In response to inquiries from the Board of Directors, the Committee deliberates and reports to the Board of
Directors on matters related to the appointment and dismissal of directors, corporate auditors, and delegationbased executive officers, appointment and dismissal of directors with titles, compensation of directors, corporate
auditors, and delegation-based executive officers, and other important management issues that the Board of
Directors deems to be necessary.
From its establishment on June 29, 2021, until the date of submission of this report, the Nomination andCompensation Committee held six times, and all members attended all meetings. The Committee mainly
deliberated regarding institution of a delegation-based executive officer system and its effect on succession plansand officer compensation levels and systems.
・Structure of the Nomination and Compensation Committee
The Committee shall comprise three (3) or more directors appointed by the Board of Directors, a majority ofwhom shall be independent outside directors. The Committeeʼs chairperson shall be appointed from among theCommittee members who are independent outside directors.
The current composition of the Committee is as follows.
Isao Tsukamoto, Representative Director, Founder & CEO / Ryoichi Kado, Representative Director, President &COO / Eiji Kawamura, Director, Managing Executive Officer / Noritomo Hashimoto, Outside Director (Chair) /Susumu Miyoshi, Outside Director / Akira Tamura, Outside Director / Hirokazu Nishiyama, Outside Director－ 11 －

Supervisory Board Members
Whether the company has a Supervisory Board

Established

Number of Supervisory Board members specified in

４

Articles of Incorporation
Number of Supervisory Board members

４

Status of cooperation among Supervisory Board members, accounting auditors, and internal audit department
The Company has entered into an audit agreement with PricewaterhouseCoopers ARATA LLC and undergoes
statutory audits. The accounting auditors regularly propose audit plans and report the results of year-end
accounting audits and quarterly reviews to the Supervisory Board members, and exchange with them opinions
on important considerations. In addition, the accounting auditors and Supervisory Board members exchange
information and opinions on any other matter as and when needed to ensure mutual cooperation.
The Company established an Audit Office as an internal audit organization. The Audit Office conducts internal
audits in cooperation with Supervisory Board members. Specifically, the Supervisory Board members and the
Audit Office conduct prior consultations regarding audit plans, and the Audit Office provides periodic reports on
the audit results to the Supervisory Board members. The Supervisory Board requests reports from the Audit
Office and engages in other collaboration as necessary.
Appointment of outside Supervisory Board members

Outside Supervisory Board
members are appointed

Number of outside Supervisory Board members

2

Number of outside Supervisory Board members

2

designated as independent Supervisory Board members
Relationships with the Company (1)Name

Affiliation

Susumu Kitsunai

Certified public accountant

Yoichi Sato

Attorney

Relationship with the Company*
a

b

c

d

e

f

g

h

i

j

k

l

m

* Categories for Relationship with the Company* Marked with ○ if the Supervisory Board member currently falls or has recently fallen under the category,marked with △ if the member fell under the category in the past
* Marked with ● if a close relative of the Supervisory Board member currently falls or has recently fallen
under the category, marked with ▲ if a close relative of the Supervisory Board member fell under the
category in the pasta. Executive of the Company or subsidiary of the Company
b. Non-executive director or accounting counselor of the Company or subsidiary of the Company
c. Executive or non-executive director of the parent company of the Company
d. Supervisory Board member of the parent company of the Company
e. Executive of a fellow subsidiary of the Company
f. Person with the Company as a major client or supplier or an executive thereof
g. Major client or supplier of the Company or an executive thereofh. Consultant, accountant, or legal professional who receives a large amount of monetary consideration or otherproperty from the Company other than compensation as an officer of the Company
i. Major shareholder of the Company (or an executive of a major shareholder if the shareholder is a legal entity)
j. Executive of a client or supplier of the Company (which does not correspond to any of f, g, or h) (the Supervisory
Board member himself/herself only)
k. Executive of a company with which the Company mutually appoints outside officers (the Supervisory Board member
himself/herself only)
l. Executive of a company or organization that receives donations from the Company (the Supervisory Board member
himself/herself only)
m. Other－ 12 －

Relationships with the Company (2)Name

Independent
Officer

Supplementary
Explanation

Reasons for Appointment

of Applicable Items

Susumu Kitsunai○――

Yoichi Sato○――

Mr. Kitsunai has extensive knowledge of andexperience in corporate management, andas a certified public accountant, finance andaccounting and is expected to provide
advice from multifaceted perspectives basedon his viewpoint as a professional. The
Company
believes he can appropriately perform audits
and supervision of the Company andappointed Mr. Kitsunai as an outside
Supervisory Board member.
In addition, the Company has determinedthat Mr. Kitsunai can serve as a significant
curb on decision-making with regard to thefairness and transparency of tax related
management policies from his perspective
as a certified public accountant and canmaintain objectivity and neutrality inmanagement monitoring functions based on
his extensive experience and knowledge asa professional, and accordingly, nominatedhim as an independent director.
Mr. Kitsunai does not have any special
interests in the Company, and the Company
has determined that there is no risk of
conflicts of interest with generalshareholders.
Mr. Sato has many years of advanced legal
experience as a judge and attorney, andconsidering his knowledge and experience
as a professional, the Company believes hecan appropriately perform audits andsupervision of the Company and appointed
him as an outside Supervisory Board
member.
In addition, the Company has determinedthat Mr. Sato can serve as a significant curb
on decision-making with regard to thefairness and transparency of compliance,
legal risks, and management policies fromhis perspective as a legal professional andcan maintain objectivity and neutrality inmanagement monitoring functions based on
his extensive experience and knowledge asa professional, and accordingly, nominatedhim as an independent director.
Mr. Sato also serves as an attorney (ofcounsel) at Alpha Partners Law Offices.
Although the company has entered into alegal advisory contract with Alpha Partners
Law Offices, because Mr. Sato is not apartner attorney of the law firm and is not
involved in the management of the law firm,
the company deems that he does not haveany special interest in the company and that
there is no risk of a conflict of interest withgeneral shareholders.

－ 13 －

Independent Officers
Number of independent officers

6

Other matters relating to independent officers
All outside officers that meet the qualifications for independent officer have been designated as independent
officers.

Incentives
Implementation status of policies relating to granting

Introduction of performance-linked remuneration

directors incentives

program and other matters

Supplementary explanation of this matter
Remuneration of the directors of the Company (excluding outside directors) comprises fixed remuneration, whichis paid at a fixed amount, performance-linked remuneration and stock-based remuneration. For details, pleaserefer to “II. Management Decision-Making, Management Organizations for Execution and Supervision, and Statusof other Corporate Governance Systems, Director Remuneration, Policy on determining remuneration amounts or
the method of calculating those amounts.”
Recipients of stock options
Supplementary explanation of this matter―――

Director Remuneration
Disclosure of the remuneration of individual directors

Some items are disclosed individually

Supplementary explanation of this matter
The Annual Securities Report for the Year Ended March 31, 2022 indicates the following amounts ofremuneration paid to directors. In accordance with laws and regulations, amounts are disclosed for somedirectors individually in the report.
Total amounts of remuneration, etc.
Seven (7) directors: Amount paid 690 million yen(210 million yen as fixed remuneration, 448 million yen as performance-linked remuneration,
38 million yen as restricted stock compensation)

Three (3) outside directors : Amount paid

30 million yen

Total remuneration, etc. paid to persons who received 100 million yen or more in remuneration, etc.
Isao Tsukamoto: 212 million yen paid
Ryoichi Kado:

144 million yen paid

Existence of a policy on determining remuneration

The Company has such as policy

amounts or the method of calculating those amounts
Details of the disclosure of the policy on determining remuneration amounts or the method of calculating thoseamounts－ 14 －

・Basic policy
The Company's basic policy is to set the remuneration of directors at an appropriate level based on theirrespective responsibilities in determining the remuneration of individual directors as a remuneration system thatis linked to shareholders' profits so that it can fully function as an incentive to secure and retain excellent humanresources who will implement the realization of the Company's management philosophy and continuously
improve corporate value. Specifically, remuneration for executive directors consists of fixed remuneration, whichis paid at a fixed amount, performance-linked remuneration and stock-based remuneration, while remunerationfor outside directors, who are responsible for supervisory functions, consists of fixed remuneration only inconsideration of their responsibilities.
Furthermore, the content of remuneration for directors is designed to be reasonable, objective and transparent
in terms of both the content of remuneration and decision-making procedures.
・Policy regarding the determination of the amount of remuneration, etc. for each individual in fixed remuneration
The fixed remuneration for directors of the Company shall be fixed monthly remuneration in cash, which shall be
determined in accordance with the position and responsibilities, etc., while taking into consideration the levels ofother companies, the business performance of the Company, and the level of employee salaries, and reviewing
the remuneration as appropriate in a comprehensive manner.
・Policy for determining the details of performance-linked remuneration, etc. and non-monetary remuneration,etc. and the method for calculating the amount or number of such remuneration
Performance-linked remuneration, etc. is monetary remuneration reflecting performance indicators in order toraise awareness of the need to improve performance for each fiscal year, and an amount calculated inaccordance with the degree of achievement of the target values for operating income, ordinary income and net
income attributable to owners of parent for each fiscal year is paid as a bonus at a specified time. The target
performance indicators and their values are based on the profit-oriented management set forth in the Medium
Term Management Plan, and will be reviewed in accordance with changes in the business environment,
respecting the report of the Nomination and Compensation Committee. The amount of performance-linked
remuneration is based on the consolidated business results.
Non-monetary remuneration, etc. is granted at a set time after the end of the fiscal year as restricted stockcompensation with a transfer restriction period of up to 20 years, which is designed to provide incentives for thesustainable enhancement of the Company's corporate value and to promote further value-sharing withshareholders through the holding of the Company's shares. The number of shares to be granted is determined inconsideration of the position, responsibilities, stock price, etc., and with respect to the report of the Nomination
and Compensation Committee.
・Policy on determination of the ratio of the amount of monetary remuneration, the amount of performancelinked remuneration, etc., or the amount of non-monetary remuneration, etc., to the amount of individual
remuneration, etc., of directors
The ratio of type of remuneration for directors (excluding outside directors) is determined based on the report of
the Nomination and Compensation Committee, taking into consideration the position, responsibilities, and trends
in the remuneration levels of other companies with similar business scale as the Company.
・Matters related to the decision policy concerning the details of remuneration, etc. for individual directors
Based on the delegated resolution of the Board of Directors, Representative Director, Founder & CEO and
Representative Director, President & COO are delegated the authority to determine the amount of fixed
remuneration for each director, the allocation of performance-linked remuneration (bonuses, etc.) based on theperformance of the business for which each director is in charge, and the number of shares to be allotted toeach individual in the form of restricted stock compensation.
The Board of Directors consults the Nomination and Compensation Committee on the draft and obtains its reportto ensure that such authority is properly exercised by the Founder & CEO and President & COO, and the Founder－ 15 －

& CEO and President & COO, who have received the above delegation, make decisions with respect to thecontent of this report.
・Matters concerning the method of decision when the decision on the details of remuneration, etc. is delegatedto a director or other third party
The Representative Director, Founder & CEO and Representative Director, President & COO determine thespecific details of the amount of remuneration, etc. and the number of shares to be allotted to each individual
based on the delegated resolution of the Board of Directors. The Board of Directors shall take measures tomake decisions after consultation and reporting by the Nomination and Compensation Committee to ensurethat such authority is properly exercised by the Founder & CEO and President & COO.
The Founder & CEO and President & COO determine the details of individual remuneration for each director by
fully respecting the advice and report of the Nomination and Compensation Committee, while taking into
consideration the Company's overall performance, stock price, the role of each director, the impact of eachdirector on the Company's performance and other circumstances.
・Matters related to the resolution of the General Meeting of Shareholders regarding the remuneration of
directors and Supervisory Board members
The maximum amount of remuneration for directors was resolved at the 54th General Meeting of Shareholders
held on June 29, 2022 to be no more than 1,000 million yen per year (of this amount, up to 100 million yen isfor outside directors; salaries for services as employees are not included). The number of directors as of theclose of this General Meeting of Shareholders was 11 (including four outside directors).
In addition, at the 50th Ordinary General Meeting of Shareholders held on June 28, 2018, it was resolved thatthe annual amount of monetary remuneration claims to be paid to directors (excluding outside directors) for
the granting of restricted stock shall be 100 million yen or less, separately from the above maximum amount of
remuneration. The number of directors (excluding outside directors) as of the close of this General Meeting of
Shareholders was eight.
At the 27th Ordinary General Meeting of Shareholders held on June 29, 1995, it was resolved that the
maximum amount of remuneration to be paid to Supervisory Board members shall be 60 million yen per year.
The number of Supervisory Board members as of the close of this General Meeting of Shareholders was four.
The remuneration for Supervisory Board members is determined through discussions among the Supervisory
Board members.
Support system for outside Directors (outside Supervisory Board members)
The Company established the Board of Directors Administrative Office to the Board of Directors to appropriately
convey information by distributing materials relating to Board meeting agenda items to all directors, including
outside officers prior to Board meetings, and providing supplementary explanations to outside officers asnecessary. The Office also prepares a schedule for ordinary meetings of the Board of Directors for the following
fiscal year by the end of each fiscal year and informs all directors including outside
officers.

Status of Resignation by President & COO and Other Positions
Names and Other Information of Consultants and Advisors who were Formerly President & COO or in other
Positions

Name

Tomohisa
Tsukamoto

Title or
Rank

Details of Duties
Operational support

Advisorfor the overall businessof the GroupWork Format andConditions(Full-time, part-time, forcompensation or gratis, etc.)
Part-time
With compensation

Total Number of Consultants and Advisors who were
Formerly President & COO or in other Positions:1－ 16 －

Date of
Resignation
by President andOther Positions

Term in
Office2014/4/1

One yearOther matters―――

2. Matters relating to functions such as business execution, audits and supervision,
nomination, and remuneration decisions (overview of current corporate governancesystems)(1) Board of Directors
The Board of Directors comprises 11 directors in total including four outside directors. In principle, the Board
meets once each month and holds extraordinary meetings when necessary.
Board makes deliberates and decisions on matters specified in laws and regulations, the Articles ofIncorporation, and other internal rules, reports on the status of the execution of business and other necessary
information, and supervises the execution of duties by directors. Supervisory Board members attend Board of
Directors meetings and actively express their opinions.
(2) Supervisory Board
The Supervisory Board comprises four members including two outside Supervisory Board members. In principle,
the Supervisory Board meets once each month and holds extraordinary meetings when necessary.
(3) The Group Management Headquarters Meeting
The Company has established the Group Management Headquarters Meeting, which is convened by the
Representative Director, President & COO as a body to deliberate and decide on important executive policies
related to Group management. In principle, the Conference meets once each week. Also, advice is requested
from the Representative Director, Founder & CEO, as necessary.
(4) Management Meeting
The Company established a Management Meeting, which is convened by the Representative Director, President &COO to coordinate Group management, confirm policies, and so on. In principle, the Council meets once eachmonth.
(5) Nomination and Compensation Committee
Please refer to Section II: Management Decision-Making, Management Organizations for Execution andSupervision, and Status of other Corporate Governance Systems, Directors, Existence of a discretionary
committee corresponding to a nominating or remuneration committee, and the Supplementary Explanation inthis report.
(6) CSR Promotion Committee
The CSR Promotion Committee is chaired by the Representative Director, President & COO, and the Company
has established the Information Disclosure Committee, Risk Management Committee, Compliance Committee,
and Personal Information Management Committee as bodies reporting to the CSR Promotion Committee. The
Committee works to decide on and optimize operations across the Group as a whole.
(7) SDGs Committee
The SDGs Committee is chaired by the Representative Director, President & COO and its members consist of
the officers overseeing each division, etc. The Company has created working groups based on the themes of“Environment,” “Society,” and “Governance,” each reporting directly to the SDGs Committee. The activities of
the working groups include formulating policies and measures related to ESG issues, setting goals, andmonitoring the status of progress(8) Audit Office－ 17 －

The Audit Office is under the direct authority of the Representative Director, President & COO. It works incollaboration with the Administration Headquarters, etc to audit the validity and use of management resources,
as well as the status of compliance with laws, regulations, and internal rules, in relation to all business activities,
including those at Group companies. The Company is also conducting evaluations of our internal control systems
in response to the enforcement of the Financial Instruments and Exchange Act.
(9) Execution of business
The allocation of duties to directors and executive officers are determined by decisions of the Board of Directors,
and each carries out their duties.
(10) Audit and supervision of directors by Supervisory Board members
The Company established and implements Supervisory Board Member Audit Standards.
(11) Status of audits
Audits in the Company are planned and carried out by the four Supervisory Board members.
The Company also undergoes audits by PricewaterhouseCoopers Aarata LLC.
(12) Nomination and Compensation Decisions
Concerning nomination, please refer to Section I: Basic approach to corporate governance, capital structure, corporate
attributes, and other basic Information, Disclosure Pursuant to the Principles of the Corporate Governance Code,Principle 3-1: Enhancement of Information Disclosures of this report.
Concerning compensation decisions, please refer to Section II: Management Decision-Making, Management
Organizations for Execution and Supervision, and Status of other Corporate Governance Systems, Director
Remuneration of this report.
(13) Limited Liability Agreements
The Company has entered into contracts with directors (excluding executive directors, etc.) and outside corporate
auditors based on the provisions of the Companies Act, Article 427, Paragraph 1 to limit their liability for damages
under Article 423, Paragraph 1 of the said Act. The maximum amount of liability for damages based on this agreement
shall be the amount stipulated in laws and regulations. Furthermore, this limitation of liability shall only be recognizedwhen the execution of duties that was the cause of the liability of the director or outside corporate auditor was
performed in good faith and without gross negligence.

3. Reasons for the selection of the current corporate governance system
With regard to systems for supervising directors, auditing the status of the execution of duties by directors, andso on, the Company believes that the Board of Director functions are reinforced by reflecting in the Companyʼs
management the opinions of the four outside directors presented from an independent perspective. In addition,
the Supervisory Board members are expressly required by internal rules to participate in Board of Directors
meetings regularly meet with the accounting auditors, and engage in other activities, and a system ofsupervision, auditing, and curbs relating to management is established by the four Supervisory Board members.
Management supervisory functions are performed from a third-party perspective through the appointment of
two outside Supervisory Board members, and the Company believes that the governance systems arefunctioning properly.

－ 18 －

III. Implementation Status of Policies Relating to Shareholders and Other Stakeholders
1. Status of initiatives to make general shareholders meetings more active and facilitate theexercise of voting rights
Supplementary Explanation
Electronic exercising of voting rights

The Company introduced electronic exercising of voting
rights to create an environment that facilitates theexercise of voting rights by shareholders in order toreflect the intentions of a greater number ofshareholders.

Participation in an electronic voting platform and

The Company participates in an electronic voting

other measures to enhance the voting

platform to create an environment that facilitates theenvironment for institutional investors

exercise of voting rights by domestic and overseas
institutional shareholders in order to reflect theintentions of a greater number of shareholders.

Provision of notifications of convocation

The Company prepares notifications of convocation(summaries) in English(summaries) in English and posts them on the
Companyʼs website.

Other

The Company strives to create convocation notices
that are easy for shareholders to read and understandby using graphs and photographs, colorization, UD
fonts, and web-based versions of some convocation
notices that are compatible with PCs and smartphones.

2. Status of investor relations activities
Existence ofSupplementary Explanation

explanations by arepresentative

Preparation and publicationof disclosure policy

Periodic briefings forindividual
shareholders

The Companyʼs disclosure policy is posted on its
website.
Disclosure policy: The Company conducts investor
relations activities to provide timely and appropriate
information to shareholders and investors. When
disclosing information, the Company releases material
facts in compliance with the timely disclosure rules of
the Tokyo Stock Exchange and promptly posts therelevant information on its website. In addition, theCompany, at its discretion, also distributes materials andposts information that it believes to be valid on its
website in a timely manner to increase understanding of
Kaga Electronics.
The Company holds "briefing meetings for individual
investors" which are conducted by the executive officer
in charge of investor relations. In the fiscal year ended
March 2021, one such meeting was organized, as
follows:
February 22, 2022 (held in Tokyo)* The proceedings of the meeting may be viewed fromthe site below (Daiwa Investor Relations Co., Ltd.) with alink posted on the Company's IR site (Japanese only).
http://www1.daiwair.jp/qlviewer/ecast/2202228154idzg4pya/index.html－ 19 －-

None

Regular briefings foranalysts
and institutional investors

Additionally, the head of Investor Relations and Public
Relations Office visits branch offices of securities
companies to give individual investors presentation onsuch themes as the Company's profile and its growthstrategy.
In the fiscal year ended March 2022, however, theCompany refrained from such activities due to theoutbreak of the coronavirus.
The Company holds "analyst and institutional investor
financial briefings", which are organized subsequent tothe announcement of interim and year-end financial
results, where financial results and management
strategy are presented by Representative Director,
President & COO and by the executive officer in chargeof investor relations.
Additionally, IR briefing sessions are also organized as
appropriate for individual business projects. The
presenter is, in principle, President & COO.

Yes

In the fiscal year ended March 2022, the following
sessions are organized.
<Earning Presentations>
May 27, 2021: Earnings presentation for the fiscal year
ended March 2021
November 25, 2021: Earnings presentation for the firsthalf of the fiscal year ended March 2022
<Business strategy presentations>
April 6, 2021: About Kaga Electronicsʼ EMS Business
March 30, 2022: EMS business strategy presentationand virtual factory tour
*The proceedings of the financial results briefings may
be viewed by video streaming through the Company's
IR site, along with presentation materials and "Main
Q&A" notes. In addition, presentation materials for pastbusiness briefings are posted on the Company's IR
website.
Earnings presentations :https://www.taxan.co.jp/en/ir/event/event_01.html
Business strategy presentations :https://www.taxan.co.jp/en/ir/event/event_04.html
Periodic briefings tooverseas investors

For investors in Europe and North America, theRepresentative Director, President & COO visit
shareholders and investors to engage in constructive
dialogue to enhance corporate value. However, in
FY2021, due to the global outbreak of the coronavirus,
it became virtually impossible to travel overseas, so we
refrained from activities and used web conferences andother means instead.
For Asia, the head of Investor Relations & Public
Relations Office engages in dialogues with the diverse
range of institutional investors on such subjects as theCompany's management policy, financial results and－ 20 －

Yes

growth strategy. However, in FY2020, as in the U.S. andEurope, we responded through web conferencing andteleconferencing as needed.
For the convenience of overseas investors, English
language versions of integrated reports, earnings
releases, as well as presentation materials and "Main
Q&A" notes used in financial results briefings held inJapan are posted on the Company's IR site.
Posting of investor relationmaterials on the Company
websiteAside from annual financial reporting, the Company
started publishing Integrated Report from the fiscal year
ended March 2019 which marks its 50th anniversary,with the aim of communicating not only financial but
also non-financial information of value to the investors.
Through integrated reporting, the Company seeks toprovide extensive IR resources and information by
including messages from the top management on
corporate philosophy, business strategy aimed atsustainable growth, overseas expansion as a global firm,
as well as ESG information relating to corporate
governance and sustainability initiatives, etc.
* Integrated Report:
https://www.taxan.co.jp/en/ir/ir_library/library_05.html
In addition to integrated reports, various other materials
are posted on the Company's IR site including earnings
releases, earnings presentation materials, annual
reports and Group reports (business reports).
* IR Library: https://www.taxan.co.jp/en/ir/ir_library/

Establishment of adepartment(or appointment of amanager)for investor relations

Aiming to strengthen strategic IR communication, weestablished a dedicated organization directly report to
the Representative Director, President & COO sinceApril 2018.
Department in charge: Investor Relations & Public
Relations Office (4 people)
Responsible person: Ichiro Shirai, General Manager,
Investor Relations & Public Relations Office

3. Status of initiatives for respecting the perspectives of stakeholders
Supplementary Explanation
The Company respects the perspectives of stakeholders and, in order toProvisions relating to respecting
build good relationships, has adopted the following as a fundamental
the position of stakeholders
policy: “Become a company that pleases shareholders, business partners,
pursuant to internal
employees, and other stakeholders and contribute to society.” Theregulations, etc.
Company has also established the following rules: Rules on Internal
Information Management and Restriction of Insider Trading,
Environmental Impact and Assessment Rules, Environment Management
Manual.
(1) Environmental preservation activities
Implementation of
The Company is cognizant that initiatives to address environment
environmental conservation
problems are an important aspect of corporate activities, and based on
activities and CSR activities, etc.
the following policy regarding environmental initiatives, has established acompany-wide environment management system and undertakes
measures to protect the global environment, prevent pollution, and so on
in all its business activities. The Company has also established an－ 21 －

Environmental Promotion Committee to carry out environmental
programs and engages in company-wide measures such as green
procurement and the sorting of waste materials.
Environmental policy: The Kaga Electronics Group always considers the
future of electronics, strives to meet the needs of customers, protects theirreplaceable earth, and works toward better protection and improvementof the natural environment.
(2) CSR measures etc.
In light of the current importance of the corporate social responsibility,
the Company established a CSR Promotion Committee and is creating arisk management system. The Company also established an Information
Disclosure Committee, Risk Management Committee, Compliance
Committee, and Personal Information Management Committee as
subordinate organizations of the CSR Promotion Committee, and eachundertakes active measures. Additionally, in view of the importance ofcorporate governance, the Company has taken steps to strengthen
related systems by establishing the SDGs Committee on April 1, 2021,
and the Nomination and Compensation Committee on June 29, 2021.
Furthermore, in order to strengthen unity within the Group with regard
to SDGs initiatives and promote sustainability management, on April 1,
2022, the Company established the SDGs Promotion Office, under the
direct authority of the Representative Director, President & COO.
Formulation of policies, etc.,
relating to the provision of
information to stakeholders

With timely disclosure as its fundamental policy on the provision of
information to stakeholders and others, the Company provides timely
information to the Tokyo Stock Exchange, holds press conferences, andissues news releases. Information Disclosure Committee, a subordinate
organization of the CSR Promotion Committee, serves as theadministrative body for the release of information and confirms
information disclosure matters on a continuous basis.

－ 22 －

IV. Matters relating to Internal Control Systems, etc.
1. Basic approach to internal control systems and status of establishment
1. With regard to the establishment of system to ensure the execution of duties by directors of the Company andGroup Companies in accordance with laws and regulations and the Articles of Incorporation, the Company and its
Group are aware that enhancing corporate governance is an important management issue and our fundamental
policy is ensuring compliance with corporate ethics and laws and regulations and reinforcing internal control
systems while maintaining the soundness, efficiency, and transparency of management and raising corporate value.
To achieve such compliance, the Company has established Rules on Officers applicable to directors and the Boardof Directors Rules applicable to the Board of Directors. To ensure appropriate management, the directors monitor
each otherʼs status of execution of duties at regularly-held Board of Directors meetings and at extraordinary
meetings held on a dynamic basis as necessary. The Company has also established Organization Rules, Rules on
the Allocation of Work Duties, Rules on Work Authority, and Rules on Internal Approval, clarifying the scope of
authority of each director and ensuring that mutual supervision by directors is effective.
In addition, the Company established an Audit Office under the direct authority of the Representative Director,
President & COO. The Audit Office works in collaboration with the Administration Headquarters, etc, to monitor
the status of compliance with laws and regulations, the Articles of Incorporation, and other internal rules.
The Company also has a Supervisory Board, and the Supervisory Board members including outside members
conduct detailed audits regarding the execution of duties by the directors.
The Company also established a CSR Promotion Committee (Corporate Social Responsibility Promotion Committee)
chaired by the President & COO and established Information Disclosure Committee, Risk Management Committee,
and Compliance Committee and Personal Information Management Committee as subordinate organizations.
These organizations work to normalize decision-making and the execution of business operations throughout theGroup.
2. The systems for the preservation and control of information relating to the execution of duties by directors
Information relating to the execution of duties by directors is appropriately and accurately controlled and preserved
according to the qualities of the recording media in accordance with the Document Control Rules, which set forth
the standards on the preparation and retention of documents, and the Document Control in Handling Manual,
which sets forth detailed provisions on document retention procedures and periods.
3. Rules and other systems relating to control of the risk of loss
Potential risks that the Group faces include matters relating to economic conditions, exchange rates, country risks,
price competition, product procurement capabilities, internal brand risks, legal regulation, market risks, major
litigation, severance pay obligations, personal information, accidents, the environment, and information
management. Responding divisions have been set for each risk and necessary and appropriate systems have been
established to control risks under the authority of risk control officers and managers in each division.
If any of the risks mentioned above should occur, the corresponding responding divisions will immediately takenecessary and appropriate responsive measures to minimize the occurrence of damage under the direction of therisk control officers and managers.
In addition, with the establishment of the Risk Management Committee as a subordinate organization to the CSR
Promotion Committee, the Company established a system to respond promptly and appropriately to risks foreseenby the Group.
4. Systems for ensuring the efficient execution of duties by the directors of the Company and Group companies
The foundations of systems for ensuring the efficient execution of duties by the directors of the Company andGroup companies are periodic meetings of the Board of Directors and extraordinary meetings of the Board held
when necessary. Meetings of the Management Meeting are held prior to meetings of the Board of Directors withregard to important matters that are within the scope of duties of the directors to conduct prior deliberations sothat the Board can engage in enhanced deliberations and make prompt decisions.

－ 23 －

The Company also introduced delegation-based and employment-based executive officer systems to separate
management decision-making and supervisory functions from business execution functions and to clarify eachrole, and has established structures that enable timely responses while enhancing the functions of Board of
Directors and business execution functions. In addition, having an appropriate number of directors allows foradequate deliberation and appropriate and timely decision-making.
With regard to specific execution of duties, the Board of Directors sets company-wide targets, formulates
medium-term management plans to achieve those targets, and establishes necessary and appropriate systems
for the execution of duties so that each executive officer responsible for business divisions can carry out thoseplans.
In addition, The Company has also established Organization Rules, Rules on the Allocation of Work Duties, Rules
on Work Authority, and Rules on Management of Affiliated Companies regarding the allocation of work duties,
authority, and so on to the directors of the Company and Group companies. These rules provide for the efficient
execution of work duties.
5. Systems for ensuring compliance by Company and Group Company employees with laws and regulations andthe Articles of Incorporation in the performance of their duties
The Basic Compliance Rules were established as a code of conduct to ensure compliance with laws andregulations and the Articles of Incorporation by employees of the Company and Group companies when
executing their duties. To ensure the effectiveness of these rules, the Company also established the Compliance
Committee as a subordinate organization of the CSR Promotion Committee, establishing a system that can makeappropriate group-wide responses.
In addition, the Company established an Audit Office under the direct authority of the Representative Director,
President & COO. The Audit Office works in collaboration with the Administration Headquarters, etc , tomonitor the status of compliance with laws and regulations, the Articles of Incorporation, and other internal
rules.
The Company has also established an internal reporting (whistleblowing) system that allows employees todirectly and anonymously report conduct by the Company or Group companies in violation of laws andregulations or the Articles of Incorporation to the Representative Director, Founder & CEO, Representative
Director, President & COO , Supervisory Board members, the CSR Promotion Committee, or the Sexual
Harassment Investigation and Countermeasures Committee.
6. System to ensure the appropriateness of business operations by the corporate group comprising the Company
and its affiliated companies
The Company established the Rules on Management of Affiliated Companies to ensure appropriate business
operations by affiliated companies and conducts control in accordance with those rules. Also, coordination
among Group companies and key decisions require deliberation and decisions by the Companyʼs The GroupManagement Headquarters Meeting and Board of Directors.
In addition, the Companyʼs Audit Office works in collaboration with the Administration Headquarters, etc, toachieve overall uniformity in Group business activities, conducts audits regarding the appropriateness of thosebusiness activities and compliance with laws and regulations and the Articles of Incorporation and so on, andindicates improvements to be made in business activities.
Furthermore, Group companies submit all minutes of their Board of Directors meeting to the Company and makemonthly reports on business activities, status of budget implementation, and important matters relating toensuring the appropriateness of business activities.
7. Matters relating to employees supporting the work of Supervisory Board members
The Companyʼs Rules on the Allocation of Work Duties include provisions relating to employees who assist
Supervisory Board members in the performance of their duties. Supervisory Board members cause employees,
to support them in the performance of audit operations, focusing on work in the Audit Office, as necessary.

－ 24 －

8. Matters relating to the independence from the directors of employees supporting the work of Supervisory
Board members and matters relating to ensuring the effectiveness of indications by Supervisory Board members
to employees
The Companyʼs Rules on the Allocation of Work Duties provide that in cases where an employee is affiliated with
the Audit Office and other departments that assist Supervisory Board members in the performance of theirduties, only Supervisory Board members have the authority to issue instructions and orders relating to thatwork. In cases of transfer, evaluation, and disciplinary disposition of such employees, the consent of theSupervisory Board is required.
9. Systems for directors and employees of the Company and Group companies to report to Supervisory Board
members and other systems for reporting to Supervisory Board members
If a Company director discovers facts that present a risk of causing substantial damage to the Company, such a
director must immediately report those facts to the Supervisory Board pursuant to the Rules on Corporate
Officers, and the Company has established systems for timely and accurate reporting to the Supervisory Board.
If an employee of the Company, director or employee of a Group company discovers facts in violation of laws
and regulations or the Articles of Incorporation or discovers facts that present a risk of causing substantial
damage to the Company or the respective Group company, such director or employee must immediately reportto the Supervisory Board in accordance with the Rules on Work Authority, and the Company has establishedsystems that enable employees to make reports directly to the Supervisory Board.
10. Systems for ensuring that the persons who make reports to the Supervisory Board are not subject todisadvantageous treatment as a result of making such reports
Reports made via the internal whistleblowing system can be made anonymously and through the use of a post
office box. Since reporting individuals cannot be identified, there is a system in place to prevent disadvantageous
treatment of persons making reports.
11. Matters relating to procedures for advance payment or reimbursement of expenses arising in the course ofSupervisory Board members performing their duties and policies regarding handling of expenses or obligations
arising in the course of Supervisory Board members performing their duties
When requests are made by Supervisory Board members for advance payment of expenses or for
reimbursement of expenses paid or obligations incurred, except in cases where it can be established that those
expenses and so on did not arise in the course of Supervisory Board members performing their duties, theCompany shall comply with such requests.
12. Other systems for ensuring effective implementation of audits by Supervisory Board members
The Companyʼs Supervisory Board members are required to attend Board of Directors meetings and otherimportant internal meetings and must express their opinions as necessary. Also, the Company established aSupervisory Board and operates that board appropriately in accordance with the Supervisory Board Rules.
The Company also established Supervisory Board Member Audit Standards setting forth the optimal audit
structure for each board member, audit standards, and conduct policies for Supervisory Board members,
ensuring the effectiveness of audits conducted by Supervisory Board members.

2. Basic approach to the elimination of antisocial forces and status of development
Responses for the elimination of antisocial forces－ 25 －

The Companyʼs basic approach is not to maintain any relationships whatsoever with antisocial forces thatthreaten social order and safety and to maintain a resolute attitude regarding the refusal of all improper
demands from antisocial forces as set forth in its Fundamental Compliance Rules and Employment Rules.
In cases where the Company receives improper demands from antisocial forces, the General Affairs Department
and CSR Promotion Committee collaborate and cooperate with crisis management advisors and attorneys tomake an organizational response as necessary. The Company also holds regular discussions with attorneys,
meets with police departments and other external specialized organizations, and participates in training andother activities in an effort to gather information.

－ 26 －

V. Other
1. Existence of takeover defense measures
Existence of takeover defense measures

None

Supplementary explanation relating to this matter―――
2. Other matters relating to corporate governance systems, etc.
1. Corporate governance systems
To enhance its corporate governance, the Company strives to create more appropriate systems including
responses to amendments of applicable laws and regulations.
In addition, the Company comprehensively operates internal control systems in accordance with enforcement of
the Financial Instruments and Exchange Act.
2. Internal system check functions relating to information disclosures and the status of internal systems
In light of the importance of corporate social responsibility (CSR), the Company established a CSR Promotion
Committee and established an Information Disclosure Committee, Risk Management Committee, Compliance
Committee, and Personal Information Management Committee as subordinate organizations to enhance internal
systems.
The Company also established a Management Planning Office under the direct authority of the Representative
Director, President & COO & COO to gather and manage information from group subsidiaries and affiliatedcompanies and strives to make appropriate and timely disclosures of information through the system set forthin the attached figure.

－ 27 －

Corporate Governance Organizational Diagram

General Meeting of Shareholders
Board of Directors

Audit

Board of Auditors

Representative Director,
Representative Director,
Founder & CEO
Deliberation,
President & COO
adviceSDGs
Committee

CSR Promotion
Committee

Environment
Working group

Compliance
Committee

Society
Working group
GovernanceWorking group

Risk Management
Committee
Information
Disclosure
Committee
Personal Information
Management
Committee

The Group Management
Headquarters Meetingcollaboration
Audit

Audit Officecollaboration

Management Meeting
Audit
Divisions,Group companies－ 28 －

Audit

g
s
nr
i
t
o
n
t
ui
od
cu

Proposals,consultation

cA n
A o
i
t
a
r
o
b
a
l
l
o
C

Nomination andCompensation Committee

Appointments,
dismissals

,
s
t
n
es
l
ma
ts
n
s
i
i
o
m
ps
pi
Ad

Appointments,
dismissals

Information Disclosure System Organizational Diagram

Information Disclosuret, EDINET, Company
to journalists clubs

Board of Directors

Information Disclosure Committee
Division responsible for public
Approval

relations and investor relations

Investor Relations
andPublic Relations Office

Reportingsclosure Manager
Important matters in accordancewith the timely disclosure rules)

Head of Administration HQ
ReportingGeneral Affairs Department

ble for information disclosure

Corporate Strategy Officeosure consulting division

Reporting
Reporting

Divisions Subsidiaries(Reporting & consultation on
disclosure matters)① Board of Directors:② Representative Director,
President & COO:

Body that approves information disclosures
Confirms information disclosure matters and convenes
meetings of the Board of Directors③ Information Disclosure Committee:

Body that investigates information disclosures④ Head of Administration HQ:

Person responsible for information disclosure management⑤ General Affairs Department:

Division responsible for information disclosures⑥ Management Planning Office:Division the consults on information disclosures⑦ Investor Relations and Public Relations Office:Division responsible for investor relations⑧ Divisions and subsidiaries

Report on information disclosure matters－ 29 －