Corporate Governance
Governance System Diagram
General Meeting of Shareholders

Basic Policy on Corporate Governance

The TS TECH Philosophy calls for us to be a company sincerely appreciated by all of our stakeholders—from shareholders and investors to customers, business partners,
employees, and local communities. We are working hard toenhance corporate governance as an important step toward
fulfilling our social responsibility and achieving sustainablebusiness growth and increasing corporate value over the
medium to long term.
TS TECH endorses the Tokyo Stock Exchange’s Corporate Governance Code and has set the above basic policies
accordingly. We will continue to work to strengthen our governance system in line with the intent and spirit of the Code.

●Fiscal 2022●

Fiscal 2023

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TS TECH Integrated Report 2023

The Board of Directors passed a resolution on the basic policies of TS TECH’s internal control system to meet therequirement to formulate regulations on internal controls
stipulated in the amendment to Japan’s Companies Act in2006. Since then, the Board of Directors has reviewed theimplementation of this system each fiscal year and passed
resolutions on changes to these policies as necessary at
Board of Directors’ meetings. Additionally, in accordancewith Japan’s Financial Instruments and Exchange Act, the TS
TECH Group has established an internal control system toensure the reliability of its financial reporting. The effectiveness of this system is maintained and internal control is enhanced through regular evaluations of improvements andoperations and corrective actions as needed.

• Moved to Prime Market of the Tokyo Stock Exchange• Appointed second woman to the Board of Directors

Board of Directors

Reports

Coordination
Ethics and Compliance
Committee

ComplianceOﬃcer
Responses and reports

Segment Management Committees

Segment Executive General Managers, etc.
(Americas/China/Asia)
Reports

14th Medium-Term
Management Plan

Directors

1

Executive Committee
4

Responses and reports

Executive General Managers Committee
Executive General Managers, etc.

Audit and Supervisory Committee 2

Audit and Supervisory Committee Members

Responses and reports

Representative Directors

Appointment

5

Audit report

Coordination

Accounting Auditor
Direction

Reports

Risk Management
Oﬃcer

Corporate Business
Audit Department

Reports
Responses and reports

TS Corporate Ethics Compliance
Consultation OfficeConsultations

Corporate ethics hotlines
set up by each company

Consultations

Divisions anddepartments in Japan
Domestic aﬃliates

Business audits

Overseas affiliates
and divisions

1

Board of Directors

T he Board of Directors is composed of 10 directors (excluding directors who are Audit and Supervisory Committee members) and four directors who are Audit and Supervisory Committee members. The Board of Directors makes decisions regarding management policies, importantmanagement issues, and matters mandated by laws and regulations. It also supervises the execution of business operations.

2

 udit and SupervisoryA
CommitteeT he Audit and Supervisory Committee is composed of four Audit and Supervisory Committee members (three of whom are outside directors).
Based on the audit policy established by the Audit and Supervisory Committee, it audits the execution of duties by the directors.

3 omination andN
Compensation
Committee

The Nomination and Compensation Committee is composed of two internal directors (excluding directors who are Audit and Supervisory
Committee members) and three outside directors. It deliberates on matters related to the appointment and dismissal of directors and executive officers and their compensation.

4

Executive CommitteeT he Executive Committee comprises the company’s three representative directors. It conducts preliminary deliberations on such matters as
resolutions to be put to the Board of Directors, and, within the scope of the authority assigned to it by the Board of Directors, discusses important matters relating to the execution of the duties of the directors.

5 xecutive General
E
Managers Committee

The Executive General Managers Committee is made up of 11 executive general managers and regional general managers. This committee
discusses policies, plans, and governance related to operations in each division to maintain efficient operations.

Group Governance Structure• Appointed an outside director as chairperson of
the Board of Directors• Transitioned from “a company with a Board of Auditors” to“a company with an Audit and Supervisory Committee” structure• Established the Nomination and Compensation Committee• Introduced restricted stock compensation scheme for directors• Appointed first woman to the Board of Directors

Responses

Monitoring

Global Risk Management
Committee

The Operation of an Internal Control System

Recent governance reforms
Fiscal 2021

Nomination and 3
Compensation Committee

Audit andsupervision

Appointment(1) Securing the Rights and Equal Treatment of Shareholders	
We respect the rights of all stockholders, who are important stakeholders, and shall maintain an environment that ensuresthat all shareholders, including non-controlling interests, are treated equally and can fully exercise their rights.
(2) Appropriate Cooperation with Stakeholders	
We shall cooperate appropriately with all stakeholders while working to achieve sustainable growth and an increase in
mid- to long-term corporate value.
(3)	Ensuring Appropriate Information Disclosure and Transparency	
We shall actively disclose information in order to be a company sincerely welcomed by all of our stakeholders, and we shallmanage our business with transparency and good faith.
(4)	Responsibilities of the Board	
The Board shall take appropriate responsibility for the establishment of mid- to long-term management policies andoversight of directors, and it shall work to build systems to enable transparent, fair, and resolute decision-making.
(5)	Dialogue with Shareholders	
The company shall engage in constructive dialogue with shareholders and investors through the annual General Meetingof Shareholders and other avenues with respect to management principles and other issues as it works to achievesustainable growth and an increase in mid- to long-term corporate value.
November 2015, Resolution of the Board of Directors

Accounting audit
Internal control audit

Basic Policies

The TS TECH Group has established a sound corporate governance system. It includes a Group-wide commitment tothe vision statement and mission statement that comprise
the TS TECH Philosophy, a basic policy on corporate governance, and a three-year medium-term management plan.
Affiliated companies also have their own effective, efficient
corporate governance systems that are based on the laws of
their respective countries and their respective businesses.
Important management issues at affiliated companies
must be reported to and approved by TS TECH in advancebased on the standards stipulated by TS TECH. Affiliatedcompanies must also regularly report business plans, sales
results, and financial status.
Furthermore, affiliated companies participate in routine
compliance and risk verification measures known as the TS
TECH Corporate Governance (TSCG) self-verification system.
This ensures that the entire TS TECH Group acts as one inpromoting compliance and reducing risk.
TS TECH’s internal audit department conducts audits ofaffiliated companies and works with internal audit departments set up at the head offices in each region to enhance
the internal audit structure of the entire TS TECH Group.

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Corporate GovernanceCompliance Framework

Based on the TS TECH Philosophy, the Group establishedthe TS Standards for Conduct (TS TECH’s norms and ideals
as an organization) and TS Guidelines for Conduct (expectations for day-to-day conduct for individual executives, officers, and employees). Regular education is provided toensure the entire Group is familiar with these concepts.
A director is appointed as a Compliance Officer in orderto promote compliance initiatives, and steps are continuallytaken to prevent legal violations before they occur throughregular TSCG self-verifications and deliberations of important ethics and compliance issues by the Ethics and Compliance Committee.
We have established a whistleblower hotline called the
TS Corporate Ethics Compliance Consultation Office, whichenables employees to bring issues before compliance officers, who respond with rapid, effective investigations andcorrective guidance in the event of a problem. Including affiliates in and outside Japan, the Group receives around 100
ethics and compliance inquiries a year, which includes consultations and other cases handled by the TS Corporate Ethics Compliance Consultation Office. In fiscal 2023, the Group
had a total of 94 cases. Continuous operation of this framework promotes internal self-improvement.

Ethics and compliance issues
Number of issues recorded (consolidated)

4 cases

8 cases

TS TECH Co., Ltd.

82 cases

Domestic subsidiaries
and affiliates

Total: 94 cases
FY2023

Overseas subsidiaries
and affiliates* Investigations into each case found no violations of laws or regulations that would have a significant
impact on our business activities.

Risk Management Framework

Important management issues are carefully deliberated
upon by TS TECH’s Executive Committee as well as various
advisory committees. Through these discussions, TS TECH
makes every effort to avoid and mitigate business risks.
In addition, a Risk Management Officer is appointed fromamong the representative directors and placed in charge ofrisk management. The Global Risk Management Committee,
comprising directors and other officers, has been establishedto deliberate regularly on the results of TSCG self-verifications
and discuss responses to serious risks affecting managementthat have been identified, ensuring that efforts are continually
made to mitigate potential risks.
Findings obtained through TSCG self-verifications areshared with internal audit departments so that they can beapplied in risk approach auditing.

Global Risk Management Committee

The Global Risk Management Committee was established as
an advisory committee to the Executive Committee to help ensure appropriate identification and control of the various risks
affecting global business activities in the 13 countries aroundthe world where TS TECH does business, and to solidify thesustainability and stability of the business.
In addition, by forming regional risk management committees in each region, risks specific to those geographic segments are identified and risk mitigation measures are promptly
advanced. TS TECH has also worked to conduct emergency
response training that anticipates a range of risks, such as themost frequently occurring natural disasters in each geographic
region, or the outbreak of an infectious disease.
In fiscal 2023, TS TECH identified four major risks and pursued the appropriate corresponding risk mitigation measures.

Four Major Risks
1. Crisis Management in Emergencies[Target]Communicable & infectious diseases/virus/wind or flood damage/earthquake/conflict/riots or terrorism[Main measures]• Preparation and enhancement of initial response task list at place
where event occurred• Continuous implementation of natural disaster response training
2. IT Security[Target]
Leakage or loss of information and cyberterrorism[Main measures]• Review of all companies’ critical systems backup methods• Survey status of compliance with IT policy and guidelines• Cybersecurity countermeasures(Enhanced monitoring systems, education about dealing withsuspicious emails, etc.)
3. Stoppage of Parts Supply[Target]Raw material supply shortages/supplier bankruptcy/trade-related,
import-export issues[Main measures]• Understand and manage the status of the supply chain for stableprocurement of components• Enhance monitoring of supplier-side financial risks
4. Fires[Target]Fire sources:
Welding/electric leakage or current surge/hazardous materials[Main measures]• Inspection based on Group-wide integrated items and crosscutting management by the department responsible• Formulation of management standards based on past incidents
and implementation of on-site education

Tax Policy

The TS TECH Group follows the TS TECH Group Tax Policy
based on the TS TECH Philosophy, seeking to minimize tax
risks while maintaining transparency and to fulfill appropriate tax obligations and social responsibilities, and in so doing, to contribute to the development of the communities inwhich the Group operates.

TS TECH Group Tax Policy
1. Tax Governance
The Group values strengthening tax governance andviews it as one of the most important management issues. The Policy was approved by TS TECH’s Board of Directors, who are ultimately responsible for tax governance.
2. Compliance
By committing to instill and establish awareness of compliance amongst its employees, the Group complies withand strives to always form the correct understanding on
both spirit and the letter of tax laws and regulations ineach country and region in which it operates to appropriately address its tax declaration and tax obligations.
3. Tax Planning and Tax Havens
The Group will determine investment and business activities according to its business objectives and economic rationality. The Group does not use business entities without
commercial substance and tax havens to engage in tax
avoidance or carry out activities such as profit shifting to
low-tax countries for the sole purpose of avoiding tax.
4. Transfer Pricing
The Group abides by international tax frameworks suchas the OECD Transfer Pricing Guidelines and the Base
Erosion and Profit Shifting (BEPS) Action Plan, and strives
to ensure tax transparency. Intragroup internationaltransactions will comply with the OECD Transfer Pricing
Guidelines, and transaction prices will be determinedbased on the arm’s length principle.
5. Minimal Tax Risk
The Group conducts appropriate accounting and tax
measures in accordance with the respective tax systems
and tax administrations of each country and region inwhich it operates. When complex, unclear tax mattersarise, the Group minimizes tax risks by consulting withexternal experts and tax authorities in advance.
6. Relationship with Tax Authorities
The Group sincerely responds to provide timely and accurate information to tax authorities of each country andregion in which it operates to mitigate tax risks and tomaintain sound relationships built on trust and cooperation.
August 2023, Resolution of the Board of Directors (Revised)

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TS TECH Integrated Report 2023

Intellectual Property Management

The TS TECH Group respects intellectual property rights. In
developing products and technologies, we take the utmost
care to ensure that the Group does not infringe on the intellectual property rights of others. At the same time, theGroup asks others to respect its intellectual property rights.
In cases where an infringement is identified, the Grouptakes all necessary measures, including demanding that infringing parties immediately discontinue any offending activities and offering such parties an opportunity to negotiate
in the signing of license agreements. Through actions suchas these, the Group works to maximize intellectual property
value and minimize loss.

Policy and Action against Antisocial Forces

The TS TECH Group’s basic policy for internal control requires individual officers and employees to diligently avoid
any type of relationship with antisocial groups that canthreaten a safe, orderly, and civil society, and to work together as an entire group to demonstrate uncompromising attitudes against such forces. Specific measures include making
assessments in advance of the start of new transactions andincorporating provisions for excluding the influence of antisocial forces in preparing agreements.

Disclosure Policy

The TS TECH Group promptly and fairly discloses accurate corporate information to its stakeholders, such as individual investors including shareholders, institutional investors, andanalysts. In addition to disclosing information in accordancewith the Financial Instruments and Exchange Act and the Timely Disclosure Rules, even when these provisions do not apply,
we adopt a proactive approach to the disclosure of information
deemed useful and appropriate to our stakeholders.
Our primary means of disclosing information include
press releases and the Timely Disclosure Network (TDnet)
provided by the Tokyo Stock Exchange. This information is
also posted on TS TECH’s website.
Information disclosed at meetings with our investors
shall be limited to information that has already been disclosed in earnings announcements and other public statements, as well as facts that are already in the public domain,and no undisclosed important facts shall be mentioned inmeetings. Furthermore, in order to prevent the leakage offinancial information, we shall designate the period from theend of each fiscal period up to announcement of financial
results as the “IR restraint period,” during which no comments shall be made or questions responded to about thefinancial information in question.
To protect the company and its employees from legal
liability under the Financial Instruments and Exchange Act
and other legislation, the Corporate Communication Department responds to all inquiries from stakeholders. In addition, this Disclosure Policy is shared and fully enforced
throughout the TS TECH Group.

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Corporate Governance

Board of Directors

REPRESENTATIVE DIRECTOR, PRESIDENTREPRESENTATIVE DIRECTOR, VICE PRESIDENT

Director in Charge of Quality Assurance, andDevelopment
Number of shares of the company held:
75,488 shares
Meetings of the Board of Directors attended:
100% (14/14 times)

Director in Charge of Administration, Business
Administration, and Corporate Managerial
Planning, Compliance Officer
Number of shares of the company held:
35,037 shares
Meetings of the Board of Directors attended:
100% (14/14 times)

Masanari Yasuda

Yoshitaka Nakajima

REPRESENTATIVE DIRECTOR,SENIOR MANAGING DIRECTOR

DIRECTOR, AUDIT AND SUPERVISORYCOMMITTEE MEMBERDIRECTOR, AUDIT AND SUPERVISORYCOMMITTEE MEMBER (Outside Director)

DIRECTOR, AUDIT AND SUPERVISORYCOMMITTEE MEMBER (Outside Director)

DIRECTOR, AUDIT AND SUPERVISORYCOMMITTEE MEMBER (Outside Director)

Director in Charge of New Business, Sales,
Purchasing, and Manufacturing,
Risk Management Officer
Number of shares of the company held:
26,615 shares
Meetings of the Board of Directors attended:
100% (14/14 times)

Number of shares of the company held:
13,254 shares
Meetings of the Board of Directors attended:
100% (14/14 times)
Meetings of the Audit and Supervisory
Committee attended: 100% (15/15 times)

Chairperson of the Nomination andCompensation Committee, TS TECH
Representative, Sazanka Law Office
Number of shares of the company held:
693 shares
Meetings of the Board of Directors attended:
100% (14/14 times)
Meetings of the Audit and Supervisory
Committee attended: 100% (15/15 times)

Representative, Tokyo Heritage Law Firm
Number of shares of the company held:
1,119 shares
Meetings of the Board of Directors attended:
100% (14/14 times)
Meetings of the Audit and Supervisory
Committee attended: 100% (15/15 times)

Number of shares of the company held:
0 shares
Meetings of the Board of Directors attended:―%
Meetings of the Audit and Supervisory
Committee attended: ―%Kenichi Hasegawa

Tatsuo Sekine

Hajime Hayashi

Tomoko Nakada

Kenichi Naito

Selection of Directors

DIRECTOR, SENIOR MANAGING OFFICERDIRECTOR, SENIOR MANAGING OFFICERDIRECTOR, MANAGING OFFICERDIRECTOR, MANAGING OFFICER

Americas Segment Executive General
Manager, President, TS TECH AMERICAS, INC.
Number of shares of the company held:
15,368 shares
Meetings of the Board of Directors attended:
100% (14/14 times)

Corporate Business Administration Division
Executive General Manager, Representative
Director, Honda Cars SAITAMAKITA
Number of shares of the company held:
13,129 shares
Meetings of the Board of Directors attended:
100% (14/14 times)

Corporate Development and Engineering
Division Executive General Manager
Number of shares of the company held:
11,448 shares
Meetings of the Board of Directors attended:
100% (14/14 times)

Corporate Sales and Purchasing Division
Executive General Manager
Number of shares of the company held:
12,153 shares
Meetings of the Board of Directors attended:
100% (14/14 times)

Akihiko Hayashi

Atsushi Igaki

Eiji Toba

Takahiro Kobori

The regulations for candidates for director positions stipulate that candidates should have impressive leadership abilities, decision-making skills,
vision and planning abilities, and should also have the personal qualities and insight fitting a director, among other qualities. Additionally, current directors who are up for reelection cannot have an attendance rate at Board of Directors’ meetings below 85% without a legitimate reason.
In addition, when selected as a candidate, a specific skill matrix should be considered for those skills that directors should have, in light of theGroup’s management strategies and business characteristics. The Board of Directors also strives for a balanced structure that reflects gender,
global, cultural, and other types of diversity in order to facilitate appropriate, swift decision-making and promote supervisory functions.
Individuals meeting the requirements who have the skills and who qualify as candidates for director are proposed as official candidates tothe Board of Directors after their eligibility and the overall balance of the Board of Directors, among other factors, have been discussed by the
Nomination and Compensation Committee. The Board of Directors holds discussions on the candidates for director in light of these reports andthe views of the Audit and Supervisory Committee and presents the candidate proposals at the General Meeting of Shareholders.
Experience and expertise
Name

Position and responsibilities

Representative Director,
President●●●

Representative Director,

●

●

●

Kenichi Hasegawa

Representative Director,
Senior Managing Director

●

●

●

Akihiko Hayashi

Director, Senior Managing Officer●●

Atsushi Igaki

Director, Senior Managing Officer●●

Eiji Toba

Director, Managing Officer

●

●

●

Takahiro Kobori

Director, Managing Officer

●

●

●

Yasushi Suzaki

Director, Managing Officer●●

Takeshi Ogita

Director●

Kaori Matsushita

Director●

Tatsuo Sekine

Director, Audit And Supervisory
Committee Member

Hajime Hayashi

Director, Audit And Supervisory
Committee Member

Tomoko Nakada

Director, Audit And Supervisory
Committee Member

Kenichi Naito

Director, Audit And Supervisory
Committee Member

Masanari Yasuda

Yoshitaka Nakajima Vice President

DIRECTOR, MANAGING OFFICERDIRECTOR (Outside Director)

DIRECTOR (Outside Director)

Corporate Manufacturing Division Executive
General Manager
Number of shares of the company held:
9,947 shares
Meetings of the Board of Directors attended:
100% (13/13 times)

Chairperson of the Board of Directors, TS TECH
Outside Director, Japan Hades Co., Ltd.
Number of shares of the company held:
1,574 shares
Meetings of the Board of Directors attended:
100% (14/14 times)

CEO, K&L Consulting LLC, Outside Director and
Audit & Supervisory Committee Member, Taisei
Oncho Co., Ltd., Outside Director, Belc CO., LTD.
Number of shares of the company held:
483 shares
Meetings of the Board of Directors attended:
100% (11/11 times)

Yasushi Suzaki

Takeshi Ogita

Kaori Matsushita

Note: C areer and positions and number of shares of the company held: As of June 23, 2023
(As of the date of submission of the Annual Securities Report)
Attendance of each meeting: April 1, 2022–March 31, 2023

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TS TECH Integrated Report 2023

Knowledge about
international
HR
Legal issues
Corporate
Financial
Technology Manufacturing
Sales andEnvironment
development
and riskManagement management business andaccounting development and quality
procurement
overseasand diversity management
strategy
conditions

Nomination and Compensation Committee

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Outside directors

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Independent directors

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Corporate GovernanceAppointments of Outside Directors

The company selects persons with extensive experience in corporate management or expertise in various fields as outside
directors in order to provide advice and supervision on management from an independent standpoint, taking into account thecharacteristics of the company’s business.
When selecting outside directors, in addition to satisfying the criteria for independence set forth in the Companies Act, theOrdinance for Enforcement of the Companies Act, and by Tokyo Stock Exchange, Inc., the company makes its decisions inaccordance with its regulations for candidates for directors and Independence Standards for Outside Directors it has set forth.
The regulations stipulate that directors may concurrently serve as officers for up to three listed companies including TS TECH.

Analysis and Evaluation of the Board of Directors’ EffectivenessIn an effort to maintain and improve the Board of Directors’ functions, we evaluate its overall effectiveness yearly. These evaluations of effectiveness have been conducted continuously since fiscal 2019. This is the fifth of these evaluations.

Fiscal 2023 evaluation process
Details

1. Each director conducts
a questionnaire-based
self-evaluation(February–March 2023)

Subjects: All directors
Aggregation method: Anonymous questionnaire responses. External organization commissioned to performaggregation.
Evaluation items: (Board of Directors’ composition)
Board of Directors’ composition, level of diversity, number of independent directors, etc.
(Deliberations and resolutions)
Strategy monitoring, business portfolio optimization, appropriate allocation of management
resources, etc.
(Operation of the Board of Directors)
Number of items for deliberation, frequency of meetings, amount of time spent deliberating andtime distribution, the system for providing information necessary for deliberations, etc.
(Individual framework evaluations)Executive compensation scheme, management appointment and dismissal process, structuralprocess construction for the risk assessment system, etc.

2. Board of Directors conducts
discussions and summarization(May 2023)

The overall effectiveness of the Board of Directors is analyzed and evaluated on the basis of the questionnaire
results, as well as comparisons with the previous fiscal year’s evaluation results, and trends seen in responses toeach of the questions. Deliberations are held on policies to be taken to further increase effectiveness.

Reasons for appointments of outside directors
Name

Reasons for appointment

Takeshi Ogita

Mr. Ogita was engaged in the management of a pharmaceuticals company for many years. Based on his extensive experienceand broad insight as a corporate manager, he provides beneficial opinions and suggestions on the management of theCompany as an Outside Director. We selected him as Outside Director, in the expectation that he can continue to contribute toensuring the soundness of management, by reflecting his extensive experience and insight in the management of theCompany. He serves as Chairman of the Board of Directors from June 2022.

Kaori Matsushita

Ms. Matsushita has extensive experience and insight gained through the planning and promotion of new business andcorporate alliance strategy at a comprehensive IT vendor, and diversity management support at a consulting company. We
selected her as Outside Director, in the expectation that she will continue to contribute to enhancing diversity and ensuring thesoundness of management of the Company.

Hajime Hayashi

Mr. Hayashi has broad insight and extensive experience as an attorney. Since his appointment as Outside Director of theCompany, he has appropriately performed audits, such as by giving advice on the management of the Company as necessary.
We selected him as Outside Director who is an Audit & Supervisory Committee Member, in the expectation that he can continue
to contribute to ensuring the soundness of management, and the audit and supervision of the Company’s management.

Tomoko Nakada

Ms. Nakada has extensive overseas experience and broad insight as an attorney. Since her appointment as Outside Director of
the Company, she has appropriately performed audits, such as by giving advice on the management of the Company asnecessary. We selected her as Outside Director who is an Audit & Supervisory Committee Member, in the expectation that she
can continue to contribute to ensuring the soundness of management, and the audit and supervision of the Company’s
management.

Kenichi Naito

Mr. Naito has extensive experience and insight through financial accounting, domestic and international sales, supervising salesof group companies, corporate management at a major general chemicals manufacturer as well as auditing duties as anauditor. We selected him as Outside Director who is an Audit & Supervisory Committee Member, in the expectation that he cancontribute to ensuring the soundness of management, and the audit and supervision of the Company’s management.

Remuneration Policy

TS TECH’s basic policy on executive compensation is to ensure that it is transparent and reasonable, with the potential
to further motivate sustained business growth.
We established the Nomination and Compensation
Committee, chaired by an outside director and composedof three outside directors and two internal directors, as anadvisory body to the Board of Directors. When reviewing thelevel and calculation method of compensation in consideration of the basic policy and social conditions, revising thecompensation structure, or determining the individual compensation for directors for each fiscal year, the Board of
Directors makes resolutions based on consultations with theNomination and Compensation Committee and the deliberations of the Audit and Supervisory Committee.

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TS TECH Integrated Report 2023

Officer compensation consists of basic fixed compensation, performance-linked remuneration as a short-term
incentive, and non-monetary stock-based compensation asa medium- to long-term incentive to enhance the Group’s
corporate value over the medium to long term and further
share value with shareholders. The composition of annualcompensation is approximately 60% base compensation,
25% performance-linked compensation, and 15% stockbased compensation.
Outside directors and directors who are Audit and Supervisory Committee members are paid basic compensation
only given that their role is to audit and supervise management from an independent perspective.

Evaluation results and future initiatives
Overall evaluation results•O ur Board of Directors was evaluated as making progress in ensuring diversity in its composition, as holding active discussions inwhich each director makes use of their respective expertise and experience, and as maintaining its effectiveness.
•O utside directors are provided with advance explanations and information on Board meeting proposals. However, there can still be
understanding and perception gaps between outside and internal directors pertaining to such matters as industry and competitor
trends. The provision of supplementary information is therefore required.
Future initiatives•O ngoing consideration of steps to take to address anticipated issues regarding the number of directors and ensuring theBoard’s diversity•P rovide opportunities for free-flow, unrestrained discussion at Board of Directors’ meetings in order to tap the expertise and gain
the broad perspectives and opinions of each outside director on themes such as growth and human resources strategies, andmanage operations efficiently to ensure sufficient time for such discussions

Development and Selection of Successors

The TS TECH Group has set out the qualities, skills, and experience we seek in the people who will take on responsibility
for management as directors and executive officers. We
offer selective training and other programs to develop the
successors who will drive the company’s future success.
In our step-by-step selective training programs for
managers and general managers, we aim to nurture humanresources with advanced interpersonal skills, dignity, andmanagement capabilities. We do this by enhancing theskills and knowledge required of managers, such as skills

in management strategy and financial accounting, as well as
broadening perspectives, using various curricula.
At the stage where we select our successors, the Nomination and Compensation Committee, chaired by an outside
director, determines director and executive officer candidates’ suitability as next-generation management personnel, including their career background, areas of expertiseand personability. After a process of careful deliberation the
final decision is made by the Board of Directors.

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