(Note) This document has been translated from the Japanese original for reference
purposes only. In the event of any
discrepancy between this translated document and the Japanese original, the original
shall prevail.
Corporate Governance Report
Last Update: August 9 2024

OPTEX GROUP Company, Limited
Tatsuya Nakajima, President
Contact: Iwao Shimokawa, General Manager, General Affairs
Securities Code: 6914
https://www.optexgroup.co.jp/en
The corporate governance of OPTEX GROUP Company, Limited (the “Company”) is described below.

I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other
Basic Information
1. Basic Views
The Group recognizes that consistently improving its corporate value while winning the trust of shareholders,investors, customers and society at large is its ultimate mission. To implement this mission, it positions theenhancement of corporate governance as one of its important management issues and seeks to improve
management transparency and maintain a management system that allows fair and prompt decision making andthe strengthening of management monitoring functions.
[Disclosure Based on the Principles of the Corporate Governance Code]UpdatedPrinciple 1.4 Cross-Shareholdings
Only if the Company deems it to be strategically conducive to the enhancement of business relationships andincreased corporate value for the Group will it acquire shares for cross-shareholding upon discussions andresolutions of the Board of Directors. In addition, the Company examines the significance of cross- shareholdings
at a meeting of the Board of Directors every year. If the Company determines it to be rationally pointless to holdcertain shares in light of the intended objectives of cross-shareholding, it will sell them in consideration of market
trends, etc., thereby endeavoring to reduce such holdings.
Listed shares currently held by the Company: One stock amounting to 55 million yen(amount recorded on the balance sheet of December 31, 2023)
With regard to exercising the voting rights it holds, the Company approves or disapproves shareholder proposals
based on comprehensive judgment by examining each agenda item individually according to its criteria forexercising voting rights and by taking into consideration whether or not the proposed motion will contribute to thesustained growth of the subject company and the enhancement of corporate value thereof and whether or not the
proposed motion will cause significant damage to shareholder value.
Principle 1.7 Related Party Transactions
Regarding transactions with Directors of the Company or transactions that involve conflicts of interest as stipulated
in the Companies Act, resolutions of the Board of Directors to approve such transactions are required inaccordance with the Rules of the Board of Directors. It is also prescribed in the said Rules that important facts
related to the situation of the said transactions after such approval are required to be reported to the Board of
Directors without delay. In addition, a survey is conducted every year on whether there are any transactions
conducted by officers of the Company or its subsidiaries and their close relatives with the Group and whether
there are any transactions with any company to which the officers and their close relatives described above havesubstantial control rights, and the results of the survey are examined by the Board of Directors.
Supplementary Principle 2-4-1. Ensuring diversity in the promotion of core human resources, etc.

1

Since its founding, the Company has aimed to serve as a stage for the self actualization of its employees, and has fo
cused on creating an environment in which, regardless of gender, nationality, employment pattern (new graduate hi
re or mid-career hire) or other characteristic, employees can make each stage impressive with great diversity.
The status of employees of the domestic companies of the Group (12 companies including the Company) is as follo
ws:・Gender distribution：Male : female = 77% : 23%
・Ratio of mid-career employees：60%

・Ratio of foreign staff：1%・Gender distribution of managerial staff：Male : female＝96% : 4%

・Ratio of mid-career employees among managerial staff：71%
As indicated above, there are inherently fewer female staff and foreign staff, reflecting the characteristics of the Gr
oup’s business domains and contents. Accordingly, they currently do not represent a high percentage of managerial
staff. On the other hand, as postings of mid-career workers to managerial positions account for more than 70%, we
believe that diverse human talent with various experiences and skills play important roles as the core of corporate
management.
Moreover, as the Group has consolidated subsidiaries around the world, we believe that adequate diversity is ensure
d in our human resources in the entire Group.
Going forward, the Company will positively study and seek to create an environment that allows diversified humantalent to exercise their abilities to a greater extent than at present, while considering the characteristics of thebusiness domains of each company in the Group.
Principle 2.6 Exercise of functions as asset owner of corporate pension plan
The Company has introduced a defined contribution pension system and is not involved in the management of
the corporate pension as the asset owner. It provides explanations of the system and education on asset formation
to its employees.
Principle 3.1 Full Disclosure(1) Corporate philosophy, management strategy and business plan
We have adopted a Group Philosophy of “We aim to become a corporate group full of Venture Spirit!” andaim
to embody this philosophy it by sharing it among all the officers and employees of the Group. The Group
Philosophy is posted on the Company’s website.
(Corporate philosophy → https://www.optexgroup.co.jp/en/company/compliance.html)
The management objectives for the three years from 2024 to 2026 are also posted on the Company’s website.
(Management objectives → https://www.optexgroup.co.jp/en/shareholder/strategy.html)(2) Basic views on corporate governance
Please see I.1 Basic Views in this report.
(3) Board of Directors’ policies and procedures in determining the remuneration of the senior managementand
Directors<Policy for determining remuneration>• Directors (excluding Directors who are members of the Audit & Supervisory Committee)
Within the total amount of remuneration approved by the general shareholder meeting, Directors are given
appropriate treatment for motivating them to contribute to the sustained growth of the Company and increase incorporate value over the medium- to long-term and to fulfill their duties and responsibilities. Directors’
remuneration comprises base remuneration, which is fixed compensation, and share-based compensation using
the Company’s stock (stock options and so forth) to be granted to motivate them to contribute to the sustained
growth of the Company and increase in corporate value over medium- to long-term and for sharing shareholder
value, and is set at an appropriate ratio of the two types of remunerationbased on comprehensive considerationof each Director’s capabilities, responsibilities and so forth.
• Directors who are members of the Audit & Supervisory Committee
Within the total amount of remuneration approved by the general shareholder meeting, Directors who aremembers of the Audit & Supervisory Committee are granted base remuneration only, which is fixedcompensation, taking into account their role of fulfilling the function of supervising the Company’s overall2management.
<Procedures for determining remuneration>
Remuneration for Directors, excluding Directors who are members of the Audit & Supervisory Committee, isdetermined based on consideration of factors such as each Director’s position and duties, the Company’s
management environment and operating performance. Specifically, Directors with special titles discuss the
remuneration of each officer, followed by the Compensation Advisory Committee’s deliberation on the resultsof these discussions. The Compensation Advisory Committee consists of three Directors, including two
Independent Outside Directors, and is chaired by an Independent Outside Director. Results of these deliberations
are reported to the Board of Directors for final decision-making. Each Director’s monthly remuneration (baseremuneration) is determined by the President, who has been delegated this duty by the Board of Directors, basedon the content of the report, while each Director’s stock-based compensation is determined at the Board of
Directors meeting.
Remuneration for Directors who are members of the Audit & Supervisory Committee is determined according
to each such Director’s position and duties based on discussions among the Directors who are members of the
Audit & Supervisory Committee.
Please refer to Ⅱ1. Matters related to remuneration of Directors in this report for an overview of the compensation
structure.
(4) Policies and procedures in the appointment and removal of the senior management and the nomination ofcandidates for Directors<Policy for the appointment and removal of the senior management and the nomination of candidates for
Directors>• Directors (excluding Directors who are members of the Audit & Supervisory Committee)
Directors are appointed by comprehensively taking into account each person’s professional experiences andcapabilities in corporate management, management supervision, technological development, production,marketing and sales, work overseas, accounting, legal affairs and other management fields, all of which shouldbe above certain levels in terms of experience and capabilities, as well as extensive insight and knowledge andfuture potential.
• Directors who are members of the Audit & Supervisory Committee
Directors who are members of the Audit & Supervisory Committee are appointed from those who exceedcertain
levels in terms of their experience in corporate management, such as professional experience and capabilities
in accounting, tax affairs, legal affairs, audit departments and other corporate management fields, as well as
excellent insight and knowledge.
<Procedures for the appointment and removal>
Regarding appointments and nominations, the Nomination Advisory Committee (chaired by an Independent
Outside Director), which consists of three Directors, including two Independent Outside Directors, provides
recommendations to the Board of Directors on the appointment of the senior management and the nominationof candidates for Directors after undertaking a comprehensive examination of the content of the descriptions
above.
With regard to removals, the Board of Directors makes the decision to remove members of senior management
based on consultation with and recommendations from the Nomination Advisory Committee, bycomprehensively taking into account cases where there were acts in violation of public order and morals or acts
in violation of laws and regulations or the Articles of Incorporation or other grossnegligence, where the subject
person is no longer capable of performing his/her duties due to mental or physical health reasons, where thesubject person is recognized to have deteriorating performance over a long period or to be neglecting
shareholders, or in other cases.

(5) Explanations with respect to the individual appointment and removal of the senior management and thenomination of candidates for Directors and members of the Audit & Supervisory Committee by the Board of
Directors based on (4) above
Detailed information of each candidate for Director, including a career summary and the reasons for nomination,3

is provided in the Notification of General Shareholder Meeting. In addition, regarding Outside Directors, moredetailed reasons for the nomination are stated therein.
Supplementary Principle 3-1-3. Initiatives for sustainability, etc.
The basic sustainability policy of the Group is as follows:
・We will strengthen relationships with all stakeholders and contribute to the sustainable growth of society.
・We aim to achieve recycling-oriented business management through the supply of environmentally friendly products.
・We aim to achieve sustainable growth and development at each Group company by improving employee engage
ment.
Based on this policy, the Group has built its business from the beginning on expertise in sensing technology, with t
he aim of contributing to industry and the creation of a safe, secure and comfortable society. We have been aiming
to become the “No. 1 global niche” sensor manufacturer by expanding our work to eliminate the “un” from unease,the “in” from inconvenient, and the “dis” from dissatisfying (the Futoru (eliminating negatives) business).
We are confident that we will be able to contribute to solving environmental and social issues by continuing topromote this “negatives eliminating business,” while at the same time harnessing this to expand each businessand enhance our corporate value, and will aim to contribute to the sustainable development of society andenhancing the corporate value.
The Group’s initiatives for sustainability are posted on the Company’s website below.
Sustainability in general → https://www.optexgroup.co.jp/esg/
Initiatives for governance and our relationship with society are posted on the site above, and detailed initiatives forthe environment and human capital are posted on the following website.
・Basic Sustainability Policy → https://www.optexgroup.co.jp/esg/policy.html
・Reduction of Environmental Impacts → https://www.optexgroup.co.jp/en/esg/environment-impact.html
・Initiatives for TCFD recommendations → https://www.optexgroup.co.jp/esg/tcfd.html
In January 2023, the Company expressed support for the Task Force on Climate-related Financial Disclosures(TCFD) and set a Group CO2 reduction target of a 30% reduction by 2030 (compared with 2019; Scopes 1 and 2).
Going forward, the Company will continue working to enhance information disclosure about the Group’s sustainab
ility initiatives both in terms of quality and quantity.
・ESG Report → https://www.bridge-salon.jp/report_bridge/archives/eng/6914/20220531.html
・Strategies, indicators and targets related to human capital → https://www.optexgroup.co.jp/esg/human-resources.htmlSupplementary Principle 4.1.1 Scope of the Matters Delegated to the Management
Matters to be determined by the Board of Directors include those prescribed by laws and regulations and othermatters stipulated in the Rules of the Board of Directors and the Rules of the Internal Approval System.
Decision-making about other important matters relating to business execution is also stipulated in the Rules of
the Internal Approval System.
Principle 4.9 Independence Standards and Qualifications for Independent Outside Directors
The Company appoints Independent Outside Directors who meet the requirements for outside directors
stipulated in the Companies Act and independence standards defined by the Tokyo Stock Exchange and whomeet the quantitative criteria determined by the Company.
Under the Independence Standards, a person who does not fall under any of 1 through 9 below is judged to have
independence.
1. Executing person of the Company and its affiliated company
2. Person whose principal trading partner is the Company (Note 1) or said person’s executing person (Note 2)
3. The Company’s principal trading partner (Note 3) or said trading partner’s executing person
4. Consultant, professional accountant or legal professional who receives a large amount of money (Note 4) orother assets from the Company besides executive compensation (in the case where person receiving said assets
is a corporate body, association or other organizations, this shall mean consultant, professionalaccountant or legal
professional who belongs to said corporate body or other organizations)
5. Large shareholder of the Company (Note 5), or in the case where said large shareholder is a corporate body,4etc., said shareholder’s executing person
6. Person who receives a large amount of donation from the Company (Note 6) or the person’s executing person
7. Person who belongs to an audit corporation and acts as accounting auditor of the Company
8. Person who fell under any of 1 through 7 above at any time during the past 3 years
9. Spouse or relative within the second degree of kinship of any person who falls under any of 1 through 7
above(Note 1) “Person whose principal trading partner is the Company” shall mean a person who received from theCompany payment of an amount equivalent to no less than 2% of the person’s consolidated net sales in theimmediately preceding business year.
(Note 2) “Executing person” shall mean director, executive officer, employee who executes businessoperations,executive director and other persons equivalent thereto, of a corporate body or other organizations.
(Note 3) “The Company’s principal trading partner” shall mean a person who paid the Company an amountequivalent to no less than 2% of the Company’s consolidated net sales in the immediately precedingbusinessyear.
(Note 4) “Large amount of money” shall mean a total of no less than 10 million yen per year calculated as theaverage of the past three years in the case of an individual person, and an amount equivalent to no less than 2%of total revenue in the immediately preceding business year calculated as the average of the past three years in
the case of corporate body, etc.
(Note 5) “Large shareholder” shall mean a person who directly or indirectly holds no less than 10% of total
voting rights.
(Note 6) “Large amount of donation” shall mean a total of no less than 10 million yen per year calculated as theaverage of the past three years.
Supplementary Principle 4.10.1 Approach to Independence of Committee Composition and Authority and Roles,etc.
To further increase transparency and objective judgment in determining the nomination of candidates for Directors,
the Company has established a voluntary Nomination Advisory Committee. In addition, the Company has
established a voluntary Compensation Advisory Committee in order to increase transparency and objectivity indetermining remuneration, etc. for Directors (including candidates for Directors). Both committees shall review
and deliberate on matters consulted by the Board of Directors and provide reports.
The majority of the members in both committees shall be Independent Outside Directors, and the chairperson shallbe determined from among the Independent Outside Directors.
For details of both committees, please refer to “Committee’s Name, Composition, and Attributes of Chairperson”
in “II. Business Management Organization and Other Corporate Governance Systems regardingDecision-making,Execution of Business, and Oversight in Management.”
Supplementary Principle 4.11.1 Balance, diversity and size of the Board of Directors as a whole
The Board of Directors of the Company comprises five Directors (four males and one female) (the maximum
number thereof is set at nine) who respectively have professional capabilities in corporate management,
management supervision, technological development, production, marketing and sales, experience in working
abroad, accounting, and other specialty fields, and three Directors (two males and one female) who are membersof the Audit & Supervisory Committee (the maximum number thereof is set at four) and have practical auditing
experience, are lawyers, certified public accountants and certified tax accountants, and haveexcellent insight andknowledge. In light of the current sizes, etc. of the Company and the Group, we believe that this composition isappropriately balanced to enable the Company to pursue its medium- to long-term management strategies.
With regard to balancing diversity and specialties, we will continue to conduct a review in order to optimize saidbalance.
Please refer to the end section of this report for the skills matrix of the current management team.
Supplementary Principle 4.11.2 Concurrent holding of managerial positions in other listed companies by the
Directors
The situation of the concurrent holding of positions by each Director and Director who is a member of the Audit& Supervisory Committee is disclosed in the Notification of General Shareholder Meeting.
Supplementary Principle 4.11.3 Analysis and evaluation of the effectiveness of the Board of Directors
To further enhance the effectiveness of the Board of Directors, the Company conducts a questionnaire once a
year targeting all Directors, and the Board analyzes and evaluates the results through constructive discussions.

5

The results of a questionnaire survey conducted in March this year (9Directors, 100% response rate) show thatthe Board of Directors of the Company is evaluated as largely fulfilling its roles and responsibilities effectively.
Meanwhile, the members of the Board of Directors share the recognition that spending more time on substantive
discussion of important matters for the medium and long term such as consideration of the direction ofmanagement strategy will further improve functionality. We will work to make improvements in those mattersand continue to ensure and strengthen the effectiveness of the Board of Directors.
Supplementary Principle 4.14.2 Training policy for Directors
The Company will provide opportunities for Directors to continuously broaden their knowledge of the legal
obligations, duties and responsibilities that they must comply with, both at the time of their appointment andafter their appointment.
Principle 5.1 Policy for Constructive Dialogue with Shareholders
To facilitate proactive and constructive dialogue with shareholders, the Company has established Public
Relations and Investor Relations Dept. and endeavors to provide clear explanations of the Company’s
management policy and management situation. In addition, the President, officers and IR personnel
systematically hold briefings for institutional investors and briefings for individual investors and field requests
for interviews from institutional investors.
The Company determines a venue for the Ordinary General Meeting of Shareholders which will to enable
diverse shareholders to attend the meeting and holds a briefing explaining the Company's future policies after
the close of the meeting.
Action to Implement Management That is Conscious of Cost of Capital and Stock Price (under review)
We believe that the most important management issues for sustainable growth are not only sales and profit on
the income statement, but also improving the cost of capital and return on capital on the balance sheet. Basedon that recognition, we have set return on equity (ROE) of 10% or more as a target management indicator. We
currently estimate our own cost of equity to be around 7% (6-8%) and believe that we have achieved a returnon capital that exceeds the expected returns demanded by shareholders and investors. However, we understandthat we need to continue improving profitability in the future.
Regarding the “Action to Implement Management That is Conscious of Cost of Capital and Stock Price”
promoted by the Tokyo Stock Exchange, the Board of Directors will carefully consider specific initiatives andother measures, and plans to disclose the details around February 2025, to coincide with the decision on thethree-year management plan starting in 2025.

6

2. Capital Structure
Foreign Shareholding Ratio

20% or more and less than 30%[Status of Major Shareholders]Name / Company Name
The Master Trust Bank of Japan, Ltd. (Trust account)
Custody Bank of Japan, Ltd. (Trust account)
STATE STREET BANK AND TRUST COMPANY 505025
Toru Kobayashi
THE BANK OF NEW YORK MELLON 133652
Katsutoshi Kurita
Wandaria CO., LTD.
Vista CO., LTD.
STATE STREET BANK AND TRUST COMPANY 505001
BNYMSANV RE BNYMSANVDUB RE LEGAL（AND）GENERALUCITS ETF PLC

Number of
Shares Owned
4,731,400
4,319,600
1,206,600
1,068,890
928,700
720,000
665,000
613,500
574,508551,208

Percentage
(%)
13.32
12.16
3.40
3.01
2.61
2.03
1.87
1.73
1.62
1.55

‐
None

Controlling Shareholder (except for Parent Company)
Parent Company

Supplementary Explanation
1. The above capital structure is as of December 31, 2023.
2. The above percentages of shares owned by major shareholders are calculated after deducting 2,211,094 shares oftreasury stock.
3. Baillie Gifford & Company and Baillie Gifford Overseas Limited submitted a large shareholding report dated
August 21, 2023 which stated that as of August 15st, 2023, they owned 1,482,600 shares (shareholding ratio: 39.3%)
and 426,600 shares (shareholding ratio: 1.13%), respectively, jointly owning a total of 1,909,200 shares(shareholding ratio: 5.06%).
However, as we are unable to confirm the number of shares actually held as of December 31st, 2023, they are notincluded in the above list of major shareholders.
In addition, Invesco Advisers, Inc. submitted a statement of large-volume holdings on April 20, 2023, stating that itheld 2,033,900 shares (shareholding ratio 5.39%) as of April 14, 2023, and submitted a statement of large-volume
holdings on July 21, 2023, stating that it held 1,581,300 shares (shareholding ratio 4.19%) as of July 14, 2023.
However, the Company was unable to confirm the number of shares actually held by Invesco Advisers, Inc as ofDecember 31, 2023, and it is therefore not included in the above list of major shareholders.

3. Corporate Attributes
Listed Stock Market and Market Section
Fiscal Year-End
Type of Business
Number of Employees (consolidated) as of the End of thePrevious Fiscal YearSales (consolidated) of the Previous Fiscal Year
Number of Consolidated Subsidiaries as of the End of thePrevious Fiscal YearTokyo Stock Exchange, The Prime Market
DecemberElectric Appliances
At least 1000
From ¥10 billion to less than ¥100 billion
From 10 to less than 50

4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling
Shareholder－
5. Other Special Circumstances that may have a Material Impact on Corporate Governance7

II. Business Management Organization and Other Corporate Governance Systems regarding
Decision-making, Execution of Business, and Oversight in Management
1. Organizational Composition and Operation
Organization Form

Company with Audit & Supervisory Committee[Directors]
Maximum Number of Directors Stipulated in
Articles of Incorporation
Term of Office Stipulated in Articles ofIncorporation
Chairperson of the Board
Number of Directors
Nomination of Outside Directors
Number of Outside Directors
Number of Independent Outside Directors

13
One year
President
8
Nominated
44Outside Directors’ Relationship with the Company (1)Relationship with the Company*
Name
Attribute
a
b
c
d
e
f
g
h
i
j
k
Kazuhiro
From another company
YoshidaShoko Negishi
scholar
Minoru Kida
Certified public accountant
Keiko Iijima
Lawyer* Categories for “Relationship with the Company”* “○” when the director presently falls or has recently fallen under the category; “△” when the director fell under
the category in the past
* “●” when a close relative of the director presently falls or has recently fallen under the category; “▲” when aclose relative of the director fell under the category in the pasta. Executive of the Company or its subsidiaries
b. Non-executive director or executive of a parent company of the Company
c. Executive of a fellow subsidiary company of the Company
d. A party whose major client or supplier is the Company or an executive thereof
e. Major client or supplier of the listed company or an executive thereof
f. Consultant, accountant or legal professional who receives a large amount of monetary consideration or otherproperty from the Company besides remuneration as a director/member of the Audit & Supervisory Committee
g. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a legal
entity)h. Executive of a client or supplier company of the Company (which does not correspond to any of d, e, or f) (thedirector himself/herself only)
i. Executive of a company, between which and the Company outside Directors/members of the Audit &Supervisory Committee are mutually appointed (the director himself/herself only)
j. Executive of a company or organization that receives a donation from the Company (the director
himself/herself only)
k. Others

8Outside Directors’ Relationship with the Company (2)Membership Designation as Supplementary
Nameof Supervisory Independent Explanation ofCommittee
Director
the RelationshipKazuhiro
Yoshida

○

-

○

-

Reasons for Appointment
Mr. Yoshida worked at a major Japaneseelectronics manufacturer as an engineer for
many years. He was also head of the generalaffairs and human resources division and of
the management planning division and an
executive officer at the company and served
as a director at an affiliate of the company. He
has extensive experience and knowledge. The
Company has determined that he is suitable
as a Director of the Company and has
appointed him as an Outside Director tocontinue to enhance the Group’s corporate
value.
The Company has designated Mr. Yoshida
as an Independent Officer because he does
not come under an executing person, etc. of
the Company, the Group or major business
partners and because it has been concluded
that he is unlikely to cause any conflicts ofinterest with general shareholders in light ofthe criteria for independence established by
the Exchange and the Company.
Ms. Negishi worked as an economist at theWorld Bank’s Research Group. Her research
focused on international finance not only indeveloped economies such as Japan but also
in developing and emerging economies. She
has a global perspective and extensive
practical experience and knowledge as wellas insight in her area of expertise. The
Company has determined that she is suitable
as a Director of the Company and has
appointed her as an Outside Director,
expecting her to give the Company
appropriate advice to further strengthen
corporate governance and to continue toenhance its corporate value.
The Company has designated Ms. Negishi as
an Independent Officer because she does notcome under an executing person, etc. of theCompany, the Group or major business
partners and because it has been concluded
that she is unlikely to cause any conflicts ofinterest with general shareholders in light ofthe criteria for independence established by
the Exchange and the Company.

Shoko
Negishi9Minoru Kida ○○-Keiko Iijima ○○-Mr. Kida has a wide range of insight andextensive knowledge and experience,
including his involvement in auditing listedcompanies as a certified public accountant
and a certified tax accountant for many years.
The Company has determined that he is able
to further strengthen the audit system of theGroup by giving accurate advice andappointed him as an Outside Director who isa member of the Audit & Supervisory
Committee.
The Company has designated Mr. Kida as an
Independent Officer because he does notcome under an executing person, etc. of theCompany, the Group or major business
partners and because it has been concluded
that he is unlikely to cause any conflicts ofinterest with general shareholders in light ofthe criteria for independence established by
the Exchange and the Company.
Ms. Iijima has a wide range of insight andextensive knowledge and experience,
including her involvement in serving as a
Director and a Corporate Auditor throughcorporate legal affairs as a lawyer in listedcompanies for many years. The Company has
determined that she is able to further
strengthen the audit system of the Group by
giving accurate advice and appointed her as
an Outside Director who is a member of the
Audit & Supervisory Committee.
The Company has designated Ms. Iijima asan Independent Officer because she does notcome under an executing person, etc. of theCompany, the Group or major business
partners and because it has been concluded
that she is unlikely to cause any conflicts ofinterest with general shareholders in light ofthe criteria for independence established by
the Exchange and the Company.

[Audit & Supervisory Committee]
Committee’s Composition and Attributes of Chairperson
All Committee
Members
Audit & Supervisory
Committee

Full-timeMembers3

InsideDirectors
1

Appointment of Directors and/or Staff to Support the
Audit & Supervisory Committee

OutsideDirectors
1

Chairperson
2

Fulltime
Director

Not Appointed

Reasons for adopting the current system
Although there are no full-time staff assigned to assist with the functions of the Audit & Supervisory
Committee, the Internal Audit Departments and other related sections provide the relevant assistance as needed.
Cooperation among the Audit & Supervisory Committee,
Accounting Auditors and Internal AuditDepartments

10With regard to accounting audits of the Company, it has an audit contract with Deloitte Touche Tohmatsu LLC. The
Company holds auditor reporting meetings with the accounting auditors on a periodic basis to receive the results ofaccounting audits from the accounting auditors, exchange opinions on important accounting issues and conduct
reviews as required.
The Company has established the Internal Audit Departments (two staff members) under the direct control of the
President, and the necessary internal audits of the Companyand business execution of its subsidiaries are performedin accordance with the Rules on Internal Audits andyearly internal audit plans. The results of such audits arereported to the President. The situation of internal audits is also reported to the Audit and Supervisory Committee
on a periodic basis, and deliberations are made on important audit matters as necessary. Accordingly, while each ofthese auditing bodies maintains its independence as an auditing body, they cooperate and collaborate witheach otherand endeavor to improve the efficiency and effectiveness of audits.
[Voluntary Establishment of Nomination/ Compensation Committee]
Voluntary Establishment of Committee(s)Corresponding to Nomination Committee orRemuneration Committee

Established

Committee’s Name, Composition, and Attributes of Chairperson
Committee Corresponding toNomination Committee
Committee’s Name
Nomination Advisory Committee

Committee Corresponding toCompensation Committee
Compensation Advisory Committee

All Committee Members

33

Full-time Members

00Inside Directors

11Outside Directors

22

Outside Experts

0

0

Other

0

0

Chairperson

Outside Directors

Outside Directors

Supplementary Explanation
The Company has established the Nomination Advisory Committee and the Compensation Advisory Committee,
both of which consist of one chairperson and two Outside Directors, for the purpose of strengthening corporate
governance in decision-making regarding nominations and the remuneration of officers.
With regards to roles of each committee, please refer to (3) “Board of Directors’ policies and procedures indetermining the remuneration of the senior management and Directors” and (4) “Policies and procedures in
the appointment and removal of the senior management and the nomination of candidates for Directors” in [Principle
3.1 Full Disclosure] described above.
The Rules of the Nomination Advisory Committee and the Rules of the Compensation Advisory Committee stipulate
the composition, operation and so forth of each committee and General Affairs Dept. acts as the secretariat forhandling such matters.
[Independent Directors]
Number of Independent Director

4

Matters relating to Independent Directors
The Company has appointed all the Outside Directors who satisfy the qualification requirements asIndependent
Directors.
[Incentives]
Incentive Policies for Directors

Restricted Stock, Stock Options

Supplementary Explanation

11

The Company has introduced stock-based compensation with restrictions on transfer for its Directors (excluding
Directors who are members of the Audit & Supervisory Committee and Outside Directors). providing the subject
Directors with incentives to make efforts to achieve sustained increases in the Company’s corporate value and for
promoting value sharing between the subject Directors and shareholders, the stock-based compensation is paid to grantshares with restrictions on transfer within the total remuneration of the Directors as a group (not exceeding 300 million
yen per year). The said remuneration takes the form of monetary claims within a total amount of not more than 25
million yen, and the specific allocation, etc. of the said remuneration is determined by the Board of Directors throughconsultation with and reporting by the Compensation Advisory Committee.
In addition, while the Company abolished the retirement benefit plan for Directors, it introduced stock optionsunder
the stock-based compensation scheme for the Directors of the Company (excluding Directors who are members of the
Audit & Supervisory Committee and Outside Directors) and Directors of the Company’s subsidiaries up to 50 million
yen per year for the purpose of sharing the advantages and risks of stock price fluctuations with shareholders and forbolstering motivation toward improvements over the long term in business performance and corporate value to agreater extent than in the past.
Recipients of Stock Options
Inside Directors, Subsidiaries’ Directors
Supplementary Explanation
Stock options are granted to the Directors in charge of business operations of the Company and its subsidiaries(excluding Directors who are members of the Audit & Supervisory Committee and Outside Directors).
[Directors’ Remuneration]
Disclosure of Individual Directors’ Remuneration
No individual disclosure
Supplementary Explanation
Directors’ remuneration is disclosed separately for Inside Directors and Outside Directors with the total
remuneration amounts and their numbers in securities reports and business reports.
Policy on Determining Remuneration Amounts andCalculation Methods

Established.

Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods
Directors’ remuneration comprises base remuneration, which is fixed compensation, stock-based compensation withrestrictions on transfer (excluding Directors who are members of the Audit & SupervisoryCommittee and Outside
Directors) and stock acquisition rights as stock options under the stock-based compensation scheme (excluding
Directors who are members of the Audit & Supervisory Committee and Outside Directors). Base remuneration isestablished according to specific standards and is determined by theBoard of Directors by taking into account each
Director’s position and specific area of ongoing responsibility,the Company’s management environment and businessresults and other matters. Stock-based compensationwith restrictions on transfer and stock acquisition rights as stock
options under the stock-based compensationscheme are determined by the Board of Directors in accordance with theRules on Stock-based Compensation with Restrictions on Transfer and the Rules on Stock Options prescribed
elsewhere.
Each type of remuneration is established according to specific standards by the Compensation Advisory Committee(chaired by an Independent Outside Director), which consists of three Directors, including two Independent Outside
Directors, and is determined by the Board of Directors.
[Supporting System for Outside Directors]
Although there are no full-time staff assigned to assist with the duties of the Outside Directors, Internal Audit
Departments and other related departments provide the relevant assistance whenever necessary. For meetings of theBoard of Directors and other important meetings, the Company has adopted a system in which the relevant materials
are distributed in advance and agenda items are explained prior to such meetings as necessary.

2.Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration
Decisions (Overview of Current Corporate Governance System)
As a body in charge of decision-making and supervision concerning matters prescribed by laws andregulations, basic
management policy and other important matters, the Board of Directors (eight Directors,of which three are members of
the Audit & Supervisory Committee) has been established to engage in deliberations and the reporting of importantmatters concerning business execution. In addition, the Audit & Supervisory Committee conducts audits of theexecution of duties by the Directors and other status in accordance with pre-determined auditing standards.
12Number of Board of Directors’ meetings convened in FY2023: 13 (Attendance rate of Directors-8 Directors: 100%, 1
Director: 92%)
(excluding eight written resolutions).

3. Reasons for Adoption of Current Corporate Governance System
From the perspective of further enhancing corporate governance and with the aim of promoting effective andefficient
corporate management to a greater extent than in the past, the Company has adopted the system of aCompany with an
Audit & Supervisory Committee. In light of the size of the Group’s business and organizational structure, it considers
that the current system is the most appropriate for ensuring the independence of audits and efficient corporate
governance.
The Company has appointed four Outside Directors who have no relationships of special interest with the Company.
The Outside Directors express their opinions based on abundant management experience at meetings of the Audit &Supervisory Committee and the Board of Directors and provide important advice that contributes to enhancing theGroup’s management system.

III. Implementation of Measures for Shareholders and Other Stakeholders
1.Measures to Vitalize the General Shareholder Meetings and Smooth Exercise of Voting Rights
Supplementary Explanations
The Company is taking steps to dispatch convocation
notices early. The convocation notice for the latest
meeting (the 45t Ordinary General Shareholder
Meeting held on March 27, 2024) was dispatched 22days prior to the date of the meeting.
Early Notification of General Shareholder Meeting
In addition, the convocation notice was disclosed on
the Company’s website on February 29, 2024, prior tosending the notices, both in Japanese (the entire text)
and in English (a narrowly defined version andreference materials).
As the Company’s fiscal year ends on December 31, theScheduling General Meetings of ShareholdersAvoiding ordinary general shareholder meeting is held in latethe Peak Day
March every year.
Exercise of Voting Rights by Electronic Method

The Company introduced electronic voting rights.

Use of the Electronic Voting Platform and Other Stepsfor the Creation of an Infrastructure Allowing
Institutional Investors to Exercise their Voting Rights

The Company uses the Electronic Voting Platform.
The entire text of the convocation notice in Japaneseand the main portion of the text (in a narrow sense;
together with reference materials) in English areposted on the platform operated by ICJ Inc.
An English version of the convocation notice in anarrow sense and reference materials are posted onthe
Company’s webpage(https://www.optexgroup.co.jp/en/) for reference
purposes.
In accordance with the provisions of the Companies
Act, the Company provides materials for generalshareholders’ meetings electronically and posts
convocation notices in full on the Company’s
website. (https://www.optexgroup.co.jp/en/).
Every year, a briefing session for shareholders is held
after the Ordinary General Meeting of Shareholders,and explanations of the Company’s future policy, etc.
are given by the Directors.
Note: The Company has abolished the social
gathering for shareholders.

Providing Convocation Notice in English

Other

13

2. IR Activities
Supplementary Explanations

Explanations
byRepresentative

Preparation and publication of
disclosure policy

The Company has prepared a disclosure policy and posts thepolicy on its web site.
(https://www.optexgroup.co.jp/shareholder/disclosure.html)

Regular Investor Briefingsfor
Individual Investors

Company information sessions for individual investors areheld on an occasional basis.

Yes

After the announcement of the fiscal year-end and interim
business results, briefing sessions are held for analysts andinstitutional investors.

Yes

The Company provides individual explanations on matterssuch as the Group’s business results and management
strategies to institutional investors mainly in the U.S., Europe
and Asia. Meanwhile, in Japan, the Company attends
conferences held by securities firms as appropriate.

Yes

Regular Investor Briefingsfor
Analysts and Institutional
Investors

Regular Investor Briefingsfor
Overseas Investors

Posting of IR Materials on
WebsiteEstablishment of Department
and/or Manager in Charge ofIR

On the page entitled “To our Shareholders and Investors,” theCompany posts earnings summaries, securities reports,
materials for results briefing sessions, convocation notices forgeneral shareholder meetings, the shareholder newsletter,materials for timely disclosure, etc.
(https://www.optexgroup.co.jp/en/).
The Company has established Public Relations and Investor
Relations Dept. (three members)

3. Measures to Ensure Due Respect for Stakeholders
Supplementary Explanations
The Optex Group Code of Conduct stipulates the importance of the continuous
Stipulation of Internal
improvement of corporate value while winning the trust of customers, business
Rules for Respecting thepartners, shareholders, investors, local communities and all other stakeholders.
Position of Stakeholders

Implementation ofEnvironmental Activities,
CSR Activities etc.

Under the Company’s unique environmental policies, its subsidiaries pursue the
manufacture of environmentally conscious products from the development anddesign phases. The Group is working to contribute to local communities, and its
initiatives include the Lake Biwa Environmental Training Course for elementary,junior high and high school students nationwide, institutions dedicated to education
for students with disabilities and other associations.

Development of Policies
on Information Provision
to Stakeholders

The Optex Group Code of Conduct stipulates that in addition to the statutory
disclosure of information, information about the management philosophy, business
policy, business activities, social contribution activities and other relationships withsociety shall be shared proactively and accurately with all stakeholders, and that
accountability shall be fulfilled.

IV. Matters Related to the Internal Control System
1. Basic Views on Internal Control System and the Progress of System Development
1. Basic views
The Group recognizes that the continuous improvement of corporate value while winning the trust of shareholders,investors, customers and society at large is its ultimate mission. To implement this mission, theGroup has set thebasic policy to develop and maintain internal control systems as systems for establishing appropriate organizations,
regulations and rules and for conducting monitoring, to constantly review and improve the said systems, and to14

seek to firmly establish lawful and efficient business execution systems.
2. Progress of system development
The Board of Directors of the Company has adopted the following resolution regarding the development of systems
that are necessary for ensuring the appropriateness of the business operations of the Company in accordance withthe provisions of the Companies Act, the Ordinance for Enforcement of the Companies Act,etc.
(1) Systems necessary for ensuring that the execution of duties by the Directors and employees of the Group
complies with laws and regulations and the articles of incorporationa. The Board of Directors of the Company shall determine the basic policies for internal control systems,
including systems for ensuring compliance with laws and regulations, the articles of incorporation, etc., supervise
the status of the implementation of the systems and review the basic policies, as needed.
b. The Audit & Supervisory Committee of the Company shall conduct examinations of the status of the executionof business, including the status of the development and implementation of internal control systems, and auditsof the execution of duties by the Directors from an independent standpoint.
c. The Company shall establish a compliance committee chaired by the President for deliberations on importantmatters that are required for ensuring a law-abiding spirit in corporate action and employee action. In addition,
the Company shall establish the Optex Group Code of Conduct, keep all the officers and employees of the Group
informed about the Code, and endeavor to maintain and improve their compliance awareness.
d. The Company shall establish the Internal Audit Departments under the direct control of the President.,
including audits of the effectiveness of internal audit systems, shall be performed in accordance with the Rules
on Internal Auditsand yearly internal audit plans. The results of such audits shall be reported to the President on
a periodic basis. The situation of internal audits shall also be reported to the Audit and Supervisory Committee.
e. The Company shall take a resolute attitude as an integrated organization in cooperation with the relevantorgans toward anti-social forces that threaten the order of society or sound corporate activities, and shall refrainfrom having any connection with anti-social forces.
(2) System for storing and managing information related to the execution of duties by the Directors of the Company
The Company shall store and manage, in an appropriate manner, the minutes of general shareholder meetings, theminutes of meetings of the Board of Directors and other statutory documents and documents that contain
information about important business execution (including electromagnetic records; the same shall apply
hereunder) together with related documents in accordance with the provisions of the DocumentManagement Rules
and other internal rules. The Directors of the Company may inspect these documents whenever necessary forsupervision or audits of the execution of duties by the Directors.
(3) Rules and other systems concerning the management of the risk of loss by the Groupa. The Company shall identify and evaluate potential risks that may have a significant impact on the Group’sbusiness operations and develop a system for utilizing such information in its business operations. In addition,
to ensure the effectiveness of the management of such risks, the Company shall establish a committee anddevelop relevant systems.
b. The Company shall take steps to determine its response to events that have a significant impact on the Group’sbusiness operations and preventative measures as necessary.
(4) Systems for ensuring the efficient execution of duties by the Directors of the Groupa. To ensure the efficient execution of duties by the Directors, the Company shall hold regular Board of Directors’
meetings once a month and temporary meetings, as necessary, and undertake prompt and appropriate decisionmaking. In addition, based on such decisions, the Directors shall ensure the efficient execution of duties.
b. To seek prompt and appropriate decision-making by all the group companies, the Company shall clearly define
authorities and responsibilities in the Holding Company Group Governance Rules, and deliberationsshall bemade by the Board of Directors of the Company regarding important matters of the subsidiaries.
(5) Systems for ensuring appropriate business operations in the corporate group consisting of the Company and its
subsidiaries
a. The Company shall establish the Optex Group Code of Conduct as action guidelines to be applied to all thegroup companies and conduct compliance management for all the group companies as a whole.
b. Directors and employees of the Company serve concurrently as Directors and Audit & Supervisory Committee
members of major subsidiaries and, therefore, supervise the execution of duties by Directors, etc. of major
subsidiaries and are also obliged to report important matters to the Company. The Company shall designate

15

departments as those that exercise control over each group company in cooperation therewith with respect tothe business management thereof in accordance with the Holding Company Group Governance Rules andother related rules, and the said departments shall conduct monitoring as necessary.
(6) Matters related to employees who assist with the duties of the members of the Audit & Supervisory Committee,
matters related to the independence of the said employees from Directors other than the members of the Audit &Supervisory Committee and matters related to ensuring the effectiveness of the instructions given to the said
employees where the Audit & Supervisory Committee requests the Companyto assign such employees
Where the Audit & Supervisory Committee requests the Company to place employees to assist with the duties ofthe members of the Audit & Supervisory Committee, the Board of Directors shall assign such employees upon
discussions with the Audit & Supervisory Committee. The appointment, transfer or evaluation of such employees,
the authority to give directions and orders to such employees and other matters shall require the prior approval of
the Audit & Supervisory Committee in order to ensure the independence of such employees from Directors otherthan the members of the Audit & Supervisory Committee and the effectiveness of the instructions.
(7) Systems for the Directors and employees, etc. of the Group and Corporate Auditors, etc. of the subsidiariesof theCompany to report to the Audit and Supervisory Committee of the Company and systems for ensuring that the said
reporters are not treated disadvantageously on the grounds of having made such reports
a. The Directors and employees of the Group shall report to the Audit and Supervisory Committee without delay
about important matters that have an impact on the business operations or business performance of theCompany and the Group in detail, including the contents of the said important matters, the situation of theexecution of operations and the results thereof. In addition, notwithstanding the foregoing, the Audit andSupervisory Committee may make a request to the Directors and employees of the Group for a report at any
time.
b. The Group shall establish internal whistleblowing systems and clearly specify in the Compliance Regulations
to the effect that whistleblowers will not be treated disadvantageously on the grounds of having undertaken
whistleblowing and shall thoroughly inform all the group companies of the above matter.
(8) Other systems for ensuring effective audits by the Audit and Supervisory Committeea. The Audit and Supervisory Committee of the Company shall hold meetings with the President on a regularbasis and exchange opinions about management policies, issues to be dealt with by the Company, risks
surrounding the Company, the status of developing audit environments for the Audit and Supervisory
Committee, significant auditing issues and other matters.
b. All the members of the Audit and Supervisory Committees, Corporate Auditors or officers in charge ofauditing in all the companies in the Group shall exchange opinions on a periodic basis to clarify the auditing
status of the companies in the Group as a whole and examine issues.
c. The internal audit section of the Company shall maintain close coordination with the Audit and Supervisory
Committee of the Company and exchange opinions.
d. The Audit and Supervisory Committee of the Company shall secure a budget allocation for the
implementation of audit plans. When the members of the Audit and Supervisory Committee of the Company
request the reimbursement of costs relating to the execution of their duties, such costs shall be paid
promptly.
(9) Systems for ensuring the reliability of financial reporting
To ensure the reliability of financial reporting by the Group, valid and appropriate internal control systems
shall be established in accordance with the Financial Instruments and Exchange Act. In addition, theCompany shall seek to improve the effectiveness of such systems by continuously evaluating the status of
the development and operation thereof and take corrective measures if necessary.

2. Basic Views on Eliminating Anti-Social Forces and the Progress of System Development* Please describe the basic views on eliminating anti-social forces and the progress of system development. In
accordance with the basic policies on internal controls stated above, the Group takes a resolute attitude incooperation and collaboration with the police authority, corporate lawyers, etc. toward anti-social forces. It is
working to prevent anti-social acts and any relationships with anti-social forces with the aim of eliminatingantisocial forces.
In addition, the Company has clearly defined the standard of behavior toward anti-social forces in the OptexGroup
Code of Conduct, the action guidelines of the Group, and ensures that its officers and employees act according tostrong moral values. Furthermore, the Group participates in exchanges of opinions with local police and othercompanies and training activities for promoting the elimination of anti-social forces.
16

V. Other
1. Adoption of Anti-Takeover Measures
Adoption of Anti-Takeover Measures

Not adopted.

Supplementary Explanation－
2. Other Matters Concerning Corporate Governance System
Timely disclosure concerning the settlement of accounts
Regarding summaries of financial statements and other corporate information concerning the settlement ofaccounts (consolidated and non-consolidated bases), draft documents are prepared collaboratively Accounting
Finance Dept, Public Relations and Investor Relations Dept., and General Affairs Dept, etc. under the controlof the Director in charge of information disclosure and are submitted to the Board of Directors for its judgment
upon obtaining the consent of the Director in charge of information disclosure.
After a resolution to approve the draft documents is adopted by the Board of Directors, the Director in chargeof
information disclosure gives directions concerning disclosure to Public Relations and Investor Relations Dept,
which then performs tasksneeded for disclosure. For the preparation of fiscal year-end and quarterly summaries
of financial statements,etc. the Company is provided with audits and instructions from the accounting auditor.
(1) Timely disclosure of other matters for disclosure
A fact that has been determined or occurred at a section shall be summarized and reported directly by the person
responsible for the section to Public Relations and Investor Relations Dept. and the Director in charge of
information disclosure and submitted to the Board of Directors for its judgment upon obtaining consent of the
Director in charge of information disclosure.
After a resolution to approve an important decision for disclosure is adopted by the Board of Directors, theDirector in charge of information disclosure gives directions concerning disclosure to Public Relations andInvestor Relations Dept. which then performs tasks needed for disclosure.
In addition, if an important fact that needs to be promptly disclosed occurs, it shall be disclosed upon obtainingthe
consent of the Director in charge of information disclosure and the approval of the President.
In this case, Public Relations and Investor Relations Dept. also performs the tasks needed for disclosure at the
instruction of the Director in charge of information disclosure.
(2) Observance of timely disclosure by the relevant personnel in the Group and management of corporate
information
The Group clearly describes the importance of timely disclosure in the Optex Group Code of Conduct as shownin the excerpt below. The text is shown in both Japanese and English side by side and distributed to allaffiliatedcompanies in and outside Japan or posted on the webpages to ensure observance by all the officersand employees
and interested parties.
In addition, basic matters for information disclosure in and outside the Company are stipulated in the
Information Management Rules. Furthermore, in an effort to prevent insider trading, the Company has
established Inside Trading Control Regulations that stipulate the management of insider information obtainedby
officers and employees during the course of the execution of their duties, restrictions on purchases, sales, etc. ofstocks, etc. by officers and employees and fundamental matters to be observed by officers and employees on
duty.
(Excerpt from the Optex Group Code of Conduct)
Chapter 4
3-(3) Information disclosure and public relations
In addition to the statutory disclosure of information, we will proactively and accurately share with all
stakeholders (customers, business partners, shareholders, investors, local communities, etc.) information about
the Company’s business policy, business activities, social contribution activities and other relationships withsociety and fulfill accountability.

17

“Corporate Governance Report” Skills Matrix【Skills Matrix】
Name

c orpor at e
management /Management
StrategyInternational
Experience

Tatsuya Nakajima●●

Toru Kamimura●●

Koki Yamana●

Kazuhiro Yoshida●●

Shoko Negishi●●

Technology/
Research andDevelopment

Sales /
Marketing

Financial /accounting

Legal Affairs/
RiskManagement

●
●

●

●

●
●

●
●

●

Masaya Okuno
Directors who
are membersof the Audit
andSupervisory
Committee

Audit/
Internal
Control●●●●
Minoru Kida

●

●

●

Keiko Iijima※The above list does not represent all the experience and knowledge possessed by each director.

18（certified tax
accountants・
certified public
accountants）●●（Lawyer）