We recognize the reinforcement and enhancement of corporate governance as our most important business challenge for the sake of the maintenance and improvement of our long-term competitive power in the global market. Based on our corporate philosophy, We will also promote efficient business administration as well as fulfill our social responsibilities toward stakeholders, and try to increase our corporate value in order to establish structures that are more profitable.
We will address this based on the following basic views.

(1) We will respect the rights of shareholders and ensure their equality.
(2) We will strive for appropriate cooperation with all stakeholders,
including shareholders, customers, suppliers, employees, and local communities.
(3) We will ensure transparency through appropriate disclosure of corporate information.
(4) The Board of Directors will provide major direction for corporate strategy, etc.,
create an environment that supports risk-taking by senior management,
and provide highly effective supervision over business execution from an independent and objective standpoint.
(5) We will engage in constructive dialogue with shareholders in order
to achieve sustainable growth and increase corporate value over the medium to long term.
Based on these views, the "Corporate Governance Policy" is established and published.

• (1)Board of Directors

The Board of Directors is comprised of 14 Directors, an appropriate number to conduct swift decisions. Meeting are held at least once per month. The Board of Directors supervises the status of business execution by each Director and checks on management functions. The Board of Directors includes seven Independent Outside Directors to execute management supervision from a more objective perspective.
Outside Directors provide helpful advice from a multifaceted perspective with a diverse background as CPAs and managers of other companies. This secures the appropriateness of management decisions.

The Board of Directors not only shares internal information, but reports on the medium-term business plans of each department. Deliberations take place about medium- to long-term company initiatives while receiving advice from Outside Directors.

In nominating Director candidates, the Board of Directors takes efforts to secure the knowledge, experience, balance, and diversity of the entire organization. In addition to this, multifaceted perspectives based on various backgrounds are utilized in management decisions. The Articles of Incorporation establish the number of Directors (excluding Directors who are Audit & Supervisory Committee Members) as ten or fewer persons. This size makes it possible to make swift decisions.

• (2)Audit & Supervisory Committee

In fiscal 2021, the Group established the Audit & Supervisory Committee, a majority of which is comprised of Outside Directors. Comprised of one Inside Director and three Outside Directors (who are Audit & Supervisory Committee Members), in principle the committee holds meeting once a month. Each Audit & Supervisory Committee Member grasps the status of operation of management execution, internal controls, compliance, internal audits, and internal regulations based on the audit policy and the audit plan, which were enacted by the Audit & Supervisory Committee at the beginning of the fiscal year. Members perform audits while focusing on the effectiveness of each mechanism. Audits are also performed in close cooperation with internal departments and the Accounting Auditor.

This further enhances corporate governance through the strengthening of the supervisory function of the Board of Directors and the strengthening of the audit and supervisory functions for the legality and appropriateness of business execution by granting voting rights in the Board of Directors to Directors who are Audit & Supervisory Committee Members. The Board of Directors strives for effective supervision through proactive opinion exchange and information sharing with Directors. Being aware of the perspective of supervision and auditing, we gather more information and survey to appropriately exercise voting rights.

• (3)Nomination and Remuneration Committee

In order to strengthen the fairness, transparency, and objectivity of procedures related to Director nomination and remuneration, the Company established the Nomination and Remuneration Committee as a voluntary advising body for the Board of Directors on April 1, 2020. The members of the Nomination and Remuneration Committee are six persons selected by decision of the Board of Directors, including four Independent Outside Directors. The Board of Directors also selects and Independent Outside Director for Committee Chair.

> Directors List

To improve the function and effectiveness of the Board of Directors, an evaluation of the effectiveness of the Board of Directors is conducted with all directors. The evaluation is conducted annually, and the Board of Directors discusses the results of the evaluation and future initiatives based on the results, with the aim of further enhancing the dialogue. Main evaluation items: composition of the Board of Directors (number of members, composition balance, etc.), and the systems supporting the Board of Directors (provision of training opportunities, etc.).

• (1)Summary of results for FY 2022

Based on the effectiveness evaluation conducted in FY 2022, we have determined that our Board of Directors is fulfilling its role and functioning effectively based on the following points.:

• The proportion of outside directors on the Board of Directors, its operational status, etc., are all appropriate.

• Materials are provided to directors in advance and time is secured for their consideration and review.

• Sufficient deliberations and decision-making are carried out at the Board of Directors.

• Discussions at the Board of Directors regarding the involvement of the Board of Directors in succession planning for the President and the determination of director remuneration based on the remuneration policy are considered in advance by a voluntary nomination and remuneration committee and are fully and sufficiently conducted.

On the other hand, the need to address the following issues has become clear:

• To deepen discussions regarding medium-term management strategies in response to the increasingly complex external environment.

• To continue to consider diversity in the Board of Directors

• To deepen discussions and initiatives regarding sustainability and the allocation of management resources.

Our Board of Directors will work to further enhance the effectiveness of the Board of Directors based on the results of the FY 2022 implementation.

As one of the means to maintain our business over the long term and in a stable manner, we own a stake in some of our business partners, etc., which is called "cross-shareholdings." With regard to cross-shareholdings, a list of shares held are regularly presented to the Board of Directors, which reviews the appropriateness and significance of holding individual issues from a company-wide perspective. We proceed to sell any shares held that are determined to have little significance as a result of the review of cross-shareholdings as quickly as possible. In addition, voting rights pertaining to cross-shareholdings will be exercised appropriately after carefully examining the content of proposals and determining whether or not they will contribute to the enhancement of shareholder value. We will not make an affirmative decision on proposals that would damage corporate value.

In order to contribute to the Company's sustainable growth and medium- to long-term enhancement of corporate value, the Company responds positively to requests for dialogue from major shareholders, such as by having the representative director engaging in such dialogue. In conducting such dialogue, the Company makes every effort to ensure that there will be no substantial information disparities among shareholders. The Company's basic policy is to hold quarterly financial results briefings for shareholders and investors, as well as briefings for other institutional investors and individual investors.

We have established a basic policy regarding the development of a system to ensure the appropriateness of the company's operations (internal control system) at the Board of Directors meeting, and based on this policy, we are working on the appropriate development and operation of the internal control system.
> Systems to ensure the appropriateness of operations and the status of operation of such systems

In order to realize the management policy, the HRS Group recognizes the importance of fulfilling the social mission and responsibility as a company in our corporate activities. In order to realize this in an ever-changing management environment, the HRS Group Code of Conduct clarifies the policy and standards for employee actions. Through diverse education and awareness-raising activities, the Group provides opportunities to deepen understanding in the Code of Conduct and compliance. The Group aims for each employee to decide to act appropriately according to the Code and fulfill the social responsibility as an organization.

We must not only observe laws and regulations but also to apply our own high ethical standards of sincerity and social responsibility in conducting our corporate activities. Aware of our social responsibilities, the Group established “HRS Group Code of Conduct” for the guidelines and standards of conduct in March 2004 and revised the content to make it globally consistent in 2007. This Code has been translated into English, Chinese, and other local languages and distributed to our overseas bases. The content of this Code is continuously reviewed and revised. Based on the Code of Conduct, each employee acts earnestly with a strong ethical perspective.
> HRS Group Code of Conduct

The Group executes compliance education so that employees can act with sincerity while also complying with laws and regulations. An example of this would be the yearly e-learning sessions for all employees on various themes. We provide opportunities for employees to measure their own understanding through this and various tests conducted at the same time about compliance.
In the regularly released compliance news, we clearly explain common themes and strive to improve employee awareness of compliance.

In order to swiftly address, resolve, and prevent compliance violations, we established the internal report system in 2008. We created diverse counters and proceeded with global compliance. Privacy of participants is strictly protected. We guarantee that whistleblowers will not receive any disadvantageous treatment. If a violation of laws and regulations is discovered, we enact and execute corrective actions and recurrence prevention measures.

For the purpose of appropriately responding to various risks surrounding us, we have established the "CSR & Risk Management Committee," consisting of full-time directors and executive officers, and its subsidiary organizations, and shared risks associated with business performance, thereby engaging in risk management.

One of the measures against risk is to establish an action plan on continuing or restarting within a necessary time frame, business activities in the event of unforeseen circumstances that may suspend the core business, and to make this plan known to everyone.
In 2009, we established this Business Continuity Plan (BCP), in which infectious disease, as well as large-scale earthquakes and fires, was taken as assumed risk and measures against such risks were incorporated. In addition to making the BCP known to our employees, we are advancing the preparations against emergencies even under normal circumstances. As for the new coronavirus, we have considered it as an important BCP issue, and have taken preventive actions and measures to deal with the outbreak of infected patients, as well as measures such as separating production sites and inventory storage sites to cope with the lock-down of our overseas plants. We are also revising our BCP to address the spread of infectious diseases by taking advantage of the experience gained in dealing with the new coronavirus.

With regard to information security, we established an information security policy in 2008 and are now acting in accordance with that policy, providing e-learning so that not only our employees but also all those concerned who handle business information may understand and put into practice the contents of the said policy.
> HRS Group Basic Policy for Information Security

Our basic philosophy regarding intellectual property is to appropriately maintain and manage intellectual property, including know-how obtained through technological development, etc., and we will work to secure it and actively utilize it to prevent it from being improperly infringed upon by third parties. We also respect the intellectual property rights of third parties and strive to avoid infringing them.

We formulate and implement intellectual property strategies that are consistent with each business strategy. We regularly coordinate with business divisions, appropriately obtain　intellectual property and manage its secrecy, and utilize it strategically. Through strategic alliances including both obtaining and granting intellectual property rights licenses, we utilize intellectual property to advantageously develop our business.

Intellectual property personnel are involved in the early stages of new product development to identify intellectual property risks and confirm whether there are any conflicts before developing products. To support the development of products under the concepts of “Always Taking the Lead, Pursuing the Cutting Edge, Achieving Differentiation,” designers and persons in charge of intellectual property work together to discover whether patentable ideas may be buried in developed products, and to file and obtain patent rights for those ideas at an early stage.

We monitor counterfeit products that infringe on intellectual property rights and actively utilize intellectual property. We are collaborating with overseas offices and taking global measures to in order to protect ourselves from being imitated, and to us act properly when imitated. When we discover counterfeit products, we carefully examine the details and take countermeasures with the help of outside experts.

We systematically educate our employees on the importance of intellectual property. We educate our employees on the importance of intellectual property research in order to apply early, secure rights, and develop non-infringing products. We also educate designers on how to conduct intellectual property research themselves using a patent information search system and how to avoid intellectual property issues through examples of intellectual property issues.

In order to improve the value of corporate and product brands, we obtain and maintain and manage house marks and product trademarks in each country. Especially regarding house marks, we monitor other companies' similar trademarks and prevent them from obtaining rights.

Our intellectual property and legal departments work together to provide legal support regarding non-disclosure agreements, license agreements, other business partnership agreements, and legal risks associated with business.