Corporate Governance Policy

1. Overviews on Corporate Governance

<Corporate Governance Philosophy>

Tokyo Seimitsu’s philosophy is “Growing together with partners and customers by collaborating technology, knowledge and information to create the world’s No.1 products.” The Group seeks to achieve sustainable growth and an increase of corporate value in a context of rapidly innovating technology and a globalized economy – as reflected in its corporate brand “ACCRETECH”. To realize this goal, the Group believes that strong corporate governance is essential to improving corporate value and conducting fair and transparent business activities as a global corporate citizen, and has established the following five (5) core policies for corporate governance.

(*)ACCRETECH is a term coined by the Company, combining ACCRETE, meaning “to grow together,” and technology.

<Core Policies>

  1. The Board of Directors strives to properly perform its roles and responsibilities to make transparent, fair, timely and committed decisions.
  2. The Group respects the rights of shareholders and ensures the equality of shareholders.
  3. The Group strives to have constructive dialogue with shareholders on investment policy that considers mid to long-term returns for shareholders.
  4. The Group strives to maintain appropriate collaboration with stakeholders other than shareholders.
  5. The Group strives to ensure proper information disclosure and transparency.

2. Directors and Boards

(1) Board of Directors

①Roles and Responsibilities of the Board of Directors

In order to respond to the mandate from shareholders, the Board of Directors determines material matters required by laws, regulations and the articles of incorporation and those pertaining to management, including business plans, development and investment plans, as well as establishment and investment in subsidiaries, and monitors the execution of business by directors. For any matters which are not on the Board agenda, substantial authority shall be delegated to the heads of internal companies within the scope of duties and authority determined by internal regulations to accelerate decision making. The Company holds executive officer meetings to discuss/share information for effective Company-wide deliberation, and has established Company-wide committees such as the Risk Management and Compliance Committees to examine and monitor important issues from multiple angles and make well founded decisions.

②Constitution of the Board of Directors

  1. The Board of Directors shall consist of an appropriate number of members to allow substantial argument and examination as well as prompt decision making, and in order to ensure the effectiveness of the Board, appointment of Directors shall consider the balance of members in terms of proper risk control, supervision of business execution and functions/divisions to be covered and shall comprehensively examine such perspectives as diversity, knowledge, experience and competence.
  2. The Board shall be inclusive at least one third (1/3) of external corporate directors in total, to reflect the opinions of external experts in business management and/or academic research in the management of the Company. External corporate directors shall be independent external corporate directors who shall satisfy the separately established criteria of independence.

(2) Audit and Supervisory Committee

The Audit and Supervisory Committee, as an independent organ, audits and supervises the state of the business execution of directors not serving as an Audit and Supervisory Committee members.

  1. Constitution of the Audit and Supervisory Committee
    The number of Audit and Supervisory Committee members shall be as appropriate, five (5) or less, and over a half shall be independent external corporate directors who shall satisfy the separately established criteria of independence. In addition, at least one (1) member shall have considerable expertise in finance and accounting.
  2. Regular Meetings with the Representative Directors
    To deepen mutual understanding between them, the Audit and Supervisory Committee shall have regular meetings with the Representative Directors and exchange opinions such as issues that the Company must address, audit findings by the Committee, and other significant issues in auditing, and if necessary, request decisions.

(3) Nomination and Compensation Council

The Company has established a Nomination and Compensation Council as a voluntary committee for the purpose of clarifying the independence, objectivity and accountability of the Board of Director’s functions. The Nomination and Compensation Council consists of members of the Audit and Supervisory Committee and external corporate directors not serving as an Audit and Supervisory Committee member. Independent external corporate directors are in the majority in the Council to realize deliberations fully independent from management.
For Compensation to the directors, the Council deliberates on/resolves classification of compensation per post, and deliberates /reports on matters related to compensation policies.
For the assignment of director(s), the Council deliberates/reports on matters related to assignments of director(s) including appointments and dismissals.

(4) Policies and Procedures for Assignment and Dismissal of Management Executives and
Nomination of Candidates for Directorships

  1. Candidates for management executives' roles such as CEO, COO and CFO as well as candidates of Director roles shall have high dignity, moral standards and deep insights regardless of individual attributes such as gender and nationality, and must be deeply versed in business management and the business of the Company or have abundant experience in their field of expertise.
  2. In principle, assignment of management executives and nomination of candidates for directorships shall be first proposed by the CEO and brought to the Nomination and Compensation Council, then, the Board of Directors meeting will deliberate on this proposal with opinions of the Nomination and Compensation Council. If a candidate is to be serving as an Audit and Supervisory Committee member, approval from this Committee becomes a prerequisite. The Board of Directors resolves nominating and/or assigning appropriate candidates who are capable to respond to the mandate from shareholders.
  3. If a management executive acts in violation of laws and regulations and the articles of incorporation, significantly damages the corporate value and integrity of the Company, and/or demonstrates his/her ability, motivation and/or performance is inappropriate, then the Board of Directors shall consider their dismissal or removal of such an executive upon advice from the Nomination and Compensation Council.
  4. Candidates for the roles of external corporate directorships shall be able to oversee management from an independent viewpoint and provide guidance on the activities of the Company based on their broad experience and deep insights.
  5. To ensure continuity and stability of the Board of Directors, a mass election of new director candidates at one time shall be carefully considered and/or avoided.
  6. Director candidates’ (including management executives) name, background, and a reason for nomination shall be stated in the reference documents of the shareholder meetings. If a management executive is being dismissed, adequate explanation for the dismissal shall be given in the document, including the reference documents for the shareholder meeting, which the law and/or regulation requires.

(5) CEO Succession Plan

The Company shall develop a CEO succession plan and the Board of Directors shall be involved in the operation of the plan on its own initiative.

(6) Improvement of the Effectiveness of Board Meetings

The Board of Directors shall strive to implement the following measures to ensure the effectiveness of the Board meetings:

  1. Information Provision
    To realize fruitful discussion in the Meeting, agenda and related materials for each item shall be distributed to external corporate directors prior to meeting, and when necessary, provide opportunities for explanation in advance.
    Also, prior to the beginning of a fiscal year, the annual schedule of the board meetings shall be determined and notified to each director.
  2. Training for Directors
    Newly appointed internal corporate directors shall be given external training opportunities to learn and understand the roles and responsibilities of managers including legal aspects.
    External corporate directors shall be given briefings of business outlines and/or functions prior of his/her assignments to allow he/she to play their excepted roles. In addition, when necessary, an opportunity to visit plants, offices, and subsidiaries of the Company shall be provided.
    Incumbent Directors shall be given the opportunity to attend external training programs and be able to attend relevant additional programs as they request.
    The expenses of any training programs described above shall be borne by the Company.
  3. Information Sharing Among External Corporate Directors
    When necessary, any external corporate directors may convene a meeting with other external corporate directors. In this case, related departments shall provide necessary supports to convene the meeting.
  4. Concurrent directorship at other organizations
    From the viewpoint of fiduciary duty, when the Company’s directors concurrently assume directorship at any other listed company, it shall be limited to a reasonable scope to secure necessary time to perform duties as a Director of the Company. Significant concurrent positions held by Directors shall be disclosed annually, such as through annual business report and/or the shareholder meeting reference material.
  5. Self-Evaluation
    The Board of Directors shall conduct annual surveys of all the Directors, and based on the results of the survey, analyze and evaluate the effectiveness of the Board of Directors as a whole for further improvement.

(7) Related Party Transactions

  1. The Company shall not be engaged in any transactions with Directors and/or major shareholders that may damage the interests of the Company or the common interests of the shareholders.
  2. When a Director is intending to enter into a transaction with the Company for him/herself or for any third parties, the Director shall obtain prior approval of the Board of Directors according to the rules of the Board of Directors, and report important facts in that transaction at the board meeting. Terms and conditions for the transaction may be determined in the same manner as a transaction with third parties.
  3. To identify any transactions involving a conflict of interest by Directors, the Company checks existence of such transactions (excluding compensation) between the Company Group and Directors or their family members within the second degree of kinship.
  4. When the Company is intending to enter transactions between the Company and major shareholders or other related parties, then it shall be approved in advance by personnel with authority commensurate with the importance and scale of the transaction in accordance with internal regulations determined by the Board of Directors.

(8) Certified Public Accountants

  1. The Company shall provide an appropriate auditing environment for certified public accountants to conduct proper audit, including providing sufficient time for auditing, and communication opportunities with the top management such as the CEO, COO and CFO, as well as members of the Audit and Supervisory Committee, Audit Dept. and Outside Directors. If the certified public accountant finds any failure or problem, incorrect conduct, or requests corrective action, the Company shall respond properly depending on the level of significance.
  2. The Audit and Supervisory Committee shall monitor and verify that the certified public accountant maintains their independence, performs an audit properly, and ensure that the auditing methods and results are valid.
  3. When appointing and evaluating certified public accountants, the Company shall make decisions from a comprehensive perspective, including a scale and worldwide network to efficiently conduct audit over a broad range of business both in Japan and abroad, proper auditing structure with qualified auditors having sufficient knowledge and capacities, auditing days, auditing period, procedures, and reasonable/adequate audit fees.

3. Compensation for the Directors

(1) Aims and structure of Remuneration Policy

  1. The compensation scheme to reward senior management is designed to ensure that it functions as an incentive system to make the corporate motto into reality.
  2. Compensation shall be in accordance with the roles and responsibilities of each director as well as the results achieved by them.
  3. Compensation shall be conducive to motivation for improvement of business results and medium to long-term corporate and shareholder value.
  4. Compensation shall be revised in a timely and appropriate manner based on the economic situation, business results of the Parent Company, external survey results, etc.
  5. And the decision-making process shall be highly objective and transparent.

(2) Compensation structure

  1. The Compensation of Directors not serving as an Audit and Supervisory Committee member nor external corporate director (hereinafter referred to as Directors in charge of business execution) shall consist of "base compensation", which is fixed, "performance-linked compensation" and “stock compensation” that are variable.
  2. The compensation of Directors serving as an Audit and Supervisory Committee member and external corporate directors shall consist only of base compensation, in light of their responsibilities of supervising and auditing business execution.
  3. Base compensation to directors is paid regularly every month. The compensation of Directors, a total annual amount of base compensation and performance-linked compensation shall be determined not to exceed the upper limit approved by the general meeting of shareholders. Base compensation amounts for each director is based on standard of compensation amount (*1) per post.
    (*1: standard of compensation amount is the amount per each director’s post planned by Compensation Planning Committee benchmarked on one for President & COO, and approved by Nomination and Compensation Council)
  4. Performance-linked compensation to Directors in charge of business execution is defined as short-term compensation based on business performance and paid at a specific period in each Fiscal Year. Total amount of base compensation and performance-linked compensation shall be determined not to exceed the upper limit approved by the general meeting of shareholders. The performance-linked compensation amount per each Director in charge of business execution shall be calculated as follows.
    Performance-linked compensation amount per each Director =
    (Base bonus amount (*2) ) x (Group Business performance coefficient (*3)) x (Each Intercompany performance coefficient (*4))
    (*2) :Base bonus amount = Consolidated net profit * 1% * Base compensation coefficient
    Base compensation coefficient = ratio of base compensation per each director,divided by total amount base compensation of Directors in charge of business execution
    (*3) Group Business performance coefficient = Calculated from their Operating profit results against FY target
    Within +/- 10% from target: 1, +10% to +30%: 1.1, +30% to +50%:1.2, over +50%: 1.3,-30% to -10%: 0.9, -50% to -30%:0.8, -50% or less:0.7(when OP downs YoY, this coefficient will be less than 1)
    (*4) Each Intercompany business performance coefficient: Comprehensively evaluate from 0.9 to 1.1 based on the Intercompany business results and other significant achievements.
  5. Stock compensation is defined as a medium to long-term incentive enabling profit sharing with shareholders and will be provided at specific period in each Fiscal Year. This stock compensation shall be determined not to exceed the upper limit (limit of compensation amount and number of stocks and/or of stock option). Stock compensation to Directors in charge of business execution consisting of Restricted Stock and SSR (Share subscription rights) (stock compensation type) shall be calculated as follows.
    a) Calculation formula for Restricted Stock: = Base stock amount (*5) x Capital efficiency coefficient (*6) x RS performance coefficient (*7)
    (*5) Base bonus amount: Formulated by Compensation Committee based on compensation amount per post, and approved by Nomination and Compensation Council
    (*6) Capital efficiency coefficient: Most recent three (3) Fiscal years’ average consolidated ROE – Above 15%: 1.2, 10-15%:1, and below 10%: 0.8
    (*7) RS performance coefficient: one based on the achievements of mid-term operating profit target
    Core coefficient: 1, When target has been achieved: 2

    b) Calculation formula for SSR (stock compensation type) = Base stock unit (*8) x Performance coefficient and others (*9)
    (*8) Base stock unit: Formulated by Compensation Committee based on compensation amount per post, and approved by Nomination and Compensation Council
    (*9) Performance coefficient and other: Formulated by Compensation Committee comprehensively based on business performance, stock price, and other factors, and approved by Nomination and Compensation Council

(3) Process to Determine Amount of Compensation

  1. The Board of Directors delegates the task of determining the compensation structure and compensation standards for each position to the Compensation Planning Committee, consisting of the representative directors and some other directors.
  2. To ensure transparency and objectivity, the proposal of Directors’ compensation amounts and related matters (such as compensation amount per post), and the amount for each directors’ base compensation, performance-based compensation and stock compensation shall be deliberated on by the Nomination and Compensation Council, consisting of directors serving as an Audit and Supervisory Committee members and external corporate directors.
  3. Compensation amounts for directors serving as an Audit and Supervisory Committee members will be mutually discussed and resolved among directors served as an Audit and Supervisory Committee members.

4. Relationships with Shareholders

(1) General Shareholders’ Meetings

The Company shall establish and improve an environment for proper execution of rights to ensure the rights and equality of shareholders.

(2) Ensuring the Rights of Shareholders

  1. To provide shareholders with sufficient time to examine proposals for the shareholders’ meeting, the Company shall make an effort to send notices of the meeting early, and at the same time electronically announce it, such as posting the notice on the Company’s website prior to the sending of invitations.
  2. The Company shall properly set the date and time of the shareholders’ meeting to allow as many shareholders as possible to attend and have constructive dialogues with them.
  3. The Company shall ensure equality among shareholders and pay due consideration to the execution of rights granted to minority shareholders.
  4. If any proposal made by the Company at a general shareholders’ meeting has been resolved but with a substantial number of negative votes, the Board of Directors shall analyze the reasons for such opposition and the causes of the high number of negative votes, and take appropriate actions.

(3) Policy Regarding Cross-Shareholdings of Other Listed Companies and the Exercise of
Voting Rights

  1. The Board of Directors shall comprehensively examine whether shares held as cross-holdings are worthwhile based on risk and return from perspective of mid to long term economic rationality and qualitative considerations such as purpose of holding and credit status.
  2. Shares held as cross-holdings that are not considered worthwhile to be retained, as a result of the examination, shall be reduced in principle. However, if it is determined that holding of such shares will contribute to the improvement of the mid to long-term corporate value, they shall be retained.
  3. The Company shall exercise voting rights associated with cross-shareholdings after sufficient consideration of each specific proposal based on concrete criteria.

(4) Policy for Dialogue with Shareholders

The Company shall establish a framework and take measures to promote constructive dialogue with investors including shareholders, which are considered beneficial to sustainable growth and mid to long-term improvement of its corporate value, based on the following policies:

  1. Dialogue with shareholders shall be overseen by the Director in charge of IR, who shall pursue constructive dialogue through such means as holding Earnings Conference and/or IR meetings.
  2. Management Support Dept. shall support the Director in charge of IR in collaboration with related divisions, and share IR information to determine IR directions and create documents for disclosure.
  3. The Company shall hold Earnings Conferences for analysts and investors, and also shall hold individual meetings, briefings organized by securities firms, and/or factory tours on the request of investors.
  4. Information or opinions obtained through dialogues with shareholders shall be reported as necessary at meetings such as the Executive Officers Meetings, and distributed to Directors and related divisions through written reports to share and utilize such information.
  5. The Company shall appropriately control insider information in accordance with the Company’s regulations. Additionally, the Company sets specific periods before earnings release as “silent period” and withholds such dialogues.

5. Appropriate Collaboration with Stakeholders

(1) Relationships with Stakeholders

With the aim of achieving sustained growth and mid to long-term improvement of corporate value, the Company shall establish good relationships and appropriate collaboration with all of its stakeholders, such as, but not limited to, customers, shareholders, communities, and employees.

(2) Corporate Philosophy and Action Guidelines

To realize its corporate vision and maintain appropriate collaboration with its stakeholders, the Company has established and shall observe the ACCRETECH Group Code of Conduct.

(3) Response to Sustainability Issues

To respond appropriately to issues surrounding Sustainability, such as consideration for global environmental issues represented by climate change, respect for human rights, consideration for the health and working environment of employees, fair and appropriate treatment of employees, fair and appropriate transactions with suppliers, and crisis management for natural disasters, the Company shall examine these issues from a global viewpoint, communicate with stakeholders, and make efforts to solve them through various activities including those of the Sustainability, and share information at the Board of Directors.

(4) Human Resources Diversity Response to Social and Environmental Issues

The Company shall seek to maintain human resources with diverse backgrounds based on the recognition of the need to have diversified viewpoints and values at a workplace where all employees are recognized and valued, maximizing the full potential of each individual employee for sustainable growth.

(5) Whistleblower System

To discover and resolve violation of law or inappropriate action as early as possible, the Company has established an internal whistleblower system independent from the normal reporting lines. The Company shall establish and implement rules to prohibit the unfair treatment of whistleblowers, protect their anonymity and privacy, strict information control, and conduct investigation by the Compliance Committee. Relevant information shall be regularly reported at the Board of Directors Meetings, which shall oversee the management of the system.

(6) Initiatives for Corporate Pension Plans

  1. The Company has established a defined benefit pension plan and a defined contribution pension plan.
  2. For the defined benefit pension plan, asset management policy and policy asset mix shall be determined to maximize the benefit to employees.
  3. Human resources with appropriate qualifications shall be assigned to the department responsible for the pension plans and their expertise shall be consistently improved through training such as periodic participation at external seminars.
  4. With respect to the selection and evaluation of asset management contractors, objective monitoring shall be carried out in consideration of the response to the stewardship code and investment performance to avoid conflicts of interest with employees.

(7) Appropriate Information Disclosure and Transparency

To further enhance reliability of shareholders, investors, and society, by complying with the disclosure requirements under applicable laws and regulations, the Company shall seek to enhance disclosure of financial information such as financial status, business results, equity policy, etc. , and non-financial information such as management policy, business plan as well as risk governance, thereby increasing transparency.

Established on November 9th, 2015

Revised on December 7th, 2018

Revised on March 26th, 2019

Revised on June 24th, 2019

Revised on May 26th, 2020

Revised on February 2nd, 2021

Revised on June 21st, 2021

Revised on December 14st, 2021
Revised on June 20th, 2022
Revised on March 28th, 2023

[Independence Standards for External Corporate Directors]

An external corporate director or external auditor must fulfill all the independence criteria below:

  1. Not an executive (*1) of Tokyo Seimitsu Group (Accretech Group) within 10 years
  2. Not the principal shareholder (*2) or its executive
  3. Not an executive of the following company or party within 3 years
    (1) A Company or party that Accretech Group is principal client/supplier for (*3)
    (2) A Company or party that is Accretech Group’s principal client/supplier (*3)
    (3) A Company or party that is Accretech Group’s principal lender (*4)
  4. Not a certified public accountant belongs to Accretech Group’s financial accountant
  5. Not an expert such as public accountant, tax accountant, attorney, judicial scrivener, nor patent attorney that obtains significant amount of cash (*5) or assets from the Accretech Group
  6. Nor others as shown below
    (1) Not a person from the company with which the Company has mutual directorship(*6)
    (2) A person’s spouse, relative within the second degree of kinship, relative living together or those who share a living are all applicable from 1. to 5. above
    (3) Not having other significant conflicts of interest with the Company

(*1) Executive: Directors in charge of business execution, Executive officer and/or equivalent responsibilities
(*2) Principal shareholder: shareholder who directly or indirectly owns over 10% of total voting rights
(*3) Principal client/supplier: Client/supplier whose sales amount at previous fiscal year is over 2% of consolidated sales amount
(*4) Principal lender: Lender that Accretech Group’s outstanding loans payable at previous fiscal year is over 10% of total assets
(*5) Significant amount of cash: over 10 million yen per year (in 3 years average) excluding directorship compensation
(*6) Mutual directorship: A person from a Company that an Accretech Group employee (or ex-employee) is being appointed to as an external director