太陽誘電（6976） – Corporate Governance Report

Corporate Governance Report Last Update: April 20, 2022 TAIYO YUDEN CO., LTD. Shoichi Tosaka President and Chief Executive Officer Contact: 03-6757-8310 Securities Code: 6976 https://www.yuden.co.jp/ut/ The corporate governance of TAIYO YUDEN CO., LTD. (the “Company”) is described below. I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information 1. Basic Views The TAIYO YUDEN Group (the “Group”) is committed to corporate social responsibilities and the mission of management to develop businesses on an ongoing basis while fulfilling sociality, public interest and public nature of the Group from a global viewpoint to put into practice and realize “Mission”, “Management philosophy” and “Vision”. Based on the views, the Company has been established Basic Policy of Corporate Governance, and emphasizes transparency and fairness of corporate management, the Company is making efforts to enhance corporate governance under the supervision of the Board of Directors, including the development of structures and mechanisms that enable timely and appropriate information disclosure, thorough compliance, and speedy decision making and execution of duties. 【Mission】 Stronger and more socially aware through the wonders of science 【Management Philosophy】 Employee Well-being Betterment of Local Communities Responsibility to Provide Returns to Shareholders 【Vision】 To be an excellent company that enjoys the trust and highest regard from all stakeholders Basic Policy for Corporate Governance https://www.yuden.co.jp/ut/ir/management/governance/ [Reasons for Non-compliance with the Principles of the Corporate Governance Code] [Supplemental Principle 2-4-1: Ensuring diversity in the promotion to core human resources] In order to realize the “employee well-being”, an objective of our management philosophy, the Company recognizes the “value of being different” so that individual employees are motivated to exercise their abilities in order to perform well. As also, the Company is working to promote diversity that brings together unique individuals as an important management issue. As for the appointment of female managerial positions, the Company has disclosed the results. However, as the ratio of candidates for managerial positions to the total number of employees is small, the Company has not yet established measurable numerical targets. We will continue to strengthen recruitment to secure candidates for managerial positions for the population, – 1 – and work to support career development and promote activities. [Disclosure Based on the Principles of the Corporate Governance Code] Update ＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝ The following items are updated. [Principle 1-4: Cross-Shareholdings] [Principle 1-7: Create appropriate procedures and frameworks for transactions between related parties] [Principle 3-1: Full disclosure] [Supplemental Principle 3-1-3: Initiatives on sustainability] [Supplemental Principle 4-1-1: Scope of delegation to the management] [Principle 4-9: Independence Criteria and Qualification for Outside Director] [Supplemental Principle 4-11-1: Ensuring effectiveness of the Board of Directors] [Supplemental Principle 4-11-2: Concurrent positions of Directors and Audit & Supervisory Board Members] [Supplementary Principle 4-14-2: Principles for Training of Directors and Audit & Supervisory Board Members] ＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝ [Principle 1-4: Cross-Shareholdings] The Company shall hold shares only if the Board of Directors determines that such shareholdings are conductive to the maintenance and reinforcement of commercial and collaborative relationship with our business partners as well as medium- to long-term improvement of the corporate value and sustainable growth, which can be attained through such relationships. The Board of Directors shall annually examine all such cross-shareholdings to verify the reasonability of holding them based on comprehensive judgment from the perspective of their holding purposes. The Company shall reduce any shareholdings that are determined to be unreasonable by selling such shares. The Company shall appropriately exercise its voting rights of the cross-shareholdings based on comprehensive judgment on several factors such as non-infringement of any laws and/or regulations, non-involvement in any antisocial actions and the fact that relevant proposal can be judged to have sound content. When cross-shareholders indicate their intention to sell their shares, the Company shall not hinder the sale of the cross-held shares by, for instance, implying a possible reduction of business transactions. Cross-shareholdings are disclosed in the Notice of Convocation of the General Meeting of Shareholders. ■ Notice of Convocation of the General Meeting of Shareholders https://www.yuden.co.jp/ut/ir/library/shm_presentation.html [Principle 1-7: Create appropriate procedures and frameworks for transactions between related parties] The Company shall resolve competitive transactions and conflict-of-interest transactions by Directors through the Board of Directors based on the Board of Directors Regulations. Transactions between related parties shall be disclosed in accordance with relevant laws, such as the Companies Act and the Financial Instruments and Exchange Act, as well as the rules and regulations established by stock exchanges. The Board of Directors shall monitor the facts and situations of related party transactions appropriately. [Principle 2-6: Roles of Corporate Pension Fund as Asset Owner] The Company has no corporate pension system. The Company shall implement a defined contribution corporate pension plan to build stable assets for employees, and shall provide education and training regarding asset management. [Principle 3-1: Full disclosure] 1.Our mission, management philosophy and vision are described in “1. Basic Views” on this report (p.1). 2.Our management strategy and business plans are disclosed in the Integrated Report. 3.Our fundamental concepts of corporate governance as well as basic policies are described in “1. Basic Views” on this report (p.1). 4.Policies and procedures for the Board to determine director remuneration are disclosed in the Notice of Convocation of the General Meeting of Shareholders. 5.Policies and procedures for the nomination of candidates for Director and Audit & Supervisory Board Member are disclosed in the Notice of Convocation of the General Meeting of Shareholders. – 2 – 6.Individual reasons regarding the selection of candidates for Director and Audit & Supervisory Board Member are disclosed in the Notice of Convocation of the General Meeting of Shareholders. ■ Integrated Report https://www.yuden.co.jp/ut/ir/library/annual_reports.html ■ Notice of Convocation of the General Meeting of Shareholders https://www.yuden.co.jp/ut/ir/library/shm_presentation.html [Supplemental Principle 3-1-3: Initiatives on sustainability] The Company has formulated the “Medium-term Management Plan 2025,” which is scheduled to start in Fiscal 2021. The Company aim to increase corporate value by increasing both economic and social value, and set KPI (numerical targets) related to economic and social value after clarifying the Materiality (important issues). The initiatives to achieve the targets are disclosed in the Integrated Report and on the Company’s website. ■ Integrated Report https://www.yuden.co.jp/ut/ir/library/annual_reports.html ■ Sustainability (website) https://www.yuden.co.jp/ut/company/sustainability/ [Supplemental Principle 4-1-1: Scope of delegation to the management] A synopsis of the scope of delegation to the management are described in “2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration Decisions (Overview of Current Corporate Governance System)” of “II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management” on this report (p.16). [Principle 4-9: Independence Criteria and Qualification for Outside Director] The Board of Directors shall select candidates for Independent Outside Director based on the “Officer Appointment and Dismissal Standards” and the “Standards for the Independence of Outside Directors/Outside Audit & Supervisory Board Members,” and shall clearly state the reasons for their appointment in a Notice of Convocation of the General Meeting of Shareholders when proposing candidates at a General Meeting of Shareholders. The “Standards for the Independence of Outside Directors/Outside Audit & Supervisory Board Members” shall be disclosed on the Company’s website. ■ Standards for the Independence of Outside Directors/Outside Audit & Supervisory Board Members https://www.yuden.co.jp/ut/ir/management/governance/criteriaofindependence.html [Supplemental Principle 4-10-1: The mandates and roles of the Nomination Committee and the Remuneration Committee] To strengthen the independence and objectivity of the functions of the Board of Directors concerning the nomination and remuneration for Directors and Operating Officers and to fulfill its accountability, the Company has established two voluntary advisory panels: Nomination Committee and Remuneration Committee. Each committee is composed of the President and Chief Executive Officer, all Independent Outside Directors, and an Audit & Supervisory Board Member, with the majority of Independent Outside Directors. In addition, each committee is chaired by an Independent Outside Director to ensure the objectivity of deliberation. The mandates and roles of each committee are described in “Supplementary Explanation” of “Voluntary Establishment of Committee(s) Corresponding to Nomination Committee or Remuneration Committee” on this report (p.10). [Supplemental Principle 4-11-1: Ensuring effectiveness of the Board of Directors] The concepts regarding the balance of knowledge, experience and skills of the Board (as a whole) as well as its size are described in “2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration Decisions (Overview of Current Corporate Governance System)” of “II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management” on this report (p.16). The skills matrix of the Board of Directors – 3 – of the Company is disclosed in the Notice of Convocation of the General Meeting of Shareholders and the Integrated Report. ■ Notice of Convocation of the General Meeting of Shareholders https://www.yuden.co.jp/ut/ir/library/shm_presentation.html ■ Integrated Report https://www.yuden.co.jp/ut/ir/library/annual_reports.html [Supplemental Principle 4-11-2: Concurrent positions of Directors and Audit & Supervisory Board Members] Directors and the Audit & Supervisory Board members (excluding Outside Directors) shall not concurrently serve as Directors of other companies unless the Board of Directors deems this to be in the best interests of the Company. If Outside Directors concurrently serve as corporate officers of other companies, the Board of Directors shall confirm the amount of time required for them to fulfill their duties as outside Directors of the Company, before approving their appointment. Significant concurrent positions of Outside Directors are disclosed in the Notice of Convocation of the General Meeting of Shareholders. ■ Notice of Convocation of the General Meeting of Shareholders https://www.yuden.co.jp/ut/ir/library/shm_presentation.html [Supplemental Principle 4-11-3: Analysis and assessment regarding the effectiveness of the Board as a whole] 1.Questionnaire Method of Evaluation Self-evaluation by questionnaire survey The Company conducts the deeper identification of issues by a multiple-choice method (to choose issues on which sufficient discussion has not been conducted at Board of Directors meetings) and a questionnaire on strengths and weaknesses of the Board of Directors. Implementation period February 2021 Subjects Directors and Audit & Supervisory Board Members (including Outside Officers) Evaluation items 1) The operation (7 questions) and composition (1 question) of the Board of Directors, 2) Management strategies (3 questions) and sustainable growth initiatives (2 questions), 3) Corporate ethics and risk management (2 questions), monitoring (1 question), and dialogue with shareholders (1 question), 4) Nomination Committee and Remuneration Committee (3 questions), 5) Provision of information (1 question) 2. Analysis/Evaluation Analysis and evaluation meetings were conducted first separately by Operating Officers and Non-operating Officers based on the results of the questionnaire with Directors and Audit & Supervisory Board Members, and then a discussion is conducted at a Board of Directors meeting based on the results of those meetings. We employed an external organization and received advice on the question design, analysis, possible response measure, etc. to improve the objectivity and the transparency of evaluation. 3. Evaluation results The external organization commented favorably that the Company is working seriously on the evaluation of the effectiveness of the Board of Directors and is striving to improve its corporate value further by steadily identifying issues and implementing measures to address them. In particular, the external organization’s evaluation improved significantly on items on which the Company implemented measures based on issues identified in the previous year, and the external organization commented that the measures have been effective. Regarding “Medium-term plan and long-term management strategies (what we should become in 10 years)” and “Human resource development and strategies,” which were among the issues identified in the previous year, the Company held discussion forums of Directors including Outside Directors separately from Board of Directors meetings and has formulated a new medium-term management plan based on the discussion there. Regarding “Revision of the risk map,” the Company modified the corporate governance structure to establish the Risk Management Subcommittee, which is responsible for the management of risk – 4 – map, under the Internal Control Committee in order to revamp and strengthen the risk management structure itself. The effectiveness of the Board of Directors has generally been ensured. 4. For Further Improvement of Effectiveness The following three issues were identified as a result of the effectiveness evaluation of the Board of Directors in the current fiscal year. The Board of Directors will endeavor to enhance the effectiveness of the Board of Directors and further strengthen corporate governance by continuing to address these matters systematically. • “Enhancement of opportunities for corporate officers to acquire knowledge and skills” • “Effective use of digital technologies” • “Initiatives on sustainability” [Supplementary Principle 4-14-2: Principles for Training of Directors and Audit & Supervisory Board Members] The Company shall provide Directors and Audit & Supervisory Board members with opportunities to attend in-house training courses such as external seminars and related laws and regulations to help them acquire knowledge and information outside their fields of expertise, and the Company shall bear the necessary expenses. Plans for provision and mediation of training opportunities shall be created and implemented at the beginning of each year. To raise the effectiveness of audits, Audit & Supervisory Board members discuss valuable skills at the Audit & Supervisory Board meeting and provide training. [Principle 5-1: Policies for Constructive Dialogue with Shareholders] The Company shall designate a Director in charge of IR and conduct IR activities to promote a constructive dialogue with shareholders and investors. The Company shall also report to the Board of Directors any opinions and requests from shareholders and investors collected through IR activities. Specifically, the following activities are to be included in the Company’s organizational structure. (1) Strengthening collaboration between the management of the IR department and other departments through the Director responsible for IR. (2) Results briefings with securities analysts and institutional investors (quarterly). (3) Handling group meetings and individual meetings with major foreign and domestic individual investors. (4) Explanations to major investors regarding General Meeting of Shareholders proposals. (5) Publishing consolidated reports to enhance the understanding of the Company’s mid- and long-term value creation. (6) Conducting investigations of shareholder findings through external survey organizations. For fairness in the disclosure of information and to prevent leaks of inside information, the information disclosed in dialogues with major shareholders and investors shall be within the bounds previously determined for disclosure. 2. Capital Structure Foreign Shareholding Ratio Update From 20% to less than 30% [Status of Major Shareholders] Update Name / Company Name Percentage (%) Number of Shares Owned 37,146,100 15,105,400 3,617,100 29.81 12.12 2.90 The Master Trust Bank of Japan, Ltd. (Trust Account) Custody Bank of Japan, Ltd. (Trust Account) Custody Bank of Japan, Ltd. (Securities Investment Trust Account) – 5 – The Iyo Bank, Ltd. Sumitomo Mitsui Banking Corporation BNYM TREATY DTT 15 Sato Traffic Orphan Welfare Fund STATE STREET BANK WEST CLIENT – TREATY 505234 Nippon Life Insurance Company BBH BOSTON CUSTODIAN FOR NEXT GENERATION CONNECTIVITY FUND A SERIES TRUST 620818 2,000,100 2,000,000 1,978,351 1,916,640 1,741,400 1,666,450 1,510,800 1.60 1.60 1.58 1.53 1.39 1.33 1.21 Controlling Shareholder (except for Parent Company) Parent Company ― None Supplementary Explanation Update 1. The information above concerns large shareholders as of March 31, 2022. 2. The Company holds 5,609,656 shares of treasury shares (4.30% of total shares outstanding) but is excluded from the major shareholders listed above. 3. The following Statement of Large-Volume Holdings (including the Change Report) is available for public inspection. However, the table above does not include the portion of the Company’s actual holdings that cannot be confirmed as of March 31, 2022. Large holder Submitted documents submission date share certificate holding ratio Asset Management One Co., Ltd. and 1 other company Sumitomo Mitsui DS Asset Management Company, Limited and 2 other companies Nomura Securities Co., Ltd. and 2 other companies Change report May 12, 2021 Change report May 12, 2021 5,632,725 6.19%( as of April 30, 2021) 4.33%( as of April 30, 2021) Change report March 31, 2022 19,293,159 14.82%( as of April 20, 2022) number of share certificates, etc. held 8,055,700 3. Corporate Attributes Update Listed Stock Market and Market Section Tokyo Stock Exchange Prime Fiscal Year-End Type of Business Number of Employees (consolidated) as of the End of the Previous Fiscal Year Sales (consolidated) as of the End of the Previous Fiscal Year March Electric Appliances More than 1000 Number of Consolidated Subsidiaries as of the End of the Previous Fiscal Year From 10 to less than 50 From ¥100 billion to less than ¥1 trillion / – 6 – 4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder ― None 5. Other Special Circumstances which may have Material Impact on Corporate Governance 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 Kansayaku Board [Directors] Maximum Number of Directors Stipulated in Articles of Incorporation Term of Office Stipulated in Articles of One year Incorporation Chairperson of the Board Number of Directors Number of Outside Directors Number of Independent Directors President and Chief Executive Officer Outside Directors’ Relationship with the Company (1) Relationship with the Company* Name Attribute Masashi Hiraiwa Seiichi Koike Emiko Hamada Attorney From another company Scholar a △ 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 a close relative of the director fell under the category in the past h g d b c e f i j * * * k a. 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 other property from the Company besides compensation as a director/kansayaku 10 7 3 3 – 7 – g. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a h. Executive of a client or supplier company of the Company (which does not correspond to any of d, e, or f) legal entity) (the director himself/herself only) i. Executive of a company, between which and the Company outside directors/kansayaku 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 Outside Directors’ Relationship with the Company (2) Designation as Independent Director ○ Name Masashi Hiraiwa Supplementary Explanation of the Relationship OHHARA LAW OFFICE Attorney Reasons of Appointment function over [Reasons for election] Mr. Masashi Hiraiwa has served as an officer or in a similar position at investment corporations, and possesses abundant experience and high-level expertise as an attorney specializing in corporate legal affairs. He has demonstrated a high sense of ethics by offering constructive opinions and organizing points of discussion or debate from an objective perspective, and fulfilling the monitoring the Company’s overall management such as governance and legal compliance including internal control, at meetings of the Company’s Board of Directors. For these reasons, it was judged that he would be able to fulfill his duties as Independent Outside Director who supervises business execution. Therefore, he was reappointed as an Outside Director. Although Mr. Hiraiwa has not been involved in corporate management in ways other than being an outside officer, it was judged for the above-mentioned reasons that he would be able to appropriately execute the duties of Outside Director. [Independence] He meets the requirements for Independent Officer defined by the Tokyo Stock Exchange and is registered with the Exchange to that effect. In addition, he meets the “Standards of Outside Directors/Outside Audit & Supervisory Board Members.” Therefore, he is judged to be sufficiently independent. [Reasons for election] Mr. Seiichi Koike has engaged in material development for automotive components and research and development related to production technology at an automotive maker over many years, and possesses wide-ranging expertise in relation to the automotive electronics business. In addition, the Company also believes it will be valuable to the Group for his wide-ranging expertise from an investor’s perspective to be reflected in the management of the Company, utilizing his abundant experience, including corporate management in the automotive industry and strengthening governance components systems as an Audit & Supervisory Board Member. For these reasons, it was judged that he will be able to provide Independence the for – 8 – Seiichi Koike ○ ― valuable advice and suggestions regarding overall management at meetings of the Company’s Board of Directors, and therefore he was appointed as an Independent Outside Director. [Independence] He meets the requirements for Independent Officer defined by the Tokyo Stock Exchange. In addition, he meets the “Standards for the Independence of Outside Directors/Outside Audit & Supervisory Board Members.” Therefore, he is judged to be sufficiently independent. [Reasons for election] While Ms. Emiko Hamada was employed by the the development and in Company, she engaged commercialization of CD-R and DVD-R. After she left the Company, she has conducted research activities for many years as a university professor mainly focusing on industry-academia-government collaboration projects. She also has experience in serving as an Outside Director at another company. The Company believes her suggestions of business execution and management supervision as an Outside Director will be valuable to the Group. For these reasons, it was judged that she will be able to provide advice and suggestions regarding overall management at the meetings of the Company’s Board of Directors, and therefore she was appointed as an Independent Outside Director. [Independence] Other than the left she meets the requirements for Independent Officer defined by the Tokyo Stock Exchange. In addition, he meets the “Standards for the Independence of Outside Directors/Outside Audit & Supervisory Board Members.” Therefore, he is judged to be sufficiently independent. Emiko Hamada ○ NGK INSULATORS, LTD. Outside Director Ms. Hamada worked for the Company from April 1984 to April 2007 as a business operator, there has been no transaction to be noted between Ms. Hamada and the Company, and no special interests currently exist between her and the Company. She serves as an Outside Director of NGK INSULATORS, LTD. However, the amounts transactions with the said company accounted for less than 0.1% of the Company’s consolidated net sales, and there is no possibility of conflicts of interest with general shareholders. Voluntary Establishment of Committee(s) Corresponding to Nomination Committee or Remuneration Committee Established Committee’s Name, Composition, and Attributes of Chairperson – 9 – Corresponding to Committee Nomination Committee Nomination Committee Corresponding Committee Remuneration Committee Remuneration Committee to Committee’s Name All Committee Members Full-time Members Inside Directors Outside Directors Outside Experts Other Chairperson Supplementary Explanation 5 0 1 3 0 1 5 0 1 3 0 1 Outside Director Outside Director 1. Nomination Committee The Nomination Committee is composed of the President and Chief Executive Officer, all Independent Outside Directors, and an Audit & Supervisory Board Member, with the majority of Independent Directors. In addition, the committee is chaired by an Independent Outside Director to ensure the objectivity of deliberation. The Nomination Committee deliberates on, among others, the nomination of candidates for Officer (including candidates for reappointment), any proposal for dismissal of Officers including the President and Chief Executive Officer, any proposal for the selection of a rank for or dismissal of each Operating Officer, and disciplinary matters based on the “Officer Appointment and Dismissal Standards” and reports the deliberation results to the Board of Directors. The consent of the Audit & Supervisory Board is obtained in advance for the nomination of a candidate for Audit & Supervisory Board Member. Masashi Hiraiwa, Chairman (Independent Outside Director) Shoichi Tosaka, Member (President and Chief Executive Officer) Seiichi Koike, Member (Independent Outside Director) Emiko Hamada, Member (Independent Outside Director) Hajime Yoshitake, Member (Independent Outside Audit & Supervisory Board Member) The Nomination Committee held three (3) meetings during the fiscal year under review, and all members attended all of the meetings. Main activities are as follows: ・Selection of the Chairman of the Nomination Committee ・Deliberations on the selection of the Representative Director and the Chairman of the Board of Directors ・Deliberations on candidates for Officer (including candidates for reappointment) ・Deliberations on the appointment of Operating Officers ・Deliberations on human resources strategy (succession plan) as part of preparation for medium-term plan 2. Remuneration Committee The Remuneration Committee is composed of the President and Chief Executive Officer, all Independent Outside Directors, and an Audit & Supervisory Board Member, with the majority of Independent Directors. In addition, the committee is chaired by an Independent Outside Director to ensure the objectivity of deliberation. The Remuneration Committee deliberates on remuneration plans and specific remuneration content of individual Officers and reports the deliberation results to the Board of Directors. Seiichi Koike, Member (Independent Outside Director) Shoichi Tosaka, Member (President and Chief Executive Officer) Masashi Hiraiwa, Chairman (Independent Outside Director) – 10 – Emiko Hamada, Member (Independent Outside Director) Toshio Mishuku, Member (Audit & Supervisory Board Member) The Remuneration Committee held six (6) meetings during the fiscal year under review, and all members attended all of the meetings. Main activities are as follows: ・Selection of the Chairman of the Remuneration Committee ・Deliberations on the evaluation and performance-based remuneration (bonuses) of individual Operating Officers ・Deliberations on stock remuneration (stock compensation-type stock options) ・Setting issues to be addressed by the Remuneration Committee and its schedule for the current fiscal year ・Deliberations on the framework of officers’ remuneration and revision of their evaluation ・Deliberations on corporate officer remuneration policy in relation to the amendment of the Companies Act [Kansayaku] Establishment of Kansayaku Board Established Maximum Number of Kansayaku Stipulated in Articles of Incorporation Number of Kansayaku 5 4 Cooperation among Kansayaku, Accounting Auditors and Internal Audit Departments Three parties consisting of Accounting Auditors, Internal Audit Departments, and Kansayaku hold regular joint meetings, including information exchange meetings for supporting the audit of each party. In collaboration with Internal Audit Departments, we exchange opinions on risk assessment, mutually report and exchange opinions on audit plans and results, and conduct joint audits, among others. In association with Accounting Auditors, we exchange opinions on risk assessment, conduct hearing of the audit plan by Accounting Auditors, perform on-site audits, conduct hearing of audit results, evaluate Accounting Auditors, and provide feedback on the evaluation results to Accounting Auditors. Accounting Auditors The primary certified accountants executing the auditing tasks include Kiyoshi Hirai, CPA Shingo Iwamiya, CPA Hiromasa Niinaya, CPA Appointment of Outside Kansayaku Appointed Number of Outside Kansayaku Number of Independent Kansayaku 2 2 Outside Kansayaku’s Relationship with the Company (1) Name Attribute Hajime Yoshitake From another company Tomomi Fujita Attorney Relationship with the Company* a b c d e g h f i j k l m – 11 – * * * 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 a close relative of the director fell under the category in the past a. Executive of the Company or its subsidiary b. Non-executive director or accounting advisor of the Company or its subsidiaries c. Non-executive director or executive of a parent company of the Company d. Kansayaku of a parent company of the Company e. Executive of a fellow subsidiary company of the Company f. A party whose major client or supplier is the Company or an executive thereof g. Major client or supplier of the Company or an executive thereof h. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as a kansayaku i. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a legal entity) j. Executive of a client or supplier company of the Company (which does not correspond to any of f, g, or h) k. Executive of a company, between which and the Company outside directors/kansayaku are mutually (the kansayaku himself/herself only) appointed (the kansayaku himself/herself only) l. Executive of a company or organization that receives a donation from the Company (the kansayaku Outside Kansayaku’s Relationship with the Company (2) himself/herself only) m. Others Name Hajime Yoshitake Designation as Independent Kansayaku ○ Supplementary Explanation of the Relationship Adjunct Lecturer of Meiji University Professional Graduate School General Manager of The Institute of Internal Auditors – Japan Reasons of Appointment [Reasons for election] Mr. Hajime Yoshitake has many years’ experience of auditing operation at financial institutions and internal control consulting operation at business corporations, is qualified as a certified Internal Auditor, etc., has contributed to audit-related meetings in Japan and overseas, and possesses exceptional insight, abundant experience and a good track record regarding auditing operation. As an Audit & Supervisory Board Member of the Company, based on his knowledge and experience, he has actively helped establish a highly transparent, fair system for auditing management of the Company, carried out auditing on the appropriateness of deliberation and decision-making on important matters, and diligently conducted on-site audits of other sites. Thus, he was elected as an Outside Auditor. [Independence] He has no particular interests involving the company. He satisfies the Company’s “Standards for the Independence of Outside Directors/Outside Audit & Supervisory Board Members” and all requirements for Independent Directors as prescribed by the Tokyo Stock Exchange. We have asked him to perform auditing tasks (as an to ensure objectivity and Independent Director) neutrality while verifying the overall effectiveness of the Board. – 12 – Tomomi Fujita ○ of Attorney Innoventier LPC Outside Director & (Audit Supervisory Committee Member) of TAKUMA CO., LTD. [Reasons for election] Ms. Tomomi Fujita has abundant experience as an attorney and a thorough knowledge of legal affairs in general and corporate legal affairs in particular. As such, she has sufficient insight to audit corporate management. For these reasons, Ms. Fujita was appointed as candidate for Independent Outside Audit & Supervisory Board Member as she is expected to be able to audit management decisions at meeting of the Board of Directors and business execution by Directors objectively expertise. [Independence] She has no particular interests involving the company. the She satisfies Independence of Outside Directors/Outside Audit & Supervisory Board Members” and all requirements for Independent Directors as prescribed by the Tokyo Stock Exchange. We have asked him to perform auditing tasks (as an Independent Director) to maintain objectivity and neutrality while verifying the overall effectiveness of the Board. the Company’s “Standards for strong based her on [Independent Directors/Kansayaku] Number of Independent Directors/Kansayaku 5 Matters relating to Independent Directors/Kansayaku Although the Company’s five Independent Directors meet the requirements imposed by the Corporation Act and the Company’s “Standards for the Independence of Outside Directors/Outside Audit & Supervisory Board Members,” they do not qualify for any of the requirements outlined in Section 211, Subsection 4-5 of the Securities Listing Regulations Enforcement Guidelines. Therefore, the five Directors are considered to be Independent Directors. [Incentives] Incentive Policies for Directors Performance-linked Remuneration / Stock Options / Supplementary Explanation Described in the “Director Remuneration” section. Recipients of Stock Options Inside Directors / Other Supplementary Explanation The details of the stock options are as follows. Name: Taiyo Yuden Co., Ltd. Stock Options Issued July 2021 Total number of options: 530 Those eligible for stock options, their number and the number of options granted include Company Board members (excluding outside Board members): 4 persons, 270 options Company Operating Officer (excluding those also serving on the Board): 9 persons, 260 options Type and number of shares underlying options: 53,000 shares of common stock in the Company – 13 – Disclosure of Individual Directors’ No Individual Disclosure [Director Remuneration] Remuneration Supplementary Explanation Remuneration of Directors for the period ending March 2021 (80th term) is as follows: – Directors: 456,000,000yen (paid to 8 persons) – Audit & Supervisory Board Members: 80,000,000yen (paid to 5 persons) Policy on Determining Remuneration Amounts Established and Calculation Methods Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods Outline of the policy to determine the contents of remuneration paid to Corporate Officers At its meeting held on March 1, 2021, the Board of Directors of the Company passed a resolution on the policy to determine the contents of remuneration paid to each Director. The Board of Directors sought and received advice from the Remuneration Committee before passing this resolution. 1. Policy to determine the remuneration paid to Corporate Officers (1) The Company shall provide remuneration that emphasizes the linkage with financial results and medium- to long-term corporate value, to share the same value with shareholders. (2) Remuneration shall be set at levels that can attract and retain excellent human resources with global competitiveness. (3) Remuneration shall emphasize transparency and fairness to be able to fulfill accountability. 2. Process to determine remuneration paid to Corporate Officers and content of remuneration In order to ensure the transparency and fairness of the process to determine remuneration for Officers, a Remuneration Committee has been established as an advisory panel to the Board of Directors. The Remuneration Committee is composed of the President and CEO, Outside Directors, and an Audit & Supervisory Board Member and is chaired by an Independent Outside Director to ensure the objectivity of deliberations. It deliberates and reports on matters pertaining to remuneration for Officers such as remuneration policy, plan, calculation methods, and specific remuneration content of individual Officers. Within the limit of remuneration approved at the General Meeting of Shareholders, specific remuneration of Directors is deliberated on an individual basis by the Remuneration Committee based on the amounts of remuneration calculated based on the relevant rules and regulations established by the Company and are determined by the Board of Directors based on the deliberation results of the Remuneration Committee. Specific remuneration of each Audit & Supervisory Board Member is discussed at the Audit & Supervisory Board meeting. Remuneration structure Type of remuneration Remuneration item Basic remuneration Fixed remuneration Performance-based bonus Performance-based Description ・Levels are determined in consideration of, among others, the economic climate and the growth potential of the Company. ・Fixed monthly remuneration based on roles and responsibilities. ・Given the responsibility of Executive Directors for meeting Group performance targets each year, Form of payment Cash Cash – 14 – remuneration (Single year) consolidated profit is chosen as the relevant performance indicator to establish a clearer linkage between factor contributing to the enhancement of corporate/shareholder value and remuneration. ・The amount of bonus for each individual is determined by allocating the total theoretical capital amount calculated based on consolidated profit using the ratio determined based on one’s position and by multiplying the result by a coefficients related to performance evaluation of the organization in his or her charge and strategic behavior evaluation of the individual. The bonus is paid annually at a certain time of the year. The total theoretical capital amount is 0.76% of consolidated profit for the fiscal year under review. ・Introduced as an incentive toward medium- to long-term enhancement of corporate value, and to nurture shared value with shareholders and Directors’ awareness to stock price. ・The number of share acquisition rights granted to each Director is determined based on his or her position and rank by the Board of Directors at its meeting held after the conclusion of each Ordinary General Meeting of Shareholders. ・The holder of the share acquisition rights may exercise his or her rights only within ten (10) days from the day following the forfeiture of all the positions as Director and Operating Officer of the Company. Shares (Share acquisition rights) Stock compensation-type stock options Stock remuneration (Medium- to long-term) Composition of remuneration by position ・Their remuneration consists of “basic remuneration,” “performance-based bonus, ”and “stock compensation-type stock options.” ・If they achieve the targets underlying “performance-based bonus,” their remuneration will consist of 40% of basic remuneration, 40% of performance-based bonus, and 20% of stock compensation-type stock options. In the interest of maintaining independence, Outside Directors receive only “basic remuneration,” with no performance-based remuneration. In the interest of promoting audits of legality, Audit & Supervisory Board Members receive only “basic remuneration.” Executive Directors Outside Directors Audit & Supervisory Board Members [Supporting System for Outside Directors and/or Kansayaku] Outside Board members and Outside Auditors may request various departments to provide information to gather the information required to perform their duties. In addition, the Company has established a system that makes available important Company’s information to Outside Board Members and Outside Auditors, as necessary. The Company has also appointed a person responsible for promptly providing required Company’s information to outside Board members and Outside Auditors upon request. [Retired presidents/CEOs holding advisory positions (Sodanyaku, Komon, etc.)] Information on retired presidents/CEOs holding advisory positions (Sodanyaku, Komon, etc.) – 15 – Name Responsibilities (Full/part time, with/without role as president/ Term Job title/ position Employment terms Date when former compensation, etc.) CEO ended ― ― ― ― ― ― Number of retired presidents/CEOs holding advisory 0 positions (Sodanyaku, Komon, etc.) Others The Company do not have the system such as the senior executive advisor (Sodanyaku) or advisor (Komon) that the person who retired from the president and representative director take office. 2.Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration Decisions (Overview of Current Corporate Governance System) 1. Roles and responsibilities of the Board of Directors (1) The Board of Directors shall aim for corporate management to be an excellent company that enjoys the trust and highest regard from all stakeholders, including shareholders to accomplish the fiduciary responsibility entrusted by shareholders and increase the Company’s interests and the common interests among shareholders. (2) The Board of Directors shall deliberate and determine important matters for the entire Group with ample time, including management policies, management strategies, business plans, capital policy and the matters on internal control, for the purpose of continuously increasing corporate value from a long-term perspective. (3) The Board of Directors shall strengthen the management system for risk factors surrounding corporate management of the Company and always monitor the execution of business operations. 2. Delegation of authority by the Board of Directors to top management (1) To ensure the effective decision making by the Board of Directors, the Management Committee shall deliberate in advance policy matters regarding business operations for Group management, whereas the TM (Top Management) Meeting shall deliberate in advance matters concerning personnel, organization and remuneration systems for the entire Group. Both organs shall determine matters delegated by the Board of Directors. (2) Operating Officers are in place in order to further clarify roles and responsibilities of Directors who monitor and supervise the management of business and persons who execute business operations. The Operating Officers shall conduct business flexibly and quickly as an executor responsible for the section he or she is in charge, under the direction of the President and Chief Executive Officer, in accordance with management policies and strategies determined at meetings of the Board of Directors. 3. Effectiveness of the Board of Directors (1) To ensure the fairness of meetings and strengthen the authority of management oversight, the Board of Directors shall be chaired by the Chairman of the Board of Directors. If the Chairman of Board of Directors is absent, the President and Chief Executive Officer shall be chaired the Board of Directors. (2) At the Board of Directors meeting, the Directors and the Audit & Supervisory Board Members shall evaluate by themselves the effectiveness of the Board of Directors every year. The Board of Directors shall disclose issues to be addressed and others based on analysis results and address how to resolve such issues. 4. Directors (1) The Board of Directors shall be composed of not more than ten (10) Directors, not less than one third (1/3) of whom shall be Independent Outside Directors. – 16 – (2) To clarify management responsibilities during a given fiscal year and increase shareholders’ confidence, Directors’ term of office is one (1) year. (3) The composition of the Board of Directors ensures ample diversity in terms of gender and nationality and adequate balance. The candidates for Director are selected based on the “Officer Appointment and Dismissal Standards” and the “Standards for the Independence of Outside Directors/Outside Audit & Supervisory Board Members”. (4) Except for Outside Directors, the Directors concurrently serve as Operating Officers who are in charge of both oversight and the execution of operations. Directors shall report with emphasis on the business performance and oversight operations of the divisions/departments they are in charge of to the Board of Directors. 5. Independent Outside Director (1) The Board of Directors shall select candidates for Independent Outside Director based on the “Officer Appointment and Dismissal Standards” and the “Standards for the Independence of Outside Directors/Outside Audit & Supervisory Board Members”. The “Standards for the Independence of Outside Directors/Outside Audit & Supervisory Board Members” shall be disclosed on the Company’s website. (2) Based on extensive insight using their expert knowledge and management experience, Independent Outside Directors shall express their opinions from a professional perspective and the perspectives of shareholders and other stakeholders, independently from the execution of operations, and participate in the decision-making process to enhance the supervisory function of management, and thus contribute to the sustainable growth of the Company, as well as the enhancement of corporate value in the medium to long term. (3) To actively contribute to the discussions of the Board of Directors, Independent Outside Directors shall participate in important meetings other than the Board of Directors meetings as observers where necessary, and share information, while exchanging opinions with Directors, Operating Officers, Internal and Outside Audit & Supervisory Board Members, and the Internal Audit Department. (4) The head of Independent Outside Directors shall be selected by mutual vote as necessary. 6. Audit & Supervisory Board and Audit & Supervisory Board Members (1) The Company has adopted an Audit & Supervisory Board Members system. The Audit & Supervisory Board meeting is held monthly, in principle. (2) The Audit & Supervisory Board shall be composed of not more than five (5) Audit & Supervisory Board Members, a majority of whom shall be Independent Outside Audit & Supervisory Board Members. The Company elects persons who have adequate experience and skills as well as sufficient knowledge of finance, accounting, and legal affairs as Audit & Supervisory Board Members to ensure the effectiveness of audits. (3) To raise the effectiveness of audits, each Audit & Supervisory Board Members attend Board of Directors meetings and attends meetings related to the execution of business operations and other important meetings by sharing the tasks with each other. Moreover, Audit & Supervisory Board Members strive to strengthen the auditing system through frequent communications with the Accounting Auditors and the internal audit department by meeting regularly, witnessing accounting audits as observers and conducting joint audits with the internal audit department. (4) The Audit & Supervisory Board has its own dedicated staff to conduct highly effective auditing operations such as information communications and data management. 7. Voluntary advisory panels (1) The Nomination Committee is composed of the President and Chief Executive Officer, all Independent Outside Directors, and an Audit & Supervisory Board Member, with the majority of Independent Directors. In addition, the committee is chaired by an Independent Outside Director to ensure the objectivity of deliberation. The Nomination Committee deliberates on, among others, the nomination of candidates for Officer (including candidates for reappointment), any proposal for dismissal of Officers including the President and Chief Executive Officer, any proposal for the selection of a rank for or dismissal of each Operating Officer, and disciplinary matters based on the “Officer Appointment and Dismissal Standards” and reports the deliberation results to the Board of Directors. The consent of the Audit & Supervisory Board is obtained in advance for the nomination of a candidate for Audit & Supervisory Board Member. – 17 – (2) The Remuneration Committee is composed of the President and Chief Executive Officer, all Independent Outside Directors, and an Audit & Supervisory Board Member, with the majority of Independent Directors. In addition, the committee is chaired by an Independent Outside Director to ensure the objectivity of deliberation. The Remuneration Committee deliberates on remuneration plans and specific remuneration content of individual Officers and reports the deliberation results to the Board of Directors. 3. Reasons for Adoption of Current Corporate Governance System The Company is a company with an Audit & Supervisory Board and established organizations: Board of Directors, Audit & Supervisory Board Members and the Accounting Auditors. In addition, the Company has adopted a corporate governance structure under which all the Outside Directors and Outside Audit & Supervisory Board Members are designated as Independent Officers for whom there is no possibility of conflicts of interest with general shareholders. Consequently, the Outside Directors and Outside Audit & Supervisory Board Members work closely with the Audit & Supervisory Board Members and the internal audit department, thereby enabling the effective utilization of the Audit & Supervisory Board Members’ functions and enhancing the authority of management oversight. III. Implementation of Measures for Shareholders and Other Stakeholders 1. Measures to Vitalize the General Meeting of Shareholders and Smooth Exercise of Voting Rights Early Notification of General Meeting of Shareholders Scheduling AGMs Avoiding the Peak Day Allowing Electronic Exercise of Voting Rights Participation in the Electronic Voting Platform Providing Notice Convocation in English of Supplementary Explanations We will send the notices regarding the convocation of General Meeting of Shareholders’ three weeks prior to the day of the meeting to ensure that our esteemed shareholders have adequate time to review the agenda for the shareholders’ meeting and properly exercise their voting rights. In addition, in the interest of more prompt disclosure, on the day prior to sending the notices, we will place them on the Company’s website, the Tokyo Stock Exchange, and the Electronic Voting Platform. Efforts shall be made to facilitate the participation of all shareholders in General Meeting of Shareholders by setting the time of meetings in the afternoon if they fall on a so-called “concentrated date.” In the interest of the shareholders and institutional investors who cannot directly attend the shareholder’s meeting, we will employ via the Internet, etc. (including Electronic Voting Platform) to exercise voting rights. In the interest of ensuring an adequate period of review for voting purposes and early disclosure, we will utilize the Electronic Voting Platform for institutional investors run by ICJ., Co. Ltd. In addition to placing an English version of the notice of convocation on the Company’s website, on the day before the notice of convocation is sent, we will also provide the notice to the Electronic Voting Platform and Tokyo Stock Exchange to speed up disclosure to foreign investors. In addition to matters to be stated by law, the Notice of Convocation in the Corporate Governance Code with a view to enhancing information that contributes to the exercise of voting rights. Other 2. IR Activities Supplementary Explanations Preparation and Publication of Disclosure Policy Regular Investor Briefings for Analysts Institutional Investors and We have formulated a disclosure policy and disclose it on the Company’s website. A result briefing or update meeting for securities analysts and institutional investors shall be held quarterly (by tele-conference) with the President and Chief Executive Officer or Director responsible for IR in attendance. – 18 – 3. Measures to Ensure Due Respect for Stakeholders Posting of IR Materials on Website Establishment of Department and/or Manager in Charge of IR Stipulation of Internal Rules for Respecting the Position of Stakeholders Implementation of Environmental Activities, CSR Activities etc. Development of Policies on to Information Stakeholders Other Provision ― We have created a shareholder and investor information site on the Company’s website, where we post IR materials, such as Financial Results and Presentation, Financial Statements, Extraordinary Report, Integrated Report, and the Notice of the Convocation of General Meeting of Shareholders Japanese website: https://www.yuden.co.jp/jp/ir/library/ English website: https://www.yuden.co.jp/ut/ir/library/ Department responsible for Public Relations Department Supplementary Explanations The TAIYO YUDEN Group is committed to corporate social responsibilities and the mission of management to develop businesses on an ongoing basis while fulfilling sociality, public interest and public nature of the Group from a global viewpoint to put into practice and realize “Mission”, “Management philosophy” and “Vision”. We are promoting various environmental and CSR activities in line with our management philosophy. We have prepared a “Safety and Environment Report” that summarizes our annual activities in security and the environment. This report can be found on the Company’s website. We have formulated a disclosure policy and disclose it on the Company’s website. IV. Matters Related to the Internal Control System 1. Basic Views on Internal Control System and the Progress of System Development 1. Systems to ensure the execution of duties by Directors, Operating Officers and employees complies with laws, regulations and the Articles of Incorporation, and other systems to ensure appropriate business operations of the Company and the Group (1) The Board of Directors shall resolve important matters in accordance with laws, regulations and the Articles of Incorporation, as well as the “Board of Directors Regulations” and other internal regulations. (2) The Board of Directors shall strengthen the management system for risk factors surrounding the management and supervise the execution of duties by Directors. (3) Audit & Supervisory Board Members shall monitor the appropriateness of resolutions by the Board of Directors, as well as the execution of duties by Directors and Operating Officers. (4) An Internal Control Committee shall be established as a system to promote the Group’s compliance activities. The committee shall designate a responsible person for each of the items set forth in the “Taiyo Yuden Group CSR Code of Conduct” of the Company and conduct compliance activities on an ongoing basis in accordance with the compliance management system. (5) A whistleblower system shall be operated for early detection of compliance-related problems of the Group. The detected problems shall be investigated and corrective measures shall be taken to prevent a recurrence. (6) Corporate information and other materials relating to the Group shall be swiftly and appropriately (7) A firm and uncompromising stance will be taken on an organizational basis against antisocial movements disclosed to shareholders and investors. or groups. (8) Internal control shall be streamlined and operated for the purpose of ensuring the reliability of financial reports in accordance with the Financial Instruments and Exchange Act. (9) As for the execution of business operations at subsidiaries, the relevant operating division/departments of the Company shall be the contact to grasp the circumstances thereof, and sufficient exchange of – 19 – information and coordination of interests shall be conducted with regard to important information in accordance with the “Group Management Rules” to ensure appropriateness of business operations while respecting the management intentions of the respective subsidiaries. 2.System for the storage and management of information with regard to the execution of duties by Directors and Operating Officers of the Company (1) The Company shall record the statutory documents such as the minutes of the General Meetings of Shareholders and the minutes of the Meetings of the Board of Directors, and the minutes of other important meetings concerning the execution of duties by Directors and Operating Officers, in the form of documents or electromagnetic media, and store and manage them together with relevant materials, in accordance with laws and regulations, as well as the respective meeting rules. (2) The Company shall maintain an environment that enables Directors and/or Audit & Supervisory Board Members to access said information at any time in accordance with the respective meeting rules. 3.Rules for managing risks of loss with respect to the Company and other systems (1) An Internal Control Committee shall be established as a system to promote risk management activities. The committee shall designate a responsible person for each risk category. Risk management activities, which consist of risk identification, evaluation of risk levels, decision and execution of risk countermeasures and monitoring/review of the status of implemented countermeasures, shall be continuously performed as per the Group risk management system. (2) As per the Company’s Group Business Continuity and Risk Management Regulations, the effects on business activities resulting from the occurrence of any risks including natural disasters shall be preassumed, an emergency task force shall be formed depending on the scale of expected adverse effects and preventive measures shall be taken in advance during peacetime. In case a business continuity problem arises, countermeasures shall be taken in compliance with the BCP (Business Continuity Plan) put in place to enable the early resumption of business activities. 4.System for ensuring the duties of Directors of the Company are efficiently performed (1) To ensure th