Corporate Governance Guideline

Introduction

These Guidelines provide for the good corporate governance of TechnoPro Holdings, Inc. (hereinafter “the Company”) and the TechnoPro Group (hereinafter “the Group”; used generically to refer to the Company and the Company’s subsidiaries), in order to realize the Group Corporate Philosophy, the TechnoPro Group Vision, shown below, and in turn to increase corporate value and to enhance the long-term interests of shareholders so that they are able to hold the Company shares over the long term with peace of mind.

The Group Corporate Philosophy – TechnoPro Group Vision

  • 1. Our mission is to engage each engineer with sincerity and diligence, and to serve as a partner in helping them achieve their goals.
  • 2. As a group of advanced engineering experts, we provide various solutions to support customer research, development, and design for customers engaged in global markets.
  • 3. By creating an environment that allows our engineers to transcend industry borders, we contribute to the realization of an industry structure capable of responding flexibly to an ever-changing market.

The Company hereby announces the Guidelines as evidence of its commitment to pursuing the best corporate governance.

Chapter 1 General Provisions

Article 1 Purpose and positioning of these Guidelines

  1. These Guidelines document the framework or the management policies of a corporate governance structure that conforms to the basic views related to the objectives of the Group’s corporate activities as well as the Company’s corporate governance.
  2. The Guidelines are positioned as a high-ranking set of regulations, following the Companies Act, related laws and regulations as well as the Articles of Incorporation, and shall be in addition to that for basic policies regarding the internal control system, Board of Directors Regulations, Directors/Audit & Supervisory Board Members Regulations and other related regulations.
  3. The Board of Directors shall continuously review the effectiveness and the appropriateness of the Guidelines and make revisions, as needed, through a resolution. If the Guidelines are revised, the content shall be announced in a timely and appropriate manner.

Article 2 Purpose of business activities and corporate governance system

  1. The purpose of the Group’s business activities is to increase our corporate value and common shareholder interests through sustainable growth, which we achieve by outlining basic management policies and strategies based on our Group Corporate Philosophy that the executives and employees of all our Group companies work as one to implement. Through our success at achieving sustainable growth, the Group is able to contribute to industry development in Japan and overseas, and make contributions towards a more prosperous society.
  2. As a holding company, the Company oversees strategic planning and operations management functions for the entire Group to ensure that our Group appropriately fulfills our social responsibilities. Further, as a listed company, we have established a corporate governance system centered on our Board of Directors to fulfill our responsibilities to shareholders by ensuring self-discipline and accountability in relation to the management of Group operations.

Article 3 Basic approach to corporate governance

  1. The Company constantly pursues ideal corporate governance and strives continuously to enhance its corporate governance.
  2. The Company respects the rights of its shareholders and believes the true meaning of corporate governance is to ensure fairness and transparency in decision-making and to increase the health of management. We work to enhance our corporate governance through activities grounded in the following basic approach.

(1) Relationship with shareholders

  • Respect shareholder rights and ensure equality between shareholders.
  • Create positive relationships and cooperate appropriately with shareholders and all stakeholders.
  • Ensure the appropriate disclosure and transparency of corporate information.
  • Have constructive communication with shareholders practicing medium- to long-term investment strategies.

(2) Corporate governance system

  • Adopt corporate structure employing a Board of Directors, which makes decisions over management and has supervisory and monitoring authority over business execution, and an Audit & Supervisory Board comprising auditors, which oversees audit functions.
  • Adopt an executive officer system that allocates executive authority and responsibility over daily operations to executive officers to enable dynamic and efficient business management.
  • Establish and utilize the Nomination and Compensation Committee to further enhance governance functions by ensuring the appropriate involvement of and receipt of advice from outside directors and auditors regarding matters such as executive appointments and compensation.
  • Enhance system of internal controls for the purpose of ensuring the reliability of financial reporting.

Chapter 2 Shareholder Relations

Article 4 General meeting of shareholders

  1. The Company secures substantial time for shareholders to consider items on the agenda of a general meeting of shareholders so that shareholders are able to exercise their voting rights in an appropriate manner. This is to be done by sending notices on the convocation of a general meeting of shareholders as well as reference materials at an early stage and by posting the convocation notice on the Company’s official website between the time a Board of Director’s resolution is passed regarding the convocation of the general shareholders meeting and the time the convocation notice is mailed out.
  2. The Company sets up an environment in which shareholders are able to exercise their voting rights in an appropriate manner, not only for shareholders who attend the general meeting of shareholders, but also for those who are using an electronic platform to exercise their voting rights, among other means.
  3. The Company provides substantial explanations to shareholders and takes time in responding to their questions at the general meeting of shareholders in order to build trust.

Article 5 Ensuring shareholder equality

  1. The Company treats each shareholder with equality based on each shareholder’s equity stake.
  2. The Company discloses information in an appropriate and timely manner so that an information gap does not emerge among shareholders.
  3. The Company shall not provide any special benefits, including profits from assets, to any particular shareholder.

Article 6 Returns to shareholders and protection of shareholder rights

  1. The Company decides on and discloses its basic policies related to shareholder returns, including surplus dividends.
  2. In order to protect shareholder rights, the Company appropriately discloses to shareholders the relevant information whenever there are changes to the Company’s shareholder composition or actions which might lead to such changes in the future, such as the allocation of new shares to particular third parties.

Article 7 Prevention of conflicts with shareholder interests

  1. To protect shareholder interests, the Company works to prevent the Group executives and employees from using their positions to conduct transactions that are counter to the interests of the Group as well as shareholders.
  2. The Group Directors shall not conduct any conflict-of-interest transactions or competing transactions without the approval of the Board of Directors.
  3. In order to prevent insider transactions by the Group executives and employees, the Company establishes the TechnoPro Group Insider Trading Prevention Regulations and strictly applies such rules.

Article 8 Interlocking cross-shareholdings

The Group’s basic policy is to not engage in pure investments. Investments in companies other than consolidated subsidiaries, including cross-shareholdings, are limited to the purposes of creating business opportunities and building and reinforcing collaborative relationships. The Group engages in such investments in accordance with the following policy.

(1) Investment decisions

  • Decisions on new investments are based on their contribution to increases in the TechnoPro Group’s corporate value, for the purpose of holding and from the perspective of medium- to long-term economic rationality.

(2) Monitoring

  • During the period in which it holds investments, the Group shall conduct periodic assessments with respect to whether the purpose of holding is being met, as well as the rationality and necessity of holding the investments from multiple perspectives, such as changes in economic advantages and disadvantages (benefits and risks) observed after acquisition, mainly factoring in capital costs. Based on these assessments, the Group shall examine annually whether or not it is appropriate to continue holding investments at meetings of the Board of Directors. In particular, if the Board decides to continue with cross-shareholding for a listed stock, the Company shall disclose the results of relevant examinations in a timely fashion.

(3) Exercise of voting rights

  • In exercising its voting rights, in principle the Group decides whether to vote for or against proposals based on whether such proposals are in line with the Group’s investment purposes and whether they enhance the corporate value of the investee, rather than abstaining from voting or giving the investee carte blanche.

Article 9 Ensuring reasonable transactions with owners of cross-held shares

  1. The Company shall periodically examine the terms and conditions for transactions with shareholders that own the Company’s stock for strategic reasons (owners of cross-held shares), based on economic rationale, and strive to secure mutual profits for the Company and its shareholders. Revisions to the terms and conditions shall not be implemented for purposes such as preventing the owners of cross-held shares from selling the Company’s stock

Article 10 Constructive communication with shareholders

  1. In addition to the General Meeting of Shareholders, the Company conducts constructive communication with shareholders to the extent and via means deemed appropriate.
  2. The Company outlines the following as a basic policy concerning system and initiatives to promote constructive communication with shareholders.
    1. (1)The Managing Executive Officer and CFO is in charge of communication with shareholders.
    2. (2)Communication with shareholders is handled by the Communication and IR Department, which is overseen by the Managing Executive Director and CFO and conducts appropriate information sharing with the Management Planning Department, Accounting Department, General Affairs Department, and other related departments prior to communicating with shareholders.
    3. (3)Regular investor conferences are held to a reasonable extent as a way to enhance communication with shareholders.
    4. (4)Opinions, etc. received during communication with shareholders should be reported appropriately to directors, etc.
    5. (5)Appropriate management of insider information is ensured during communication with shareholders.
  3. The Company, with an accurate understanding of its capital costs, drafts and discloses a medium-term business plan and other important strategies, including the basic polices related to profit plans and capital strategy as well as goals related to profitability and capital efficiency, to provide a plain, clear, and logical explanation to shareholders regarding the specific policies on the distribution of management resources and the steps necessary to achieve the goals.

Chapter 3 Stakeholders Relations

Article 11 Interests of stakeholders

The Group, to improve the Group’s corporate value over the medium to long term, considers the interests of not only the Company’s shareholders, but also those of various stakeholders, such as the Group employees, customers, business partners, creditors and regional communities.

Article 12 Code of Conduct

  1. To ensure that the Group, as a corporate group that is trusted by society, works to build positive relationships with stakeholders and proactively contributes to society, the Group outlines the “TechnoPro Group Code of Conduct” and it conducts honest corporate practices that focus on compliance.
  2. The Group outlines “the Six Core Commitments of TechnoPro Group” as the Code of Conduct for the Group executives and employees. The Group conducts honest corporate practices by upholding and promoting these commitments.

Article 13 Sustainability

The Group is grounded in the assumption of sustainable business activities and sustainable development. With an understanding of the importance of the balance between business activities and the global environment, the Group establishes the “TechnoPro Group Environmental Principles” and the “TechnoPro Group Basic Environmental Policy”, and through the implementation of these the Group aims to make proactive contributions to society.

Article 14 Whistle-blowing

  1. The Group clearly notes in its Whistle-blowing System Management Regulations and other regulations related to human resources that the Group employees and others are able to report serious misgivings regarding illegal or unethical actions or practices within the Group and shall not be placed in a disadvantageous position for the notification.
  2. The Board of Directors establishes a structure associated with a whistle-blowing system and review in an appropriate manner by receiving regular reports from the CSR Promotion Department regarding its status.

Chapter 4 Disclosure and Transparency

Article 15 Disclosure and transparency

  1. The Company determines policies concerning matters such as Group risk management, internal control systems, and legal compliance in accordance with the Companies Act and other applicable laws, and provides timely and appropriate disclosure.
  2. The Company complies with the Companies Act, the Financial Instruments and Exchange Act, and other applicable laws as well as applicable financial instrument exchange regulations to disclose financial and administrative information via fair, detailed, and simple methods.
  3. The Company shall formulate a Disclosure Policy, and based on such policy, it shall not only make a law-based disclosure, but always provide honest and value-added disclosure from the perspective of shareholders and investors.
  4. The Company establishes a system and means for information disclosure and works to foster trust-based relationships by enhancing communication with shareholders and investors.
  5. The Company shall strive to disclose/provide information in English to the extent that such disclosure is reasonable.

Article 16 Secure appropriate execution of accounting audits

  1. The external accounting auditors ensure the reliability of financial statements, and they have an important responsibility toward shareholders and investors to realize the best corporate governance.
  2. The external accounting auditors must ensure independence from the Company and must possess expertise to secure audit quality, along with conducting systematic management for the quality control of auditing.
  3. The Audit & Supervisory Board formulates the Evaluation Standards for External Accounting Auditors for selecting external auditor candidates as well as verifying the presence of independence and expertise as noted in the previous paragraph.
  4. The Board of Directors and the Audit & Supervisory Board secure sufficient time to ensure high-quality audits; provide external accounting auditors access to management, including the President and CEO and the CFO; secure substantial coordination between external accounting auditors and Audit & Supervisory Board Members, outside directors, and the Internal Audit Department, among others; and establish a structure that can respond to any misconduct, inadequacies or problems pointed out by external accounting auditors.

Chapter 5 Responsibilities of the Board of Directors

Article 17 Roles and responsibilities of the Board of Directors

  1. In light of the responsibilities and accountability as the shareholders’ trustee, the Board of Directors is responsible for the Groups’ sustainable growth and for continuous improvements to medium- to long-term corporate value and common shareholder interests.
  2. The Board of Directors aims to fulfill these responsibilities by creating an ideal corporate governance structure to support the realization of the Group Corporate Philosophy and serves in a supervisory role for all business activities to ensure fairness and transparency while also conducting ideal decision-making, including making decisions on a basic management policy and other vital matters, evaluating major risks and drafting response measures, nominating senior management personnel and deciding on compensation.
  3. The Board of Directors shall include a medium-term management plan and fiscal budget in the basic management policy and focus on conducting strategic and constructive deliberations related to specific management strategies and policies aimed achieving said plans and targets. In the event that the company fails to achieve the goals outlined in a medium-term business plan or fiscal budget, the Board of Directors shall sufficiently analyze and validate said factors, provide an explanation to shareholders, and take appropriate measures to reflect those results into plans for the upcoming fiscal year.
  4. The Board of Directors supervises the implementation of timely, accurate information disclosure and conducts the appropriate management of potential conflicts of interest between the Company and related parties, including supervisory and management personnel, and majority shareholders.
  5. The Board of Directors shall ensure Group’s agility to execute business operations and shall ensure sufficient deliberation time at Board of Directors’ meetings for important matters. Furthermore, to strengthen supervisory functions for general operations, excluding matters stipulated by the Companies Act, relevant laws, or the Articles of Incorporation, matters entrusted to the Board of Directors via a resolution by the General Meeting of Shareholders, and matters outlined above in paragraphs 2, 3 and 4 in this Article, the Board of Directors may defer matters related to operating decisions to Executive Directors and Executive Officers. The Board of Directors shall establish appropriate internal controls and a risk management system within the Group to ensure the practicality of the decision-making process for entrusted matters.

Article 18 Directors’ role and responsibilities

  1. Directors shall receive reports and explanations from the President and Representative Director or from other Directors as a member of the Board of Directors, and provide questions, instructions and advice, as necessary, as a way to participate in the Board’s decision-making and supervise the execution of business by other Directors and Executive Officers.
  2. In addition to the previous paragraph, Outside Directors, from the perspective of securing the effectiveness of the Board of Directors’ independent and objective supervision of management, shall provide advice from the vantage point of improving corporate value over the medium to long term by promoting the Company’s sustainable growth regarding its management policies and improving management. They shall also consider and make decisions from a standpoint of stakeholders outside of the Group, including shareholders who are independent of management and controlling shareholders.
  3. Directors have the obligation to exercise a duty of care, duty of loyalty and the duty of confidentiality.
  4. Directors shall actively express their opinions and conduct thorough discussions, as well as collect sufficient information to execute their responsibilities.
  5. Directors shall spend sufficient time on the execution of their duties and demonstrate the competence expected of them, in responding to the trust placed in them by all shareholders.
  6. Directors must not pursue their personal interests or those of a third party and operate against the interests of the Group. Even when there is no such intention, they must not be involved in transactions with a conflict or compete with the interests of the Group without approval by the Board of Directors.
  7. Directors with a conflict of interests (not only personal conflicts of interests, but also business-related conflicts of interests regarding those outside the Company or outside the Company’s subsidiaries) cannot participate in decision-making in the Board of Directors resolutions associated with matters noted in the previous paragraph.

Article 19 Size and composition of the Board of Directors

The maximum number of members of the Board of Directors is prescribed under the Articles of Incorporation. Also, the Board of Directors shall in principle set its optimal size and composition based on the following items from the perspective of an effective and stable operation of the Board.

  1. (1)The Board shall consist of an appropriate number of members to ensure sufficient deliberations and review as well as swift decision-making.
  2. (2)The Board shall appoint a sufficient number of Independent Outside Directors based on the Board’s role of taking on a supervisory function regarding management.
  3. (3)A necessary number of Internal Directors (refers to directors other than Outside Directors; the same applies hereinafter) shall be appointed with the aim of secure stable and appropriate operations through guaranteed quality in decision-making, including expertise, by Directors who are well versed in matters including our business models, trends, actual operations and related regulations.
  4. (4)The Internal Directors under the President & Representative Director shall consist of Business Director(s) and Managing Director(s), by giving due attention to the standpoint of internal control in organizational management.
  5. (5)Due attention will be paid to avoid having all or almost all candidates being new appointments when deciding on Director candidates from the perspective of sustainability and stability of the Board.
  6. (6)Balance in knowledge, experience, capability and specialty areas, as well as diversity, including gender and internationality, will be considered from the perspective of effectiveness of the Board.

Article 20 Nomination and Compensation Committee

  1. The Board of Directors has the Nomination and Compensation Committee, an advisory organ on nominations and compensations for the Group Directors, Audit & Supervisory Board Members and Executive Officers, which consists entirely of Independent Outside Directors and Independent Outside Audit & Supervisory Board Members, as a way to strengthen objectivity and accountability regarding decisions made on nominations and remunerations for the Group executives.
  2. Matters related to the Nomination and Compensation Committee is prescribed in the “Regulations for Nomination and Compensation Committee” which requires a resolution by the Board of Directors for changes.
  3. The president (chairperson) of the Nomination and Compensation Committee shall be selected from Committee members who are Independent Outside Directors or Independent Outside Audit & Supervisory Board Members.

Article 21 Selection Standards for Director and Audit & Supervisory Board Members

  1. The Board of Directors formulates its own “Selection Standards for Directors and Audit & Supervisory Board Members and Procedures for Appointments and Dismissals”, in addition to requirements stated in the Companies Act. The Board of Directors shall select the appropriate candidates of Director and Audit & Supervisory Board Member after comparing the requirements, upon consultation with the Nomination and Compensation Committee.
  2. It would be preferable for Outside Directors and/or Outside Audit & Supervisory Board Members (hereinafter referred to generically as “Outside Executives”) as well as Outside Executives candidates to satisfy the “Independence Standards for Outside Directors/Audit & Supervisory Board Members” established in Article 23 of these Guidelines.

Article 22 Standards and Procedures for Appointment and Dismissal of CEO and Succession Plans

  1. The Board of Directors shall formulate the “Standards and Procedures for Appointment and Dismissal of CEO”, and clarify the type of individual expected in a chief executive officer and objective, timely and transparent procedures pertaining to such appointment and dismissal as part of succession plans for the Company’s chief executive officer.
  2. The Board of Directors shall continuously supervise succession plans for chief executive officers by allowing the Nomination and Compensation Committee to formulate and become involved with such plans.

Article 23 Independence Standards for Outside Directors/Audit & Supervisory Board Members

  1. The Company establishes and utilizes the “Independence Standards for Outside Directors/Audit & Supervisory Board Members” (hereinafter referred to as the “independence standards”).
  2. The Company shall submit to the Tokyo Stock Exchange and disclose in an appropriate and timely manner regarding Outside Directors/Audit & Supervisory Board Members who have been judged as fulfilling such independence standards after deliberations by the Nomination and Compensation Committee and deciding that they are independent Directors/Audit & Supervisory Board Members who are not at risk of having a conflict of interest with general shareholders.
  3. Independent Outside Directors/Audit & Supervisory Board Members must endeavor to continuously secure independence standards until they step down from their post.

Article 24 Independent Executive Committee

  1. In order to actively contribute to discussions at the Board, Independent Outside Directors/Audit & Supervisory Board Members among themselves exchange information, develop a shared awareness and discuss proposals to the management, by regularly holding the Independent Executive Committee. When they deem it necessary, they can have other persons - officers/employees of the Group and/or outside experts on legal/accounting/finance etc. - attend the Independent Executive Committee, and ask them to provide opinions and explanations.
  2. The Chief Independent Outside Director shall act as chairman of the Independent Executive Committee.

Article 25 Chief Independent Outside Director

Independent Outside Directors votes to select a Chief Independent Outside Director from among themselves, in order to ensure smooth communication and coordination with the senior management and to liaise with the Audit & Supervisory Board Members or the Audit & Supervisory Board.

Article 26 Executive compensation

  1. The following points shall be taken into consideration to determine compensation for the Group Directors, Audit & Supervisory Board Members and Executive Officers.
  1. (1)Reasonableness of the amount of compensation for which the Company shall be held accountable and responsible to stakeholders including shareholders.
  2. (2)Reasonableness of the amount of compensation as an incentive for the accomplishment of management policies and enhancement of corporate earnings and shareholder value. Effectiveness of compensation as a means to drive efforts for not only achieving results in the short-term, but also consistently increasing corporate value and shareholder value.
  3. (3)Reasonableness of the amount of compensation as consideration for the execution of duties, as well as in terms of whether the amount is at a justifiable level to recruit/promote, to motivate and to retain talented personnel.
  1. The finalization of policies for determining compensation for Directors, Audit & Supervisory Board Members and Executive Officers and individual compensation (only applicable to cases in which the relevant individual compensation for Auditors is determined in a General Meeting of Shareholders), as well as the formulation, change and abolishment of necessary basic policies, guidelines, regulations and procedures for such finalization, shall go through the process of consultation with, discussion with and recommendation by the Nomination and Compensation Committee from the perspective of enhancing the level of objectivity and transparency.
  2. The Company, outlines and employs the “Basic Policies and Procedures for Determining Executive Compensation.”

Article 27 Operation of the Board of Directors meeting

  1. The chairperson of the Board of Directors secures sufficient time for the Board’s deliberations and endeavor to invigorate discussions and improve their quality as well as advance constructive deliberations.
  2. Materials related to items on the agenda for a Board of Directors meeting are to be distributed to Directors and Audit & Supervisory Board Members sufficiently in advance of the meeting date in order to enable effective deliberations. However, this is not required of topics that specifically carry a sense of urgency and confidentiality, and the Board of Directors could hold deliberations prior to the distribution of materials.
  3. The General Affairs Department is to serve as the secretariat office for the Board of Directors, which will endeavor to ensure the smooth operation of the Board by setting a schedule for annual Board meetings or adjusting anticipated agenda by holding a review meeting to discuss topics ahead of a Board meeting.
  4. The Board of Directors as well as the Nomination and Compensation Committee, when necessary, shall have Directors, Executive Officers and employees of the Group other than Board and committee members and outside experts to attend, report and express their views.

Article 28 Concurrent post at other companies

  1. It is preferable that Directors or Audit & Supervisory Board Members do not simultaneously serve as executives (director, audit & supervisory member, executive officer) of more than three listed companies, in addition to their role at the Company, given that they are expected to devote sufficient time and effort required to fulfill their respective roles and responsibilities.
  2. When a Director or Audit & Supervisory Board Member receives a request from another company or organization to serve in an executive position, regardless of whether or not said company is listed, the Director must provide notification to the Board of Directors.
  3. The status of Directors and Audit & Supervisory Board Members who serve simultaneously at other companies or organization is to be reported regularly to the Board of Directors.

Article 29 Training and education for Directors and Audit & Supervisory Board Members

  1. Directors and Audit & Supervisory Board Members must proactively collect information on the Group management strategies, earnings, financial conditions, corporate governance and compliance, among other matters, and study diligently to continuously update their knowledge necessary to fulfill their respective roles and responsibilities.
  2. The Company continuously offers necessary information and knowledge to each Director and Audit & Supervisory Board Member for executing their responsibilities both and provide and arrange training opportunities suitable to each executive along with financial support for associated expenses.
  3. The Company outlines the “Training Policy for Directors and Audit & Supervisory Board Members” in executing items noted in the previous paragraph.

Article 30 Board Evaluation

  1. Each year, Directors are to submit a self-evaluation to the Board of Directors as to whether the execution of duties of the Board is being operated in accordance with these Guidelines.
  2. Each year, the Board of Directors uses the self-evaluations conducted by each Director to analyze and evaluate its overall effectiveness, and provides appropriate disclosure of a summary of said results.
  3. The Company shall work to maintain and continuously improve the effectiveness of corporate governance through the aforementioned process.

Chapter 6 Other

Article 31 Holding the Company shares

It is preferable for Directors (excluding Outside Directors) to acquire the Company shares from the perspective of clarifying their commitment to management responsibilities aimed at realizing the Group’s sustainable growth and improving corporate value and shareholder interests over the medium to long term.

Supplementary Provisions
These Guidelines may be revised by a resolution of the Company’s Board of Directors.

Revision History
Established: July 1, 2015
Revised: July 1, 2020

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