Corporate Governance Report (Last Update: June 29, 2022)

Corporate Governance

Corporate Governance Report

Last Update: June 29, 2022

Anritsu Corporation

Hirokazu Hamada, President and Representative Director Contact: IR Team of Corporate Branding Department Securities Code: 6754 https://www.anritsu.com/en-US/

The status of the corporate governance of Anritsu Corporation is described below.

1. Basic Views on Corporate Governance, Capital Structure, and Corporate Profile and Other

Basic Information

1. Basic Views

Anritsu Corporation ("Anritsu" or "Company") acknowledges that it is the top management priority for the Company to heighten its corporate value continuously by adapting to changes in the business environment flexibly and promptly and enhancing its competitiveness as a global corporation. To attain that goal, Anritsu has strived to construct an environment and structure where corporate governance effectively functions. As an immediate issue, we are now tackling the strengthening of corporate governance from the following points of view:

1. Greater transparency in the management,
2. Appropriate and timely disclosure of information
3. Stronger supervisory function over the management
4. Training up of management personnel

To fulfill our corporate mission with "sincerity, harmony, and enthusiasm," as declared in the Company Philosophy, we will further implement appropriate and necessary measures for cultivating our corporate culture that respects the rights and interests of all the stakeholders, including shareholders, customers, and employees, as well as improving our internal organizational structure.

Following the principles of the "Corporate Governance Code," the Company sets out the "Anritsu Basic Policy on Corporate Governance," describing its basic views and the organizational structure and frameworks upholding such beliefs to pursue better corporate governance in Anritsu Group (a corporate group comprising of the Company and its subsidiaries, "Group"). The Basic Policy is disclosed on the Company website.

[Reasons for Non-compliance with the Principles of the Corporate Governance Code] [Updated]

Anritsu has complied with all the principles laid down in the "Corporate Governance Code."

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[Disclosure on the Principles of the Corporate Governance Code] [Updated]

cross-shareholdings, results of the assessment on the appropriateness of individual cross-shareholdings, and standards to ensure the appropriateness in the exercise of voting rights to cross-held shares>

- Policy on cross-shareholdings-

To contribute to the increase in mid-to-long-term corporate value, the Company holds the shares of some listed companies, mainly those of its clients or business partners, for cross-shareholding, considering its business strategy and marketing and other policies comprehensively. In those cases, while monitoring the relevant cross-shareholders' business conditions, the Company annually assesses the importance and rationality of continuing to hold their shares. Suppose the necessity to continue having any stock becomes less, or it loses its meaning; we will consider the sale or disposal of the stocks as appropriate, based on the share price, market trend, and other factors. The result of the above assessment on the appropriateness of having individual stocks, the details of their sale or disposal, if implemented, and other matters relating to cross-shareholdings will be reported to the Board of Directors annually and when required.

Anritsu is propelling transactions from an ESG perspective and based on economic rationality; therefore, it never demands any client or business partner to hold the Company's shares as a condition for a transaction with the Group. It also never requires the client or business partner who currently has its shares to keep doing as a condition for continuing the transaction.

- Results of assessment on the appropriateness of individual cross-shareholdings

The Company makes it a rule to hold the shares of other listed companies for cross-shareholding only where such shareholding is necessary for implementing its key business strategies, and it is now trying to reduce the cross-shareholdings. Following the rule, we examined the rationality of individual stocks of cross-held shares regarding the importance of keeping them and whether the earnings derived from such holding have covered its targeted capital cost or not. We also considered market value fluctuation and the accumulated amounts of dividends received during a specific period. As a result, the Company confirmed that all the stocks held by it have contributed to maintaining and strengthening the business relationship with the relevant cross- shareholders. At the same time, by the above examination conducted for the period until the end of the latest business year, it was found that there was little need to hold some stocks, which the Company worked to sell. Consequently, the percentage of the book balance of the shares of other listed companies held for cross- shareholding to the total net asset decreased to below approximately 0.1% at the end of March 2022.

-Standards to ensure the appropriateness in the exercise of the voting rights to cross-held shares

When exercising the voting rights as to its cross-shareholdings, the Company comprehensively determines its stance after examining whether its exercise can contribute to the increase in corporate value from a mid-to-long-term perspective based on TSR (total shareholders return) and other metrics, taking into account the following factors: the purpose of the cross-shareholding; the business performance, management policy, governance, and other elements of the relevant cross-shareholder.

In compliance with the laws or ordinances for operating activities and material procurement, the Company engages in fair transactions in line with sound business practices and social norms. Also, to ensure that any transaction does not harm its interests or the shareholders' common interests, for the transactions below, it is required to submit the proposition to the Board of Directors and obtain approval in advance: (i) a competitive transaction conducted by a Director; (ii) a conflict-of-interest transaction between a Director and the Company; and (iii) an extraordinary transaction with one of the major shareholders who hold more than 10% of voting rights of the Company. Once Directors conducted the above transaction, they will be obliged to report, without delay, the material facts about the transaction to the board. When Directors who are not on the Audit & Supervisory Committee intend to conduct a conflict-of-interest transaction, they are required to obtain the approval of the Audit & Supervisory Committee in addition to the board approval.

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2-4 (1): Ensuring diversity in core human resources, such as the promotion to middle managerial positions>

It is essential for the Company to create an environment where diverse employees can share their values and proactively work to continue business activities and achieve development on a global basis while enhancing our ability to respond to diversified needs and address business risks; thus, we have been promoting "Diversity Management." The fundamental basis for the management of the Anritsu Group, whose core competence is technology, is to hire and develop human resources capable of leading technical innovation and constituting the resources of corporate value. With that in mind, the Company hires both new graduates and mid-career, whether technical or administrative staff, regardless of gender, nationality, and other personal factors, in all lines of work. In human resource development, we continuously strive to enhance education and training programs and ensure their fair and transparent operation to support the independent growth of diverse employees.

The Company's policy on ensuring diversity, our goals and status, the development of human resources, the improvement of our internal environment, and other related matters are disclosed in the Sustainability Report posted on our webpage.

For the promotion of non-Japanese employees to middle managerial positions, we have not set specific numeral targets. The Company pursues global management by which all domestic and overseas Group companies can share information, such as social issues and customers' needs, obtained through cooperative work to make the best use of the information for developing and providing customers with products and services. Among non-Japanese employees who belong to Group companies abroad, some members take middle managerial posts in the Company. Further, non-Japanese members hold about 30 percent of officers' posts and have proactive roles in managing their respective overseas companies. Given those situations, we deem diversity in middle managerial positions across the Group has been ensured; thus, we will maintain the current status in the immediate future. Since it is necessary to propel diversity further to expand our business fields and explore new businesses by leveraging our global perspectives and local networks, the Group will continue personnel staffing regardless of nationality.

The Company has its corporate pension reserve under management through the Anritsu Corporate Pension Fund, the operation of which is entrusted to a fund management company. In selecting a fund management company, Anritsu periodically exchanges views on stewardship activities and examines the details of reports submitted; and appoints an appropriate management company. Since we recognize that the corporate pension fund has a mission to continue sound fiscal management and adequately assess and select the right management company, the Company, a governing body of the Fund, is working to recruit and assign qualified personnel in a planned manner. Those persons should be experts on the pension system and management and have knowledge about finance, accounting, personnel management, and related affairs. In addition, the Company offers continuing training and education for the assigned personnel to develop their expertise. In this way, we are going ahead with the Corporate Pension Fund's operation according to its by-laws, including the council's decision-making on the reserve management. The Anritsu Corporate Pension Fund pays special attention to the conflicts of interest which could arise between the pension fund beneficiaries and the Company. For instance, if the fund management company exercises its voting rights against Anritsu, the Company respects its decision.

The Company acknowledges that information disclosure is of great importance as the basis for communication with the stakeholders. Therefore, under the applicable laws or ordinances, Anritsu discloses timely, appropriately, and proactively the financial standing, operation results, and other financial information, as well as material facts contained in its non-financial information, such as management strategies and challenges, risk management, internal control system, and governance.

To attain the "sustainable growth and increase in corporate value over the mid-to-long term," the Company accurately figures out its capital cost and develops a mid-to-long-term management plan, which defines targets in terms of its earning capacity and capital efficiency, and utilization of management resources. When disclosing the mid-to-long-term management plan and its progress, we will provide the information to our

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stakeholders in an integrated, structured, and understandable way to gain their proper understanding and trust for Anritsu. For that purpose, we focus on our business strategies and initiatives that explain the source and strength of corporate value and sustainability issues for the Company.

With "sincerity, harmony, and enthusiasm," the Company offers "Original and High-Level" products and services to contribute to developing a safe and secured global society, aiming to become a corporation, the growth and advancement of which are sought after in the whole society. Anritsu also will respond in good faith to, respect, and keep harmony with every party concerned, including its shareholders, investors, clients, business partners, employees, and local communities, and proactively take actions to fulfill our responsibility. In addition to the above Company Philosophy, other management principles, including the management strategy and the mid-term business plan, are disclosed on our website, the Integrated Report, and other disclosure materials.

The basic views on corporate governance of the Company are as described in "1. Basic Views" under "I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information" of this Report. In attaining such goals, we assume responsibility for our stakeholders; therefore, Anritsu establishes the structure and frameworks for corporate governance, aiming to make decisions in a transparent, fair, prompt, and decisive manner and disclose information appropriately and timely. Further, in relentless pursuance of its advancement, the Company continuously improves the above structure and frameworks.

For the determination of remuneration or compensation for Directors, Vice Presidents, and Executive Officers (Vice Presidents and Executive Officers are collectively referred to as "Officers") of the Company, the Compensation Committee, an advisory body to the board, deliberates the compensation scheme, its components, payment level, the balance of allocation, and other details, before submitting a report (toshin) to the Board of Directors. As to compensation for Executive Directors, the Company primarily intends to give them motivational effects as an incentive for improving their business performance for each business year and heightening corporate value over the mid-to-long term. Therefore, the board determines their compensation under the basic principles set by the Company, using the survey data on officers' compensation gathered by outside research firms as a reference in terms of the components and payment level. It also considers a balance between the basic remuneration and the performance-linked one (including bonus as the short-termperformance-linked compensation and the stock reward as the mid-to-long-termperformance-linked one) depending on their respective responsibilities and duties. Other principles and procedures in determining compensation for Directors are described in the column "Director Compensation" of "1. Organizational Composition and Operation" under "II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Supervision in Management" in this Report.

By introducing the "Training Program for Next Generation of Executives," the Company strives to develop the next executive candidates. In selecting the candidates, we pick up the promising personnel with advanced expertise, highly capable of business exercise, and expected to contribute to improving business performance. The Company comprehensively evaluates the candidates based on the following five key five capabilities representing a desirable member of the Group: "the power of empathy with the Company's vision and policy," "high character," "strategic and conceptual thinking power," "initiative, the power of action, and rationale thinking power," and "high ethical values." In nominating Directors and appointing key employees such as Officers, to ensure better transparency, objectivity, and impartiality, the Board of Directors makes the decision based on the deliberation of its advisory body, the Nominating Committee. To submit a proposition of the appointment of Directors who will be Audit & Supervisory Committee Members to a general meeting of shareholders, the board makes the decision based on the Audit & Supervisory Committee's deliberation.

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In executing duties by Directors, if there is any misconduct or the material fact that violates laws or ordinances or the Company's Articles of Incorporation and constitutes a due reason, the Company will dismiss the Director from the office. In that case, for removing a Representative Director or submitting a proposition of dismissal of Directors to a general meeting of shareholders, the Board of Directors resolves based on the Nominating Committee's deliberation. A Director with a particular interest in such dismissal or removal may join in neither the Nominating Committee's deliberations nor the board's vote.

To enhance and ensure the effectiveness of the board's decision-making process, the Articles of Incorporation specify that the number of Directors (excluding those on the Audit & Supervisory Committee) shall be no more than ten Directors, and the same of Directors on the Audit & Supervisory Committee shall be no more than five Directors. In nominating Directors, the Board of Directors decides, given the balance of their knowledge, experience, and capabilities among Directors, irrespective of gender, nationality, and other private factors, to ensure the board members' diversity.

The Company appoints at least one-third of all the Directors constituting the board as independent Outside Directors; also, it intends to keep the number of Non-executive Directors as many or more than the same of Executive Directors. Further, in appointing candidates for Outside Directors, we pay attention to ensuring their independence and neutrality according to the "Criteria for Judging Independence of Outside Officers" set by the Company. When Directors wish to serve concurrently as an officer for another company outside the Group, they will be allowed to do so only where they are able to fulfill duties and responsibilities as the Group's Director. The status of concurrent holding of key positions of other companies is disclosed annually.

• There is also the description in

When submitting a proposition of the appointments or dismissals of Directors to a general meeting of shareholders, the Company explains the reasons for appointments for Directors or the dismissal of a specific Director and related information in the meeting's reference materials. In FY 2021 and from April 2022 to the submission date of this Report, no Director has been dismissed. The reasons and other related information for the appointments of Outside Directors (including those on the Audit & Supervisory Committee) are also explained in the column "Directors" of "1. Organizational Composition and Operation" under "II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Supervision in Management" of this Report.

For six Directors (excluding those on the Audit & Supervisory Committee) and four Directors on the Audit & Supervisory Committee, those who are in service as of the submission date of this Report, the main reasons for individual appointments as candidates for Directors are as follows:

*Hirokazu Hamada

Mr. Hamada was engaged in product development and domestic and international marketing in the Communication, Test, and Measurement business department, which is the core business of the Group, thereby having broad business knowledge and experience, including trends in industry and technology. He currently drives Anritsu's global business by exerting leadership as the Company's Representative Director, President, and Group CEO. The Company nominated him as a candidate for Director, expecting that he would make full use of his knowledge and experience in its management and the board's decision-making process.

*Akifumi Kubota

Mr. Kubota was engaged in the accounting and finance of the Company and some overseas subsidiaries. He is currently taking charge of executing finance strategy and business administration of the Group as CFO and Chief Corporate Officer with broad knowledge and experience in finance, accounting, and corporate governance. The Company nominated him as a candidate for Director, expecting that he would make full use of his knowledge and experience in its management and the board's decision-making process.

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