Conexio : Corporate Governance Report 2022/06/30

Corporate Governance Report

Please note that the following is an unofficial English translation of the Japanese original text of the Corporate Governance Report of CONEXIO Corporation which has been reported to the Tokyo Stock Exchange. CONEXIO Corporation provides this translation for reference and convenience purpose only and without any warranty as to its accuracy or otherwise, in the event of any discrepancy between this translation and the Japanese original, the latter shall prevail.

Last Update: June 30, 2022

CONEXIO Corporation

Hiroshi Suguta, President Contact: Corporate Planning Department [phone] Securities Code: 9422 https://www.conexio.co.jp

The corporate governance of CONEXIO Corporation (the "Company") is described below.

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

Basic Information

1. Basic Views [Revised]

Under the philosophy statement "the Company is to connect people and values," the Company desires to achieve sustainable growth of enterprise value by contributing to the realization of a secure and comfortable life and society and deepening the bond of trust with all stakeholders.

As a basic policy to achieve this, the Company recognizes that the ongoing strengthening of corporate governance is an important management issue, and as a company having corporate auditors (Board of Corporate Auditors), in addition to oversight from the Board of Corporate Auditors, the Company has appointed a number of Independent Outside Directors/Corporate Auditors, and as a voluntary advisory body to the Board of Directors, the Company has established the Nomination and Remuneration Committee and the Governance Committee, both composed of members including Independent Outside Directors, and the Special Committee, composed only of Independent Outside Directors and Independent Outside Corporate Auditors to strengthen management oversight functions. Furthermore, the Company is strengthening its organizational internal checks and balances through the Internal Audit Department and the Internal Control Committee.

In addition, the Company has taken appropriate measures to protect shareholders rights and ensure equality among shareholders in effect and strives to disclose information in a timely and appropriate manner and to have fruitful dialogue with investors.

Based on these basic views and policy on corporate governance, the Company strives to put in place an effective corporate governance system.

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

The Company has complied with all Principles of the Corporate Governance Code.

[Disclosure Based on the Principles of the Corporate Governance Code] [Revised]

Efforts for the corporate governance taken by the Company are described in the notice of general shareholders meeting, annual securities report, integrated report, the website of the Company, etc., in addition to this Report, for your review.

The disclosure based on the principles of the Corporate Governance Code (including those applicable to the TSE Prime Market) is as follows:

[Principle 1.4 Strategic-Shareholdings]

1. Policy on reduction of strategic-shareholding

While the Company may acquire shares of business partners as a means of creating business opportunities or strengthening business relationships, the holding of such shares is limited to the minimum amount necessary.

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If the holding of shares is deemed inappropriate, the Company will sell such shares by taking all factors into consideration, such as the impact on the market.

2. Examination of strategic-shareholding

We appoint a responsible department for each acquired strategic-shareholding and determine whether to invest in a particular investee in comprehensive consideration of the strategic significance or economic rationality (including capital cost).

Listed shares are examined on an issue-by-issue basis once a year by the Board of Directors with respect to the achievement of the purpose of the acquisition, medium- to long-term economic rationality (including capital cost) and future outlook to decide whether to continue to hold such shares.

3. Exercise of voting rights

We recognize the exercise of voting rights pertaining to shares held as strategic-shareholdings as an important means of communication with our business partners. For this reason, we exercise these voting rights appropriately in accordance with the judgment made by the responsible department from the perspective of medium- to long-term growth of the enterprise value of both the Company and the business partner and based on the results of the internal examination.

[Principle 1.7 Related Party Transactions]

Any competitive transaction or conflict of interest transactions with the Company carried out by a director or transactions of any other important related party are subject to internal approval and the approval of the Board of Directors upon deliberation by the newly-established Special Committee as necessary in accordance with the provisions of laws and regulations, the articles of incorporation, the board of directors regulations, and other internal regulations.

[Supplementary Principle 2.4.1 Policies and Goals for Ensuring Diversity, Human Resources Development and Internal Environment Development Policies]

In our future business initiatives, we have identified the promotion of diversity and inclusion as an important SDGs management issue, and have set a medium-term goal of "developing a comfortable work environment in which diverse human resources can play an active role". In addition to further promoting diversity, including the promotion the empowerment of women, which we have been working on for some time, we will demonstrate the collective strength of the company as a whole by embracing diverse personalities, values, and ways of working.

• Promotion of women to middle management positions

With the percentage of female employees being above 50%, the Company works to improve the work environment and culture on an ongoing basis for the purpose of helping them to keep a good balance between carrier development/work and family. The percentage of women among employees in management positions reached its target of 15% for FY 2023 ahead of schedule with the Women's Manager Training School and enhancement of the promotion of initiatives by each department. We will continue the current initiatives to increase the percentage of female managers.

• Promotion of foreign nationals to middle management positions

As the business of the Company is primarily a domestic business, the percentage of foreign nationals among all employees is only around 1%. We will continue to promote excellent employees to management positions without regard to their nationality.

• Promotion of midcareer hires to middle management positions

In the past, the Company's recruitment efforts focused on midcareer hires. For this reason, midcareer hires account for more than half of all employees at management positions. As in the past, we will promote qualified employees to management positions regardless of whether they joined the Company as new graduates or midcareer hires.

• Policy for human resource development

Our policy for human resource development is to develop human resources who can continue to contribute to the society by appropriately grasping changes in the environment and initiating self-transformation through independent thinking. Regardless of whether they joined the Company as new graduates or midcareer hires,

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we assign employees to appropriate jobs, projects, etc., while providing them with opportunities for educations. In addition, we support the self-realization of employees through their career ownership.

• Policy for internal environment development

The Company promotes the creation of an environment in which human resources of great individuality with diverse background can continue to work for many years while demonstrating their strengths. We will promote the work-life balance by improving, and promoting the proper operation of, relevant programs, such as childcare leave for male employees and work-life balance support program. For our other initiatives, please refer to the Company's website.

https://sustainability.conexio.co.jp/en/social/work/(in English text)https://sustainability.conexio.co.jp/social/work/(in Japanese text)

[Principle 2.6 Roles of Corporate Pension Funds as Asset Owners]

While the Company does not have a corporate pension fund plan, the Company has a lump-sum retirement payment plan and additionally introduced a defined contribution plan in April 2021 to help employees' stable asset formation.

[Principle 3.1 Full Disclosure]

1. Company objectives (e.g., business principles), business strategies and business plans

Our objectives (reason for existence) are as follows: Under the philosophy statement "the Company is to connect people and values," we aim to cherish one's feelings, touch customer's heart, and contribute to the realization of a secure and comfortable life and society. For more details of our corporate objectives, please refer to the website of the Company.

https://www.conexio.co.jp/en/ir/vision/(in English text)https://www.conexio.co.jp/corporate/vision/(in Japanese text)

For our business strategies and plans, please refer to the website of the Company, our summary financial reports, annual securities reports, results briefing materials, etc.

https://www.conexio.co.jp/en/ir/library/earning/2021/financialreport_FY21Q4.pdf(in English text) * Please refer to "1. Overview of operating results, etc. (3) Outlook" on page 8-9.https://www.conexio.co.jp/corporate/target/(in Japanese text)

1. Basic views and guidelines on corporate governance As stated in I.1. Basic Views of this Report.
2. Policies and procedures in determining the remuneration of the senior management executives and Directors
   Please refer to II.1. [Directors] Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods of this report.
3. Policies and procedures for the appointment/dismissal of senior management executives and the nomination of candidates for Directors and Corporate Auditors
   Please refer to II.2. of this Report.
4. Explanations with respect to the individual appointment/dismissal and nomination

Reasons for nomination of each candidate for Directors and Corporate Auditors are described in the notice of

general shareholders meeting.
https://www.conexio.co.jp/en/ir/library/meeting/2021/generalmeeting_220606.pdf	(in English text)
https://www.conexio.co.jp/ir/library/meeting/2021/2021001/shoshu_220531.pdf	(in Japanese text)

[Supplementary Principle 3.1.3 Initiatives on Sustainability] 1. Initiatives on sustainability

We consider sustainability to be the materialization of our corporate philosophy of "Conexio is to connect people and values" through our business. In the field of communication network, we, with our stakeholders, contribute to the realization of a prosperous society where people respect each other's human rights.

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Furthermore, in order to contribute to the sustainable growth of society, we will identify five important issues and implement SDGs management through our main business and specialized fields.

We recognize that responding to sustainability issues is an embodiment of our corporate social responsibility as well as an important management task that will create new business opportunities and promote sustainability initiatives as part of our business activities. The erstwhile "CSR Committee" has been renamed the "Sustainability Committee" and is responsible for reporting to the Board of Directors. The Board of Directors will further step-up discussions and review sustainability.

For details of our initiatives, see the Integrated Report, which has been posted on our website. https://www.conexio.co.jp/en/ir/library/integrated-report/2021/(in English text) https://www.conexio.co.jp/ir/library/integrated-report/2021/(in Japanese text)

2. Disclosure regarding the Task Force on Climate-related Financial Disclosures (TCFD)

As part of promoting initiatives to address climate change, our company endorsed the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) in October 2021 and joined the TCFD Consortium formed by the companies and financial institutions endorsing those recommendations. As specific initiatives, we participated in "RE Action - Declaring 100% Renewable", an initiative for completely switching electricity generation to renewable energy, which we are implementing successively at each of our locations by setting 2030 as the goal to use renewable energy for generating all our electricity requirements.

Our company will continue to sequentially disclose details of the sustainability initiatives on our sustainability website, including how we analyze and respond to the risks and opportunities posed by

climate change to our business.
https://sustainability.conexio.co.jp/en/	(in English text)

https://sustainability.conexio.co.jp/ (in Japanese text)

3. Investments in human capital and intellectual property

We believe in the necessity of embracing and respecting the diverse personalities of our employees and aiming for a company where individuals can demonstrate their capabilities to their fullest, thereby demonstrating the total power of the Company as a whole. Based on this belief, we are aiming to realize work-life balance by promoting flexible work-styles and creating workplace environments where each and every individual employee can play an even more active role. Furthermore, we provide education and training programs that leverage in-person and online formats with an eye to strengthening the growth of individual employee and their on-site capabilities. As for intellectual property, in the IoT field of the Corporate Business, we have developed our unique products and have disclosed our research and development expenses in the annual securities report.

For details of our initiatives for human capital, see pp. 43-44 of the Integrated Report.

[Supplementary Principle 4.1.1 Scope of Delegation to the Management]

Matters prescribed by laws and regulations, the articles of incorporation, and board of Directors regulations and other matters equivalent thereto are decided by the Board of Directors. Other matters are delegated to the management and the authority and responsibilities of each individual are clearly defined in accordance with resolutions of the Board of Directors and internal regulations.

[Principle 4.9 Independence Standards and Qualification for Independent Directors] Please refer to II.1. [Independent Directors/Corporate Auditors] of this Report.

[Supplementary Principle 4.10.1 Appropriate Engagement/Advice of Independent Outside Directors by Establishing Independent Nominating Committee/Compensation Committee]

The Nomination and Remuneration Committee, which consists of the President (chairperson), a Director (part-time), and three Independent Outside Directors, deliberates on the criteria and process for nominating (appointing) candidates for directors/corporate auditors and executive officers, the design of the remuneration system for directors and executive officers, director remuneration, and other matters, and provides its opinions and advice to the Board of Directors. The Committee seeks to improve the supervisory function of the Board of Directors and further enhance its corporate governance function by ensuring objectivity and transparency in procedures related to decisions on nominations, remuneration, and other matters, utilizing the knowledge and advice of a diverse range of Outside Directors and Corporate Officers.

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As the majority of the members of the committee are Independent Outside Directors, it is deemed that independence and objectivity from the Board of Directors can be ensured.

[Supplementary Principle 4.11.1 Views on the appropriate balance between knowledge, experience and skills of the Board of Directors as well as on its diversity and size]

Please refer to II.2. of this Report. We have also identified necessary skills of our Directors and Corporate Officers in view of our medium- to long-term management strategies, etc. and have prepared a skills matrix summarizing the technical expertise and experience of each Director/Corporate Officer. This skills matrix is prepared to visualize the area of knowledge and technical expertise of each Director/Corporate Officer and is used to determine candidates for these positions so that they complement with each other in terms of their skills, knowledge, etc., For the skills matrix, please refer to the Company's website.

https://sustainability.conexio.co.jp/en/governance/governance/	(in English text)
https://www.conexio.co.jp/corporate/governance/skillmatrix.pdf	(in Japanese text)

[Supplementary Principle 4.11.2 Concurrent positions held by Directors and Corporate Auditors] The Company discloses significant concurrent positions held by each Director and Corporate Auditor, including those at other listed companies, in the notice of general shareholders meeting.

[Supplementary Principle 4.11.3 Evaluation of the Board of Directors]

The Company regards efforts to improve the effectiveness of the Board of Directors as an important part of continuous improvement of corporate governance. As part of these efforts, the Company conducts an effectiveness assessment in principle once a year, and the effectiveness assessment for the fiscal year ended March 31, 2022 was conducted as follows:

(Effectiveness assessment process)

The effectiveness assessment was conducted under the leadership of the Governance Committee, which is a voluntary advisory committee to the Board of Directors and is chaired by an Independent Outside Director, and the results of the assessment were discussed and reviewed by the Board of Directors.

(1) Assessment method

Self-assessment by Directors and Corporate Auditors (Questionnaire)

Responses are tabulated by the secretariat and reported to the Governance Committee

The Governance Committee analyzes and assesses the responses and summarizes future initiatives as recommendations

The Board of Directors decides future initiatives based on the report and recommendations from the Governance Committee

(2) Questionnaire items

1. Composition of the Board of Directors: Composition and appointment method of the Board of Directors
2. Basis for the operation of the Board of Directors: How ideas that form the premise for the operation of the Board of Directors are shared
3. Operation of the Board of Directors: Number of board meetings held, number of agenda items, duration and excess or shortage of materials
4. Decision-makingprocess at the Board of Directors: Appropriateness of the decision-making process
5. Provision of training opportunities to Directors and Corporate Auditors: Adequacy of training opportunities
6. Inspection of business locations: Adequacy of inspection of business locations
7. Others: Additional opinions and comments

(Effectiveness assessment results)

After confirming that the responses to questionnaire items were generally appropriate through the assessment process outlined above, the Company concluded that the effective functioning of the Board of Directors is ensured. The Company concluded that all three of the following points that were identified in FY2021 as future steps to be taken have been addressed, and were evaluated as having been generally improved.

However, we recognized "2. Approach to Decision-making" and "3. Strengthen the Promotion of ESG/SDGs" as ongoing issues since we received new opinions and suggestions to improve effectiveness further.

1. Enhancement of the nomination process
2. Approach to Decision-making (Continued)

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