V Technology : Corporate Governance Report(Updated on December 28th,2021)

CORPORATE GOVERNANCE

Last Update: December 28, 2021

Company Name: V Technology Co., Ltd.

Representative: Shigeto Sugimoto, President, and CEO

Person to Contact: Jin Iino, Manager, General Affairs Dept

Securities Code: 7717

Stock Exchange Listing: TSE 1st Section

Phone: [phone]

【Corporate Governance Report】

The Status of the Company's corporate governance is as follows.

Ⅰ Basic Approach to Corporate Governance, Capital Structure, Corporate Attributes, and Other Basic Informationasic Approach to Corporate Governance

1. Basic Approach

We pursue the expansion of profits over the medium to long term through strategic initiatives and proactive management activities and contribute to society by creating innovation through our business. We aim to continue the enterprise and increase the corporate value, and we believe that it is essential to establish an organizational system by enhancing corporate governance and building good relationships by sharing cooperation, trust, and expectations with stakeholders such as shareholders, investors, customers, and our employees.

1. Establishment of a flat and flexible management organization system that enables prompt decision-making
2. Rapid and accurate information gathering ability, creative technology development ability, and aggressive boldness of cost competitiveness
3. Compliance with laws and regulations, articles of incorporation and company rules
4. Promote dialogue and timely, appropriate information disclosure

We strive to have more transparent company management, full of ambition, and a sense of speed.

【Reason for not implementing the Principles of the Corporate Governance Code】[Updated]

The Company has implemented all of the above in accordance with the Corporate Governance Code as revised in June 2021.

【Disclosure Based on the Principles of the Corporate Governance Code】[Updated]

• Principle 1-4:Cross-held Shares

Our company has a basic policy of not owning Cross-held Shares and, we do not own any of them.

• Principle 1-7: Related Party Transactions

When conducting related party transactions, the relevant directors are required to report in writing to the Board of Directors in advance.

Then, the Board of Directors, after excluding the relevant director from the quorum, resolves on the merits of the transaction.

When a transaction is implemented, the relevant director reports to the Board of Directors on a regular basis, and the Board of Corporate Auditors conducts audits as necessary.

• Supplementary Principle 2-3①

The Company has identified three material issues related to sustainability (materiality) as themes that it should be aware of throughout its corporate activities, based on its basic policy (Supplemental Principle 4-2②) that sets forth its initiatives related to sustainability.

The Company regards all material issues as business opportunities and is currently engaged in the following activities.

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・Environment and Resources

The Company will conduct business activities in consideration of the global environment and the efficient use of limited resources, taking into account climate change risks and opportunities.The Company is developing energy- saving equipment and exploring business models for a decarbonized society.

One specific example is the development of yield improvement technology and the establishment of a company to deliver salvage services.

The Company's entry into the agricultural sector is also a business model that solves issues related to water, which is an important resource in the agricultural sector, and the bearers of this resource.

・Our social contribution activities

The Company supports sports promotion activities and educational activities that contribute to the sound growth of young people. Currently, we are also supporting the activities of the All Japan Judo Federation to contribute to local sports promotion activities.

We have established a women's judo club as an active support for women to play an active role in society, and are hiring them as athlete employees.

The Company also supports the Consortium for Education and Research in Advanced Laser Science (Coral), where our employees give classes and conduct experiments on cutting-edge laser technology.

・Employees

The Company provides an internal environment in which employees, who are the important foundation of our business, can exercise their abilities. We apply a staggered workday system of up to one hour. We also manage our employees to take paid leave as early as possible within 10 months of grant.

The Company most recently introduced monthly PCR testing for all employees, including temporary employees, and a telecommuting system in response to the spread of the new coronavirus infection.

The Company will also continue to identify and address important issues by referring to the social situation, including the recommendations of TCFD.

• Supplementary Principle 2-4①

The Company conducts its corporate activities based on the concept of ensuring diversity, which is to fairly evaluate the abilities and knowledge of individuals, including those of overseas subsidiaries, and to promote them to management positions regardless of gender, nationality, or recruitment route.

The Company has a background (corporate culture) of accepting and growing a variety of people since its establishment. As a result, the percentage of mid-career hires who are promoted to management positions is currently over 95%, which is extremely high. In addition, we have promoted people to executive officers as appropriate, depending on their abilities. We have also been actively promoting women and non-Japanese to management positions, depending on their qualifications and abilities.

The Company has recently set a target of about 30% of non-Japanese employees in management positions in the 2030s (currently about 25%), taking into account the fact that the Company is currently expanding its business mainly in Asian countries. We will continue to actively promote women to management positions. Since the rate of mid-career hires to management positions is at a high level, we have not set a specific numerical target for the 2030s but maintain the status quo.

The Company is also working on the improvement of the work environment in parallel with the development of diverse human resources. The Company is working to create an environment that places the highest priority on the health and safety of its employees by ensuring that 100% of employees receive compensatory days off for working on holidays and that paid vacations are taken as soon as possible (within 10 months of being granted).

• Principle 2-6: Asset Owner

We have introduced a defined contribution individual pension plan (401K), have employees know the necessary information, and hold briefings on the investment plan regularly.

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• Principle 3-1: Enhancement of Information Disclosure

1. We have the following management principles.

Contributing to society with fervor and great ambition, through our world-class innovative manufacturing solutions.

The management philosophy is also disclosed on our website.

https://www.vtec.co.jp/en/corporate/philosophy.html

We appropriately disclose Our Company's management plan (outlook for business performance) for the current fiscal year in the Summary of Financial Results.

We are also working to enhance information disclosure, such as disclosing information on financial results briefings for institutional investors and presentation materials at the general shareholders' meeting on our website immediately after the event.

(ii) The following is the basic policy regarding corporate governance.

Dscribed above item "1. Basic Approach" of "Ⅰ . Basic Approach to Corporate Governance" in this Corporate Governance Report.

（iii）Regarding the policies and procedures for determining the compensation of executives and directors of our company,We will consider the balance with our profit, capital policy, and measures such as shareholder return.

Remuneration is determined based on the balance between the Company's earnings, capital policy and measures for shareholder return. For details, please refer to "Ⅱ Corporate Governance Structure for Management Administration About Management Decision-making,Execution, and Supervision, and Others" below.

（iv）Basic approach to selection and dismissal (basic policy, factors to consider, etc.), and process for decision making.

＜Policy＞

Senior management and directors: The Company's basic policy is to have knowledge, experience, ability, and multiple perspectives commensurate with their responsibilities. For Directors in particular, we place importance on their overall management capabilities, including (1) leadership to strongly promote the business, (2) a deep understanding of the business environment surrounding the Company, and (3) strengths and challenges.

Corporate Auditors:The Company's basic policy is to emphasize the balance of business experience and knowledge based on an understanding of accounting and finance at the Company and other companies, as well as qualities that ensure independence from business execution personnel.

The Company's basic policy on dismissal is to use the following as criteria for deliberation: (1) in the event of an act against public order and morals, (2) in the event that the continuation of duties becomes difficult due to health reasons, (3) in the event that corporate value is significantly impaired by neglect of duties, and (4) in the event that it becomes clear that the qualifications specified in the requirements at the time of appointment are not recognized.

＜Procedure＞

Senior management:Based on the proposal of the Representative Director, the Board of Directors shall make the appointment.

Directors and Corporate Auditors:Based on the proposal of the Board of Directors, the Board of Directors will submit each candidate to the General Meeting of Shareholders after deliberation by the voluntary Nomination and Compensation Committee.

Dismissal:In the event of a conflict with the above criteria, the Board of Directors will make a decision on dismissal after deliberation by the voluntary Nomination and Compensation Committee, based on a proposal by the Board of Directors in consideration of the importance of the relevant person to the Company.

(v) Reasons for such election/dismissal/nomination, expected roles, etc.

The reasons for the nomination of candidates for Directors and Corporate Auditors of the Company, whether internal or external, are disclosed in the notice of convocation of the General Meeting of Shareholders.

In addition, the Company believes that the election and dismissal of senior management will be explained as necessary to the extent appropriate.

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• Supplementary Principle: 3-1③

In accordance with our management philosophy, the Company focuses on management that is conscious of sustainability. In order to achieve sustainable business growth, we are working to utilize human capital and intellectual property as follows.

Human capital:

To support a variety of work styles, we allow our employees to stagger their work hours by up to one hour. In addition, in response to the recent outbreak of the new coronavirus, we have introduced a telecommuting system (July 2020). We consider the health and safety of our employees to be our top priority, and we are taking measures with a sense of speed in terms of human capital, such as introducing telecommuting for all employees on an experimental basis in March 2020.

Intellectual property:

We have always focused on research and development, but as mentioned above, in recent years we have been placing particular emphasis on the field of sustainability. The ratio of R&D to sales was 3.76% in the most recent fiscal year, the 24th.

Examples of initiatives related to climate-related risks and opportunities:

We are developing technologies that contribute to decarbonization. Examples include reducing energy consumption in manufacturing equipment by applying LED light sources in exposure systems, and improving the energy efficiency of customers' manufacturing devices by developing annealing technologies. We also aim to diversify our business by solving agricultural issues in Japan and overseas, and are working on environmentally friendly agricultural methods that can significantly reduce the use of agricultural chemicals and water compared to conventional methods.

In the future, we will consider how to respond to the monitoring and supervision of climate-related risks and opportunities by the Board of Directors, with particular reference to the TCFD.

• Supplementary Principle: 4-1①

The Company has introduced an executive officer system to clarify the roles and responsibilities of directors and executive officers in order to strengthen corporate governance.

The Company has established "Regulations of the Board of Directors" and "Regulations of Duties and Authorities" to clearly define matters to be submitted to the Board of Directors. As the Company places importance on speed, business decisions are made by resolution of the Executive Officer in charge and the President and CEO.

On the other hand, the Company considers particularly important matters and managerial decisions to be matters for resolution by the Board of Directors, which, together with the supervision of business execution, are the duties of the Board of Directors. The duties of executive officers are to fulfill their roles as persons responsible for the execution of their assigned duties.

• Supplementary Principle: 4-1③

The succession plan for the CEO, etc. is based on the Company's management philosophy and specific management strategies as well as the skill matrix defined in accordance with Replenishment Principle 4-11① , and is managed by the Board of Directors after consultation with the Nomination and Compensation Committee.

The Nomination and Compensation Committee is chaired and majority of its members are independent outside directors, and has established a highly transparent and fair system for nominating successors. This process is reviewed as necessary in response to changes in the business environment surrounding the Company.

The development of successors with sufficient time and resources will also be reported to the Board of Directors and proceed as appropriate.

• Supplementary Principle: 4-2②

The Company believes that it is important for a company to fulfill its social responsibilities so that it can coexist with society and the Earth and achieve sustainable development. We have established the following basic policies for our sustainability initiatives based on our management philosophy, management policies, corporate action guidelines, and employee action guidelines.

・Contribute to society and the Earth through the creation of the world's best innovations.

We will not only address global environmental issues through our business, but also participate in and contribute to the local community through our sponsorship. In order to make various contributions, we will continue to take on the challenge of innovation in new technologies and businesses.

・Compliance with laws and regulations in economic activities

We will comply with domestic and international laws and regulations, and conduct our business activities in a sensible manner. In order to conduct fair transactions, we will respect free competition in the market and strive to maintain a fair and equal position with our stakeholders.

・Respect for human rights and various values

We will respect the diverse values, individuality, and privacy of our employees and other related individuals. In addition, as a company engaged in global corporate activities, mainly in Asia, we will strive for mutual understanding, taking into consideration not only individual values but also the culture and customs of each country and region.

In addition, each department is responsible for the implementation status and effects of various strategies related

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to human capital and intellectual property, and reports to the Board of Directors as appropriate.

• Principle 4-9: Independence Judgment Criteria and Qualifications of Independent Outside Directors
  The Company shall designate as independent outside directors those outside directors of the Company who do not

fall under any of the following conditions. The Company will, in principle, file a notification with the Tokyo Stock Exchange with the consent of the individual.

・Criteria for determining independence

The Company shall designate as independent outside directors those outside directors of the Company who do not fall under any of the following conditions.

• A person who has the Company as a major business partner or a person who executes the business of the Company (payment of 2% or more of annual consolidated total sales)

②The Company's major business partners or their business executors (payment of 2% or more of the annual consolidated total sales)

• Consultants, accounting experts, or legal experts who receive a large amount of money (payment of 10 million yen in the case of an individual, or 2% or more of annual gross sales and ordinary income in the case of a corporation on average for the past three fiscal years) or other assets from the Company other than compensation for their services as directors. In the event that the person obtaining such assets is a corporation, partnership or other organization, the person shall be a member of such organization.

• Accounting auditor of the Company or its subsidiary or its employee

• Directors, corporate auditors, accounting advisors, executive officers, corporate officers, managers, or any other employees of financial institutions or any other major creditors essential to the procurement of funds, or their parent companies or important subsidiaries

• Those falling under ① to ⑤ for the past five years

• • Spouse or relatives within the second degree of relationship falling under ① to ⑥.
• Supplementary Principle: 4-10①

The Company established a voluntary Nomination and Compensation Committee as an advisory body to the Board of Directors in February 2021.

For details, please refer to "1. Matters Concerning Institutional Structure and Organizational Operations" in "Ⅱ Corporate Governance Structure for Management Administration About Management Decision-making, Execution, and Supervision, and Others.

• Supplementary Principle: 4-11①

The Company believes that it is important for the Board of Directors to fulfill its responsibilities to have each director, both inside and outside the Company, who has diverse experience, knowledge, expertise and insight, to share and scrutinize opinions from various perspectives.

In addition to the details described in Principle 3-1 regarding policies and procedures for the election of directors, we will consider the combination of the skills currently possessed by each director.

We believe that the current composition of the Board of Directors is an appropriate size that allows for substantive discussions to be held in a compact manner, while at the same time generally ensuring diversity.

For details of the skill matrix of the Company's Board of Directors, please refer to the table attached to " V. Others", "2. Other Matters Concerning Corporate Governance System, etc.".

• Supplementary Principle: 4-11②

When an officer of the Company wishes to serve concurrently as a director or corporate auditor of another listed company, the Board of Directors confirms and deliberates whether or not the officer can adequately fulfill his/her role and responsibility as a director or corporate auditor of the Company, and then decides whether or not the officer can serve concurrently.

In addition, when making a resolution, the relevant officer is excluded from the quorum.

The status of concurrent positions is disclosed annually in the notice of convocation of the General Meeting of Shareholders and in the Annual Securities Report.

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