Outlines of the Company’s Corporate Governance System

1. Reason for Adopting the Present Corporate Governance System

Since Anritsu engages in a highly professional manufacturing business, swift business execution based on the front line's opinions is indispensable. In this light, since 2000, the Company has introduced the Corporate Officer System as a management structure to continuously increase corporate value by having management executives make decisions, execute businesses speedily and exert their management abilities. Since corporate governance is one of the vital issues, the Company has also appointed independent Outside Directors and set up voluntary advisory bodies to the board, i.e., the Nominating Committee and the Compensation Committee, mainly consisting of Outside Directors. In this way, we are forging ahead with ensuring the transparency and the accountability of the Company management. Furthermore, to facilitate those approaches and strengthen audit and supervisory functions, as resolved at the 89th Ordinary General Meeting of Shareholders held on June 25, 2015, the Company transitioned to a “Company with Audit & Supervisory Committee.” The principal reasons for such transition were as follows: (1) Anritsu had strived to improve corporate value aiming at the introduction of the corporate governance system which could smoothly obtain support and understanding from the global point of view, considering the high proportion of overseas sales in the consolidated sales and the ownership ratio of shares held by non-Japanese; (2) Anritsu expected that by reducing the number of independent Outside Officers who were valuable and rare, and having them to join the board, the proportion of Outside Directors in the whole board would rise; thereby leading to the further improvement of transparency and active discussions based on the perspectives of the shareholders; and (3) Anritsu considered that the participation of officers who engage in audit activity into the board resolution would lead to the reinforcement of audit and supervisory functions.

2. Overview of Company Structure

Anritsu transitioned to a “Company with an Audit & Supervisory Committee” as a corporate structure and also introduced the Corporate Officer (shikko-yakuin) System. For the decision-making on the execution of important business operations, the Articles of Incorporation of the Company specify that “based on Article 399-13.6 of the Companies Act, the Board of Directors may delegate all or part of a decision regarding the execution of significant operations (excluding the matters listed in items of paragraph 5 of Article 399-13) to any Director by its resolution.” However, as a current rule, such an important matter shall be deliberated and decided by the board. As a future action, Anritsu will improve the board’s deliberations and strengthen its supervisory function by delegating a decision partly to any Director, reconsidering the criteria for submitting matters to the board to narrow down the list.

In the Articles of Incorporation of the Company, there is no provision for the roles or positions of a corporate counselor (sodanyaku) and advisor (komon). Currently, the Company does not have a structure or practice of a Representative Director serving in such a role or position and playing a leading role continuously in the Group’s management after retiring as Director.

Anritsu has separated the functions of decision-making and supervision by the Board of Directors, and Officers’ business execution.

With the introduction of the Corporate Officer System in 2000, the Company has streamlined its structure to make faster decisions through discussions in smaller groups. The “Rules of the Board of Directors” specifies matters to be submitted to the board, and Outside Directors actively express their honest opinions at the board meeting. Through fruitful deliberations, the board resolves the matters stipulated by the Companies Act and the Articles of Incorporation and other material matters about the Company and the Group companies; it also affirms reported cases, such as the progress or status of business execution. In principle, a regular board meeting is held monthly, and an extraordinary meeting is convened when required. In FY 2021, the board had 14 meetings attended by all the Directors, except for two meetings from which one Director was absent. As to a “Free Discussion,” a quarterly session held after the close of a board meeting, all the Directors (including Outside Directors and Audit & Supervisory Committee Members), Officers, department managers, and senior staff engage in active discussions about managerial challenges and other matters in the mid-to-long term, according to the themes of the presentations made on the relevant business division of the Group.

The material matters on business execution are deliberated and decided at the Management Strategy Conference chaired by the Group CEO and consists of Executive Directors, Officers, and other executives. A regular meeting of the Management Strategy Conference is held monthly, and an extraordinary meeting is convened when required. The Management Strategy Conference formulates a comprehensive strategy for global management and Group management and makes decisions on material matters on business execution that do not require the board’s deliberation. To deepen the consideration of issues submitted to the board, the Conference members discuss them in advance, except those exclusively resolved by the board.

The Company establishes the Nominating Committee, an advisory body to the board, to enhance transparency, objectivity, and impartiality in selecting or dismissing directors and officers and removing the Representative Director. It also receives advice and recommendations on the training of management executives from the Committee. The Nominating Committee deliberates matters, including those listed below, before submitting a report (toshin) to the board.

1. Proposal for selection of candidates for Directors and the same for dismissal of any Director
2. Advice or recommendation on the removal of the Group CEO and Succession Plan
3. Proposal for appointments of Officers and advice or recommendation on their Succession Plan
4. Proposal for the board’s composition (the ratio between inside and outside Directors, the area of expertise and professional careers of the board members, and other elements)
5. Examination and determination of the qualification of Director and the selection criteria
6. Advice or recommendation about the management and operation or revisions of several systems for Directors and Officers (such as the term of office and age limit)
7. Advice or recommendation on the “Training Program for Next-Generation of Executives” and training for Directors and Officers or their successor candidates

Further, since compensation and other rewards (compensations) for Directors and Officers are material matters in corporate governance, the Company establishes the Compensation Committee as an advisory body to the board. The Committee deliberates the amount of performance-linked compensation, including bonus based on the performance review for a previous business year as well as the compensation scheme, its components, payment level, the balance of allocation, and other details for a current business year, before submitting a report (toshin) to the board.

Currently, the Nominating Committee and the Compensation Committee have seven members each, consisting of all the Outside Directors (five Directors, including Directors on the Audit & Supervisory Committee), the Group CEO, and one Director designated by the Group CEO. The respective chairpersons are selected among Outside Directors. All meetings of both Committees held during the latest business year (three sessions for the Compensation Committee and three sessions for the Nominating Committee) were held with members’ perfect attendance, and they had fruitful deliberations on the subjects listed above.

As another effort made after transitioning to a “Company with Audit & Supervisory Committee,” Anritsu sets up the Independent Committee consisting of Outside Directors only. The chairperson of the Committee is selected among Outside Directors, and as the “Leading Independent Outside Director,” the chairperson takes the role of forming an opinion of the Committee and plays as a liaison and coordinator with the senior management of the Company. Through mutual good and smooth communication among Outside Directors, the Committee creates a venue for free and active discussions to facilitate information exchange and share the same problem recognition from an independent and objective standpoint. The Company expects to utilize their advice on the management; suggestions on the evaluation of the board’s effectiveness; reports (toshin) presented at the board’s request based on the deliberations at the Nominating Committee and the Compensation Committee; and other opinions for addressing its management challenges and leading such use to raise the Group’s corporate value.

The Audit & Supervisory Committee stipulates the “Rules of the Audit & Supervisory Committee” and its by-laws to work on many activities. At the beginning of every business year, the Committee selects its chairperson and full-time personnel, allocates audit work among its members, and determines other matters necessary for fulfilling their duties as the Committee members. Further, the members review their activities and the Committee operation and audit results for the previous term, assess risks for a new business year as one of the Company’s management challenges, discuss and draw up their audit policy, identify priority items, and prepare an annual audit plan.

Subject to the regulations under the Article 427, paragraph 1 of the Companies Act, agreements on limitation of liability for damage under Article 423, paragraph 1 of the said Act have been concluded between the Company and Directors who do not execute business (including Outside Directors). The limit of liability for damage in accordance with the relevant agreement is either 10 million yen or the amount stipulated by laws and regulations, whichever is higher. Such limitation of liability is permissible only in cases in which the relevant Directors act in good faith and without gross negligence when performing duties which triggered such liability. The Company has not entered into an agreement on limitation of liability for damage with the Accounting Auditor.

With regard to resolutions concerning the appointment of Directors, the Company has made regulations under the Articles of Incorporation to the effect that Directors shall be elected at a general meeting of shareholders under the condition that shareholders holding more than 1/3 of the shareholders’ voting rights are present, the election shall take place through a resolution of a majority vote of such voting rights, and the election of Directors by cumulative voting shall not be allowed.

The Company has made regulations under the Articles of Incorporation that matters outlined in each item of the provisions of the Article 459, paragraph 1 of the Companies Act can be applied via resolution of the Board of Directors, except where separately regulated under laws and regulations, so that flexible capital policies can be fulfilled.

The Company has made regulations under the Articles of Incorporation to the effect that resolutions regulated under Article 309, paragraph 2 of the Companies Act are made under the conditions that shareholders holding more than 1/3 of the shareholders’ voting rights are present at a general meeting of shareholders and more than 2/3 of such voting rights effectuate a resolution, in order to further assure the preservation of a quorum for a special resolution at a general meeting of shareholders.