Initiatives

Candidates for Directors and Audit & Supervisory Board Members

The Articles of Incorporation stipulate that the term of directors is one year and the term of Audit & Supervisory Board Members is four years. Directors and Audit & Supervisory Board Members are elected when attending shareholders with a majority of voting rights approve their appointment at a general meeting of shareholders in which at least one third of the total voting rights of all shareholders are exercised by the attending shareholders.

Candidates for director are required to have deep knowledge of photonics, a desire to explore the frontiers of light and an entrepreneurial spirit with passion for a new industry. To put these qualities into practice, candidates should be capable of implementing bold reforms, backed by leadership and teamwork. Based on these criteria, the Company selects candidates while taking into consideration gender, expertise and other diversity in the composition of the Board of Directors, as stated in Article 13 of the Basic policy on corporate governance the skills matrix, and through a comprehensive assessment of their performance, achievements, character, ethics and other factors. Furthermore, in order to enhance fairness, transparency, and objectivity in the selection of candidates and to earn the trust of our shareholders, we consult in advance with the Nomination and Compensation Committee —a committee composed of a majority of Outside Directors—and The Nomination and Compensation Committee Regulation clearly stipulates that the Board of Directors shall respect the Committee’s reports.

Candidates for Audit & Supervisory Board Members are required to fulfill their duties from an independent and objective standpoint. Candidates should be individuals of outstanding character, insight and abilities, abundant experience, and high ethical standards. At least one Audit & Supervisory Board Member is appointed with appropriate knowledge of finance and accounting.

The skills matrix

Outside Directors and Outside Audit & Supervisory Board Members

We strive to establish systems for providing and sharing the necessary information so that our outside directors and outside Audit & Supervisory Board Members can fully exercise their advisory and supervisory functions from an independent standpoint. In particular, with a view to enhancing the quality of deliberations at Board of Directors meetings, we focus on initiatives to provide outside directors and outside Audit & Supervisory Board Members with information on agenda items in advance and to promote their understanding of those items.

・Advance distribution of materials on matters for resolution

・Prior explanation of the agenda as necessary

・Reporting of views of internal Audit & Supervisory Board Members

・Ensuring appropriate access to necessary internal information, such as minutes of the Board of Executive meetings

Through these initiatives, we have established a system in which outside directors and outside Audit & Supervisory Board Members actively participate in the deliberations of the Board of Directors meetings based on their extensive expertise, thereby contributing to improved management transparency and objectivity, as well as strengthened corporate governance.

【Officer in charge of contact point for outside directors and outside Audit & Supervisory Board Members】

Ken Nozaki (Director, Managing Executive Officer, Chief of Global Management and Planning General Headquarters)

【Message from Outside Directors】

Compensation scheme for Directors

Compensation for Directors and Audit & Supervisory Board Members is as follows.

【Compensation data for Directors and Audit & Supervisory Board Members】

Compensation of directors	Fixed Remuneration	720 million yen or less per year (including an amount within 120 million yen per year for Outside Directors)	Determined at the December 22, 2023 ordinary general meeting of shareholders
	Short-term performance-linked Remuneration
	Restricted Stock Remuneration	200 milliom yen or less per year (Excluding Outside Directors)	Determined at the December 20, 2019 ordinary general meeting of shareholders
Compensation of Audit & Supervisory Board Members	Cash Remuneration	10 million yen or less per month	Determined at the December 17, 2021 ordinary general meeting of shareholders

【Remuneration Policy】

On the basis of the conviction that light has unlimited possibilities, the Company strives to pursue the unknown and unexplored. Based on new technologies and knowledge the Company creates new markets that contribute to a better society and a healthier planet.

Since these philosophies cannot be achieved in the short term, the Company requires its Directors to achieve results from a medium-to long-term perspective, not from a short-term perspective. Therefore, the Company considers that fixed remuneration is suitable as the base remuneration for Directors. In addition, the Company has introduced short-term performance-linked remuneration in consideration of the need to achieve stable performance improvement in each fiscal year in order to respond to shareholders' entrustment.

On the other hand, the Company has introduced stock-based remuneration (restricted stock remuneration) with the aim of contributing to the sustainable enhancement of corporate value from a long-term perspective, standing on the same standpoint as our shareholders.

As a result, the remuneration for Directors (excluding Outside Directors) consists of (1) fixed remuneration, (2) short-term performance-linked remuneration, and (3) stock-based remuneration. Since the Company places importance on a medium-to long-term perspective, the Company has structured the ratio of these remunerations to be generally 70:15:15*. In addition, the remuneration for Outside Directors is fixed remuneration only.

* Short-term performance-linked remuneration may increase or decrease depending on the business performance of each fiscal year. Therefore, the actual ratio may change. In addition, above ratio may not be applied to Officers who concurrently serve as employees due to the relationship with their salaries as employees.

A summary of the remuneration system for Directors is as follows:

1. Involvement of the Nomination and Compensation Committee

Remuneration for Directors is determined on an individual basis by the Board of Directors. Decisions by the Board of Directors are made after consultation with the Nomination and Compensation Committee, the majority of whose members are Outside Directors. The Nominating and Compensation Committee regulations stipulate that the Company respect the reports of the Nominating and Compensation Committee.

2. Summary of each remuneration

Remuneration for Directors consists of (1) fixed remuneration, (2) short-term performance-linked remuneration, and (3) stock-based remuneration. The ratio of these remunerations shall be 70:15:15. Short-term performance-linked remuneration changes in accordance with business performance.

A summary of each remuneration is as follows:

(1) Fixed Remuneration

The amount of monthly fixed remuneration is determined for each position, taking into consideration other companies' standards through surveys conducted by external organizations. Remuneration for Outside Directors is fixed remuneration only.

(2) Short-term performance-linked remuneration

Short-term performance-linked remuneration is determined individually by the Board of Directors based on the performance of each fiscal year and the Company pays the remuneration to Directors in December of each year. The index of this remuneration is the consolidated operating profit of our group. The remuneration amount is calculated by multiplying the base amount (generally 15 % of the entire remuneration) with the following coefficients: (i) the consolidated operating profit and (ii) each position. This remuneration serves as an incentive to improve business performance.

(3) Stock-based remuneration

Stock-based remuneration set at around 15% of total Director remuneration is decided for each Director at the Board of Directors and paid prior with a 30-year transfer restriction period from the record date.

【Remuneration scheme for Directors (Excluding Outside Directors)】

Remuneration scheme for Directors (Excluding Outside Directors

■Fixed remuneration: Determined by position taking into account industry benchmarks through surveys conducted by a third party organization.

■Restricted stock remuneration: Determined on an individual basis so as to constitute approximately 15 % of the Director’s total remuneration. The allotment agreement includes a provision allowing the Company to forfeit restricted stocks allotted to a Director if the Board of Directors determines that the Director has committed a material violation of laws, regulations, or internal company rules (Claw back clause).

■Short-term performance-linked remuneration: Determined on an individual basis by multiplying a base amount by a separately determined coefficient based on the consolidated operating profit for the fiscal year and a position.

Effectiveness evaluation of Board of Directors

We evaluate the effectiveness of the Board of Directors to improve its functionality and enhance corporate value. With the support from a third party organization and by continuously implementing a cycle of surveys, analysis, and improvement, we aim to ensure a more objective and effective Board of Directors. The effectiveness evaluation conducted in September 2024 received generally positive feedback, and we believe that the effectiveness of the Board as a whole has been maintained. Meanwhile, we recognized issues such as oversight of the governance structure of the Group as a whole. In response, we have strengthened oversight systems, such as reporting of internal audits of subsidiaries to the Board of Directors, in addition to ongoing efforts to improve our governance system, the results of which have begun to manifest.

The effectiveness evaluation conducted in September 2025 also identified issues such as greater revitalization of discussions on company policy and strategy as well as continued strengthening of group-wide oversight in connection with corporate acquisitions. We will continue striving to improve the function of the Board of Directors by addressing and resolving these issues.

【Overview】

Target: Directors and Audit & Supervisory Board Members

Type: Self-evaluation using a five-grade evaluation and free-form descriptive questionnaire

Managed by: Third party organization

【Survey items】

Overall operations and discussion items
Support system for Directors and Audit & Supervisory Board Members
Monitoring function
Dialogue with investors
Executive performance
Operation of the Nomination and Compensation Committee

【Process】

Initiatives to strengthen corporate governance

Year	Initiatives
2015	The percentage of independent Outside Directors rose to 14 % (2 members)
2016	Started the effectiveness evaluation of the Board of Directors
2019	Resolved to Introduce stock-based remuneration for Directors (Excluding Outside Directors)
2020	The percentage of independent Outside Directors rose to 27 % (3 members) Introduced Executive Officer System Entrusted the effectiveness evaluation of the Board of Directors to a third party
2021	The percentage of independent Outside Directors rose to 40 % (4 members) Reduced the Director's term of office from 2 years to 1 year Established the Nomination and Compensation Committee
2023	Resolved to Introduce short-term performance-linked remuneration for Directors (Excluding Outside Directors)
2024	Expanded the scope of the effectiveness evaluation of the Board of Directors to include the Nomination and Compensation Committee

Training successors

To fulfill its corporate social responsibility on a sustainable basis, Hamamatsu Photonics believes it is vital to take effective steps to cultivate successors, not only for the president but also for directors. However, the Company has no officially stipulated procedures for cultivating successors.

Instead, the Company relies on a bottom-up process of manager development. A characteristic of the Company that has continued since its foundation is that each small manufacturing-group unit or “segment” is required to be profitable in its own right. Multiple small segments combine to comprise a manufacturing department, and the manufacturing departments combine to form a business division. Personnel in charge of each unit are asked to carry out management with an awareness of profitability. This arrangement enables managers to acquire the awareness and qualities they need to serve the Company as management professionals.

Training for Board members

We encourage directors and Audit & Supervisory Board Members to conduct voluntary self-training to enhance their ability to fulfill their duties. We also obtain training from outside sources.

【Examples of training topics】

2026: Business management and AI use

2025: Compliance and crisis management

2024: Dialogue with institutional investors
2023: Performance indicator
2022: Anti-corruption
2021: Revised Corporate Governance Code
2021: ESG management
2019: Patent Infringement Proceedings
2019: Cost of capital
2018: Directors’ duties and responsibilities

Prevention of conflict of interest

Our officers and employees will not engage in any conduct that conflicts with the interests of the Company for the benefit of an individual (including conflicts of interest and potential one) without just cause.

Initiatives

Candidates for Directors and Audit & Supervisory Board Members

Outside Directors and Outside Audit & Supervisory Board Members

Compensation scheme for Directors

【Compensation data for Directors and Audit & Supervisory Board Members】

【Remuneration Policy】

【Remuneration scheme for Directors (Excluding Outside Directors)】

Effectiveness evaluation of Board of Directors

Initiatives to strengthen corporate governance

Training successors

Training for Board members

【Examples of training topics】

Prevention of conflict of interest

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