September 7, 2017
To whom this may concern,
Company: Tamagawa Holdings, Co., Ltd.
Representative: President, Toru Masuzawa(JASDAQ Code: 6838)
Contact: Management Planning Division, Junya Tokumoto
Tel: 03-6435-6933

The Sequence of Background Concerning Dividends of Term-end of FY March 2018
and Preventive Measures

Please be informed that we established the internal investigation committee and external investigationcommittee and conducted investigation and cause analysis concerning the case where we made payment ofdividends exceeding the distributable amount to be calculated by the Companies Act and Corporate Accounting
Rules as a result for the dividends amount of term-end of FY March 2018 (hereafter “Case”), which wasannounced in the “Notice on dividend of last fiscal year beyond distributable amount” dated August 1,
2018, as we announced in the “Notice on establishment of investigation committee concerning the dividends ofthe previous term-end exceeding the distributable amount” dated August 6, 2018. The following is the reporton the investigation result and preventative measures thereof.

1.

Background of the CaseOn May 11, 2018, we held the decision at the board of directors in writing for dividends of surplus of 0.5
yen per share (total amount of 21 mil. yen) with March 31, 2018 as the record date, and made payment ofdividends with June 29, 2018 as the effective date (the bill of dividends of such surplus shall be hereafter
called “Bill of Dividends,” and dividends of such surplus shall be called “Dividends”). The Dividends was
subsequently found by our auditors’ suggestion to have exceeded the distributable amount calculated bystipulation of the Companies Act and the Corporate Accounting Rules in the course of preparation for theaccount statement of 1Q March 2019 in late July 2018.
In order to thoroughly investigate the cause of occurrence of the Case and prevent future reoccurrence, on
August 6, 2018, the internal investigation committee was established mainly with the lawyers assigned toour outside directors who were elected at the ordinary shareholders’ meeting held on June 28, 2018, andthe external investigation committee was established consisting of four lawyers to request verification of
the internal investigation committee’s investigation result, proposal of cause investigation and preventive
measures, and consideration of responsibility of the persons concerned in the Case.

2.

Investigation method
In the internal investigation committee, confirmation of the fact process, hearing from the concerned
persons, analysis of the cause of occurrence, consideration of the internal treatment, design of preventive
measure, etc. were conducted.
Chairperson:
Noriko Kamibayashi(appointed at the 50th-term ordinary shareholders’ meeting, outside director, lawyer)
Committee member:
Kiyoshi Furukawa(appointed at the 50th-term ordinary shareholders’ meeting, outside auditor, tax accountant)Committee member:
Takaharu Kando(Management Administration Division Manager of our subsidiary, Tamagawa Electronics, Co., Ltd.)In addition, in the external investigation committee, verification of the internal investigation committee’s
investigation result, cause investigation as needed and proposal of preventive measures and considerationof responsibility of the persons concerned in the Case were conducted.
Chairperson:
Committee member:Committee member:Committee member:

Atsunori Nobukuni (Mori Hamada & Matsumoto LPC)
Kentaro Minegishi (Mori Hamada & Matsumoto)
Go Chihara (Mori Hamada & Matsumoto)
Midori Yamaguchi (Mori Hamada & Matsumoto)3.

Facts found by investigation
In our board of directors held on April 27, 2018, the proposal was made and discussed upon the dividends
for term-end of FY March 2018 as the report matters, but the director in charge of finance (then current; thesame hereafter) made proposal of the dividends amount without being aware of proposing the dividends
amount exceeding the distributable amount, and the deliberation continued with assumption by all of theattendees that the directors in charge of finance had submitted the proposal in consideration of the legal
regulation for distributable amount, etc. As a result, on May 11, 2018, we held the decision at the board ofdirectors in writing for dividends of surplus of 0.5 yen per share (total amount of 21 mil. yen) with March 31,2018 as the record date, and consequently made payment of dividends with June 29, 2018 as the effective
date, which exceeded the distributable amount calculated by the Companies Act and Corporate Accounting
Rules.
In consideration of the internal investigation committee’s investigation result and the external investigationcommittee’s verification result, when considering the specific dividends amount, the distributable accountcalculation was not done within the company, and we could not find that the Dividends exceeded thedistributable amount in the course of internally determining the specific amount of the Dividends, ofdeliberating the Dividends at the board of directors, and of the auditors’ consideration of legality of the Billof Dividends.

4.

Analysis of cause of the Case occurrence
Analysis of cause of the Case occurrence in consideration of the internal investigation committee’sinvestigation and the external investigation committee’s verification is as follows.
(1) Division of duties concerning the distributable amount was unclear, and we did not calculate the
distributable amount as work of the financial accounting division, and also no specific direction to makecalculation was given.
(2) Excessive trust was placed to the board member in charge, and due to assumption that considerationof the dividends is requested at the board of directors because the restriction of distributable amount,etc. is naturally observed, no specific question was asked or no explanatory materials are requested
from other directors or auditors at the board of directors held on April 27, 2018, and no discussion on
legality of the Dividends including whether the Dividends would exceed the distributable amount at theboard of auditors.
(3) The directors and auditors, and the employees engaged in the dividends did not have enoughknowledge of distributable amount.
(4) There were no divisions or departments in the management division where the matters concerning thelegal affairs should be main division of duties, and the system for the matters concerning the legalaffairs was not sufficient.
(5) When submitting the bill or reporting the reporting matters to the board of directors, enoughopportunities were not secured for verification and discussion on legality of the bill of the board ofdirectors.

5. Treatment for the Case
In order to make clear the locus of responsibility for the Case, the directors who proposed the Bill ofDividends and the directors who agreed to the proposal concerning the Bill of Dividends shall be subject tothe treatment of reduction of consideration by 30% for two (2) months from September 2018 (in terms ofthe directors who resigned at ending of the 50th-term ordinary shareholders’ meeting, the directors incharge of finance have offered to voluntarily return 30% of the past four-month consideration, and otherdirectors have offered to voluntarily return 30% of the past two-month consideration).
Additionally, each auditor who did not pose objection against the proposal concerning the Bill of Dividends
has offered to voluntarily return 30% of the two-month consideration (the auditor who resigned at ending of
the 50th-term ordinary shareholders’ meeting has offered to voluntarily return 30% of the past two-monthconsideration).
Furthermore, among the directors who proposed the Bill of Dividends and the directors who agreed to theproposal concerning the Bill of Dividends, four directors who received the Dividends as shareholders(including two directors who resigned at ending of the 50th-term ordinary shareholders’ meeting) haveoffered to voluntarily return the amount equivalent to the dividends received by each of such directors as
shareholders.

6.

Preventive measures
In order to reinforce the preventive measure, we will execute the matters listed in the following.
(1) To conduct dividend including calculation of distributable amount, to clearly describe the work process
and to prepare the process to double-check the content(2) To hire an external expert to check the dividends(3) To make effort to conduct internal trainings by inviting an external instructor and to acquire necessary
knowledge by attending external seminars as approach to educate our board members and employees

with knowledge of the Companies Act(4) To prepare the system for the matters concerning the legal affairs in the management division and toincrease the staff as needed(5) To sufficiently secure the opportunities for verification and discussion concerning the legality of the billof the board of directors, to notify the bill by the previous day of the date of such board of directors forthe bill and document, and to distribute such document for satisfactory deliberation.

7.

Locus of responsibility
We have received the following consideration result from the external investigation committee forresponsibility of the persons concerned in the Case. Please see the Annex “Investigation Report” forverification of the internal investigation committee’s investigation result and investigation of cause asneeded and proposal of preventive measures by the external investigation committee , and consideration ofresponsibility of the persons concerned in the Case. Additionally, we are not at this moment planning toinvestigate the legal responsibility of the directors who proposed the Bill of Dividends, the directors whoagreed to such proposal for the Bill of Dividends and the auditors who did not pose opposition against theproposal in consideration of the external investigation committee’s opinion to judge that the treatment forthe persons concerned which is described in above 5. is appropriate as treatment for the Case, provided
that such treatment will be taken.

(1) Criminal charge
As the fact is not observed that the directors and auditors executed the dividends for the Case although
they were aware of the dividends for the Case exceeding the distributable amount, nor is it observed to
be intentional, and therefore, this is not the case where the directors and auditors are accused for
criminal charge.
(2) Civil liability
In consideration of the investigation result of the internal investigation committee and verification resultof the external investigation committee, it cannot be determined that the directors do not hold liability fordamage under the Companies Act and that the auditors do not hold liability for compensation by breachof the responsibility for care of a good manager.
(3) Treatment of the concerned persons
In general consideration of condition of the Case, the treatment for your directors who agreed to theproposal concerning the Bill of Dividends and the treatment for the auditors who did not pose objection
against the Proposal are considered to be appropriate as treatment for the Case.

8.

Future prospective
We will take this situation sincerely, make thorough preventative measures and make effort for structuringof robust internal management. Your kind understanding is very much appreciated.