Corporate Governance Guidelines

Chapter 1. General Provisions
Article 1. Purpose
These guidelines set out the basic policy, framework and operating policy of the corporate governanceof Subaru Corporation (hereinafter referred to as the “Company”) in order for the Subaru Corporation
Group (hereinafter referred to as the “Group”) to achieve sustainable growth and improve its corporate
value in the medium and long term.
Article 2. Basic policy of the corporate governance1.

Aspiring to the Subaru vision of being a “Delivering happiness to all” the Company shall work on theenhancement of corporate governance as one of the top priorities of management in order to gain thesatisfaction and trust of all its stakeholders by achieving sustainable growth and improving its corporate
value in the medium and long term based on the corporate philosophy and management philosophy
outlined below

2.

The Company shall clearly separate the function of decision making and the oversight of corporate
management from that of the execution of business operations and aim to realize effective corporate
management by expediting decision making.

3.

The Company shall ensure proper decision making and the oversight of corporate management and theexecution of business operations as well as enhance its risk management system and compliance systemthrough the monitoring of its management and operations and advice provided by outside officers.

4.

The Company shall implement proper and timely disclosure of information in order to improve thetransparency of management.

Subaru’s vision, value statement, and corporate statement

1Article 3. Revision and amendment and/or abolition
The Board of Directors shall consider reviewing these guidelines appropriately and amend and/or abolishthem by its resolution as necessary, in order to realize effective corporate governance in view of changes
in economic and social circumstances, etc.

Chapter 2. Ensuring Rights and Equal Treatment of Shareholders
Article 4. Ensuring equal treatment of shareholders
The Company shall treat its shareholders equally in accordance with the features and number of theshares they hold in order to ensure substantial equality of shareholders.
Article 5. General Meeting of Shareholders
1.

The Company shall recognize that the General Meeting of Shareholders is an opportunity to holdconstructive dialogue with shareholders and make efforts to improve the environment for the exercise ofrights at the General Meeting of Shareholders.

2.

The Company shall make efforts to send the notice of convocation of the Ordinary General Meeting of
Shareholders about a week earlier than the date required by law so that its shareholders have adequate
time to examine proposals for the meeting and exercise their voting rights appropriately. In addition, theCompany shall post said notice of convocation on its website as well as the websites of stock exchanges
before sending it by mail.

3.

The Company shall make efforts to improve the environment for all its shareholders to exercise theirvoting rights appropriately through means such as participation in electronic voting platforms andpublishing an English translation of the notice of convocation.

4.

In principle, only shareholders whose names are recorded in the register, or proxies as stipulated in the
Articles of Incorporation, are entitled to exercise their voting rights at the General Meeting of
Shareholders; substantial shareholders, however, are allowed to listen to the proceedings of the General
Meeting of Shareholders, if they have requested in advance to attend via shareholders recorded in theregister, provided that they have followed the prescribed procedures.

5.

The Company shall make efforts to set the date of the General Meeting of Shareholders in principle byavoiding the dates on which there is a concentration of other shareholder meetings.

6.

If a proposal submitted by the Company is resolved but there are a considerable number of votes against
it, the Board of Directors shall analyze the reasons for objection and the factors that prompted the votes
against the proposal and examine the proper response to such objection.

Article 6. Basic capital policy
1.

The Company shall conduct daily corporate management by recognizing “return on capital,” “financial
soundness” and “return to shareholders” as the three key indicators of capital policy.

2.

Specifically, the Company shall appropriately return profits to shareholders, while maintaining a balance
at a high level between return on equity (hereafter, referred to as the “ROE”) and equity ratio in themedium and long term.

2

3.

In returning profits to shareholders, the Company shall continuously pay steady dividends and flexibly

repurchase shares, taking full account of business performance, investment plans, and the businessenvironment.
4.

As for capital policies that would lead to a change of control or significant dilution, the Board of Directors
shall judge whether or not such policies will contribute to the improvement in the Company’s corporate
value upon examining and verifying their impact on all the Company’s stakeholders from various
perspectives, and then determine a course of action.

Article 7. Basic policy regarding cross-shareholdings and the exercise of voting rights of shares in a crossshareholding
1.

Regarding listed stocks held by the Company as cross-shareholdings, the Company shall conduct
dialogues with the corresponding companies and, each year, have the Board of Directors assess the
purpose of the cross-shareholding and measure the benefits and capital cost thereof. If the Board of
Directors judges based on said quantitative verifications, that a cross-shareholding will contribute to
management and business strategies in the medium and long term, the Company shall continue to holdthat shareholding.

2.

Regarding the exercise of voting rights for listed stocks held by the Company as cross-shareholdings,
the Board of Directors shall determine the criteria for the exercise of voting rights. The Company shallalso exercise such voting rights appropriately, having made a comprehensive decision based on theabove dialogues with the corresponding companies and efforts to improve corporate value from theviewpoints of the relevant companies’ business performance, management policies, medium- andlongterm management plans, corporate governance, social responsibility, and other considerations.

Article 8. Transactions with related parties
If the Company’s directors conduct competition and conflict of interest transactions with the Company
prescribed by laws and regulations, they shall report such transactions to and obtain approval from theBoard of Directors in advance.

Chapter 3. Proper Cooperation with Stakeholders
Article 9. Conduct in accordance with the Subaru vision
In hopes of achieving the Subaru vision, value statement, and corporate statement, the Company shallingrain a culture of compliance while conducting business activities with the following in mind:
1. Become a brand that is “different” from others by enhancing distinctiveness
2. Engage in business activities that resonate with customers by putting them center-stage
3. Fulfill corporate social responsibilities by contributing to diversifying social needs
Article 10. Sustainability initiatives
1.

Through its business activities, the Company shall help to resolve various social issues and achieve asustainable society according to the following Subaru Global Sustainability Policy, which has been
approved by the Board of Directors.
3

Subaru Global Sustainability Policy
We, Subaru Group, are committed to sustainable business practices designed to promote harmony between people,
society and the environment in the following ways:
1. Through our business activities, we will contribute to the resolution of various social issues, including the protectionof the global environment, and to the creation of a sustainable society.
2. Respecting the quality and originality of our products, we will continue to provide Subaru's unique value using
advanced technologies, and enrich the lives of all those involved with the Subaru Group.
3. As a good corporate citizen in the international community, we respect human rights, diverse values andindividuality,
and treat all stakeholders with sincerity in every interaction.
4. We strive to maintain and advance the workplace environment so that employees can work safely in peace, and with asense of satisfaction.
5. We respect international rules and the laws and regulations of each country and region, as well as local culture andcustoms, and pursue fair and transparent corporate governance.
6. We make use of dialogue with stakeholders to management decisions, and disclose corporate information in a timely
and proper manner.
(Subaru Group means Subaru Corporation and its all subsidiaries)

2.

The Company shall enhance its CSR initiatives by establishing a Sustainability Committee presided overby a director appointed by the Board of Directors as an organization to promote CSR and taking into
account societal perspectives when considering the Company’s business.

3.

The Company shall, according to the Subaru Global Sustainability Policy, strive to communicate
appropriately with stakeholders by disclosing its sustainability approach, goals, and initiatives.

Article 11. Human rights initiatives
1.

As part of its efforts to enhance CSR initiatives, the Company shall establish a human rights policy
for the Subaru Group based on the United Nations Guiding Principles on Business and Human Rights,
and respect for the rights and characteristics of individuals.

2． The Company shall clarify the Subaru Group’s responsibilities to respect human rights, shall appoint
Representative Director, President and CEO as a director who is responsible for leading the process ofdeveloping the Policy and assigning resources as needed for its implementation and continued
improvement, and shall make ongoing efforts, in particular, to response to human rights risks and strive
to implement remedies.

Article 12. Promotion of diversity
The Company shall respect the diversity of gender, age, nationality, culture, lifestyle, etc., and endeavor
to provide a comfortable working environment to enable employees with different individual
backgrounds and values fulfill their potential, in order to continue creating values that will satisfy

4customers. The Company shall promote diversity management to enable a broad range of employees,
including female employees, mid-career recruits, and non-Japanese employees, to thrive as professionals.

Article 13. Environmental initiatives
1.

The Company’s Environmental Policy declares that “‘The earth, the sky and nature’ are Subaru’s fieldsof business.” The Company considers that, to ensure the future sustainability of both society and its own
organization, it is of utmost importance to preserve the earth’s environment, comprising ‘the earth, thesky and nature,’ which are the fields in which our automotive and aerospace businesses—the pillars of
our enterprise—operate. Accordingly, the Company shall pursue environmental initiatives in all its
business activities.

2.

To combine the sustainable growth of society and its own organization with preservation of the earth’s
environment, the Company shall establish an Environmental Committee chaired by the corporate vicepresident in charge of sustainability, as appointed by the Board of Directors, to deliberate and decide on
overall medium- and long-term measures (comprising targets, etc.) aligned with the environmental
standards that society will demand in future, and to assess the progress of those measures.

3.

The Company shall work to enhance the quality and quantity of its disclosures of Subaru Group
information relating to climate change in accordance with internationally established disclosure
frameworks.

Article 14. Risk management and compliance
1.

The Company views risk management and compliance as a key responsibility of management and firmly
believes that only through company-wide implementation of risk management and compliance can ourbusiness have a strong foundation. The Company shall strive to engage in fair and just corporate
activities that comply with laws and regulations, its own internal rules, and the standards of society. It
shall also conduct activities to avoid compliance and other risks and to minimize human, social, andeconomic loss caused by such risks.

2.

The Company shall stipulate regulations relating to risk management and compliance. It shall establish
a system to ensure that all its officers and employees comply with requirements including laws andregulations, the Articles of Incorporation, and internal rules, as well as a system for implementation ofrisk management.

3.

The Company shall establish a Risk Management and Compliance Committee chaired by a corporate
vice president appointed by the Board of Directors to enforce risk management and compliance. The
committee shall conduct deliberations and discussions, make decisions, and engage in informationexchange and communication with regard to important matters relating to risk management andcompliance.

4.

The Company shall establish an internal reporting system (Compliance Hotline) serving as an internal
communication channel to report any illegal acts, etc., in business by the Group and its officers andemployees should they discover such acts, in order to help create a transparent and fair corporate culture
and thoroughly ensure compliance, and the Company shall operate the Compliance Hotline in an
appropriate manner.
5Chapter 4. Appropriate Information Disclosure and Securing of Transparency
Article 15. Information disclosure
1.

The Company shall strive to ensure fair disclosure based on internal rules on information disclosure. To
that end it shall swiftly, fairly, and properly disclose information in accordance with the law, along withsuch corporate information as is considered useful to promoting a better understanding of the Company,
including its management strategy and business activities.

2.

The Company shall promote information disclosure and the provision of information in English to areasonable extent from the viewpoint of achieving fairness of information disclosure.

Article 16. Accounting Auditor
1.

The Company shall acknowledge that the accounting auditor plays an important role in ensuring theaccuracy of financial reporting and implements proper measures to ensure appropriate audit practices.

2.

The accounting auditor shall maintain its independence from the Company and perform business
operations systematically to ensure quality control over its audit practices.

3.

The Company shall endeavor to provide an environment that will enable the accounting auditor toperform high-quality audits through such means as arranging opportunities to interview the chief
executive officer (hereafter, referred to as the “CEO”) and the chief financial officer (hereafter, referred
to as the “CFO”) and ensuring cooperation with the Internal Audit Department.

4.

The Company shall have the Board of Corporate Auditors determine the appointment/dismissal or
nonreappointment of the accounting auditor upon checking the appropriateness of the status of executionof its duties, the audit system and independence/expertise, etc., of the accounting auditor.

Chapter 5. Responsibilities of the Board of Directors, etc.
Article 17. Organs and Main Deliberative Bodies
1.

The Company shall choose to be a company with a board of corporate auditors as its corporate
governance structure, and the Board of Directors shall decide and supervise the execution of importantbusiness.

2.

As the framework for executing business operations, the Company shall adopt a system of corporate vicepresidents, to whom shall be delegated the directors’ powers to execute business operations. Corporate
decision-making and oversight functions as performed by the Board of Directors shall thus be clearly
separated from execution of business operations in order to expedite decision making.

3.

To strengthen the independence, objectivity, and accountability of the functions of the Board of Directors
pertaining to the appointment and compensation of directors, the CEO, and other management teammembers (including plans for their successors), an Executive Nomination Meeting and an Executive
Compensation Meeting shall be established made up of a majority of independent outside directors.

Article 18. Roles and responsibilities of the Board of Directors
1.

The Board of Directors shall be responsible for helping the Company achieve the Subaru vision, value
statement, and corporate statement, an effort through which the Company shall work to attain sustainablegrowth and maximize corporate value in the medium and long term, for the Company’s shareholders
and all other stakeholders.
62.

In order to fulfill the responsibilities prescribed in the preceding paragraph, the Board of Directors shallperform the oversight function for overall management to ensure fairness and transparency ofmanagement. The Board of Directors shall also make the best decisions possible for the Company
through appointment, evaluation and resolution regarding the compensation of its CEO and othermanagement team members, the assessment of material risks faced by the Company and thedevelopment of measures to deal with such risks, and decisions on the execution of important businessof the Company, etc.

3.

The Board of Directors shall set forth matters to be resolved by itself in the Regulations of the Board of
Directors and clarify those decisions on matters that do not fall under the category of matters to beresolved, etc., are entrusted to corporate vice presidents appointed by the Board of Directors.

4.

The Board of Directors formulates the basic policy for the establishment of the internal control systemand endeavors to achieve the optimal operation and improvement of the internal control system tomaintain the effectiveness and efficiency of internal control.

5.

The Board of Directors shall oversee the Risk Management and Compliance Committee that conducts
deliberations and discussions, makes decisions, and engages in information exchange andcommunication with regard to important matters relating to risk management and compliance, andendeavor to implement risk management and compliance fairly and effectively.

6.

The Board of Directors and executive officers make their best efforts towards the achievement of targets
set in the mid-term management plan. Specifically, they appropriately check the progress towards targets
at Executive Management Board Meetings and Executive Board Meetings and implement proper
measures as necessary. If targets need to be revised, the Board of Directors and senior management
adequately analyze factors requiring revision and clearly disclose the results to shareholders.

7.

The Board of Directors regards enhancing corporate managers as an important issue for the Company toachieve sustainable growth, and conducts proper oversight of the successor plan for the CEO and othertop executives based on the requirements for officers, etc., derived from the Company’s management
philosophy and management strategy, etc. Its oversight entails conducting continuous deliberations
taking into account factors such as changes in the business environment, as well as ensuring that thetraining of prospective successors is undertaken systematically with adequate time and resources
invested.

Article 19. Structure of the Board of Directors
1.

The Board of Directors shall be structured to ensure the balance of knowledge, experience, and ability
within its organization as a whole that is essential for sustainable growth and medium- to long-term
improvement in corporate value of the Company. Furthermore, consideration shall be given to such
attributes as gender and international experience thereby ensuring substantial diversity.

2.

To ensure the balance of knowledge, experience, and ability, as well as diversity, as detailed in thepreceding paragraph, the Board of Directors shall select two or more outside directors from amongcorporate managers, experts, etc., in view of their experience, insight, and expertise.

3.

Internal directors shall be selected, after comprehensive evaluation and judgment of their experience,
insight, expertise, etc., in light of the requirements for officers derived from the Company’s corporate
statement and management strategy, etc.

7

4.

The number of directors shall be limited to fifteen or less (combined total of directors and outside
directors) as prescribed in the Articles of Incorporation.

Article 20. Roles and responsibilities of independent outside directors
1.

Independent outside directors of the Company shall fulfill the roles of the monitoring function from a
position independent from the management team and provide appropriate advice to the Company’s
management based on a wide range of sophisticated knowledge.

2.

The Company shall appoint two or more independent outside directors who possess qualities consistent
with market requirements and represent the viewpoints of a wide range of stakeholders, in order tocontribute to the attainment of sustainable growth and the enhancement of corporate value in the medium
and long term, as well as improvement in the social value of the Company.

3.

Independent outside directors must allocate the time and effort that are necessary to fulfill their roles andresponsibilities for performing the duties of the Company’s directors.

4.

The Company shall provide a working environment that enables independent outside directors to performtheir duties efficiently through such means as arranging meeting dates in advance. In addition, theCompany shall continuously monitor actual execution of duties by independent outside directors andrelated matters, including the number of companies in which they concurrently hold positions and theirattendance at and input into meetings, and shall disclose the results in business reports.

5.

Independent outside directors, upon assuming the post, shall understand relevant laws and regulations,the Company’s Articles of Incorporation and other internal regulations, such as the Board of Directors
Regulations, in order to adequately fulfill their responsibilities.

6.

The Company shall create opportunities for independent outside directors and independent outside
corporate auditors to exchange opinions, with the aim of having independent outside directors
proactively contribute to discussions at the Board of Directors Meeting to help the Company achievesustainable growth and improve corporate value in the medium and long term.

7.

The Company shall create opportunities for sharing information and exchanging opinions with directors,
corporate auditors and corporate vice presidents, in order for independent outside directors tocommunicate or coordinate with the management team or enhance cooperation with corporate auditors
or the Board of Corporate Auditors.

Article 21. Appointment of independent outside directors
Candidates for independent outside director shall satisfy the following requirements.
(1) Persons who play a leadership role in the fields of company management, law, accounting, public
administration, consulting, education, etc., and have extensive experience and expert knowledge.
(2) Persons who are deeply interested in the Company’s business, understand the essence of the issues
faced by the Company from the position of observing the overall management of the Company andhave the ability to express opinions and provide guidance and oversight to the management team ina timely and appropriate manner.
(3) Persons who meet the independence requirements set forth by stock exchanges, as well as criteria for
independence prescribed by the Company.

8

Article 22. Management of the Board of Directors
1.

The Board of Directors shall endeavor to improve the management of meetings in order to promote therespect for free, vigorous and constructive discussion and exchange of opinions, including raising issues
by outside directors, and stimulate deliberations.

2.

The Board of Directors shall distribute materials for its meetings in advance to ensure the time necessary
for prior examination by directors and corporate auditors depending on the nature of the material. Further,in addition to materials for its meetings, it shall as needed provide outside directors and outside corporate
auditors with any other materials necessary to assessing management conditions or gaining a better
understanding of the Company’s business. It shall also brief them as necessary.

3.

The Board of Directors shall disseminate the annual schedule of its meetings and matters expected to be
discussed and reported at such meetings in advance, to the maximum extent possible.

4.

The Board of Directors shall set the agendas, time for deliberation and frequency of its meetings to enable
necessary and adequate discussion, in order to decide on the execution of important business and oversee
the performance of duties.

Article 23. Evaluation of the Board of Directors
The Board of Directors shall analyze and evaluate its own effectiveness and other aspects of its
performance by such means as conducting periodic interviews with each director. It shall apply the
results to improving the functioning of the Board and disclose an outline thereof in a timely andappropriate manner.
Article 24. Roles and responsibilities of corporate auditors and the Board of Corporate Auditors
1.

The Board of Corporate Auditors, as an independent organization entrusted by shareholders, shall be
responsible for ensuring the sound and sustainable growth of the Company and establishing a highquality corporate governance system that can be trusted by society by performing audits of the executionof duties by directors, passing resolutions on the contents of proposal items regarding the appointment
and dismissal, or non-reappointment, of accounting auditor that will be submitted to the General Meetingof Shareholders, and performing business audits, accounting audits and other matters prescribed by thelaws and regulations.

2.

Corporate auditors must attend the Board of Directors Meeting and other important meetings, verify thecontent of reports received from directors, employees or accounting auditor, etc., and implement
necessary measures, such as expressing opinions by giving advice or recommendations to directors or
employees, in a timely manner.

3.

The Board of Corporate Auditors shall establish the Regulations of the Board of Corporate Auditors andCode of Corporate Auditor’s Auditing Standards to perform its duties and comply with them.

4.

Outside corporate auditors must allocate the time and effort that are necessary to fulfill their roles andresponsibilities for performing the corporate auditor’s duties of the Company.

5.

The Company shall provide a working environment that enables corporate auditors to perform theirduties efficiently through such means as the preliminary arrangement of meeting dates, etc. In addition,
the Company shall check continuously the detailed status of the execution of duties, etc., such as thenumber of companies in which outside corporate auditors are concurrently holding positions and the9status of attendance and the remarks of outside corporate auditors at meetings, and disclose the results inbusiness reports.
Article 25. Policy and procedures for decision on nomination
1.

The Board of Directors shall nominate candidates for directors and corporate auditors andappoint/dismiss the CEO or corporate vice presidents on the criterion of whether they have the extensive
experience, superior ability and insight, and advanced expertise conducive to bringing about the Group’s
sustainable growth, and boosting its corporate value in the medium and long term, in their respective
capacities.

2.

When nominating candidates for directors, the Board of Directors shall nominate two or more
independent outside directors from the viewpoints of giving consideration to diversity, etc., within the
Board of Directors, and improving the transparency of management and shareholder value by serving
the oversight functions of management from an independent position.

3.

To ensure the fairness and transparency of the decision-making process for nominating candidates for
directors and corporate auditors and appointing/dismissing the CEO or corporate vice presidents, theBoard of Directors shall establish as a voluntary committee an Executive Nomination Meeting made up
of a majority of independent outside directors. The chairman of the Executive Nomination Meeting shallbe appointed by a resolution of the Board of Directors.

4.

Matters pertaining to the nomination of candidates for directors and corporate auditors and theappointment/dismissal of the CEO or corporate vice presidents (including the suitability of their skill
matrix), matters pertaining to grooming a CEO and other executives, and such other matters as are
deemed necessary by the Board of Directors shall be referred by the Board of Directors to the Executive
Nomination Meeting, in principle each fiscal year, without the need for a specific resolution of the Boardof Directors. The Board of Directors shall then deliberate on and decide such matters based on the
Executive Nomination Meeting’s recommendations.

5.

Each director can request that a meeting of the Board of Directors be convened at any time for the
purpose of appointing/dismissing the CEO or a corporate vice president.

6.

When nominating candidates for corporate auditors, the approval of the Board of Corporate Auditors
shall be obtained.

7.

When nominating candidates for directors and corporate auditors and appointing/dismissing corporate
vice presidents, in each case explanations shall be required on matters such as background, the status ofconcurrent holding of positions, insights and expected roles at the Company of the candidate, and thereasons for the nomination or appointment/dismissal.

Article 26. Policy and procedures for determining compensation
1.

The Board of Directors shall design a compensation system via an objective, transparent process,determine a policy for determining details of compensation for individual directors, and disclose said
policy in order to ensure that the compensation for management team members effectively functions as
an appropriate incentive for fostering sustainable growth and improving corporate value in the medium
and long term.
(1) Compensation, etc., shall be of levels commensurate with the roles and responsibilities of directors
and corporate vice presidents, as well as being proper, fair and balanced.
10

(2) The compensation structure shall be determined by giving consideration to generating motivation forsustainable improvement in corporate performance and corporate value and securing excellent
human resources.
2.

To ensure the fairness and transparency of the decision-making process pertaining to executive
compensation and related matters, the Board of Directors shall establish as a voluntary committee an
Executive Compensation Meeting made up of a majority of independent outside directors. The chairmanof the Executive Compensation Meeting shall be appointed by a resolution of the Board of Directors.

3.

The Executive Compensation Meeting shall, by a resolution of the General Meeting of Shareholders anda resolution of the Board of Directors, be delegated authority to decide such matters as the exact amountof base compensation, annual performance-linked bonuses, and compensation in restricted stock fordirectors and corporate vice presidents, and when they are to be paid. It shall decide such matters
following sufficient deliberation by its members, including independent outside directors. Revisions to
the executive compensation system and other matters pertaining to compensation in general shall bedeliberated on and decided by the Board of Directors based on the content of proposals approved by the
Executive Compensation Meeting.

Article 27. Acquisition of information and support systems
1.

Directors and corporate auditors shall gather information for effectively fulfilling their roles andresponsibilities, while the Company shall endeavor to improve the system for properly providing
necessary information.

2.

Directors and corporate auditors, including outside directors and outside corporate auditors, shall request
the Company to provide additional information if deemed necessary to adequately fulfill their roles andresponsibilities.

3.

The Company shall establish a system that enables directors and corporate auditors to obtain assistancefrom external experts, such as lawyers and certified public accountants, as needed, and bear the necessary
costs for the system.

4.

In the interests of the proper functioning of the Board of Directors and Board of Corporate Auditors, theInternal Audit Department shall report directly to the Board of Directors and ensure cooperation withdirectors and corporate auditors. Other operating departments shall also, if so requested, proactively
provide any information required by directors and corporate auditors to perform their duties.

Article 28. Training of directors and corporate auditors
1.

The Company shall continuously provide directors and corporate auditors with information andknowledge on its business activities necessary for the oversight of corporate management so that they
can adequately fulfill their responsibilities.

2.

The Company shall provide outside officers with opportunities to obtain reports on business operations
from operating departments and for plant tours, etc., with the aim of continuously providing informationon the Company’s management philosophy, corporate culture and business environment, etc. The
Company shall also cultivate an environment for enhancing information sharing and exchanging
opinions between officers.

3.

The Company shall bear the costs necessary for directors and corporate auditors to fulfill their roles.

11

Chapter 6. Dialogue with Shareholders
Article 29. Policy for constructive dialogue with shareholders
1.

The Company shall endeavor to develop a long-term relationship of trust with shareholders by holding
constructive dialogue with them in order to contribute to the achievement of sustainable growth andimprovement in corporate value in the medium and long term.

2.

All aspects of constructive dialogue with shareholders shall be supervised by the CEO and CFO andhandled by the investor relations department. The relevant departments, including corporate planning,
the Board of Directors secretariat, finance & accounting, legal affairs, human resources, sustainability,
intellectual property, and internal auditing, shall cooperate organically to enhance the dialogue.

3.

The Company shall, to enable shareholders to deepen their understanding of its management strategy,lines of business, products, business results, and other such matters, proactively disseminate clear
information to shareholders by such means as holding various types of briefings as circumstances requireand utilizing its website.

4.

The Company shall periodically update directors, corporate auditors and corporate vice presidents, aswell as relevant departments, on the details of opinions and concerns of shareholders obtained throughdialogue with them.

5.

The Company shall rigorously enforce information management in accordance with regulations against
insider trading, in order to prevent the leakage of undisclosed important internal information (insider
information) during dialogue with shareholders. In addition, the Company shall hold appropriate
dialogue with shareholders through fair disclosure in accordance with the separately established internal
rules on information disclosure.
End

Supplementary provisions
Effective on November 5, 2015
Revised on June 28, 2016
Revised on October 1, 2016
Revised on June 23, 2017
Revised on November 5, 2018
Revised on April 1, 2019
Revised on April 1, 2020
Revised on November 5, 2021
Revised on March 30, 2023
Revised on December 1, 2023

12

[Accompanying material for the Corporate Governance Guidelines]<Criteria for Independence of Outside Officers>
The Company considers that it is desirable for outside directors and outside corporate auditors (hereafter,
collectively referred to as “outside officers”) to maintain independence to the maximum extent possible, in orderto ensure corporate management with high levels of objectivity and transparency and a strong management
oversight function, and to improve corporate value.
Accordingly, the Company shall set the criteria for independence and conduct an investigation to the extent
reasonably possible. If any of the following items apply to an outside officer, the Company deems that the relevant
outside officer does not maintain adequate independence.
1.

A person engaged in business execution*1 of the Company and its current consolidated subsidiaries (hereafter,
referred to as the “Group”)

2.
3.

A major shareholder*2 of the Company or a person engaged in business execution of a major shareholder
A major business partner*3 of the Group or a person engaged in business execution of such business partner,
or a business partner for whom the Group is a major business partner*4 or a person engaged in businessexecution of such business partner

4.
5.
6.
7.

8.
9.
10.
11.
12.
13.

A person engaged in business execution of the Group’s major lender*5
A party whose shares corresponding to 5% or more of the voting rights the Group holds, or a person engaged
in business execution of such party
A person who belongs to the accounting firm that performs statutory audits of the Company
A consultant, accounting professional or legal professional obtaining large amounts*6 of money or otherfinancial benefits other than officers’ compensation from the Company (if such financial benefits are
obtained by an organization, such as an incorporated entity and union, a person belonging to suchorganization)
A person or a person who belongs to a corporation or association receiving a large donation*6 from the Groupand who is directly engaged in the activity for the donation.
If a person engaged in business execution of the Group is concurrently holding the position of outside officer
at another company, a person engaged in business execution of such company
Close relatives*7 of a person who fall within any of items 1. through 9. above.
A person who fall within any of items 2. through 10. above during the past 5 years
A person who has been holding the position of outside officer of the Company for a cumulative total of eightor more years
A person for whom a substantial conflict of interest may constantly occur with the Company’s generalshareholders as a whole for reasons other than those considered in items 1. through 12. above*1 A person engaged in business execution refers to executive directors, executive officers, corporate vice presidents or other persons
performing an equivalent function and employees who belong to the Group currently.
*2 A major shareholder refers to a shareholder holding 5% or more of the voting rights of the Company in their own name or anotherperson’s name as of the end of the most recent fiscal year. If a major shareholder is an organization such as an incorporated
entity and union, a person engaged in business execution of item 2. refers to such person who belongs to said organization.
*3 A major business partner of the Group refers to a business partner with which the Company conducts business transactions forwhich net sales, etc., in any one fiscal year of the three fiscal years immediately preceding the most recent fiscal year exceed
2% of the Group’s annual consolidated net sales, etc., in the relevant fiscal year.
*4 A business partner to which the Group is a major business partner refers to a business partner with which the Company or its
consolidated subsidiaries conduct business transactions for which net sales, etc., in any one fiscal year of the three fiscal years
immediately preceding the most recent fiscal year exceed 2% of the annual net sales, etc., of the said company group.
*5 A major lender refers to a financial institution from which the Group borrows funds for which the outstanding borrowings as ofthe end of the most recent fiscal year exceed 2% of the consolidated total assets of the Company.

*6 A large amount refers to a case in which the amount of consideration or donation received from the Company exceeds 10 million
yen for an individual and either higher amount of followings 10 million yen or 2% of annual gross income or consolidated net
sales for an incorporated entity or association per year.
*7 Close relatives refer to spouses and first- and second-degree relatives.

[Accompanying material for the Corporate Governance Guidelines (Supplementary materials)]< The Policy for Determining Details of Compensation for Individual Directors >1. Basic policy
As a basic policy, compensation for directors of the Company is determined in view of the following items:(1) Compensation is at a level commensurate with the roles and responsibilities of directors and is appropriate,
fair, and balanced.
(2) The compensation structure is determined by giving consideration to providing motivation for sustained
improvement in corporate performance and corporate value and securing excellent human Resources.
Specifically, compensation for Directors, excluding Outside Directors, will consist of base compensation,
annual performance-linked bonus, and compensation in restricted stock (for non-residents, phantom stock,instead of restricted stock). For outside directors, the Company pays only basic compensation in view of
their roles of fulfilling monitoring and oversight functions of corporate management from an independent
position. The total amount of compensation for individual directors and the levels of each compensation
item are set for every position depending on difference in responsibility by utilizing the research datacompiled by outside specialized agencies.
2. Policy for determining the amount of monetary compensation excluding performance-linked compensation(hereinafter, the “Fixed Monetary Compensation”), performance-linked compensation, and non-monetarycompensation (including the policy for determining the timing or conditions for granting such compensation)(1) Policy for the Fixed Monetary Compensation
Directors receive the Fixed Monetary Compensation monthly as basic compensation. The amount forindividual directors is determined based on their positions, taking into consideration elements such as thebusiness environment.
(2) Policy for performance-linked compensation
Directors, excluding Outside Directors, shall receive annual performance-linked compensation by cash
at a certain time of the year. The specific amount is determined according to a compensation table byposition prepared based on the consolidated profit before tax for the current fiscal year as a key
performance indicator (KPI).
In addition, in order to facilitate the achievement of the Group's medium- and long-term strategy targets,a portion of the restricted stock compensation to be granted as non-monetary compensation (see (3)below) will be set as Performance Share Units (hereafter, "PSUs"), in which the number of shares granted

is linked to the degree to which target business results are achieved. To set KPIs for PSUs, consolidated
return on equity, a key financial indicator in the mid-term strategy, as well as employee engagement as a
non-financial indicator, will be adopted.
The Company will appropriately review the KPIs for annual performance-linked bonuses and PSUs basedon changes in the environment and reports from the Executive Compensation Meeting.

(3) Policy for non-monetary compensation
The Company grants restricted stock units to Directors (excluding Outside Directors) for the purpose ofproviding them an incentive for sustained improvement of the Company’s corporate value and further
value sharing with the shareholders
A portion of the restricted stock compensation shall be granted as fixed compensation and the remainder
as variable compensation, both of which shall be prohibited from being transferred during the term ofoffice and the restriction on transfer shall be lifted upon retirement.
Restricted stock compensation in the form of fixed compensation (RS) shall be granted as shares of theCompany's common stock that are equivalent to a standard amount determined by taking into
consideration the Company's business performance, the scope of each Director's responsibilities, andvarious other circumstances at a certain time of the year.
At a certain time of the year, the Company shall grant restricted stock compensation in the form of fixedcompensation (PSU) in a number of units (1 unit = 1 share) that are equivalent to a standard amountdetermined by taking into consideration the Company's performance, the scope of each Director's
responsibilities, and various other circumstances. After the evaluation period, shares of the Company's
common stock shall be granted in a number calculated by multiplying the number of units by a payment
ratio (50% to 100%) that is determined in conjunction with the degree to which the target businessperformance indicators have been achieved.
The total number of shares of the Company's common stock to be allocated to Directors as restricted
stock compensation as part of RS and PSUs shall be limited to 150,000 shares per year. In addition, theCompany and Directors shall enter into a restricted stock allotment agreement that includes an overview
and provisions that state (1) Directors shall not, for a set period of time period during his/her term ofoffice as an officer of the Company, transfer, create a security interest on, or otherwise dispose of theshares of the Company’s common stock that have been allotted to them, and (2) the Company may acquire
the said shares of its common stock without compensation if certain events occur.
Compensation for a Director who is a non-resident at the time of granting shares will be paid in the formof a phantom stock equivalent to the said stock compensation instead of restricted stock compensation,
thereby being treated in accordance with the restricted stock allotment agreement.
3. Policy for determining the proportion of the Fixed Monetary Compensation, performance-linked
compensation, and non-monetary compensation to the total amount of compensation, etc. for individual
directors

The Company shall appropriately determine the proportion of compensation by type of directors excluding
outside directors in reference to the compensation levels and compensation mix of companies of a similar
scale to the Company or industry peers obtained through an external research company, and in considerationof factors such as the Company’s overall salary level and social situations. The following proportions are
generally used as rough standards (for performance-linked compensation, the proportions are those of thebase amount).
Breakdown
Annualperformancelinked
Basic
compensation Compensation
Fixed Monetary
Compensation
Performance-linked
Compensation
Non-monetary
Compensation

Rate
Restricted stock
Compensation
RS
PSU

President

Directors
other than
the President

45%

50%

●

45%*1

40%*2

●

25%*1

20%*2

●
●
●

The Company shall appropriately review the compensation level and compensation mix in consideration of
the Company's business environment, as well as the situation of companies of a similar scale to the Company
or industry peers, and other circumstances based on reports from the Executive Compensation Meeting.
4. Matters concerning the determination of details of compensation, etc. for individual directors
The Executive Compensation Meeting, by a resolution of and upon delegation by the Board of Directors,
determines specific amounts of compensation, etc. of individual directors, following sufficient deliberation
by its members including outside directors. Its authorities include the determination of specific amounts ofbasic compensation, annual performance-linked bonuses, and restricted stock compensation, and their
payment schedule. For restricted stock units, the number of shares allotted to individual directors isdetermined by the resolution of the Board of Directors based on decisions of the Executive Compensation
Meeting.
With regard to revisions of the compensation system and other matters pertaining to compensation overall,
proposals approved by the Executive Compensation Meeting are deliberated and decided on by the Board of
Directors.
To ensure transparency and effectiveness of the executive compensation determination process, theExecutive Compensation Meeting shall, by a resolution of the Board of Directors, be structured so that the
majority of its members are outside directors, and its chairman shall be appointed by a resolution of theBoard of Directors.
*1: Each of the performance-based compensation (45%) and non-monetary compensation (25%) includes
restricted stock unit compensation (PSU) (15%).
*2: Each of the performance-based compensation (40%) and non-monetary compensation (20%) includes
restricted stock unit compensation (PSU) (10%).