Corporate Gavanance Report

Last modified：June 24, 2024
ＣＫＤ株式会社
Katsuhito Okuoka,
Representative Director, President
Contact：0568-74-1111
Securities code：6407
https://www.ckd.co.jp/

The status of the Company's corporate governance is as follows:

ＩBasic approach to corporate governance, capital structure, corporate attributes, and other basic
information
１．The basic idea.
Based on our “Values’’, we believe that in order to build good relationships with stakeholders withdiverse interests and become a company that continues to be trusted, we will build and function asystem to enhance the transparency and fairness of our management content and achieve sustainablegrowth and increase corporate value through prompt decision-making.
【Disclosure based on the principles of the Corporate Governance Code】【Principle 1-4

Policy holdings shares】

In principle, the Company will not hold its own shares unless it deems it to contribute to theenhancement of the Company's corporate value from the viewpoint of business strategy, businessalliances with business partners, maintenance and strengthening of business relationships, etc.
We will proceed with the sale of shares with a diminished retention value in a phased way, taking
into account the situation of the company concerned. When it is judged that it is necessary to hold, theCompany examines the market value evaluation, ROE, dividend yield, etc. of each stock held every year
regarding the necessity of maintaining and strengthening business strategies, business alliances,business relationships, etc., and verifies the aim and rationality of holding at the Board of Directors
meetings. In addition, when the exercise of voting rights pertaining to the stock adversely affects thesoundness of the finances of the issuing company or illegal acts occur, the Company will exercise its
voting rights by considering whether it will lead to an improvement in the corporate value of thecompany concerned and whether it will lead to an improvement in shareholder value, such as opposing
the proposal. In addition, if a company holding the Company's shares indicates its intention to sell the
Company's shares, the Company shall not prevent the sale.
【Principle１-7

Transactions between related parties】

When the Company conducts business with officers of the Company, the Board of Directors shallobtain approval from the Board of Directors in accordance with the provisions of laws and regulations
and internal regulations so as not to harm the interests of shareholders. In addition, the officer who
conducted the transaction shall report important facts to the Board of Directors without delay.
1

【Principle 2-4

Securing diversity in the internal including promotion of women's participation】

Replenishment principle 2-4①
In order to build a corporate culture that emphasizes human resources, we believe that it is necessary
to develop human resources and create a rewarding workplace where individuals can take on thechallenge of self-realization. Regardless of gender, nationality, age, etc., we value the potential of eachand every diverse human resource and strengthen human resource development so that they can play
an active role to the fullest extent of their abilities.
As a promotion system, we have established the "Human Resources Strategy Committee" to promotemanagement that makes the most of all the people in the CKD Group. In addition, in order to realize acompany and workplace where all employees can work with enthusiasm, we have launched the "Future
Human Resources Project" as a sub-organization of the "Human Resources Strategy Committee" withthe aim of outlining the ideal situation and promoting an ideal human resources strategy. By promoting
a human resources strategy that corresponds to our medium- to long-term management strategy, we
will optimize our human capital and achieve sustainable growth.
(Human Resource Development Policy)
The CKD Group strives to create a highly engaged and rewarding workplace.
Through systematic development of future human resources and diversity and inclusion, we will build a
corporate culture that emphasizes human resources.
(Policy for Improving the Internal Environment)
In order to realize our human resource development policy, we are promoting the development ofeffective measures and systems for each of the three priority measures, as well as awareness reforms.
（１） Creating a highly engaged and rewarding workplace
・Measures for self-realization of employees, such as the Innovator Challenge system and theinternal recruitment system
・GO CKD！Award as a place to recognize excellent initiatives
・Health and productivity management initiatives（２） Systematic development of future human resources
・External training for the systematic development of next-generation leaders
・Trainee dispatch system to overseas bases to develop global human resources
・Training for digital human resource development（３） Diversity & Inclusion
・Trainee dispatch system from overseas bases to Japan *Training introduced in fiscal 2014
(FY2025 target: 23 in total, FY2023 results: 19 in total)
・Creation of an employment environment that makes it easy to take childcare leave(FY2025 target for taking childcare leave: 70.0% for men, 100.0% for women, FY2023 results:
57.4% for men, 100.0% for women)
・Promoting the active participation of female employees(FY2030 target for female managers: 10.0%, FY2023 results: 4.7%)
・Promote the active participation of seniors (60 years and older)2

・Workplace development for people with disabilities【Principle 2-6

Functioning as an asset owner of corporate pensions】

The Company uses the Defined Benefit Corporate Pension Plan and the Defined Contribution Pension
Plan. With regard to the defined benefit corporate pension plan, we entrust the management of assets
to the management trustee. Since it is necessary to continue sound fiscal management andappropriately evaluate and select management organizations, we appoint persons with specializedskills and knowledge related to the operation and management of the Fund as the president and seek
human resource development by participating in various trainings. In terms of management, byregularly monitoring the status of the management of pension assets, we pay attention to conflicts ofinterest that may arise between the beneficiaries of corporate pensions and the Company, and strive tocreate an appropriate investment environment. Employees are the first to operate the defined
contribution pension system.
【Principle 3-1

Enhancement of information disclosure】and【Replenishment principle 4-10①

Establishment of Voluntary Nomination Committee and Compensation Committee】（１）In April 2023, we established our new philosophy of "Corporate Purpose", " We will continue toexplore and co-create automation technologies to cultivate a healthy global environment and aprosperous future," and we will strive for the purpose of accurately fulfilling social responsibility andcontinuing and developing business.
（２）Please refer to the Company's website for our basic philosophy and basic policies on corporate
governance.
（３）Policies and procedures for determining remuneration for senior management and directors
・Basic Policy① A system that enhances the desire to contribute to the enhancement of corporate value② Ensure the appropriateness of the method and allocation of remuneration③ A system in which shares can share interests with shareholders
・Process and content of the decision
Directors' remuneration consists of basic remuneration, performance-linked compensation, and stockcompensation, and outside directors who are responsible for supervisory functions shall be only basic
remuneration in light of their duties.
In addition, the ratio of performance-linked compensation is higher for the higher ranks of directors bycompensation type. The amount of remuneration for directors is determined by the Board of Directors
after submitting a report to the Nomination, Remuneration Advisory Committee, which has anindependent director as the chairperson and a majority of its members are outside directors, within therange approved by the General Meeting of Shareholders. The decision policy is also determined by the
Board of Directors after submitting a report to the Nomination, Remuneration Advisory Committee
submitted.
（４）Policies and procedures for selecting and dismissing senior management and nominating
candidates for directors and audit & supervisory board members
3Directors and Audit & Supervisory Board Members have been appointed who have excellent personality
and insight and have extensive knowledge and experience in corporate management, etc.
Outside Directors are appointed who can perform management oversight functions from an
independent standpoint outside the Company and can provide advice on the Company's corporate
activities based on their abundant experience and high knowledge.
In addition, if it is recognized that it does not contribute to the enhancement of corporate value, or if
there is an injustice in the execution of duties or a serious violation of laws and regulations from theviewpoint of corporate governance, it will be dismissed, and it will be decided by the Board of Directors
after consultation by the Nomination and Compensation Advisory Committee.
（５）For directors and audit & supervisory board members, please refer to the "Reasons for Making
Them Candidates" in the "Notice of Convocation of ordinary general meetings of shareholders" for thereasons for individual candidates.
【Replenishment principle

3-1③ Issues related to sustainability】

The Company recognizes that issues related to sustainability are important from the viewpoint of
improving corporate value over the medium to long term, and have disclosed them in our integrated
report.
The Company will also collect and analyze the impact of climate change risks and profit opportunities
on the Company, and enhance the quality and quantity of information disclosure. Information based on
the TCFD framework is disclosed on the Company's website.
【Principle 4-1

Roles and Responsibilities of the Board of Directors（１）】Replenishment principle 4-1①
The Company has established the Matters stipulated by Laws and Regulations, the Articles ofIncorporation, and other matters related to important operations as matters to be decided by resolutionof the Board of Directors, and the Board of Directors delegates the decision from the Board of Directors
to management in accordance with internal rules that clarify the authority to make decisions on otherbusiness executions.
【principle 4-9

Independence Criteria and Qualities of Independent Outside Directors】

The Company believes that creating an environment in which independence can be ensured when
deciding on outside officers will contribute to maintaining and strengthening corporate governance, andhas established standards for the independence of outside officers and discloses them on the
Company's website.
Additionally, independent outside directors are selected from individuals who are deemed to have thepotential to contribute to the Company's business management based on their careers, knowledge,
expertise, and other factors.
【Principle 4-11

Prerequisites for ensuring the effectiveness of the Board of Directors and the Audit& Supervisory Board】
4

Replenishment principle 4-11①
In order to flexibly respond to changes in the market environment, including globalization, we actively
engage in diversity management, etc., and make decisions at the Board of Directors after consultation
with the Nomination and Compensation Advisory Committee from the perspective of securing a wide
range of human resources with diverse values such as overseas experience and gender, in addition to
the background, knowledge, and expertise essential for business development. The skills matrix isstated in the "Notice of General Meeting of Shareholders," "Integrated Report," etc. Additionally, theindependent outside directors include individuals with management experience at other companies.
Replenishment principle 4-11②
Please refer to the business report and general meeting of shareholders' reference documents in the
Notice of Convocation of The General Meeting of Shareholders. In addition, the situation of concurrent
employment is to a reasonable extent.
Replenishment principle 4-11③
Every year, the Company conducts a questionnaire to evaluate the effectiveness of the Board of
Directors by all directors and audit & supervisory board members, and periodically verifies thecomposition and operation of the Board of Directors and the support system for directors and audit &supervisory board members in order for the Board of Directors to effectively fulfill its roles andresponsibilities.
The results are reported to the Board of Directors, then issues and improvement plans are shared to
implement the PDCA cycle. An overview of the results is also disclosed in the "Integrated Report."【Principle 4-14

Training of Directors and Audit & Supervisory Board Members】

Replenishment principle 4-14②
We support directors to acquire the necessary knowledge and understand their roles andresponsibilities, so that they can participate in external courses as appropriate. In addition, newdirectors and audit & supervisory board members participate in seminars for newly appointed officers
to improve the knowledge necessary for officers. In addition to seminars and study sessions held by theJapan Audit & Supervisory Board Members Association, full-time corporate auditors participate inexternal exchange meetings to acquire necessary knowledge.
In conjunction with these initiatives, we hold in-house seminars as appropriate inviting experts, etc.
【Principle 5-1

Policy on Constructive Dialogue with Shareholders】

The Company's basic policy is to continuously disclose fair, timely and appropriate information to all
stakeholders, including shareholders and investors, and aims to gain the company's appropriate
evaluation and trust through IR activities.
（１）With regard to dialogues with shareholders and investors, the executive in charge ofmanagement supervises and actively takes measures to realize various dialogues, including financial
results briefings.
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（２）We have established a system in which corporate planning, general affairs, finance, accounting,legal departments, etc. can respond in an organic manner, and exchange opinions based on theirrespective professional perspectives.
（３）Once every six months, we hold financial results briefings on financial results information,
management measures, and management policies. In addition, we have established a contact point for
opinions and questions on the Company’s website.
（４）The content of dialogue with shareholders and investors is fed back to the Board of Directors,
etc. through the officer in charge of management as necessary.
（５）In order to prevent the leakage of financial results information and ensure fairness, the period
from the end of each quarter to the announcement of financial results is a quiet period, and during thisperiod, in principle, we refrain from disclosing information related to financial results or commenting onquestions. In addition, we have established internal regulations to prevent the leakage of insider
information.
【Responses aimed at achieving management that takes capital costs and stock prices into
consideration】
The Company has set the following three basic policies to ensure the investment necessary forsustainable growth and provide stable shareholder returns.
① We will secure liquidity by using cash flows from operating activities as our main source of funds
and flexibly raising external funds as necessary while maintaining financial soundness.
② We will place emphasis on ROE as an indicator of improving corporate value and conduct financial
management with an awareness of "Profitability," "Asset Turnover," and "Financial Leverage."③ We will realize appropriate allocation of management resources by promoting the investments
necessary to achieve sustainable growth and initiatives such as reviewing our business portfolio while
being fully conscious of capital costs and return on capital.
Implementing these policies will lead to sustainable improvement of corporate value and increased
shareholder returns.
We aim for an ROE of 10% to 13% and will flexibly acquire treasury shares while aiming for a dividend
payout ratio of 40% for shareholder returns.
The Company’s ROE targets, which are conscious of capital costs, are stated in our medium-term
management plan and integrated report and are published on the Company’s website.

Capital Structure
Foreign Shareholding Ratio

30% or more but less than 40%[Status of Major Shareholders]Number of Shares
Owned (shares)
9,981,000
4,772,000
2,892,884

Name/Company Name
The Master Trust Bank of Japan, Ltd. (Trust account)
Custody Bank of Japan, Ltd. (Trust account)
JP MORGAN CHASE BANK 385839
6

Percentage
(%)
14.95
7.15
4.33

2,839,933
1,914,000
1,765,110
1,581,257
1,400,000
1,330,000
1,038,500

CKD Shareholding Association
SUMITOMO LIFE INSURANCE COMPANYCKD Cooperative Companies Investment Association
Sumitomo Mitsui Banking Corporation
The Dai-ichi Life Insurance Company, Limited
THE BANK OF NEW YORK MELLON 140044
STATE STREET BANK AND TRUST COMPANY 505025
Controlling Shareholder (except for Parent Company)-

Parent Company

None

4.25
2.87
2.64
2.37
2.10
1.99
1.56

Supplementary Explanation
Corporate Attributes
Listed Stock Market and Market Section
Fiscal Year-End
Type of Business
Number of Employees (consolidated) as of the End of the Previous Fiscal YearNet Sales (consolidated) as of the End of the Previous Fiscal Year
Number of Consolidated Subsidiaries as of the End of the Previous Fiscal YearTokyo Stock Exchange/Prime Market,
Nagoya Stock Exchange/PremiermarketMarch
Machinery
1,000 persons or more
¥100 billion or more but less than ¥1trillion
10 or more but less than 50 companies

Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder
Other Special Circumstances which may have Material Impact on Corporate Governance
There are no listed subsidiaries.
There are no other special circumstances that may have a significant impact on corporate governance.

7

Business Management Organization and Other Corporate Governance Systems regarding Decisionmaking, Execution of Business, and Oversight in Management
1. Organizational Composition and Operation
Organizational Structure

Company with Audit & Supervisory Board Members

Maximum Number of Directors Stipulated in the Articles of Incorporation

10 persons

Term of Office of Directors Stipulated in the Articles of Incorporation

1 yearChairperson of the Board

Chairman (except when concurrently
holding the post of President)

Number of Directors

6 personsElection of External Directors

ElectedNumber of External Directors

3 persons

Number of External Directors Designated as Independent Directors

3 personsExternal Directors’ Relationship with the Company (1)Name
Stefan Sacré
Koichi Hayashi

Hiroko Shimada

*
*
*
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.

Attribute

Relationship with the Company*
a

b

c

d

e

f

g

h

i

j

k

From another company
Certified Public
Accountant
From government
agencies

Categories for “Relationship with the Company”“○” when the director presently falls or has recently fallen under the category;“△” when the director fell under the category in the past“●” when a close relative of the director presently falls or has recently fallen under the category;“▲” when a close relative of the director fell under the category in the past
Person executing the operations (“Executing Person”) of the Company or its subsidiaries
Non-executive director or Executing Person of a parent company of the Company
Executing Person of a fellow subsidiary company of the Company
A party whose major client or supplier is the Company or an Executing Person thereof
Major client or supplier of the Company or an Executing Person thereof
Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property
from the Company besides compensation as a director/audit & supervisory board member
Major shareholder of the Company (or an Executing Person of the said major shareholder if the shareholder is a legal
entity)Executing Person of a client or supplier company of the Company (which does not correspond to any of d, e, or f) (thedirector himself/herself only)
Executing Person of a company, between which and the Company external directors/audit & supervisory board
members are mutually appointed (the director himself/herself only)
Executing Person of a company or organization that receives a donation from the Company (the director
himself/herself only)
Others8External Directors’ Relationship with the Company (2)Designation as
Supplementary
Name
Independent
Explanation of
Director
the Relationship

Reasons for Election<Reasons for Election>
Dr. Stefan Sacré appropriately performs his duties as an External
Director by making important managerial decisions and overseeing
business execution from an independent and impartial standpoint.
Furthermore, has a high level of academic knowledge as a Doctor ofEngineering and extensive experience as a manager in the

Stefan Sacré○-

manufacturing sector in Japan and overseas, and can be expected tooversee all aspects of the Company’s operations as well as offer
advice and opinions from broad management perspectives.
<Reasons for Designation as an Independent Director>
The Board of Directors believes that there is no risk of a conflict ofinterest between Dr. Sacré and general shareholders, and has
designated him as an Independent Director.
<Reasons for Election>
Mr. Koichi Hayashi is appropriately fulfilling his role of deciding
important management issues and supervising business execution
from an independent and fair standpoint. In addition, he has
specialized knowledge, mainly as a certified public accountant, and a

KoichiHayashi

wealth of experience as a manager, and we expect him to supervise○-

the Company's overall management as well as provide advice andopinions from a broad managerial perspective. Therefore, we request
his continued election.
<Reasons for Designation as an Independent Director>
The Board of Directors believes that there is no risk of a conflict ofinterest between Mr. Koichi Hayashi and general shareholders, andhas designated him as an Independent Director.
<Reasons for Election>
Ms. Hiroko Shimada is appropriately fulfilling her role of deciding
important management issues and supervising business execution
from an independent and fair standpoint. In addition, she has ample
experience both in Japan and overseas in personnel policies andlaws, such as recruitment and training, diversity, work style reform,

HirokoShimadaand labor-related issues, mainly at the National Personnel Authority○-

and the Ministry of Foreign Affairs, and we expect her to supervise
the Company's overall management as well as provide advice andopinions from a broad perspective. Therefore, we request that she
continue to be elected.
<Reasons for Designation as an Independent Director>
The Board of Directors believes that there is no risk of a conflict ofinterest between Ms. Hiroko Shimada and general shareholders, andhas designated her as an Independent Director.

9Voluntary Establishment of Committee(s) Corresponding

Established

to Nomination Committee or Remuneration Committee

Voluntary Committee’s Name, Composition, and Attributes of Chairperson

Committee’s Name

Voluntary Committee Corresponding

Voluntary Committee Corresponding

to Nomination Committee

to Remuneration Committee

Nomination, Remuneration Advisory

Nomination, Remuneration Advisory

Committee

Committee

All Committee Members

33

Full-time Members

00Internal Directors

1

1

External Directors

22

External Experts

0

0

Other

0

0

External Director

External Director

Chairperson
Supplementary Explanation

The chairperson of the committee is elected by the committee members from among themselves.
[Audit & Supervisory Board Members]
Establishment of Audit & Supervisory Board

Established

Maximum Number of Audit & Supervisory Board

4 personsMembers Stipulated in the Articles of Incorporation
Number of Audit & Supervisory Board Members

4 persons

Cooperation among Audit & Supervisory Board Members, Accounting Auditor and Internal Audit Departments
An audit report meeting is held at the end of each fiscal year with the Accounting Auditor and Audit & Supervisory
Board Members.
Regular monthly liaison meetings are held with the Audit & Supervisory Board Members, the Internal Control Audit
Office, and the officer in charge of internal control.
Appointment of External Audit & Supervisory Board

ElectedMembers
Number of External Audit & Supervisory Board Members

3 persons

Number of External Audit & Supervisory Board Members

3 persons

Designated as Independent Audit & Supervisory Board
Members10

External Audit & Supervisory Board Members’ Relationship with the Company (1)Relationship with the Company*
Name

Attribute

Shuzo Hashimoto

Attorney-at-law

Kiyoshi Miura

From another company

Tsuyoshi Takeuchi

Certified public

a

b

c

d

e

f

g

h

i

j

k

l

m

△

accountant
*
*
*

a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.

Categories for “Relationship with the Company”“○” when the audit & supervisory board member presently falls or has recently fallen under the category;“△” when the audit & supervisory board member fell under the category in the past“●” when a close relative of the audit & supervisory board member presently falls or has recently fallen under the
category;“▲” when a close relative of the audit & supervisory board member fell under the category in the past
Person executing the operations (“Executing Person”) of the Company or its subsidiaries
Non-executive director or accounting advisor of the Company or its subsidiaries
Non-executive director or Executing Person of a parent company of the Company
Audit & supervisory board member of a parent company of the Company
Executing Person of a fellow subsidiary company of the Company
A party whose major client or supplier is the Company or an Executing Person thereof
Major client or supplier of the Company or an Executing Person thereof
Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property
from the Company besides compensation as an audit & supervisory board member
Major shareholder of the Company (or an Executing Person of the said major shareholder if the shareholder is a legal
entity)Executing Person of a client or supplier company of the Company (which does not correspond to any of f, g, or h) (theaudit & supervisory board member himself/herself only)
Executing Person of a company, between which and the Company external directors/audit & supervisory board
member are mutually appointed (the audit & supervisory board member himself/herself only)
Executing Person of a company or organization that receives a donation from the Company (the audit & supervisoryboard member himself/herself only)
Others11External Audit & Supervisory Board Members’ Relationship with the Company (2)Designationas
Independent
Supplementary Explanation of
Name
Audit &
the RelationshipSupervisory
Board
MemberShuzo
Hashimoto

KiyoshiMiura

TsuyoshiTakeuchi○-○

Mr. Kiyoshi Miura was enrolled at the
Sumitomo Mitsui Banking Corporation
until April 2014, which is a major clientof the Company. Although the Company
has borrowing from the bank, since about
ten years have passed since he retired, he
is not in a position to be influenced by the
bank's intentions. In addition, the ratio ofshares held by the bank is around 2%, thisdoes not affect the independence of theCompany.

○-

12

Reasons for Election<Reasons for Election>
Mr. Shuzo Hashimoto has extensive experience andprofessional expertise as an attorney-at-law. The
Company believes that he will appropriately
perform his duties as an External Audit &Supervisory Board Member.
<Reasons for Designation as an Independent Audit& Supervisory Board Member>
Although he concurrently holds a position as an
Executing Person at another company, there is nobusiness relationship between that company and theCompany. Therefore, the Company believes that
there is no risk of a conflict of interest between him
and general shareholders, and has designated him as
an Independent Audit & Supervisory Board
Member.
<Reasons for Election>
Mr. Kiyoshi Miura has long term of experience atfinancial institutions, and extensive experience andinsight as a manager. The Company believes that hewill appropriately perform his duties as an External
Audit & Supervisory Board Member.
<Reasons for Designation as an Independent Audit& Supervisory Board Member>
The Company believes that there is no risk of aconflict of interest between him and generalshareholders, and has designated him as an
Independent Audit & Supervisory Board Member.
<Reasons for Election>
Mr. Tsuyoshi Takeuchi has professional knowledge
as a certified public accountant and abundant
overseas experience. The Company believes that hewill appropriately perform his duties as an External
Audit & Supervisory Board Member.
<Reasons for Designation as an Independent Audit& Supervisory Board Member>
Although he concurrently holds a position as an
Executing Person at another company, there is nobusiness relationship between that company and theCompany. Therefore, the Company believes that
there is no risk of a conflict of interest between him
and general shareholders, and has designated him as
an Independent Audit & Supervisory Board
Member.

[Independent Directors/Audit & Supervisory Board Members]
Number of Independent Directors/Audit & Supervisory

6 personsBoard Members
Other Matters relating to Independent Directors/Audit & Supervisory Board Members[Incentives]
Incentive Policies for Directors

Performance-linked Remuneration / Other

Supplementary Explanation
The Company has introduced a restricted stock remuneration plan.
Eligibility for Stock Options
Supplementary Explanation[Director Remuneration]
Disclosure of Individual Directors’ Remuneration

Only some items are disclosed individually

Supplementary Explanation
Individuals whose total remuneration exceeds 100 million yen are disclosed individually in the Annual Securities
Report.
For the total amount of Directors' Remuneration, the Annual Securities Report shall post on the Company’s website
and available for public inspection.
Policy on Determining Remuneration Amounts andEstablishedCalculation Methods
Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods[Policy on determining the remuneration for Directors]
1. Basic Policy(i) Design the system to motivate officers to contribute to the enhancement of corporate value(ii) Ensure the appropriateness of the method for determining the remuneration and distribution(iii) Design the system to allow officers to share the interests with shareholders through stock ownership
2. Determination process and details
Remuneration for Directors consists of basic remuneration, performance-linked remuneration, and stock remuneration,
while External Directors who are responsible for the oversight function, are paid only basic remuneration, in light of
their role.
In addition, the ratio of performance-linked compensation is higher for the higher ranks of directors by compensation
13

type. The amount of remuneration for Directors is determined by the Board of Directors within the scope approved by
the General Meeting of Shareholders after consulting with the Nomination and Remuneration Advisory Committee,
which is chaired by an independent outside director and a majority of its members are outside directors. In addition,
the decision-making policy is decided by the Board of Directors after consulting with the Nomination andRemuneration Advisory Committee.
[Types of remuneration (composition ratio)]Basic remuneration (about 30 to 70%) (Note)

The amount is fixed by position according to responsibilities determined upon comprehensive consideration whilereferring to the levels of employee’s salaries and remuneration levels at other companies.
Performance-linked remuneration (about 20 to 40%) (Note)

To raise awareness on improving performance each year, performance-linked remuneration shall be paid in cash in an
amount reflecting the results of the performance indicator in the previous fiscal year. The target performance indicator
and its amount shall be consulted with the Nomination, Remuneration Advisory Committee as necessary in accordancewith changes in the environment and shall be reviewed based on its recommendations. Officers other than those withtitles are eligible for bonuses, to be paid at a certain time each year in an amount obtained reflecting the degree oftargets achieved for each individual.


Restricted stock remuneration (about 5 to 20%) (Note)

Restricted stock remuneration shall consist of restricted stock intended to further raise motivation to contribute tosustainably improving corporate value and shareholder value over the medium to long term within the range approvedat the General Meeting of Shareholders. The number of shares to be granted to Directors shall be resolved in advanceat a Board of Directors meeting. The restrictions on shares shall be lifted when the Director retires.
Note: If there is a pronounced decline in performance, performance-linked remuneration and stock remuneration may
all below the stated range. Therefore, basic remuneration may surpass the stated range.
[Supporting System for External Directors and/or Audit & Supervisory Board Members]
The Company has established a Board of Directors Secretariat which distributes materials concerning the agenda andreports for a Board of Directors meeting to all officers including External Directors and External Audit & Supervisory
Board Members beforehand, provides supplementary explanation as necessary, and relays any other information. In
addition, the Secretariat transmits information to officers as necessary on important matters not limited to the regular
Board of Directors meeting.
2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration Decisions (Overview
of Current Corporate Governance System)(1) Overview of the current systema) In principle, the Board of Directors meets at least once a month, and the Corporate Officers' Meeting, which
consists mainly of corporate officers, meets as necessary. The Company recognizes that rapid management
decision-making is one of the most important issues for responding to rapid changes in the business environmentand continuously increasing corporate value. The Board of Directors is positioned as an organization that decides
on the basic management policies and important management matters, in addition to matters required by laws and14

regulations. The Corporate Board of Directors promotes prompt management decisions and flexible
business execution to achieve not only short-term but also medium- to long-term performancetargets and further enhance corporate value.
b) The Company has adopted an Audit & Supervisory Board Members system and the Audit & Supervisory Board
consists of four Audit & Supervisory Board Members, including three External Audit & Supervisory Board
Members. Each Audit & Supervisory Board Member audits the execution of duties by the Directors by attending
meetings of the Board of Directors and other important meetings, and by examining the status of operations andassets, in accordance with the audit policy and audit plan formulated by the Audit & Supervisory Board.
c) At the Monthly Business Review, which is held monthly with the participation of officers and division heads,
information is shared and reflected in management decisions by discussing management issues in each businessdivision, analyzing the business environment, and reporting on the progress of business plans.
d) Accounting audits are conducted under an audit contract with Deloitte Touche Tohmatsu LLC for audits under theCompanies Act and the Financial Instruments and Exchange Act. The Company requests accounting audits thatare fair and unbiased.
e) The Company established the Nomination, Remuneration Advisory Committee as a voluntary advisory body to
the Board of Directors on April 27, 2018. The purpose of establishing the Nomination, Remuneration Advisory
Committee is to ensure objectivity and transparency in the determination process for matters such as thenomination of Directors and Audit & Supervisory Board Members and the remuneration, etc. for Directors and tofurther enhance the corporate governance system. The Committee has a total of three members consisting of two
External Directors who are independent officers and one Internal Director, and is chaired by an independent
officer selected from among the members themselves.
(2) Efforts to strengthen the functions of Audit & Supervisory Board Members
Audit & Supervisory Board Members cooperate with the Internal Control Audit Department, and the Accounting
Auditor by exchanging information regularly and as necessary.
3. Reasons for Adoption of Current Corporate Governance System
Of the six Directors, three are External Directors, and of the four Audit & Supervisory Board Members, three areExternal Audit & Supervisory Board Members. All six External Officers are independent officers, and the Company
believes that there is a system in place where advice and oversight are expected to be provided based on specialized
knowledge and experience of each officer. Please refer to the attached organizational chart for the details of the businessexecution and audit/oversight system.

Implementation of Measures for Shareholders and Other Stakeholders
1. Measures to Vitalize the General Meeting of Shareholders and Smooth Exercise of Voting Rights
Supplementary Explanations
Early Notification of Annual General Meeting of

The paper notice of convocation of the General Meeting of

Shareholders

Shareholders is sent two weeks before the General Meetingof Shareholders. Electronic provision measures are posted
15

on the Company's website, the Tokyo Stock Exchange
website, the Sumitomo Mitsui Trust Bank, Limited's
portal site, and ICJ's voting platform three weeks prior to
the General Meeting of Shareholders.
Allowing Electronic Exercise of Voting Rights

The Company uses an Internet-based voting system andvoting rights can be exercised by PC, mobile phone andsmartphone.

Participation in Electronic Voting Platform and Other

The Company participates in the voting rights exercise

Measures to Improve the Environment for Exercise of

platform for institutional investors operated by ICJ, Inc.

Voting Rights by Institutional Investors
Providing Convocation Notice (abridged) in English

An English notice is prepared and posted on the
Company’s website and on the voting rights exercise
platform of ICJ, Inc. prior to the sending date.

2. IR Activities
Supplementary Explanations
Preparation and Publication of

The Company’s Basic IR Policy is

Disclosure Policy

posted on the Company’s website in

Explanation by the Representative
Directors in person-

both Japanese and English.
Regular Investor Briefings for

In March 2022, we held an online

Individual Investors

briefing for individual investors.

Regular Investor Briefings for

After announcing our quarterly

Analysts and Institutional Investors

financial results, we hold financial

Yes

results briefings either in person at ourTokyo venue or remotely via online or
telephone.
We also participate in conferencesYes

hosted by securities companies andalso conduct individual interviews andonline remote interviews uponrequest.
Regular Investor Briefings for

We participate in conferences hosted

Overseas Investors

by securities companies and also
conduct individual interviews andYes

online remote interviews uponrequest.
Posting of IR Materials on the

We post Japanese and English

Company’s website

versions of financial statements,
financial results briefing materials,
16-

securities reports, press releases,
integrated reports, business overviews,
etc. on the Company’s website.
Establishment of Department and/or

Investor Relations Office, Corporate

Person in Charge of IR

Planning Department-

3. Measures to Ensure Due Respect for Stakeholders
Supplementary Explanations
Stipulation of Provisions in

The Company’s Code of Conduct stipulates that we will respond to all stakeholders

Internal Regulations Concerning

appropriately and in good faith, value our relationships with them, fulfill our corporate

Respect for the Standpoint ofresponsibilities through our business activities, and contribute to society.

Stakeholders
Implementation of

The Sustainability Committee, chaired by the President and CEO, reviews andEnvironmental Preservation

discusses the status of initiatives for sustainability issues, including the environment.

Activities, CSR Activities, etc.

The content of the discussions is reported to the Board of Directors once a year andwhenever necessary.
The main environmental initiatives include reducing greenhouse gas emissions,developing and expanding sales of products that reduce the environmental impact, andpromoting waste reduction.
As part of our efforts to reduce greenhouse gas emissions, we have introduced solar
power generation systems at our main factories in Japan and overseas (Komaki,
Kasugai, Tohoku, Hokuriku, Shikoku, China, Thailand). We will continue tointroduce these systems in a planned manner at our factories in Japan and overseas,
and will continue to take proactive steps to reduce CO2 emissions and protect theenvironment.

Formulation of Policies, etc.

The Company has formulated the Basic IR Policy and aims to achieve sustainable

Relating to the Provision of

growth and increase its corporate value in the medium-to-long term as it actively

Information to Stakeholders

maintains constructive dialogue with shareholders and investors. The Company
endeavors to make timely, appropriate, and fair information disclosure and to be a
corporation that is trusted.

Other<Human Rights Initiatives>

Our Group has established the CKD Group Human Rights Policy to ensure that we act
in a way that respects the human rights of all people involved in our businessactivities.
Based on the CKD Group Human Rights Policy, we identify and evaluate humanrights risks and conduct annual human rights surveys of CKD Group companies andmajor suppliers.

17

Matters Related to the Internal Control System
1. Basic Views on Internal Control System and the Progress of its Development
The following describes the system for ensuring the appropriateness of the Company operations and the overview.
1.

Compliance system[Content of the basic policy]a.

The Company shall establish the Code of Conduct to fulfill its corporate social responsibility and establish
rules and regulations regarding related laws and regulations to ensure compliance.

b. The Company shall not have any relationship with antisocial forces, and will take a firm stand against themas an organization.
c.

The Company shall establish a reporting contact point and implement a system to prevent and correct
violations of laws and regulations.

[Overview of the system operations status]a. The Company has established the Compliance Committee as an organization to promote theenhancement of business ethic awareness of employees and the Company’s value and isconducting activities.
b. The Company clearly states its basic policy on antisocial forces in the Code of Conduct. In
addition, this policy is made known to employees working at the Group through initiatives suchas internal training.
c. The Company has established a reporting contact point as a whistle-blowing mechanism for
employees, working in the Group. In addition to the internal reporting contact point, by setting
up an external reporting contact point using independent attorney-at-law, the Company
ensures the anonymity of the reporter and the confidentiality of reporting, giving consideration
to the protection of the reporter and endeavoring to ensure the early detection and correctionof any compliance violations.
2.

Risk management system[Content of the basic policy]
The Company identifies various risks ancillary to business activities to ensure business continuity
and raise the corporate value, and based upon the proper assessment of such risks, undertakes
efficient and effective management activities.
[Overview of the system operations status]
The Risk Management Committee has been established as an organization under the direct control of the Board of
Directors. It reports the progress and results of its activities to the Board of Directors regularly to promote risk
management.
We established a Risk Management Office as a subordinate organization of the Risk Management Committee in
July 2022 and a monitoring system by the Internal Control Audit Office to further strengthen our risk management
system.
Specifically, the Risk Management Office comprehensively identifies and analyzes the risks for CKD, checks thestatus of each division’s efforts to address each risk, and encourages improvements as necessary. It regularly reports
to the Risk Management Committee.
The Internal Control Audit Office, the third line of risk management, monitors the appropriateness of functions ofeach division, the first line of risk management, and the Risk Management Office, the second line. Additionally,18

the Internal Control Audit Office reports directly to the Board of Directors to share information to ensure that theBoard of Directors and the Audit & Supervisory Board fulfill their functions.
3.

System to the duties efficiently[Content of the basic policy]a.

In principle, the Board of Directors convenes once a month, and the Board of Corporate Officers, composed
mainly of Corporate officers, is convened as needed to facilitate swift management decision-making.

b. The Company shall hold business reporting meetings with directors and division heads in attendance.
Management issues at each business division, and share information through reports on the analysis of thebusiness environment and business planning progress, and reflect such information in management
decisions.
c.

With the introduction of the Executive Officer System, the Board of Directors will separate the functions
previously held by the Board of Directors, such as managerial decision-making, supervision, and businessexecution. As a result, the Board of Directors makes accurate and prompt decisions by reducing the number
of Directors. Regarding business execution, the Company will execute business flexibly by delegating
authority to executive officers and clarifying responsibility. In principle, the Board of Directors convenes
once a month, and the Management Meeting, which is composed mainly of Company officers, is convened
as needed to facilitate swift management decision-making.

[Overview of the system operations status]a. The Board of Directors' regulations clearly define the matters to be resolved and reported by
the Board of Directors, and the Board of Directors held its meetings 12 times in the current
fiscal year, discussed issues, and formulated management plans.
b. Important matters related to business execution are discussed at the Board of Corporate
Officers and the Business Reporting Meeting just before reaching the Board of Directors
meetings, and discussions are held to determine whether there are potential risks. Throughthese discussions, we are working to ensure the appropriateness and efficiency of businessexecution by directors.
c. Executive officers perform their duties under the supervision of the Board of Directors within the scope of
their authority and responsibilities The Board of Directors' regulations clearly define the matters to beresolved and reported by the Board of Directors, and the Board of Directors held its meetings 12 times lastyear. Seven directors, including three External Directors, were present at all meetings to report and discuss
issues and formulate management plans as needed.
4.

Information Storage and Management System[Content of the basic policy]
Information concerning the execution of duties by Directors, including documents for obtaining management
approval and minutes of various meetings, shall be stored and managed appropriately in accordance with laws andregulations and internal rules to ensure that the execution of duties by Directors is conducted appropriately.
[Overview of the system operations status]
Documents concerning the execution of duties by Directors, including documents for obtaining management
approval and minutes of the Board of Directors meetings, are stored and managed appropriately in accordancewith the document control regulations and other relevant internal rules.
19

5.

Group management system[Content of the basic policy]a.

In addition to establishing approval rules for the execution of operations, the Company shall establish asystem to ensure that essential management matters of subsidiaries shall be approved in advance by theCompany or reported to the Company in accordance with internal regulations.

b.

The scope of the Code of Conduct and the risk management system shall include subsidiaries to ensure thatthe operations of the Group as a whole are appropriate.

c.

The Company shall ensure that the Group is fully aware of the Company’s “Purpose” and ensure theappropriateness of its operations. In addition, the Company shall establish Subsidiary Management
Regulations both in and outside of Japan to promote efficiency in the management of its subsidiaries.

d.

In addition to establishing the Code of Conduct applicable to the Group as a whole, the Company shalladequately understand the actual conditions of its subsidiaries and provide necessary advice and guidance toensure compliance thoroughly.

[Overview of the system operations status]a.

The Management Regulations stipulate matters for which prior approval and reporting are required forsubsidiaries.

b.

The Company extends its Code of Conduct and risk management initiatives to its subsidiaries to ensure theappropriateness of operations.

c.

The Company extends the dissemination of its “Purpose” and the Subsidiary Management Regulations to its
subsidiaries, to promote more efficient management at subsidiaries.

d.

The management status and other information are reported monthly to the Company’s Board of Directors. In
addition, the internal audit departments undertake timely audits, and the departments in charge provide
guidance and support to enable appropriate business operations.

e.

The internal audit departments have established a new overseas department to strengthen group
governance.The Subsidiary Management Regulations set forth matters that the Subsidiary should apply foror report in advance.

6.

Audit System for Auditors[Content of the basic policy]a.

Whenever necessary, the Company shall appoint employees to assist the Audit & Supervisory Board
Members in their duties and authorize those employees to conduct investigations at the direction of the Audit& Supervisory Board Members. In such cases, Directors and Audit & Supervisory Board Members shalldiscuss the personnel matters in advance.

b.

Directors and employees of the Company and its subsidiaries shall provide necessary reports andinformation upon request of Audit & Supervisory Board Members in accordance with laws and regulations,and provisions stipulated by the Audit & Supervisory Board.

20

c.

No disadvantageous treatment shall be given to any employee for reporting or providing information to
Audit & Supervisory Board Members.

d.

Opportunities for Audit & Supervisory Board Members, the Accounting Auditor, and the Internal Control &Audit Office to exchange information shall be secured. In addition, Audit & Supervisory Board Members
may consult with external experts in law, accounting, etc., as necessary, and the Company shall bear the costof such consultations.

[Overview of the system operations status]a.

Two dedicated employees have been appointed to assist the Audit & Supervisory Board Members in theirduties.

b.

Audit & Supervisory Board Members periodically exchange opinions with the Representative Director, other
Directors, Executive Officers, etc., and participate in Board of Directors meetings and other important
committees. They also check important material documents concerning the execution of duties, as necessary.

c.

In fiscal 2023, the Company held 12 meetings of the Audit & Supervisory Board, which consists of four
Audit & Supervisory Board Members, including three External Audit & Supervisory Board Members.
During these meetings, Audit & Supervisory Board Members conducted discussions with Executive Officers
on four occasions and with the Accounting Auditor on three occasions. In addition, the Audit & Supervisory
Board also held 12 three-way audit meetings with the Accounting Auditor and internal audit departments to
exchange audit information. The Company has assigned two employees to assist with the duties of the Audit& Supervisory Board Members.

2. Basic Views on Eliminating Antisocial Forces and the Progress of its Development
The Conduct Guidelines formulated in internal regulations stipulates that the Company shall not have any relationshipwith antisocial forces and shall reject any unreasonable inducement or coercion, and the Conduct Guidelines Manualis distributed to all employees to ensure that they are fully aware of the Guidelines. The General Affairs Department
oversees the response to antisocial forces and works in close cooperation with the police, corporate defense measures
councils, attorneys, and other external specialist organizations. In addition, the Company has concluded a memorandumof understanding with its suppliers regarding the elimination of antisocial forces and it has taken measures to eliminate
any relationship with antisocial forces thoroughly.

Other
1. Adoption of Anti-Takeover Measures
Adoption of Anti-Takeover Measures

Not adopted

Supplementary Explanation
2. Other Matters Concerning Corporate Governance System<Overview of the timely disclosure system>
1. Timely disclosure policy
The Company is fully aware that timely and appropriate disclosure of corporate information to investors forms thebasis of a sound securities market, and it provides timely and appropriate corporate information to investors through21

means such as enhancing its internal systems to ensure that corporate information is appropriately disclosed in a prompt,
accurate, and fair manner from an investor’s perspective at all times.
2. Internal system for information disclosure
The Company’s internal system for timely disclosure is as follows:
The contents of disclosures are posted on the Tokyo Stock Exchange’s TDnet, as well as on the Company’s website(including news and updates).
(1) Decisions
In principle, decisions requiring disclosure are resolved by the Board of Directors. The General Affairs Department(the person responsible for handling information) consolidates the matters submitted to the Board of Directors,
considers the content, timing, method, etc. of disclosure, and promptly discloses the information after a resolution by
the Board of Directors.
(2) Facts
The Information Disclosure Committee considers the content, timing, method, etc. of disclosure of facts requiring
disclosure, and the information shall be disclosed promptly upon approval of the President.
(3) Financial settlement information
In principle, financial settlement information is resolved by the Board of Directors. The Accounting Department
prepares disclosure materials and promptly discloses the information after the resolution by the Board of Directors.

22

Corporate Governance System Diagram

23