Basic Policy on Corporate Governance

Chapter 1

Basic Views

CKD Corporation (the “Company”) views corporate governance as a system that createsand facilitates a mechanism through which it seeks to achieve sustainable growth andincrease corporate value by enhancing the transparency and fairness of management andmaking swift decisions, with the goal of building a good relationship with stakeholders
who have diverse interests and of continuing to be a trustworthy company, guided by its“Values”.

Chapter 2

Securing the Rights and Equal Treatment of Shareholders

1. General Meetings of Shareholders
Mindful that general meetings of shareholders are opportunities to have constructive
dialogue with shareholders, the Company sets appropriate dates for those meetings andassociated events. To provide shareholders with sufficient time to consider theproposals submitted to the meeting, the Company sends out the Notice of the General
Meeting of Shareholders as early as possible and discloses it on the corporate website
or elsewhere prior to sending it out. In regard to the exercise of voting rights, theCompany participates in an electronic voting platform and implements other measures
to create an environment in which all shareholders, including those unable to attend
the meeting, can exercise their voting rights appropriately.
2. Cross-shareholdings(1) Policy for and approach to the reduction of cross-shareholdings
In principle, the Company does not hold cross-shareholdings, except in cases
where the Company judges that they will contribute to the enhancement of its
corporate value from the perspective of business strategies, business allianceswith business partners, and the maintenance and strengthening of business
relationships. If the significance of the shares held by the Company has
diminished, the Company will sell them in a phased manner, taking into
account the circumstances of the company concerned.
(2) Examination on whether or not to hold shares1

In cases where the Company determines that it is necessary to hold shares, theBoard of Directors annually examines the objectives and rationale for holding
the shares to determine the need for business strategies, business alliances, andthe maintenance and strengthening of business relationships.
(3) Criteria for exercising voting rights
When exercising voting rights pertaining to the shares it holds, the Company
considers whether or not the exercise of voting rights will lead to an increasein the corporate value of the issuing company and shareholder value, forexample, by opposing any proposal in the event where the financial health of
the issuing company is adversely affected or if an illegal act occurs.
(4) How to respond if entities holding shares in the Company indicate their intention
to sell or otherwise dispose of the shares
If entities holding shares in the Company indicate their intention to sell orotherwise dispose of those shares, the Company does not hinder the sale.
3. Transactions between Related Parties
The Board of Directors must approve transactions between the Company and its
officers in accordance with the provisions of laws and regulations and internal
regulations to ensure that the interests of shareholders are not damaged. In addition,
officers who have conducted such transactions are required to report material facts
about the transactions to the Board of Directors without delay.

Chapter 3

Appropriate Cooperation with Stakeholders Other Than Shareholders

1. Corporate Commitment and Code of Conduct
The Company endeavors to instill its Corporate Commitment thoroughly with a viewto ensuring the appropriateness of operations. In addition, the Company establishes
regulations for the control of subsidiaries both in and outside of Japan to promote
efficiency in the management of its subsidiaries.
Furthermore, to fulfill its corporate social responsibility, the Company seeks to deepen
communication with stakeholders by engaging in environmental preservation
activities even more actively, contributing to society, helping employees volunteer,
and taking other actions. At the same time, to augment these efforts, the Company
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develops code of conduct and other internal regulations.
2. Whistleblowing System
As part of its whistleblowing system, the Company has established a reporting contact
point through which employees working at the Company or other persons can reportwrongdoings. In addition to this internal reporting contact point, the Company has anexternal reporting contact point in place that is operated by an independent attorney.
Through these measures, the Company strives to secure the anonymity ofwhistleblowers and the confidentiality of the information reported, to protect thewhistleblowers, and to detect and correct compliance violations at an early stage.

Chapter 4

Ensuring Appropriate Information Disclosure and Transparency1. Basic Thinking
The Company is fully aware that timely and appropriate disclosure of corporate
information to shareholders forms the basis of a sound securities market, and it
provides timely and appropriate corporate information to shareholders through means
such as enhancing its internal systems, to ensure that corporate information isappropriately disclosed in a prompt, accurate, and fair manner from a shareholder
perspective at all times.

Chapter 5

Responsibilities of the Board of Directors and Other Organs

1. Board of Directors(1) Role
The Company stipulates in the CKD Corporation Regulations for the Board ofDirectors that matters stipulated by laws, regulations and the Articles ofIncorporation, and other matters related to important businesses shall bedecided by resolution of the Board of Directors, and the Board of Directors
delegates decision-making authority for execution of other businesses to themanagement team in accordance with internal regulations that clarify decisionmaking authority.
(2) Appointment3

In regard to the appointment of Directors, the Board of Directors makes
decisions upon consultation with the Nomination, Remuneration Advisory
Committee, principally from the perspective of actively advancing diversitymanagement to respond flexibly to globalization and other changes in themarket environment, and of securing a wide range of human resources withdiverse values, including overseas experience and gender, in addition to thebackground, knowledge, and expertise that are essential for businessdevelopment.
(3) Dismissal
Directors are subjected to dismissal if they are not deemed to be contributing
to the improvement of corporate value, or if there is misconduct in theexecution of duties from the perspective of corporate governance or a material
violation of laws and regulations. Such decisions are made by the Board ofDirectors after consultation with the Nomination, Remuneration AdvisoryCommittee.
(4) Evaluation and operation
The Company periodically conducts a survey to evaluate the effectiveness ofthe Board of Directors by a third-party organization for all Directors and Audit& Supervisory Board Members. The Company examines matters such as thecomposition of the Board of Directors and its operations as well as the support
structure for Directors and Audit & Supervisory Board Members, so that theBoard of Directors fulfills its roles and responsibilities effectively.
2. Audit & Supervisory Board(1) Role
The Audit & Supervisory Board and Audit & Supervisory Board Members bearin mind their fiduciary responsibilities to shareholders and make appropriate
decisions from an independent and objective standpoint when executing theirroles and responsibilities, which include the audit of the execution of Directors’
duties, appointment and dismissal of the Accounting Auditor, and the exercise
of authority regarding audit fees.
Audit & Supervisory Board Members seek to gather information proactively
by attending important meetings, such as those of the Board of Directors andthe Management Conference, and audit the state of business execution at the4Company.
Audit & Supervisory Board Members work hand in hand with the internal audit
departments and Accounting Auditor to make sure that audits by Audit &Supervisory Board Members are performed in an effective manner.
3. Nomination, Remuneration Advisory Committee(1) Role and purpose
The Nomination, Remuneration Advisory Committee has been established forthe purpose of ensuring objectivity and transparency in the determination
process for matters such as the nomination of Directors and Audit &Supervisory Board Members and remuneration for Directors, and of further
enhancing the corporate governance system.
4. Remuneration Systems(1) Directors(a) Basic policy Design the system to motivate Directors to contribute to the enhancementof corporate value; Ensure the appropriateness of the method for determining remunerationand distribution; and Design the system to allow Directors to share the interests withshareholders through stock ownership.
(b) Process and details
Remuneration for Directors consists of basic remuneration, performancelinked remuneration, and stock remuneration. The combination of thesethree is designed in such a way that the higher a person’s position, thegreater the proportion of performance-linked remuneration. External
Directors, who are responsible for the oversight function, are paid only basic
remuneration in light of their role. The determination process and details
must follow the range approved by the General Meeting of Shareholders;and must also adhere to recommendations from the Nomination,
Remuneration Advisory Committee chaired by an independent External
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Director, to further increase transparency.
(2) Audit & Supervisory Board Members
Remuneration for Audit & Supervisory Board Members is determined by theAudit & Supervisory Board within the range approved by the General Meetingof Shareholders. Audit & Supervisory Board Members are paid only basic
remuneration to secure their independence from management.

Chapter 6

Dialogue with Shareholders

1. Basic Thinking
The Company aims to achieve sustainable growth and increase its corporate value inthe medium-to-long term as it actively maintains constructive dialogue withshareholders and investors.
2. Initiatives and Frameworks for Dialogue(1) The Company holds briefings to explain its financial results, management
initiatives, and management policies, among other matters. In addition, there is acontact point at the Company’s website for feedback and questions.
(2) The content of dialogues with shareholders is provided as feedback to the Boardof Directors and other bodies as necessary.
(3) In order to prevent the leakage of financial information and ensure fairness, theCompany observes a quiet period, during which it does not disclose informationor comment on questions related to the financial results as a general rule. Inaddition, the Company has established internal regulations to prevent the leakageof insider information.

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