Revised on July 31th, 2017

Policies on the Approach to Corporate Governance
Kuroda Electric Co., Ltd. (the Company) has prepared corporate governance policies forthe purpose of implementing and understanding its current status of implementation,corresponding to each principle of the Corporate Governance Code (“the CG Code”) set
up by the Tokyo Stock Exchange for listed companies. The Company would like toshare its views and efforts made on corporate governance with every stakeholder, andattempts to further enhance and improve its effort on corporate governance in the
future.

Contents
Introduction

Basic Policies and Principles

Chapter 1

Securing the Rights and Equal Treatment of Shareholders

Chapter 2

Appropriate Cooperation with Stakeholders Other Than
Shareholders

Chapter 3

Appropriate Information Disclosure and Transparency

Chapter 4

Responsibilities of the Board of Directors, etc.

Chapter 5

Dialogue with Shareholders

Appendix 1

Policies and Standards on the Composition of the Board of
Directors and the Selection of Outside Officers

Introduction Basic Policies and Principles
1. Basic Policies and Views on Corporate Governance
The Company has been fostering the corporate philosophy described in the next
paragraph ever since its foundation in its corporate culture. With “the sustainablegrowth of the company and the creation of mid- to long-term corporate value” as the
bedrock of business activities, we recognize corporate governance as a system tocreate consistent corporate value. We consider it highly important to enhancetransparency in management and make quick decisions for higher corporate value,
while making considerations for the creation of added value for all stakeholders
surrounding the Company. For this reason, we have adopted a system of a company
with nominating committee, etc. to enable flexible business execution andstrengthen the management supervisory function carried out by the Board of
Directors.
2. Corporate Philosophy
The Company considers the three pillars of “Life,” “Freedom,” and “Creativity” as
the source of its corporate value, which has been the corporate philosophy eversince the foundation of the Company. The Company believes that appreciating thebenefits received from society and the environment and continuing to develop
business freely and creatively are the reasons the Kuroda Electric Group exists,
and that this leads to the social responsibility of the Group. For human beings tolive, basically, the most necessary and important factors are “Life” and “Freedom.”
For a business to expand forever, “Life” and “Freedom” must be respected, realized
and permeated in the company as a corporate culture. Our company maxim, “todraw on roots of life as deep as the earth and extend freedom as high as the sky,”
was set up to encourage the three pillars in the following ways.
Life:
Freedom:Creativity:

A proactive approach and recognition of what we owe to thecommunity and the environment
Fostering the independence of each of our members by giving themautonomy and responsibility, while allowing them to develop theirpotential to the full
Most of all, seeking constant evolution by taking on the challenge of
unexplored fields and possibilities

3. Management Policies
The Company is under management in conformity with the aforementioned
principles and basic policies related to corporate governance.
-2-4. Establishment, Amendment or Abolishment of the Policies
The Board of Directors shall determine the establishment, amendment or
abolishment of the policies herein set forth.
The following chapters and items are described in the order of the contents of the“Corporate Governance Code” adopted by the Tokyo Stock Exchange in June 2015.

Chapter 1

Securing the Rights and Equal Treatment of Shareholders

1. Securing the Rights and Equal Treatment of Shareholders
For listed companies, shareholders are significant stakeholders. The Company
develops an environment in which shareholders can exercise their rights in aproper manner. As the general meeting of shareholders is the most important
opportunity for us to have dialogue with every shareholder, we give special
consideration to the meeting, so that the shareholders’ exercising their rights aswell as their equal treatment should not be impeded. Exercising voting rights at thegeneral meeting of shareholders is the fundamental right of a shareholder, and wetake proper measures to ensure that their rights can be practically exercised.
a. If the Company’s proposal is approved at the general meeting of shareholders
with a large number of dissenting votes, it is the Company’s policy to analyze
the cause of the dissenting votes. Depending on the outcome of the analysis, weconsider whether to seek dialogue with shareholders or other action plans.
b. The Company adopted a system of a company with nominating committee, etc.
and separated the management supervisory function and business executionfunction. Three committees have been set up, namely, the Nominating
Committee, Compensation Committee and Audit Committee. Each of thesecommittees is made up of a majority of outside directors and sufficiently fulfills
its role and function related to corporate governance.
c. The Company prepared enhanced information disclosure and designated a pointof contact, etc., so that shareholders’ rights are not impeded. For the equal
treatment of domestic and foreign investors in substance, information disclosure
is prepared in English so that foreign shareholders, including institutional
investors, may exercise their rights smoothly, as described in Chapter 3.
Chapter 5 deals with the fact that the Company is engaged in IR activities forforeign investors as actively as for domestic investors.
2. General Meeting of Shareholders
The Company considers the general meeting of shareholders as an opportunity forconstructive dialogue with shareholders, and thus makes sure that consideration is-3-made from the perspective of shareholders to ensure that they can exercise theirrightsa. The Company sets up an appropriate information disclosure system incompliance with the Timely Disclosure Rules of the Tokyo Stock Exchange.
b. For the convenience of shareholders, the Company sends out the notice ofconvocation of the general meeting of shareholders earlier (approximately 3
weeks in advance) than required by the laws and ordinances. It is also disclosed
early on stock exchange’s website and the voting rights exercise platform for
institutional investors, as well as on the Company’s website.
c. For scheduling of the general meeting of shareholders, including the date of themeeting, the Company makes every effort to offer information disclosure inadvance to enhance constructive dialogue with shareholders.
d. Voting rights may be exercised through the voting rights exercise platform for
institutional investors, run by ICJ, Inc. The English version of the notice ofconvocation of the general meeting of shareholders is also prepared anddisclosed.
e. In case institutional investors, etc., who hold the Company’s shares under thename of a trust bank, etc., request in advance to exercise their voting rights inlieu of the trust bank, etc., we would accommodate such requests after
consultation with the trust bank, as required.
3. Basic Policies on Capital Management
As capital management directly affects stakeholder interests, commencing withshareholders, the Company considers capital management as one of the mostimportant corporate governance issues and set up the basic policies as follows.
(i) Maintaining the level of shareholder capital required for sustainable growthand increase in corporate value over the mid- to long- term for the Group.
(ii) In doing so, the Company emphasizes so-called “capital productivity,” and as its
indicator, maintains the ROE (Return on Equity), at the level considered to
exceed the cost of capital.
(iii)As for shareholder returns, the Company focuses on the dividend policy with ahigh regard for its long-term sustainability, while taking into consideration therequired and appropriate rate of shareholders’ equity to total assets under (i),ROE, dividend on equity ratio, and competitive dividend yield. As required, theagile share buy-back may be implemented. Under the design of a system of acompany with nominating committee, etc., decisions related to dividends andthe agile share buy-back are delegated to the Board of Directors.
(iv) The Company does not implement capital management that may not contributeto the long-term creation of shareholder value.

-4-4. “Cross-Shareholdings” (translation used in the CG Code) of Listed Shares
In overall consideration of establishing, maintaining or strengthening relationships
with business partners, the Company may hold shares of other listed companies if it
determines that holding such shares would contribute to higher corporate value of
the Group in the mid- to long- term. The policy regarding the holding andmaintaining shares is reviewed on a regular basis as our management strategy andother factors may change. Going forward, the policy is put into discussion once a
year at the Board of Directors meeting, and if the holding of any shares is
considered to bring no shareholder value in the long run from the perspective of
economic rationality, such as risks and returns, the disposal of such shares shall beconsidered.
Upon exercising the voting rights for the shares held by the Company, we would
examine comprehensively whether the proposals would contribute to theappropriate maintenance of corporate governance or the higher corporate value ofthe issuing company, as well as that of the Company, in the mid- to long-term.
5. So-called Anti-Takeover Measures
Currently, the Company has not adopted so-called anti-takeover measures, but incase a large acquisition of its shares occurred, to presumably harm the common
interests of shareholders, the Board of Directors would appropriately deal with thesituation to secure the Company’s corporate value and protect the interests ofshareholders, including minority shareholders. If we were to adopt
countermeasures, such as anti-takeover measures in the future, we would fully
discuss the rationality and appropriateness of such measures at the Executive
Board and the Board of Directors meetings, and make proposals to the general
meeting of shareholders.
a. The Company shall make every effort to offer information necessary forshareholders to appropriately determine whether to accept a takeover bid in thecase of a buy-out of the Company’s shares, and shall explain its policies andactions after full discussion at the Executive Board and the Board of Directors
meetings.
6. Capital Management That May Harm Shareholders’ Interests
In compliance with the basic policies on capital management (Chapter 1 -3), theCompany does not implement capital management that may not contribute to thelong-term creation of shareholder value. As for capital management that may
possibly harm the interests of shareholders, the Company shall fully examine thenecessity and rationality, to minimize the possibility of harming the interests ofshareholders and provide a full explanation after ensuring appropriate procedures
so that existing shareholders are not unfairly harmed.
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7. Related-Party Transactions
When a director or an executive officer of the Company is engaged in a transaction
with the Company, or when the Company is engaged in a transaction with major
shareholders, etc., the matter shall be fully discussed and resolved at the Board of
Directors meeting. The content of such transaction shall be reported to the Board of
Directors after the completion of the transaction.

Chapter 2 Appropriate Cooperation
Shareholders
1.

with

Stakeholders

Other

Than

Business Principles as the Foundation of Corporate Value Creation over the Mid- toLong-Term
Based on the corporate philosophy (Introduction-2) since its foundation, theCompany shall pursue further growth potential and profitability, develop business
operations with a global perspective, and enhance corporate value consistently overthe mid- to long-term. The Company recognizes that sustainable growth and thecreation of mid- to long-term corporate value that it strives for are made possible
through cooperation with all stakeholders, and thus shall appropriately maintainsuch cooperative relationships. For this reason, we shall make all efforts in building
and maintaining good long-lasting relationships with stakeholders other thanshareholders, including clients, employees, business partners and the local
community, etc. In addition, in accordance with the Company’s CSR policies, weconsider our social responsibility to be a fiduciary responsibility to all of our
stakeholders, and carry out the responsibilities with much consideration for theenvironment, human rights, etc., from a global perspective.

2. Development and Implementation of the Code of Conduct
Based on the belief that corporate activities of the Company and each one of theGroup companies shall always bring “trust” to the parties involved and contribute to
the benefit of all stakeholders including shareholders, investors, employees,
business partners and people in the local community, the “Group Compliance Codeof Conduct” is set up for and has been informed to all employees including officers,
regular employees, advisors, temporary workers, seasonal employees and part-timeworkers.
a. The Board of Directors periodically reviews and audits the operation of the“Group Compliance Code of Conduct.” To facilitate action plans of complianceand risk management in specific terms and on a regular basis, the Corporate
Action Committee is set up to coordinate with the Board of Directors.

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3. Issues Surrounding Sustainability Including Social and Environmental Matters
The Company officially participated in the UN Global Compact in March 2011. In
accordance with the Company’s CSR policies based on the corporate philosophy, we
consider our social responsibility to be a fiduciary responsibility to all of our
stakeholders, and carry out the responsibilities with much consideration for theenvironment, human rights, etc., from a global perspective. The details are provided
in the CSR reports, which are available on the Company’s website.
a.
For issues surrounding social and environmental sustainability, the Company
sets up a specialized department and puts a target action plan into practice.
4. Ensuring Diversity within the Company, Including Promoting Women’sParticipation
In order to create a work environment in which female employees can keep working
actively and in diversified fields, and to realize a work-life balance, the Company
sets up the following measures.
a. Raising awareness within the company for plans to promote women’s
participationb. Preparing a system to support employees who both manage work and raisechildren or nurse their relatives after work, etc., and promote the use of thesystem by employees including malec. Providing wider occupational fields and categories for female employees
d. Promoting less overtimee. Promoting to ensure diversity in the company
5. Whistle-Blowing
A whistle-blowing system is set up and in operation for all employees of the Group
companies. The status of operation of the system is reported to the Audit Committee
as needed or on a regular basis. The Committee shall supervise and take actions sothat the whistle-blowing system practically functions.
a. The Company adopts an external informing system and attempts to protect the
informer by stipulating the privacy and the prohibition of unfair treatment of theinformer in the related rules. In addition, the contact persons include externallawyers.

Chapter 3

Appropriate Information Disclosure and Transparency

1. Basic Policies Related to Information Disclosure
Financial information that represents a company’s financial position andmanagement performance and non-financial information that provides
management strategies and business trends are useful for shareholders, and thus
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they are disclosed in a timely and appropriate manner in compliance with laws andregulations as well as the stock exchange regulations.
(i)What the company strives for (management principles, etc.), management
strategies and business plans are disclosed on the Company’s website.
(ii)
Basic principles and polices regarding corporate governance, based on eachprinciple of the Code are also disclosed on the Company’s website.
(iii)
Compensation for management personnel and directors are determined by
the Compensation Committee, which is composed of a majority of
independent outside directors, in accordance with the basic policies alreadyset. (“Independent outside directors” means those designated as“independent officers” defined by Securities Listing Regulations of the Tokyo
Stock Exchange and filed as such to the Tokyo Stock Exchange. Please refer
to Chapter 4 -7, 8 and 9 for their roles in the Company.)(iv)
The appointment of directors and executive officers is carried out by the
Nominating Committee, composed of a majority of independent outside
directors. Candidates are selected in overall consideration of personal
character, knowledge, experience and achievements, etc. appropriate for the
position.
(v)
The reasons for selecting the candidates for directors are described in thenotice of convocation of the general meeting of shareholders.
a. The “Corporate philosophy,” “Corporate governance” and “Midterm BusinessPlan” are disclosed for the users on the Company’s website.
b. In light of the increasing shareholding ratio of foreign investors, major
documents disclosed on the Company’s website are available in English.
Materials in English are offered thorough the voting platform as well, including
the notice of convocation of the general meeting of shareholders.
2. External Accounting Auditor
The Company and the external accounting auditor ensure appropriate audits, while
recognizing their responsibilities to shareholders and investors.
a.
(i) The Audit Committee comprehends and evaluates the operational statusthrough audits implemented by the external accounting auditor and audit
reports, etc. At present, we have not fixed clear standards relating to theevaluation of candidates for the external accounting auditor. The Committee
shall develop, from now on, policies and standards for the appropriate
selection and evaluation of the candidates for external accounting auditor.
(ii) The Audit Committee examines the independence and professional
expertise of the external accounting auditor through the exchange of opinionswith the external accounting auditor and the audit implementation status, etc.
The Company’s present external accounting auditor, KPMG AZSA LLC, is-8-

recognized to have no problem in terms of independence and professional
expertise, and we receive reports from KPMG AZSA LLC a “result of
examination by Certified Public Accountants and Audit Oversight Board”b.

(i) The external accounting auditor enters into an audit contract after
consultation with the Audit Committee, to secure sufficient audit time basedon the audit policy of each term.
(ii) Information provided by the external accounting auditor shall be sharedwith management via the Audit Committee. Each year, the external
accounting auditor has an opportunity to interview a representative officer toshare information.
(iii)-(iv) The external accounting auditor shall establish a cooperative
relationship that enables free discussion on sharing awareness and actionplans, by means of exchanging relevant information with the Audit
Committee and the Internal Audit Department (Audit Office) and attending
the Audit Committee, etc., as needed.

Chapter 4
1.

Responsibilities of the Board of Directors, etc.

Roles and Responsibilities of the Board of Directors (1)The Board of Directors supervises management based on the management
principles and strategic direction it establishes, for sustainable growth and thecreation of mid- to long-term corporate value. The Board is well aware of its
fiduciary responsibility and accountability to shareholders, and fulfills the roles andresponsibilities described below, including the role of deciding on the items definedin the Articles of Incorporation. The Board establishes highly effective corporate
governance as a company with nominating committee, etc. defined and required by
the Companies Act.
1) Determining allocation of important management resources and indicating thedirection of management strategies2) Developing a supporting environment for appropriate risk taking
3) Ensuring fairness and transparency in management using the supervisory
function over management in generala. (Delegation of Business Execution) The Company separates management
oversight and business execution, and adopts a system of a company withnominating committee, etc. for more transparency in management.
The Board of Directors concentrates on the supervisory function of management
through deliberations of resolution matters based on the rules of the Board,while the execution of business is largely delegated to executive officers.

-9-The duties delegated to the Executive Board and executive officers are
determined by the decision of the Board of Directors, and their roles are clearly
defined by the internal rules.
As for executive officers, including the representative officers, each officer’s
authorities and responsibilities are clearly defined in the rules of the Executive
Board, based on the decision by the Board of Directors, and in authority rules, inconjunction with the authority standards set forth in accordance with the rank
and duties.
b. (Midterm Business Plan) The Board of Directors, the Executive Board andexecutive officers shall make all efforts in realizing the midterm business plan,
as it is a part of the commitment made to stakeholders, including shareholders.
The Company offers disclosures and briefings on the midterm business plan,
based on the disclosure policies. The outcome, progress and degree ofachievement are periodically analyzed at least once a year. The analysis,
including problems found as a result of the analysis and action plans thereof,
shall be disclosed on the Company’s website, and explained in financial results
briefings and in the general meeting of shareholders.
c. (Succession Plan) The Board of Directors assumes a role to select and discharge
management personnel, and at the same time discusses as necessary andappropriately supervises the succession plan of representative officer, based on
the Company’s corporate philosophy and management strategies.
2.

Roles and Responsibilities of the Board of Directors (2)The Board of Directors considers demonstrating a healthy entrepreneurial spirit by
the executive officers and management personnel and developing an environment tosupport appropriate risk-taking challenges are in line with the Company’s corporate
philosophy that raises “Life” and “Freedom.” Based on such belief, the Board
recognizes its roles and responsibilities and implements appropriate monitoring andincentives, utilizing the three committees of Nominating, Compensation and Audit.
a. (Management Compensation System) The Company’s current compensation for
executive officers consists of fixed salaries and performance-based annual
bonuses. As part of the compensation system based on mid- to long-term
achievement, we are contemplating introducing a stock-based compensation
system.

3.

Roles and Responsibilities of the Board of Directors (3)The Board of Directors effectively supervises directors and executive officers from an
independent and objective perspective, appropriately evaluates their performancesand reflects them on human resources management. In addition to providing
appropriate information disclosure, the Board also prepares internal controls andrisk management systems.
- 10 -

a. (Selection and Discharge of Management Personnel) The Board of Directors shallfollow fair and highly transparent procedures upon selecting or discharging
management personnel, based on the corporate performance.
b. (Compliance and Risk Management) The Board of Directors shall establish acompliance system, an internal control system and a risk management system,
as a basis of risk-taking challenges for business operations.
c. Together with the independent outside directors, the Board of Directors
establishes a system that enables appropriate control over potential conflicts ofinterest between the Company and management or related parties, such as
controlling shareholders, etc.
4.

Roles and Responsibilities of Audit Committee
The Company’s Audit Committee consists of a majority of independent outside
directors. From its independent and objective position, the Committee participates
actively, makes questions and proposals, etc., at the Board of Directors meetings,
and audits the execution of duties by executive officers and directors.
a. Each of the Company’s independent outside directors, who are appointed as amember of the Audit Committee, has professional expertise in either legal,financial accounting or corporate management. With the cooperation of theinternal secretariat, they utilize the Company’s internal control system anddemonstrate their high ability in gathering information and making proposals.

5.

Fiduciary Responsibility of Directors
Directors and executive officers recognize their fiduciary responsibilities toshareholders in each of their duties, and thus act for the common interests of theCompany and shareholders while securing appropriate cooperation withstakeholders.

6.

Management Oversight and Execution
Under the system of “Company with nominating committee, etc.” the Company
separates management oversight and business operations to enable executive
officers to make timely management decision while three committees, Nominating
Committee, Compensation Committee, and Audit Committee, each comprised ofmajority of Independent Outside Directors ensure transparency and fairness in thedecision-making process and effectiveness of management oversight. Audit
committee enhances the effectiveness of oversight functions of the Board with close
cooperation with the internal audit department and a financial audit firm.

- 11 -

7.

Roles and Responsibilities of Independent Outside Directors
A system is set up so that independent outside directors, who are registered as“independent officers” with the stock exchange, can fulfill the following roles andresponsibilities.
(i)
Increasing the effectiveness of the Board of Directors through activities as amember of the three committees; the Nominating Committee, Compensation
Committee and Audit Committee. (Including the following roles andresponsibilities)(ii)
With respect to management policies and improvement of management,
providing advice from the perspective of “facilitating the sustainable growthof the company and enhancing corporate value over the mid- to long-term,”
based on their own insights while keeping the fiduciary responsibility toshareholders in mind.
(iii)
Supervising management through decision-making at the Board of Directors
meetings.
(iv)
Overseeing conflicts of interest between the Company and the officers (ormanagement) or controlling shareholders, etc.
(v)
Appropriately reflecting the opinions of stakeholders, including minority
shareholders, from an independent position from the officers (ormanagement), controlling shareholders, and major shareholders, etc. in the
Board of Directors meetings.

8.

Effective Use of Independent Outside Directors
The Company selects two or more outside directors, who are qualified to fulfill roles
and responsibilities to contribute to facilitating the sustainable growth of thecompany and enhance corporate value over the mid- to long-term.
a. The Company shall promote to exchange and share information and awarenesscollectively by independent outside directors from their objective perspective.
b. As for the placement of a “chief of independent outside directors,” who assumes aleading role to organize and facilitate the exchange of opinions among
independent outside directors and constructive dialogue with shareholders, theCompany has currently postponed it as a future topic, since each of theCompany’s current independent outside directors has various professional
expertise, and each one effectively leads the discussion in his or her professional
fields.

9.

Independence Criteria and Qualification for Independent Outside Directors
Upon selecting independent outside directors, in addition to complying relevant laws
and regulations, the Company determines whether a candidate can fulfill amanagement supervisory function from an independent position. As a standard todetermine independence, one should be unlikely to have conflicts of interest with the- 12 -

general shareholders of the Company. The details of the criteria are provided in the
Appendix titled “Policies and Standards on the Composition of the Board of
Directors and the Selection of Outside Officers.” Candidates are nominated by the
Nominating Committee, based on the overall consideration of credentials such as
wider knowledge, high professional expertise, sufficient experience and sufficientunderstanding of the Company’s business, management principles and businessactivities, besides the independence criteria. The policies and standards on selecting
the Company’s outside officers, as well as the credentials of outside officers, areprovided in Appendix 1.
10. Use of Optional Arrangements
As a company with nominating committee, etc., the Company has three committees,
the Nominating Committee, Compensation Committee and Audit Committee. The
Company also makes use of optional committees, conferences and arrangements, forenhancing risk management and compliance, with the “Corporate Action Committee”
as a pivotal example, and intends to further improve the governance function.
11. Preconditions for Ensuring the Effectiveness of the Board of Directors and the Audit
Committee
The composition of the Board of Directors shall be well-balanced overall in terms ofknowledge, experience and abilities so that the roles and responsibilities expected of
the Board can be effectively fulfilled. Specifically, directors appointed as members of
the Audit Committee shall include one or more directors who are appropriately
experienced in finance and accounting.
a. For the purpose of enhancing management supervisory function, the Company
selects directors with different backgrounds in terms of knowledge andexperience, and limits the number of Board members up to 11, so that the Boardof Directors functions efficiently and substantive discussion and appropriatedeliberation are put into practice. The selection of candidates for Board members
is considered based on appropriateness, etc., and resolved by the Nominating
Committee, composed of a majority of outside directors.
b. When directors or executive officers hold cross-appointments with other listedcompanies, the number of cross-appointments (the number of companies) should
be restricted to a reasonable number, and the Company discloses the status ofcross-appointments. All directors of the Company are subject to re-election every
year. If any director cannot attend more than 80% of the Board of Directors
meetings sufficiently prepared and cannot fully participate in important
discussions due to the cross-appointment status, the number ofcross-appointments is considered unreasonable, and the Nominating Committee- 13 -

shall deliberate whether to re-elect such director as a candidate for the nextterm.
c. The effectiveness of the Board of Directors is evaluated in overall considerationof the rate of attendance by all directors, the quality and quantity of discussion,
efficiency, the content of responses to questions from the outside directors, andthe reflection of constructive opinions from shareholders, etc. We have recently
included the self-assessment of each director in the new analysis and evaluationof effectiveness, a summary of which is to be disclosed from fiscal 2016.
12. Active Deliberation at the Board of Directors Meetings
The Company applies its corporate philosophy in the operation of the Board of
Directors meetings, trying to establish an environment for free, open andconstructive discussions and the exchange of opinions.
a. The Company and the Board of Directors attempt to invigorate deliberation,with the following points in mind.
(i) Distributing in advance deliberation materials for the Board of Directors
meetings(ii) Providing information required, as needed, other than the deliberationmaterials(iii) Setting an annual meeting schedule(iv) Setting the appropriate frequency of the meeting and the deliberation
agenda for each meeting(v) Securing adequate deliberation time for each meetingb. The Company provides an environment in which some of the Audit Committee
members, including the outside directors, can always observe the Executive
Board meetings so that they can grasp the activities of the actual execution ofduties at all times, in an attempt to substantiate the Board of Directors
discussion and execution oversight.
13. Information Gathering and Support Structure
An environment is set up so that directors and Audit Committee members canproactively obtain company information. In addition, a secretariat of the Audit
Committee is established in the Legal Department in order to assist directors.
a. As directors contribute to fair, transparent and swift decision-making for thecompany, they may request necessary information from the company, as needed.
b. Directors and Audit Committee members may seek advice from specialists
outside the company at the company’s expense, as deemed necessary.
c. Directors, Audit Committee members and the Audit Office (Internal Audit
Department) are ensured to have mutual collaboration.
- 14 -

14. Training for Directors
The Company encourages directors and executive officers to participate in externalseminars for obtaining knowledge required for their roles and responsibilities, andoffers necessary information.
a. When a new director or executive officer holds an office, executive training shallbe carried out so that he or she has an opportunity to obtain necessary
information about the company and fully understand his or her role andresponsibilities.
b. The Company shall offer opportunities, as needed, for directors and executive
officers to obtain knowledge required for their roles and responsibilities, and letthem attend external training.

Chapter 5

Dialogue with Shareholders

1. Policies on Constructive Dialogue with Shareholders
For the Company’s sustainable growth and the enhancement of mid- to long-term
corporate value, the Company, including management personnel and directors,
makes an effort to have constructive dialogue with shareholders in addition to thegeneral meeting of shareholders. Through these opportunities, the Company seeks
to provide clear explanations on its management policies to shareholders to offer
them a deeper understanding.
The Company shall develop IR activities to pursue good interactive dialogue with
fairness, accuracy and consistency in mind, in providing information on
management strategies, business strategies, capital management and financial
information. The President & Chief Operating Officer, Accounting Officer,
Business Planning and IR persons are in charge actively involved in the dialogue.
Such IR activities are carried out mainly for institutional investors in Japan andoverseas.
a. Upon demand from shareholders, management personnel shall have direct
dialogue with shareholders to the extent reasonable and possible.
b. (i) The President & Chief Operating Officer and Accounting Officer are thedesignated management in charge of dialogue with shareholders.
(ii) Through coordination with management and all departments, the IR
persons in charge and the IR Department shall appropriately collect internal
information, such as management information, etc., for timely, accurate andfair disclosures, and for constructive dialogue with shareholders and investors.
(iii) - (iv) Feedback and opinions from shareholders, institutional investors,
analysts, etc., are timely and properly communicated to management, andreported to the Board of Directors on a regular basis along with the general- 15 -

report on IR activities. They serve as materials for management decisions for
all directors, including the outside directors.
(v) Insider information is controlled in compliance with relevant laws andregulations, and the method of handling insider information is repeatedly
communicated within the Company Group on a regular basis. In having
dialogue with shareholders and investors, insider information is also understrict control.
c. The Company keeps track of the shareholder composition in coordination withthe shareholder registry administrator. The information is used for facilitating
IR activities and constructive dialogue with shareholders in an efficientmanner.
d. Excessive information disclosure or contact with particular shareholders,which would compromise fairness with other shareholders, shall be avoided asa rule.
2. Development and Announcement of Management Strategies and Planning
The Company makes official announcements and explains management strategies
and plans at financial results briefings and the general meeting of shareholders,etc. When a midterm business plan is prepared, it is also announced and explainedin a similar manner. The outline is also disclosed and available to the public on the
Company’s website.

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Appendix 1
Policies and Standards on the Composition of the Board of Directors and the
Selection of Outside Officers
1. Policies on the Composition of the Board of Directors
1) The composition of the Company’s Board of Directors shall be well balanced interms of gender, age, nationality, professional field, etc., and shall consist of
individuals with good personal character, knowledge, ability, and richexperience, as well as high ethical standards.
2) The Articles of Incorporation of the Company limits the number of directors to
be up to 11 persons.
3) Candidates for directors shall include an appropriate ratio of independent
outside directors, as a basic policy.
4) All independent outside directors at the Company shall serve as a member of atleast one of the three committees; the Nominating, Compensation and Audit
Committees (multiple posts are allowed). By comprising the majority of eachCommittee, the objectivity of the corporate governance function of the Company
is increased and enhanced.
5) At least one candidate for independent outside director in the Audit Committee
is required to be an expert in finance and accounting.
6) As stipulated in the Articles of Incorporation of the Company, all directors,
including the independent outside directors, are subject to re-election at thegeneral meeting of shareholders every year.
2. Policies and Standards on the Qualification, Diversity and Appropriateness of the
Candidates for Outside Directors
1) The candidates for the Company’s outside directors shall have expertise incorporate management, corporate governance, corporate finance and accounting
or laws and legal systems, and be individuals with good personal character,knowledge, ability, and rich experience, as well as high ethical standards. The
Nominating Committee shall select individuals satisfying the independence
criteria described in item 3 below.
2) It is the Company’s policy to promote diversity in the composition of outside
directors as well. But currently, the upmost consideration is made to ensure
diversity in terms of professional fields.
3) A background suggesting a relationship with anti-social forces or doubtful
ethical views or a record of dispute is deemed as an indication of
inappropriateness as a candidate.

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3. Independence Criteria for a Candidate for Outside Director
A candidate who satisfies the independence criteria for the Company’s outside
directors shall meet the following criteria.
1) The candidate has never served and never serves as a director (excluding
outside director), a statutory auditor (excluding outside statutory auditor), an
executive officer, an officer or an employee of the Company or of its consolidated
subsidiaries at present or in the past, and was never a director (excluding
outside director), a statutory auditor (excluding outside statutory auditor), an
executive officer, an officer or an employee of the Company in the past.
2) The candidate was not a major shareholder (holding over 10% of all voting
shares in substance) of the Company during any time in the past 5 fiscal years,
or was not a relative within the second degree of kinship of such major
shareholder, or in case such major shareholder was a corporation, he or she was
not an officer or employee of such corporation or a relative within the second
degree of kinship of the officer or employee of such corporation.
3) The candidate has never been an officer or employee of a corporation for which
the Company is a major shareholder.
4) The candidate is not an officer or an employee of the Company’s major business
partner or customer (with the amount of payment to the business partner or theamount received from the customer for transactions with the Company
exceeding 2% of the consolidated sales figure of the Company or of such party(including its parent and major subsidiaries) in the last fiscal year and the last 3
fiscal years).
5) The candidate is not a trustee, an officer or an employee of a corporation or an
organization that receives a large donation from the Company (in an amountgreater amount than either an annual average of 10 million yen or more overthe last 3 fiscal years or over 2% of the consolidated sales or the total revenue ofthe party in the last 3 fiscal years).
6) No director, statutory auditor, executive officer or officer is assigned to and/orfrom the Company.
7) The candidate was never a representative partner, a professional, a partner oran employee of the Company’s present accounting audit firm in the last 5 years.
8) The candidate is not a lawyer, a certified public accountant, or a consultant,
who receives a large monetary consideration or other goods from the Company,
other than the director’s compensation (for an individual, over 10 million yen on- 18 -

average per year, or for an organization, over 2% of the consolidated sales of theorganization, for the last 3 fiscal years).
9) The candidate is not a spouse, a relative within the second degree of kinship, a
relative living together or a relative of the same household of the Company’s
director, executive officer or manager above departmental head.
10) The candidate has never been nominated as a candidate for outside director, bya shareholder proposal made in the past or present by the Company’s major
shareholder.
11) When re-elected, the candidate would not serve as an outside director for morethan consecutive 6 years as a general rule.
《Revision history》
1. December 18th, 2015 established
2. March 29th, 2016 revised
3. July 31th, 2017 revised- 19 -