[Translation for Reference and Convenience Purposes Only]

CORPORATE GOVERNANCE REPORT
Kuraray Co., Ltd.

Last Update: January 28, 2022
Kuraray Co., Ltd.
Hitoshi Kawahara
President and Representative Director
Contact: +81-3-6701-1075
Securities Code: 3405
https://www.kuraray.com
The corporate governance of Kuraray Co., Ltd. (hereinafter “Kuraray” or the “Company”) is described
below.

I

Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other
Basic Information

1. Basic Views
The Company believes that the maintenance of appropriate relationships with various stakeholders and thefulfillment of social responsibilities through establishing a corporate governance system that ensures effective andfair management would contribute to the long term and sustainable enhancement of corporate value.
The Company has adopted the governance system as “a company with the board of corporate auditors.” Under
this framework, the Company has established corporate governance function centered on its Board of Directors
and Board of Corporate Auditors to improve the effectiveness of supervisory and monitoring function while
maintaining management efficiency and to handle issues including management remuneration, selection of newcompany officers, internal control and risk management.
Through the above establishment of function, the Company believes that the effectiveness of supervisory andmonitoring function would be improved while maintaining management efficiency, contributing to the long termand sustainable enhancement of corporate value.
Reasons for Non-compliance with the Principles of the Corporate Governance Code[Supplementary Principle 2-4-1: Ensuring Diversity in the Promotion to Core Human Resources]
Kuraray group consists of employees from various nationalities and backgrounds, and the active participation of
all diverse members is crucial to the long-term and sustainable improvement of corporate value. To achieve this,the Company has developed the “Kuraray Group Global HR Policy” as a common HR policy to the Group. In
addition, the Company has established the “Kuraray Group Diversity and Inclusion Guiding Principles” that is
focused on diversity of human resources. Based on these policies, the Company is improving human resource
development program or the environment of workplaces. The goals for ensuring diversity in the promotion to corehuman resources will be disclosed in the next Medium-Term Management Plan that will start from fiscal 2022.
[Supplementary Principle 4-2-2: Development of a Basic Policy for the Sustainability Initiatives]

1

Sustainability activities are led by top management with the aim of achieving long-term growth and creating value.
The basic policy for the sustainability initiatives will be disclosed in the next Medium-Term Management Plan
that will start from fiscal 2022.
[Supplementary Principle 5-2-1: Development of a Basic Policy for the Business Portfolio]
The Company conducts the business performance evaluation regularly and allocates the management resources
according to such evaluation with the aim of organizing the business portfolio which enables the Company togrow sustainably. The basic policy for the business portfolio will be disclosed in the next Medium-Term
Management Plan that will start from fiscal 2022.

Disclosure Based on the Principles of the Corporate Governance Code[Principle 1-4: Cross-Shareholdings]<Policy on Cross-Shareholdings>
The Company has set forth the policy on cross-shareholdings and standards for exercising voting rights pertaining
to cross-held shares as follows.
1. Coming from the viewpoint of stable and long term business operation, the Company may hold the sharesof its business partners, etc. if maintaining and strengthening the relationships with such business partners are
deemed to contribute to corporate value enhancement.
2. Regarding the shares held pursuant to the preceding paragraph (hereinafter, “cross-held shares”), theCompany regularly examines economic rationality and significance of holding individual stock at the Boardof Directors meetings in consideration of benefits and risks associated with such holding, capital cost andother factors. The Company will sell shares of stocks, as necessary, whose holding was deemed not to beappropriate based on the examination to reduce such stocks.
3. Concerning the voting rights pertaining to the cross-held shares, the Company appropriately exercises suchvoting rights in light of the objectives of shareholdings set forth in the preceding two paragraphs, taking into
consideration the business conditions of the companies and potential impact to the business operation of theCompany or a subsidiary of the Company (hereinafter “the Group”). Particularly, the Company carefully
exercises such voting rights in a case where performance of the companies has been sluggish for a long periodof time or a serious scandal has occurred or in a case where a proposal that would impair shareholders’ value
was made.
<Content of Examination on the Propriety of Holding Cross-Held Shares>
In the fiscal year ended December 31, 2020, the Company sold all shares of 5 stocks and part of 2 stocks of its
cross-held listed shares. Additionally, as the result of an examination at the Board of Directors meeting held on
February 10, 2021 of the economic rationality and significance of holding individual cross-held listed stocks forthe fiscal year ended December 31, 2020 (examination on cross-held shares as of the end of December 2020) in
consideration of benefits and risks, capital cost and other factors associated with such holding, the Company plans
to continue with the sale of some stocks.
[Principle 1-7: Related Party Transactions]
The Company stipulates that transactions with competitors held by a Director, transactions between the Company
and a Director, and transactions involving any conflict of interests would require the approval of the Board of
Directors.
[Principle 2-6: Roles of Corporate Pension Funds as Asset Owners]
Regarding the management of corporate pension funds of the Company, the Finance Department, which
specializes in fund management, monitors management policy, method and status through an externalmanagement agency.
[Principle 3-1: Full Disclosure]

2

(i)

Company objectives (e.g., business principles), management strategies and management plans<Company objectives (e.g., business principles)>Based on our history and moving towards the future, we at the Company develop our corporate activities byadhering to “Our Mission” that represents how the Group should act to meet the society’s expectations andmake contribution thereto, and act in accordance with “Our Values” and “Our Commitment.”[Our Mission]
We are committed to developing new fields of business using pioneering technology that improves theenvironment and enhances the quality of life throughout the world.
For people and the planet ̶ to achieve what no one else can.
[Our Values]
Philosophy:
Respect for individuals,
Close cooperation to attain shared goals,
Constant creation of new value
Guiding Principles:
Safety is the cornerstone of everything we do
Customers’ needs are our top priority
We act on ideas in the workplace[Our Commitment]
We will constantly develop and provide safe, high-quality products and services.
We will maintain a sound relationship with society through good communication.
We will strive to preserve and improve the global environment, and to secure safety and health inall our workplaces.
We will value all members of the Kuraray community and respect their rights.
We will always conduct businesses in a free, fair and transparent manner.
We will honor all intellectual property and secure data and information in a proper manner.
The Company formulated “The Kuraray Group Code of Conduct” as our guiding principles by breaking
down “Our Commitment” and ensures that the officers and employees of the Group are fully aware of it, ofwhich implementation status is checked as necessary.
<Management strategies and management plans>
The Company also proceeded with its three-year medium-term management plan “PROUD 2020,” whichstarted in the fiscal year ended December 31, 2018.
The Company originally planned to formulate and announce a new medium-term management plan startingfrom the fiscal year ending December 31, 2021. However, the fallout from the COVID-19 pandemic has
clouded the future outlook with regard to the global economy and the business environment surrounding theGroup. The Company therefore determined to postpone the formulation of the new medium-term
management plan for one year, and formulate a five-year medium-term management plan spanning from2022 to 2026. A single-year management plan was formulated for 2021. Details of this plan have beenannounced on the Company’s website.
(URL: https://pdf.irpocket.com/C3405/HTFv/pC1G/qCDG.pdf)(ii) Basic views on corporate governance
The Company believes that the maintenance of appropriate relationships with various stakeholders and thefulfillment of social responsibilities through establishing a corporate governance system that ensures effective
and fair management would contribute to the long term and sustainable enhancement of corporate value.
(iii) Policies and procedures for determining the remuneration of Executives and Directors
The Company’s basic policy for the remuneration of its Directors is to have a competitive level and systemof remuneration that can secure and retain competent Directors fit for their positions and responsibilities in3

order to achieve long-term and sustainable improvements in corporate performance and corporate value. The
Remuneration system comprises three parts: (1) fixed remuneration as basic remuneration in accordance withjob responsibilities, (2) performance-linked remuneration as an incentive to achieve yearly business results,and (3) stock-based remuneration designed to enhance corporate value over medium to long term and sharing
value with shareholders through appropriate corporate management, provided remuneration for Outside
Directors shall solely comprise fixed remuneration without performance-linked or stock-based remuneration
as their role is to supervise management from an independent standpoint.
The specific level and system of remuneration will be verified and deliberated by the Corporate Advisory
Committee, mainly comprising outside officers and outside experts, on whether the level and system of
remuneration are appropriate, based on the results of a survey by a specialized external research institution
on executive remuneration covering companies such as those listed on the First Section of the Tokyo Stock
Exchange, and the salary of the managers of the highest level in the Company. The Board of Directors
receives reports on the results from the Committee and gives it due consideration to determine the level andsystem of remuneration.
(iv) Policies and procedures for the election and dismissal of executives and for the appointment of thecandidates for Directors and Corporate Auditors.
1. The Company appoints individuals who have experience, knowledge and capabilities required for
Directors of the Company as candidates at the Board of Directors meeting with the attendance of Outside
Officers and elect them as Directors with the resolution of the General Meeting of Shareholders. However,the candidates for Outside Directors shall satisfy the criteria of independence provided separately.
2. The Company appoints individuals who have experience, knowledge and capabilities required for
Corporate Auditors of the Company as candidates at the Board of Directors meeting with the attendance ofOutside Officers, and elect them as Corporate Auditors with the resolution of the General Meeting of
Shareholders after obtaining the consent of the Board of Corporate Auditors. However, the candidates for
Outside Corporate Auditors shall satisfy the criteria of independence provided separately.
The election and dismissal of Directors and the appointment and removal of Representative Directors andDirectors with special titles are determined by the Board of Directors after deliberation at the aforementioned
Corporate Advisory Committee.
(v) Explanations on the election and dismissal of executives and the appointment of each candidate for Director
and Corporate Auditor
Regarding the reasons for nominating each candidate for Director and Corporate Auditor, please refer to the
Notice of Convocation of the General Meeting of Shareholders.
[Supplementary Principle 3-1-3: Disclosure of the Sustainability Initiatives]
In keeping with its mission, “For people and the planet—to achieve what no one else can,” the Company has
developed businesses that contribute to enhancing the natural environment and people’s quality of life. In recent
years, companies are required to strengthen their sustainability initiatives. Under such circumstances, theCompany has selected material issues at the management level and made effort to solve issues throughout theGroup. These sustainability activities are led by top management with the aim of achieving long-term growth andcreating value. Details of sustainability initiatives are disclosed on the Company’s website.
Kuraray Report（integrated report）https://www.kuraray.com/csr/report_backnumber
Sustainability Website
https://www.kuraray.com/csr[Supplementary Principle 4-1-1: Scope of the Matters Delegated to the Management]
The Company clearly defines the scope of the matters delegated to the management by specifying the matters tobe judged and determined by the Board of Directors as matters to be discussed in the Board of Directors’Regulations.

4[Principle 4-9: Independence Standards for Outside Officers]
1. The Company judges that its Outside Officers and the candidates for the Outside Officers are fully independent
from the Company if they do not fall under any of the following items:(1) A business executive of the Group(2) A counterparty which has transactions principally with the Group, or its business executive thereof(3) A major business partner of the Group, or its business executive thereof(4) A major lender of the Group, or its business executive thereof(5) A counterparty that receives a large amount of donations from the Group, or its business executive thereof(6) A major shareholder of the Company (who possesses 10% or more of the total voting right either directly or
indirectly), or its business executive thereof(7) A business executive of the party whose major investor (who possesses 10% or more of the total voting righteither directly or indirectly) is the Group(8) A consultant, certified public accountant or other accounting professional, attorney or other legal professional
who receives a large amount of monetary or other assets from the Group other than the executive remunerations(in case of a legal entity, association or other organization, a person belonging thereto)(9) A person who belongs to an accounting firm that conducts the statutory audit of the Company(10) A person who has fallen under the above criteria (1) in the past ten years(11) A person who has fallen under any of the above criteria (2) through (9) in the past three years(12) A person whose position constitutes him/her as having an Outside Officer’s interlocking relationship with theGroup(13) A relative of the persons listed in the above criteria (1) through (11)
2. Even in cases where a person falls under any of the above items, if the person is deemed to be appropriate forthe post of an independent Outside Officer in light of his/her personality, knowledge and other qualities, theCompany may appoint him/her as independent Outside Officer on the condition that the reasons why the person
is deemed appropriate for the post are explained to the public.
[Supplementary Principle 4-11-1: Policies on the Structure and Size of the Board of Directors]
1. The Company’s Board of Directors shall be comprised of the Directors with diverse backgrounds in theirknowledge, experience and expertise, and the number of Directors shall not exceed twelve as prescribed in
the Articles of Incorporation in order to enable swift and bold decision making.
2. In the light of the importance of the Outside Directors’ functions in corporate governance, the Company
stipulates that, in its Board of Directors, at least one-third of its directors shall be appointed as independent
Outside Directors to ensure transparency and fairness in its decision making.
When appointing candidates for Directors pursuant to the above policies, the Company takes into consideration
diversity, including gender and internationality, as well.
The skills matrix for Directors and Corporate Auditors of the Company is stated on the last page of this report.
[Supplementary Principle 4-11-2: Status of Concurrent Posts Held by Directors and Corporate Auditors]
The Company regularly confirms the status of concurrent posts held by all of its Directors and Corporate
Auditors at the Board of Directors meetings and is notified of the changes in such status in advance if any. The
status of concurrent posts is also stated in the business report.
[Supplementary Principle 4-11-3: Analysis and Evaluation of the Effectiveness of the Board of Directors]
1. Analysis and Evaluation Method
The Company distributed "Questionnaire on Evaluation of the Effectiveness of the Board of Directors" (nonanonymous) to all the Directors and Corporate Auditors in December 2020 and collected responses and opinionsfrom all members in January 2021. The secretariat of the Board of Directors aggregated the responses, andanalyzed and evaluated the effectiveness of the Board of Directors based on the data.
<Questionnaire > (34 questions in total)

5

⚫
⚫
⚫
⚫
2.

Concerning Structure of the Board of Directors
Concerning Agenda of the Board of Directors
Concerning Operations of the Board of Directors
Systems Outside the Board of Directors

Outline of Analysis and Evaluation Results➢ The evaluation confirmed that the Company’s Board of Directors is generally functioning properly andthat the effectiveness of the Board of Directors is secured in all aspects such as its size, composition,
diversity, agenda selection, the scope of matters to be discussed or reported, the timing for schedulingthe Board of Directors meetings, frequency of the meetings, operations of the Board of Directors
including deliberation time, provision of additional information to the Directors, systems outside theBoard of Directors such as those for providing training opportunities, etc.
➢ In light of the results from this evaluation, the Company will continue to examine and implement
necessary measures to make discussions more lively and productive at the Board of Directors meetings.

[Supplementary Principle 4-14-2: Training Policy for Directors and Corporate Auditors]
1. The Company continuously provides lectures and trainings by the internal specialist team or outside experts
to its Directors and Corporate Auditors at the time when they assume their offices or when needed thereafter,
regarding the Company’s management strategies, organization, financial status, legal compliance, corporate
governance and other important matters.
2. The Company shall provide the summary of the business and organization of the Group to its Outside Officers
at the time when they assume their offices or when needed thereafter, and create opportunities of the Company’s
on-site tour, etc. as needed.
[Principle 5-1: Policy for Dialogue with Shareholders]
1. The Company engages in constructive dialogue with shareholders and investors with an aim to maintain its
growth and enhance its corporate value and the common interests of its shareholders over the mid-term.
2. In order to promote dialogue with shareholders and investors, the Company prepares a framework based on
the following policies:(1) President or an officer responsible for investor and public relations deal with the interviews withshareholders to the extent reasonable.
(2) President and an officer responsible for investor and public relations oversee the dialogue withshareholders and the measures related thereto.
(3) An officer responsible for investor and public relations holds information exchange on a day-to-day basis
among divisions responsible for corporate management planning, general affairs, finance, accounting andlegal affairs to establish an organic coordination system.
(4) In addition to holding individual interviews with shareholders and investors, the Company works for a
full provision of information through financial briefing sessions, explanatory meeting on medium-term
management plan and other means.
(5) President or an officer responsible for investor and public relations report to the Board of Directors about
the opinions and concerns obtained from the dialogue with shareholders and investors as necessary.
(6) Insider information shall be strictly managed based on the internal regulations during the dialogue withshareholders and investors.

2. Capital Structure
Foreign Shareholding Ratio

20% to less than 30%

6[Status of Major Shareholders]Name / Company Name
The Master Trust Bank of Japan, Ltd. (Trust account)

Number of Shares
Owned (Shares)
42,363,100

Percentage (%)
12.32

Custody Bank of Japan, Ltd. (Trust account)

24,280,300

7.06

National Mutual Insurance Federation of Agricultural
Cooperatives

10,882,700

3.16

Nippon Life Insurance Company

10,448,963

3.04

Custody Bank of Japan, Ltd. (Trust account 7)

7,253,900

2.11

Meiji Yasuda Life Insurance Company

5,969,412

1.74

SMBC Nikko Securities Inc.

5,270,100

1.53

JP MORGAN CHASE BANK 385781

5,093,660

1.48

Kuraray Employee Stock Ownership Plan

4,965,066

1.44

Custody Bank of Japan, Ltd. (Trust account 5)

4,891,700

1.42

Controlling Shareholders (excluding Parent
Company)
Parent Company—
None

Supplementary Explanation
The information above is the status of major shareholders as of December 31, 2020.
In addition to those stated in the Status of Major Shareholders, there are 10,940,270 shares of treasury stock(percentage: 3.08%) owned by the Company as of the same date.

3. Corporate Attributes
Listed Stock Market and Market Section

Tokyo Stock Exchange, First Section

Fiscal Year-End

DecemberType of Business

Chemicals

Number of Employees (consolidated) as of
the End of the Previous Fiscal YearSales (consolidated) as of the End of thePrevious Fiscal Year
Number of Consolidated Subsidiaries as of
the End of the Previous Fiscal Year

1,000 or more
¥100 billion to less than ¥1 trillion
50 to less than 100

7

4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling
Shareholders—
5. Other Special Circumstances which may have Material Impact on Corporate Governance

—

8

II

Business Management Organization and Other Corporate Governance Systems
regarding Decision-making, Execution of Business, and Oversight in Management

1. Organizational Composition and Operation
Organization Form

Company with Corporate Auditors[Directors]
Maximum Number of Directors Stipulated
in Articles of Incorporation
Terms of Office Stipulated in Articles ofIncorporation

12
1 yearChairperson of the Board

Chairman

Number of Directors

12

Appointment of Outside Directors

Appointed

Number of Outside Directors

4

Number of Independent Directors

4Outside Directors’ Relationship with the Company (1)NameAttributeJun Hamano

From another company

Keiko Murata

Academic

Satoshi Tanaka

From another company

a

b

c

Relationship with the Company (*)
d
e
f
g
h
i

j

k

〇
〇


〇

Kiyoto Ido
From another company〇* Categories for “Relationship with the Company”* “” When the person currently falls or has recently fallen under the category“” When the person fell under the category in the past
* “” When a close relative of the person currently falls or has recently fallen under the category“” When a close relative of the person fell under the category in the pasta. Executive of the Company or its subsidiaries
b. Non-executive director or executive of a parent company of the Company
c. Executive of a fellow subsidiary company of the Company
d. A party whose major client or supplier is the Company or an executive thereof
e. Major client or supplier of the Company or an executive thereof
f. Consultant, accountant or legal professional who receives a large amount of monetary consideration or otherproperty from the Company besides remuneration as a director
g. Major shareholder of the Company (or an executive of said major shareholder if the shareholder is a legal
entity)9

h. Executive of a client or supplier company of the Company (which does not correspond to any of d, e, or f)(the director himself/herself only)
i. Executive of a company, between which the Company’s Outside Directors/Corporate Auditors are mutually
appointed (the director himself/herself only)
j. Executive of a company or organization that receives a donation from the Company (the director
himself/herself only)
k. Others
Outside Directors’ Relationship with the Company (2)Jun Hamano

Designationas
Independent
Director○

Keiko Murata

○

Name

Supplementary Explanation of theRelationship

Reasons of Appointment

Mr. Jun Hamano is concurrently
serving as President of The Ohara
Memorial Institute for Science ofLabour. The Ohara Memorial
Institute for Science of Labour
was established by Mr.
Magosaburo Ohara, theCompany’s first president, in
1921 with the purpose ofpromoting sound business
management, enhancing thewelfare of the laborers andcontributing to the improvementand development of social
welfare.
As a part of its CSR activities, theCompany pays annual
membership fee to support the
research activities of the Institute.
The amount of annual payment of
the said membership fee is lessthan 1 million yen.

Mr. Jun Hamano has been
appointed as Outside Director
based on the judgment that his
wealth of experience and broad
insight gained through economic
administration and other roles at
the Economic Planning Agencyof Japan and the Cabinet Officewould allow him to provide
objective opinions andsuggestions that are useful for theCompany’s management. In
addition, he has been designatedas Independent Director based on
the judgment that there would be
no conflict of interest withordinary shareholders.

—

Ms. Keiko Murata has been
appointed as Outside Director
based on the judgment that her
experience in economic
administration and analysis ofJapan and overseas at the Cabinet
Office, and deep insight as aprofessor of Graduate School ofTokyo Metropolitan University
would allow her to provide
opinions and suggestions thatwould be useful for helping to

10

Name

Designationas
Independent
Director

Supplementary Explanation of theRelationship

Reasons of Appointment
improve the Company’s
management and corporate value.
In addition, she has been
designated as Independent
Director based on the judgmentthat there would be no conflict ofinterest with ordinary
shareholders.

Satoshi Tanaka○

Mr. Satoshi Tanaka has served as
Representative Director,
Executive Vice President and inother positions of Mitsui & Co.,
Ltd. in the past. The sales ofMitsui & Co., Ltd. to theCompany for the most recent
fiscal year were less than 0.2% of
Mitsui & Co., Ltd.’s revenue forthe same period.

Mr. Satoshi Tanaka has been
appointed as Outside Director
based on the judgment that his
wealth of experience and broad
insight gained through his service
as Director responsible for the
Corporate Staff Unit andRepresentative Director of Mitsui& Co., Ltd. would allow him toprovide opinions and suggestions
that would be useful to theCompany’s management. In
addition, he has been designatedas Independent Director based on
the judgment that there would be
no conflict of interest withordinary shareholders.

Kiyoto Ido○—

Mr. Kiyoto Ido has been
appointed as Outside Director
based on the judgment that his
wealth of experience in economic
administration gained at the
Ministry of Finance of Japan,
etc., and broad insight whichwere developed throughinternational experiences at the
Ministry of Foreign Affairs andother professional research
institutions would allow him toprovide opinions and suggestions
that would be useful to theCompany’s management. In
addition, he has been designatedas Independent Director based on
the judgment that there would be
no conflict of interest withordinary shareholders.

11A Discretionary Committee Corresponding to a
Nomination Committee or Remuneration Committee

Yes

Committee’s Name, Composition, and Attributes of Chairperson

Committee’s
NameCommittee
Corresponding
to Nomination
Committee
Committee
Corresponding
to Remuneration
Committee

The
Corporate
Advisory
Committee
The
Corporate
Advisory
Committee

All

Full-time

Internal

OutsideOutside

Other

Chairperson

Committee

Members

Directors

Directors

Experts

8

0

1

4

2

1

Internal
Director

8

0

1

4

2

1

Internal
Director

Members

Supplementary Explanation
The Company has established “Corporate Advisory Committee” comprised mainly of Outside Officers andoutside experts, as an advisory organ to the Board of Directors, with a view to enhancing transparency, fairness
and objectively in decision making concerning important matters of management, including nomination andremuneration of Directors, and further strengthening its corporate governance.
The Corporate Advisory Committee was comprised of eight members: the Chairman and Director (Mr. Masaaki
Ito) four Outside Directors (Mr. Jun Hamano, Ms. Keiko Murata, Mr. Satoshi Tanaka, and Mr. Kiyoto Ido), one
Outside Corporate Auditor (Ms. Tomomi Yatsu), and two outside experts (Mr. Takeshi Komura and Mr. Go Egami(listed under the name Mr. Haruki Kohata)), as of the submission date of this Report. No head of the Committee
has been appointed, and meetings are chaired by the Chairman and Director of the Company.

[Corporate Auditors]
Establishment of the Board of Corporate Auditors

Established

Maximum Number of Corporate Auditors Stipulated
in Articles of Incorporation
Number of Corporate Auditors

5
5

Cooperation among Corporate Auditors, Accounting Auditors, and Internal Audit Department
The Corporate Auditors regularly have meetings with the Accounting Auditor receive reports on audit planning,
implementation status and audit content. Also, the Corporate Auditors receive reports on internal audit results by
the Corporate Auditing Division. The Corporate Auditors also serve as corporate auditors of core subsidiaries to
conduct subsidiary audits as needed and attend periodic Group Auditor Liaison Meetings consisting of thesubsidiary auditors to deepen their understanding of each company.

12Appointment of Outside Corporate Auditors

Appointed

Number of Outside Corporate Auditors

3

Number of Independent Corporate Auditors

3

Outside Corporate Auditors’ Relationship with the Company (1)NameAttribute

Mitsuhiro Nagahama

From another company

Tomomi Yatsu

Attorney at lawab

Relationship with the Company (*)
c d e
f g h
i
j
k

l

m





Kenji Komatsu
From another company* Categories for “Relationship with the Company”* “” When the person currently falls or has recently fallen under the category“” When the person fell under the category in the past
* “” When a close relative of the person currently falls or has recently fallen under the category“” When a close relative of the person fell under the category in the pasta. Executive of the Company or its subsidiaryb. Non-executive director or accounting adviser of the Company or its subsidiaries
c. Non-executive director or executive of a parent company of the Company
d. Corporate Auditor of a parent company of the Company
e. Executive of a fellow subsidiary company of the Company
f. A party whose major client or supplier is the Company or an executive thereof
g. Major client or supplier of the Company or an executive thereofh. Consultant, accountant or legal professional who receives a large amount of monetary consideration or otherproperty from the Company besides remuneration as a Corporate Auditor
i. Major shareholder of the Company (or an executive of said major shareholder if the shareholder is a legal
entity)j. Executive of a client or supplier company of the Company (which does not correspond to any of f, g, or h)(the Corporate Auditor himself/herself only)
k. Executive of a company, between which the Company’s Outside Directors/Corporate Auditors are mutually
appointed (the Corporate Auditor himself/herself only)
l. Executive of a company or organization that receives a donation from the Company (the Corporate Auditor
himself/herself only)
m. Others
Outside Corporate Auditors’ Relationship with the Company (2)Name
Mitsuhiro

Designationas
Independent
Auditor○Supplementary Explanation of theRelationship
Mr. Mitsuhiro Nagahama has

13

Reasons of Appointment

Mr. Mitsuhiro Nagahama has

Name

Designationas
Independent
AuditorNagahama

Supplementary Explanation of theRelationship

Reasons of Appointment

served as Chairman and in otherpositions of Mizuho Securities
Co., Ltd. in the past. The sales ofMizuho Securities Co., Ltd. to theCompany for the most recent
fiscal year were less than 0.1% ofMizuho Securities Co., Ltd.’s net
sales for the same period.
Furthermore, Mr. Mitsuhiro
Nagahama has served as Deputy
President and in other positionsof Mizuho Bank Ltd. (formerly:
Mizuho Corporate Bank, Ltd.) in
the past. The balance of loans
outstanding from Mizuho Bank,
Ltd. to the Company for the mostrecent fiscal year was less than
2% of the Company’s
consolidated total assets for thesame period.

been appointed as Outside
Corporate Auditor because he hasa wealth of experience atfinancial institutions and broad
insight, as well as track record atother companies as outside
auditor. In addition, he has been
designated as Independent
Corporate Auditor based on the
judgment that there would be no
conflict of interest with ordinary
shareholders.

Tomomi Yatsu○―――

Ms. Tomomi Yatsu has been
appointed as Outside Corporate
Auditor because she has broad
insight as a certified public
accountant and attorney at law
and a wealth of experience as
outside officer of othercompanies. In addition, she has
been designated as Independent
Corporate Auditor based on the
judgment that there would be no
conflict of interest with ordinary
shareholders.

Kenji Komatsu○―――

Mr. Kenji Komatsu has been
appointed as Outside Corporate
Auditor because he has trackrecords in management at manyother companies both
domestically and internationally,and he has a wealth of experienceand broad insight developed
through his career. In addition, he
has been designated as
Independent Corporate Auditor
based on the judgment that there

14

Name

Designationas
Independent
AuditorSupplementary Explanation of theRelationship

Reasons of Appointment

would be no conflict of interest
with ordinary shareholders.

[Independent Directors/Corporate Auditors]
Number of Independent Directors/ Corporate
Auditors

7

Matters relating to Independent Directors/Corporate Auditors
The Company has appointed all Outside Officers as Independent Directors /Corporate Auditors, insofar as
they meet the qualifications thereof.
[Incentives]
Status of the Measures Regarding Incentives for
Directors

Introduction of a Performance-linked Remuneration
System, Other

Supplementary Explanation(1) Introduction of a performance-linked remuneration system: the Company abolished the prior bonus scheme
to Directors and introduced a performance-linked remuneration system in July 2006, thereby strengthening the
incentive for increasing the Company’s corporate value. In addition, to respond to the increase in the amount of
performance-linked remuneration in conjunction with the improved business performance, it was resolved toincrease the maximum amount of annual remunerations to Directors from ¥450 million to ¥800 million(including ¥100 million annually for Outside Directors) at the Company’s 131st Ordinary General Meeting of
Shareholders held on June 22, 2012. Performance-linked remuneration is not paid to Outside Directors.
(2) Calculation method of performance-linked remuneration: as a short term performance incentive, theperformance-linked remuneration for the President shall be the amount that is obtained by multiplying theamount of actual consolidated net income attributable to owners of the parent for the current fiscal year (before
deducting performance-linked remuneration (bonus)) by 0.75/1000. The performance-linked remuneration for
Directors shall be determined by multiplying the said amount by a predetermined index corresponding to theposition of each Director. The amounts of performance-linked remuneration paid to Directors in charge ofbusiness units shall be determined so that they partially reflect the performance of the relevant business units.
(3) Introduction of a restricted stock compensation plan: at the 140th Ordinary General Meeting of
Shareholders held on March 25, 2021, the Company resolved to abolish the existing stock options plan, andintroduce a restricted stock compensation plan, with the aim of incentivizing Internal Directors and Executive
Officers to improve the Company’s corporate value in a sustainable manner as well as raise the degree they sharevalue with shareholders. Restricted stock compensation for Directors under this plan shall not exceed ¥90 million,
separately from the maximum amount of fixed remuneration by position and performance-linked remuneration.
The number of shares to be granted under the plan shall not exceed 60,000 shares each year. Restricted stockcompensation is not paid to Outside Directors. Monetary compensation linked to stock price (“phantom stock”)
has been introduced in lieu of restricted stock compensation for Directors who are non-residents of Japan.

15

No further stock options will be granted under the stock option scheme abolished in March 2021. However,
the exercise of previously-granted stock options held by Directors and Executive Officers on retirement willcontinue until such time as all Directors and Executive Officers currently holding stock options have retired.
Recipients of Stock Options
Supplementary Explanation[Director’s Remuneration]
Disclosure of Individual Director’s Remuneration

No Individual Disclosure

Supplementary Explanation
Details of the disclosure status are as follows:・Total amount of remuneration paid by classification, amount of monetary remuneration paid by type of
remuneration, and the number of eligible Directors and Corporate Auditors, as well as the method for
determining the remuneration, etc. for Directors and Corporate Auditors are disclosed on the securities report.
(Reference) Page 40 of the securities report dated March 25, 2021 for the 140th fiscal period (Status ofcorporate governance (Remuneration, etc. for Directors and Corporate Auditors))
https://pdf.irpocket.com/C3405/HRxf/Re9w/XtUK.pdf (Japanese Only)
・Total amounts of remuneration by classifying Internal Director and Outside Director, and number of
Directors and Corporate Auditors paid are disclosed on the business report.
(Reference) Page 42 of Notice of Convocation of the 140th Ordinary General Meeting of Shareholders (Total
Amounts of Remuneration, etc., Paid to Directors and Corporate Auditors)
https://pdf.irpocket.com/C3405/pJa6/U1SS/UrIu.pdf
Policy on Determining Remuneration Amounts andCalculation Methods

Established

Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods
Details of the policy on determining remuneration amounts paid to Directors and the method for determination
are as follows:
In respect to remunerations, etc. for Directors, the Company’s basic policy is to have a competitive level andsystem of remuneration that can secure and retain competent Directors fit for their positions and responsibilities
in order to achieve long-term and sustainable improvements in corporate performance and corporate value. The
remuneration system for Directors comprises three parts: (1) fixed remuneration as basic remuneration inaccordance with job responsibilities, (2) performance-linked remuneration as an incentive to achieve yearlybusiness results, and (3) stock-based remuneration designed to enhance corporate value over medium to longterm and sharing value with shareholders through appropriate corporate management, provided remuneration for
Outside Directors shall solely comprise fixed remuneration without performance-linked or stock-based
remuneration as their role is to supervise management from an independent standpoint.
・ Type of remuneration paid to Directors
Remuneration to Directors is comprised of monetary remunerations (fixed remuneration by position andperformance-linked remuneration) and restricted stock compensation.
・ Maximum amount of annual remunerations to Directors

16Regarding the maximum amount of annual remunerations to Directors of the Company, the following was
resolved at the 125th Ordinary General Meeting of Shareholders of the Company held on June 28, 2006 and the140th Ordinary General Meeting of Shareholders of the Company held on March 25, 2021.
<1> Amount of annual remunerations to Directors: ¥800 million or less resolved at the 131st Ordinary
General Meeting of Shareholders<2> Amount of restricted stock compensation to Directors (aside from <1> above): ¥90 million or less, up
to 60,000 shares each year, resolved at the 140th Ordinary General Meeting of Shareholders
・ Calculation method of remuneration, etc. paid to Directors
The calculation method of the remuneration by type is as follows. The Corporate Advisory Committee led by
Outside Directors, Outside Corporate Auditors and outside experts evaluates the amount of remuneration,
calculated based on the calculation method described below, from an objective standpoint, and reports back to
the Board of Directors. The Board of Directors determines the amount of remuneration for each Director after
giving due consideration of the contents of this report.
Fixed remuneration by position: Fixed remuneration by position, in principle, is the amount obtained bymultiplying the amount of fixed remuneration by position for the President which serves as the basis with thecoefficients predetermined according to each position. The fixed monthly remuneration of the President isapproximately six times the regular monthly salary of the managers of the highest level.
Performance-linked remuneration: Net income attributable to owners of the parent (before deducting
performance-linked remuneration (bonus)) is the index for calculating the performance-linked remuneration as
it is a clear indicator of the results of business operations and corporate management. Performance-linked
remuneration for the President shall be the amount that is obtained by multiplying the amount of actual net
income attributable to owners of the parent by 0.75/1000. The performance-linked remuneration for Directors
shall be determined by multiplying the said amount by a predetermined index corresponding to the position ofeach Director. Moreover, the amounts of performance-linked remuneration paid to Directors in charge ofbusiness units shall be determined so that they partially reflect the performance of the relevant business units.
Performance-linked remuneration is not paid to Outside Directors.
Restricted stock compensation: A number of shares shall be allotted in consideration of the responsibilities of
the President and the level of remuneration at other companies. The plan is designed so that those in higher
positions receive more allotment of shares. Restriction on transfer is to be lifted at the time of retirement.
(Reference) Page 40 of the securities report dated March 25, 2021 for the 140th fiscal period (Status ofcorporate governance (Remuneration, etc. for Directors and Corporate Auditors))
https://pdf.irpocket.com/C3405/HRxf/Re9w/XtUK.pdf (Japanese Only)[System for Supporting Outside Officers]
The information is shared among Outside Officers through distributing and explaining in advance theproposals to be deliberated at the regular and extraordinary meetings of the Board of Directors. Three membersof Secretariat Group, General Affairs Department assist in the sharing of this information to the Outside Directors.
The Company appoints staff for Corporate Auditor to assist Corporate Auditors including Outside Corporate
Auditors. The staff collects and provides information necessary for auditing activities and offers other forms of
support.

17

[Status of Retired Representative Directors and Presidents, etc.]
Status of retired Representative Directors andRecordedPresidents, etc.
Names, etc. of Advisers and Counselors, etc. Formerly Served as Representative Directors and Presidents,
etc.

Name

Position

Form andConditions of Work
(Full-time/Parttime;
Compensation, etc.)

Responsibilities

Date of
Retirement as
President, etc.

Term of
Employment

Chairman, etc. ofaffiliates, etc. with
an emphasis on
Form of work: Fullsocial
Seniortime
contribution;
Yasuaki Wakui
June 21, 2013
Definite
Advisersocial contribution Compensation: Yes
activities, etc. (notinvolved inmanagement)
Total number of Advisers, etc. formerly served as Representative Directors and Presidents, etc.: 1
Other matters
Mr. Yasuaki Wakui serves as a chairman or a member of the board at affiliates with an emphasis on social
contribution such as hospitals and an art museum, etc., and provides them with management guidance.
He is not involved in the Company’s business execution or supervision.
His term of office has been changed from previous lifetime appointment to no more than nine years after hisretirement as a Director due to regulatory revision.

2. Matters on Functions of Business Execution, Auditing, Oversight, and Decision-Making ofNomination and Remuneration (Overview of Current Corporate Governance System)(1) Board of Directors and business execution body
The Board of Directors (convenes at least once a month), according to the Board of Directors’ Regulations,deliberates and decides important management matters, including legal matters, and supervises the execution ofbusiness. The Board of Directors is chaired by the Chairman and Director. The maximum number of Directors
is 12 in order to promote agile management decision-making by the Board of Directors, and the term of office
is one year to clarify their responsibilities to the shareholders. There are currently 12 incumbent Directors,
including one female and one foreign national. Four Outside Directors have a wealth of experience in and broad
insight into economics, finance, and management, and assume the function of managerial oversight from an
independent third-party standpoint.
No personal, capital, transactional or other relationship that would present a conflict of interest exists between
the Company and the Outside Directors.

18

・ Mr. Jun Hamano supervises the management from an objective standpoint as Outside Director and isproviding opinions and suggestions based on his wealth of experience and broad insight gained througheconomic administration and other roles at the Cabinet Office, etc.
・ Ms. Keiko Murata supervises the management as Outside Director and is providing opinions andsuggestions based on her experience in economic administration and analysis of Japan and overseas at the
Cabinet Office and deep insight as a professor of Graduate School of Tokyo Metropolitan University.
・ Mr. Satoshi Tanaka supervises the management from an objective standpoint as Outside Director and isproviding opinions and suggestions based on his wealth of experience and board insight gained through hisservice as Director responsible for the Corporate Staff Unit and Representative Director of Mitsui & Co., Ltd.
The sales of Mitsui & Co., Ltd. to the Company for the most recent fiscal year were less than 0.2% of Mitsui &Co., Ltd.’s revenue for the same period.
・ Mr. Kiyoto Ido has been appointed as Outside Director because of wealth of experience in economic
administration gained at the Ministry of Finance of Japan, etc., and broad insight which were developed throughinternational experiences at the Ministry of Foreign Affairs and other professional research institutions.
Pursuant to Article 427, Paragraph 1 of the Companies Act, the Company has entered into contracts with
Outside Directors which limit their liability for damages under Article 423, Paragraph 1 of the same Act. The
maximum liability amount under such contracts shall be the amount stipulated in laws and regulations. However,
the aforementioned liability limitation shall be applied only in cases where such Outside Directors executed theirduties in good faith and without gross negligence. As the chief executive responsible for business execution, thePresident appointed by the Board of Directors exercises control over the execution of business in the Group.
Every executive officer (one-year term of office) appointed by the Board of Directors is responsible for businessexecution in the Group organization. As the heads of internal companies, divisions and major functionalorganizations, the executive officers bear responsibilities for operations and business results. In this way, theCompany clearly separates the responsibilities of Directors, that is, decision-making and supervision on the
management, from the responsibilities of business execution. Some Directors hold concurrent positions as
executive officers. The President has established the Executive Committee (in principle, convenes twice amonth) and various other councils and committees to deliberate and report on important matters concerning theGroup’s management policies and business execution.
(2) Board of Corporate Auditors and Internal Audit
The Board of Corporate Auditors consists of five Corporate Auditors, of which four are males and one isfemale, and three of them are independent Outside Corporate Auditors, the majority thereof. The Outside
Corporate Auditors have a wealth of experience and broad insight into areas such as finance, law andmanagement, and assume an auditing function from an independent third-party standpoint.
No personal, capital, transactional or other relationship that would present a conflict of interest exists between
the Company and the Outside Corporate Auditors.
・Mr. Mitsuhiro Nagahama has a wealth of experience at financial institutions and broad insight, and conducts
audit as Outside Corporate Auditor based on his track record as outside auditor of other companies.
・Ms. Tomomi Yatsu conducts audits as Outside Corporate Auditor based on her broad insight as a certified
public accountant and attorney at law and her wealth of experience as outside officer of other companies.
・Mr. Kenji Komatsu conducts audits as Outside Corporate Auditor based on his track records in management
at many other companies both domestically and internationally, and a wealth of experience and broad insightdeveloped through his career.
Corporate Auditors attend meetings of the Board of Directors and other important meetings, and monitor the
Directors’ execution of duties through inquiries conducted by such means as the examination of important19

documents and requests for explanations of the state of business affairs. In principle, the Board of Corporate
Auditors convenes monthly.
The Corporate Auditors regularly have meetings with the Accounting Auditor receive reports on audit
planning, implementation status and audit content. Also, they receive reports on internal audit results by the
Corporate Auditing Division. The Corporate Auditors also serve as corporate auditors of core subsidiaries to
conduct subsidiary audits as needed and attend periodic Group Auditor Liaison Meetings consisting of thesubsidiary auditors to deepen their understanding of each company.
Pursuant to Article 427, Paragraph 1 of the Companies Act, the Company has entered into contracts with
Corporate Auditors which limit their liability for damages under Article 423, Paragraph 1 of the same Act. The
maximum liability amount under such contracts shall be the amount stipulated in laws and regulations. However,
the aforementioned liability limitation shall be applied only in cases where such Corporate Auditors executed
their duties in good faith and without gross negligence.
In addition, staffs for corporate auditors are appointed to assist the duties of Corporate Auditors.
(3) Status of Accounting Auditor
No special interests exist between the Company and the Accounting Auditor, PricewaterhouseCoopers Aarata
LLC, or the engagement partners of the auditing firm who audit the Company. In addition, the auditing firm
voluntarily takes steps to ensure the engagement partners are not involved in audits of the Company for longer
than the prescribed period of time. The names of the certified public accountants who engaged in the duties ofaccounting auditor and the composition of assistants of audit engagement during the fiscal year ended December
31, 2020 were as follows:
Names of the certified public accountants who engaged in the duties of accounting auditor:
Designated limited liability partners: Masahiko Hagimori (continuous audit years: 3 years) / Kazuaki
Sekine (continuous audit years: 1 year)
Composition of assistants of audit engagement:
Six certified public accountants; five employees who have passed the qualification exam for accountants;
and nine other staff

3. Reasons for Adoption of Current Corporate Governance System
The Company has adopted the structure of “a company with the board of corporate auditors,” whereby thefairness and transparency in the management is deemed to be secured, by having Outside Corporate Auditors
who offer a wealth of management experience and professional knowledge added to the existing structure where
Outside Directors are elected to provide valuable opinions and suggestions to the management also from an
objective perspective.

20

III Implementation of Measures for Shareholders and Other Stakeholders
1. Measures to Vitalize the General Meeting of Shareholders and Smooth Exercise of Voting Rights
Supplementary Explanation
We dispatch the notification of General Shareholder Meeting, in
Early Notification of Generalprinciple, three weeks prior to the meeting. The convening notice for the
Shareholder Meeting
140th Ordinary General Meeting of Shareholders (held on March 25) was
dispatched on March 3.
Scheduling of General
We hold the General Meeting of Shareholders in March to avoid the peakMeeting of Shareholders
season of other companies’ shareholders meetings.
Avoiding the Peak Day
The exercise of voting rights via electromagnetic means has been
Electronic Exercise of Voting
introduced from the 126th Ordinary General Meeting of Shareholders
Rightsheld on June 20, 2007.
Participation in Electronic
An electronic voting rights exercise platform for institutional investors
Voting Platform
operated by ICJ, Inc. (Investors Communication Japan) can be used.
The convening notice of the General Meeting of Shareholders is prepared
Provision of the Convocation
in English and posted on the Company’s website and the electronic
Notice in English
voting rights exercise platform.
Video of the General Meeting of Shareholders is available on the
Company’s website on the following day of the meeting.
From the 135th Ordinary General Meeting of Shareholders held on
Other
March 29, 2016, the convening notice for the General Meeting of
Shareholders was posted on the Company’s website prior to dispatchingby postal mail.
2. IR Activities
Supplementary Explanation
Preparation and Publication ofDisclosure Policy
Regular Investor Briefings for
Individual Investors

Regular Investor Briefings forAnalysts and Institutional
Investors

Disclosure policies were prepared and announced in2007. It is currently disclosed on the Company’s
website:https://www.kuraray.com/disclosure
Investor briefings for individual investors are held asneeded.
The Company holds meetings for analysts andinstitutional investors, including conference calls, fourtimes a year. Audio and video archives of suchmeetings are available (English version also available)on the Company’s website on the same or next day toeliminate the information gap between the analysts andinstitutional investors who can attend the briefings and21

Presentation byRepresentatives

None

Available

Supplementary Explanation

Regular Investor Briefings forOverseas Investors

Posting of IR Materials on
WebsiteEstablishment of Department
and/or Manager in Charge ofIR

those including individual investors who cannot due tolocation in remote areas.
The Company holds investor briefings in Europe, theUnited States, and Asia three times or thereabouts ayear in principle.
The Company also participates in conferences held bysecurities companies several times a year.
In addition to financial results, materials for timely
disclosure, press releases, videos and materials of theresults briefings, explanatory materials of mediumterm management plan, integrated reports, status ofcorporate governance and stock information, etc.,
other materials such as dividend policy, past businessperformance data, contents to provide the Company’s
overview and other materials are posted for theconvenience of investors.
IR-related services are handled by Corporate
Communications Department, Corporate Management
Planning Office.

Presentation byRepresentatives

None

3. Measures to Ensure Due Respect for Stakeholders
Supplementary Explanation
Stipulation of Internal Rules for
Respecting the Position of
Stakeholders

Internal rules for respecting the position of stakeholders are set forth in“Our Commitment” and “The Kuraray Group Code of Conduct” and havebeen announced.

Implementation ofEnvironmental Activities andCSR Activities, etc.

In 2003, Kuraray instituted the CSR Committee to bolster its CSR
promotion structure. Currently, the CSR Committee maintains six working
teams under its umbrella (environmental conservation, global warming
countermeasures, quality assurance and product safety, philanthropy,
workplace environment and information management) and anorganizational structure that takes coordinated and flexible action asnecessary. Results of such activities are disclosed in the Kuraray Report(an integrated report) and on the Company’s website on an annual basis.
In 2020, the Company declared its support for the recommendations of the
Task Force on Climate-related Financial Disclosures (TCFD), and becamea signatory of the United Nations Global Compact (UNGC). By clearlystating its corporate position through these initiatives, the Company willfurther promote sustainability management based on the Kuraray Group’s
Corporate Statements, and continue helping to realize a sustainable society.

Development of Policies on
Information Provision to
Stakeholders

The policies on information provision to stakeholders are set forth in the
Disclosure Policy of the Kuraray Group and the Company Disclosure
Guidelines.

22

Other

Supplementary Explanation
Policies on and measures for promoting diversity:
By formulating the Kuraray Group Global Human Resources (HR) Policy,
the Company is promoting the employment of a diverse workforce
encompassing not only females but also foreign national, persons withdisabilities and seniors under the policies to ensure non-discrimination on
any ground such as gender, race and nationality, and to respect diversity
and individuality (Transferring contract workers to full-time permanent
employees is also actively underway.)
With the establishment of the Act to Partially Amend the Act on Promotionof Women’s Participation and Advancement in the Workplace on May 29,
2019, we formulated and announced the business owner action plan withthe purpose of raising the ratio of women among newly-recruitedemployees by 10% or more compared to December 31, 2019, in both theEC (general) and FL (clerical) streams, by December 31, 2024. The
Company has also established a goal of increasing the number of
employees utilizing the teleworking system during the fiscal year ending
December 31, 2024 by a factor of five or more compared to the fiscal year
ended December 31, 2019. In this way, we aim to ensure that all employees
will be able to develop careers inclusive of promotion, advancement, andbroader range of positions, while balancing work with childcare, nursing
care, and other household chores. To establish a professional environmentthat enables a diverse workforce to thrive, we have been creating
mechanisms that enable everyone to continue their careers even whencontending with various life events (family circumstances). For instance,
we have made arrangements for flexible working styles, such that include
flextime, and have also established a scheme through which the employees
are given temporary leave, allowing them to accompany their spouse when
their spouse is assigned to overseas posts, and a comeback recruitment
system for corporate alumni. Under the workplace management with thefocus on work-life balance, an average of 152 hours of overtime areworked by employees each year (approximately 13 hours per month),while the rate of taking yearly paid vacations is approximately 80%.

23

IV Matters Related to the Internal Control System
1. Basic Views on the Internal Control System and the Progress of System Development(Basic Views on the Internal Control)
Recognizing that developing and operating the internal control system is an important management issue, theGroup has determined at its Board of Directors the Basic Policy for Establishment of an Internal Control System
as following:
1. Systems to ensure compliance of execution of duties of Directors and employees with laws, regulations andthe Articles of Incorporation(1) The Board of Directors, based on the Articles of Incorporation, Regulations of Board of Directors,
and other internal regulations, will make decisions concerning important management items of theGroup, in addition to supervising the execution of duties by Directors and Executive Officers. To
strengthen the supervisory functions of the Board of Directors, at least one-third of its Directors
will be appointed as Independent Outside Directors.
(2) The Company has established “Corporate Advisory Committee” mainly comprised of Outside
Officers and outside experts, as an advisory organ to the Board of Directors, with a view toenhancing transparency, fairness and objectivity in decision making concerning important mattersof management, including nomination and remuneration of Directors.
(3) To promote corporate activities from the standpoint of sustainability, a Sustainability Committee
will be established, which reports to the Board of Directors.
(4) Policies regarding compliance with laws and regulations will be defined as The Kuraray Group
Code of Conduct. In order to conduct systematic development and operation of a compliancestructure as the Group, a Risk Management and Compliance Sub Committee will be established,which reports directly to the President.
(5) As an internal reporting point for discovering unfair and illegal actions and unethical actions within
the Group at an early stage and aiming for independent resolution, a Group Employee Counseling
Room and the Global Compliance Hotline will be established. In addition, a Corporate Auditor
Hotline will be established as an internal reporting point independent of the management.
(6) As a prevention measure against the violation of the antitrust laws, regular education and training
will be held for executives and employees from each Group company, raising awareness of theinternal guidelines regarding the antitrust laws and conducting regular monitoring of the compliancestatus.
(7) The Corporate Auditing Division, in compliance with the Internal Audit Regulations, will audit theconditions of business execution within the Group.
(8) Based on the Financial Instruments and Exchange Act, an internal control system will be establishedto ensure propriety of financial reporting, and will be operated appropriately.
(9) The Kuraray Group Code of Conduct will prescribe that the Group will deal with Anti-social forcesand groups in a firm manner, and will not have any association with such forces and groups,
thoroughly disseminating the rules throughout the Group.
2. Systems concerning storage and management of information regarding execution of duties of Directors
Records regarding execution of duties of Directors such as approval documents, request documents, etc.,
and minutes and materials of General Meetings of Shareholders, Meetings of Board of Directors, and othermain meetings will be stored and managed appropriately in accordance with laws and regulations and24internal regulations.
3. Regulations and other systems regarding management of risk of loss
(1) Based on the Group Risk Management Regulations, systematic risk management will be conducted
throughout the Group.
(2) Based on the Company Emergency Headquarters Operational Regulations, in the event of asignificant crisis regarding the business activities of the Group, the Company Emergency
Headquarters will be established headed by the President to deal with the issue.
(3) Assuming a significant crisis such as a large-scale natural disaster, etc., a business continuity plan
(BCP) will be defined on a per-division basis to minimize any interruption of business, and the BCP
will be reviewed regularly.
4. Systems to ensure efficient execution of duties by Directors(1) For decisions made by the President or requests of approvals by the Board of Directors regarding
significant management items of the Group, preemptive deliberations will be held by the Executive
Committee and various committees, aiming for swift management decision-making and efficientbusiness execution.
(2) Authority to operate businesses as managers of Companies, Divisions, and key organizations will
be delegated to Executive Officers, etc., appointed by the Board of Directors, and execution ofbusiness at each organization will be made in an appropriate and efficient manner.
5. Systems to ensure the propriety of business operations at the corporate group, composed of the Company
and subsidiaries(1) Business operation of each Group company will be conducted according to the management policiesof the Group as a whole, as defined in the medium-term management plan and annual management
plan. Based on the Domestic Affiliated Companies Management Standards and the Overseas
Affiliated Companies Management Standards, each Group company will seek approval and reportto the Board of Directors or Executive Committee of the Company concerning important items.
(2) Decision-making standards will be defined for each Group company within the Domestic AffiliatedCompanies Management Standards and the Overseas Affiliated Companies Management Standards,
and will be managed appropriately and efficiently. Additionally, to promote unified operations
through aiming for communication of views within the Group, a liaison meeting will be held as
required between the President of the Company and the Presidents of each Group company.
(3) Based on The Kuraray Group Code of Conduct, the system will be put in place to enable appropriate
execution of duties by Directors and employees of each Group company. In addition, officers will
be seconded from the Company to each Group company, to supervise business execution by
Directors and employees of each company, and the Corporate Auditing Division will conduct
internal audits in accordance with the Internal Audit Regulations.
6. Independence from Directors of employees assisting the duties of Corporate Auditors and items regarding
ensuring the effectiveness of instructions given to these employees
Staff for Corporate Auditor will be assigned to assist the duties of Corporate Auditors. Staff for Corporate
Auditor will receive direction and orders from Corporate Auditors, and concerning personnel affairs andsalary of Staff for Corporate Auditor, decisions will be made after deliberations between the Director
supervising personnel affairs and the Corporate Auditor.
7. Systems regarding reporting to Corporate Auditors of the Company and systems to ensure persons whomake reports do not receive detrimental treatment as a result of making a report(1) Corporate Auditors will attend Meetings of Board of Directors and receive reports concerning
conditions of business execution at the Company and each Group company through liaison meetings,

25

etc., with Presidents of significant subsidiaries.
(2) The Corporate Auditing Division will periodically report to the Board of Corporate Auditors
concerning conditions of internal audits at the Company and each Group company.
(3) Upon discovering important issues regarding significant violations of laws and regulations or othercompliance issues, Directors and officers of the Company and each Group company will swiftly
report to Corporate Auditors. Corporate Auditors may request reports regarding these items as
required from employees of the Company and the Group.
(4) Employees of the Company and each Group company can notify Corporate Auditors of thesematters using the Corporate Auditor Hotline.
(5) Regarding persons who make the above reports and notifications, internal regulations will stipulatethat persons who make reports do not receive detrimental treatment on the grounds of making thereport.
8. Items regarding prepayment of expenses, procedures for reimbursement, and policies regarding processingof other expenses and liabilities arising from execution of duties by Corporate Auditors
When Corporate Auditors request prepayment or reimbursement, etc., for expenses arising during the courseof execution of duties, unless the contents are especially unreasonable, payment will be processed without
delay.
9. Other systems to ensure that audits by Corporate Auditors are made effectively
In order to exchange opinions regarding challenges facing the Company, important audit issues, etc.,
Corporate Auditors will periodically meet with the Representative Directors, and implement interviews with
Directors, Executive Officers, and important employees.
(Progress of the System Development for Internal Control and Risk Management in the fiscal year ended
December 31, 2020)
1. Initiatives relating to compliance(1) To work toward improving compliance awareness, workshop-style online seminars were
implemented for Section Managers (including Group Leaders) or higher at domestic Group
companies, and each Manager or Section Manager subsequently implemented training for
employees in their respective divisions.
(2) To establish an effective Antimonopoly Act compliance system, the Company has been developing
and strengthening a compliance program across the entire Kuraray Group. In fiscal 2020, theCompany evaluated and reviewed the compliance program for the Group companies in Japan andoverseas, taking various measures including the development of relevant internal regulations,education and training of officers and all sales staff, risk assessment by business segment, and audit
of divisions that participate in bidding.
(3) The Internal Auditors Office implemented an assessment on the development and operation statusof an internal control system (J-SOX) to ensure propriety of financial reporting of the Company and
the Kuraray Group. Results of the assessment were audited by PricewaterhouseCoopers Aarata LLC,
and was reported to the Board of Directors. As teleworking has become more common during the
COVID-19 crisis, we considered new ways of approval that require no paper or seal with the audit
firm.
2. Initiatives relating to risk management(1) Self-assessment of risks was implemented at each domestic and overseas organization based on the
Kuraray Group Risk Management Regulations. Following discussions at the Risk Compliance
Committee, the President specified significant business risks and appointed supervisors in charge

26

of each risk in order to implement measures to avoid and reduce such risks.
In November 2020, we identified the following items as priority issues in the Kuraray Group risk
management for fiscal 2021.
i. To mitigate risks of occupational incidents, conduct an overall inspection especially of overseas
plants from administrative aspects (operational management, facility management) including not
only safety design but also human resources development, and establish effective measures toaddress identified issues.
ii. Establish a globally-unified system for managing confidential information, and steadilystrengthen initiatives for maintaining data.
iii. Ensure the reliable operation of the Antimonopoly Act compliance program establishedglobally and eliminate the possibility of recurrence.
iv. Taking into account emergency response to COVID-19, thoroughly implement measures
including those for infection prevention and control and ensure business continuity under the
pandemic.
(2) In response to the global outbreak of the new coronavirus, we set up a response team led by the
Officer Responsible for Administrative Unit at the Head Office in January 2020 to continually
collect information on infection cases in Group companies in Japan and overseas, plan andimplement infection prevention measures, and disclose infection cases, if any, to internal andexternal parties. In addition, a safety confirmation drill was held, participated in by all employees
working at the Head Office and Osaka Office, assuming the occurrence of a large-scale natural
disaster (earthquake, flood). Additionally, assuming that a leakage accident has occurred in the
Niigata Plant, Emergency Headquarters at Head Office and the Plant jointly conducted an
emergency drill for internal and external response. Further, to prepare for scenarios where meetingat the Head Office becomes difficult due to a pandemic or other emergency, we have developed
procedures to establish the Company Emergency Headquarters using a remote conference system.
3. Initiatives relating to internal control of the corporate group(1) The “Corporate Advisory Committee,” comprised of five outside officers and two outside experts,
met twice during the year. As an advisory body to the Board of Directors, the Committee deliberated
on Director candidates and executive compensation, etc. and made recommendations and reportson the outcome to the Board of Directors.
(2) Each Kuraray Group company operates its business according to the management policies of theKuraray Group as a whole, as defined in the medium-term management plan and annual
management plan. Based on the Domestic Affiliated Companies Management Standards and theOverseas Affiliated Companies Management Standards, each Kuraray Group company has sought
approval and reported to the Board of Directors or Executive Committee of the Company as needed
concerning their respective important items.
4. Initiatives relating to audit systems of Corporate Auditors
Corporate Auditors met with Representative Directors to exchange opinions regarding challenges theCompany faces, important audit issues, etc., while implementing interviews with each Executive
Director, Executive Officer, and other important employees.

2. Basic Views on Eliminating Anti-Social Forces and the Progress of System Development
The Group declares in Corporate Statement, “Our Commitment” how the Group fulfills its accountability
and responds to the expectation from the society in regard with the diverse connections to the society. In the
Kuraray Group Code of Conduct, which embodies “Our Commitment,” we have pledged that we take aresolute stance against, and will not associate with, anti-social groups or organizations. In order to ensure

27

that its Directors and employees comply with this code of conduct, the Company strives to familiarize themwith this code through creating and distributing Kuraray Group Compliance Handbook, which offers
explanations of the Kuraray Group Code of Conduct, and holding training on corporate ethics. In addition,
the Company separately stipulates the prohibition of illegal profit offering and handling of donations, etc.
and is working on educational activities on a Group-wide basis to maintain a sound relationship with thesociety. In case of any unreasonable demands, etc. made by anti-social forces, the Company has a system inplace whereby General Affairs Department of the Head Office, the responsible division, collects and collates
information, and Manager of General Affairs Department deals with the case as a person in charge ofpreventing unreasonable demands through coordinating with the relevant external authorities including thepolice and attorneys.

V

Other

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

Not adopted

Supplementary Explanation

2. Other Matters concerning Corporate Governance System
1. Basic Stance toward DisclosureWith our mission of “We are committed to developing new fields of business using pioneering technology that
improves the environment and enhances the quality of life throughout the world. For people and the planet ̶ toachieve what no one else can,” the Group is striving to enhance its corporate value. Under this mission, our basic
stance toward disclosure is to fulfill our accountability to the society through timely and sufficient disclosure of
information.
Our basic policy on disclosure is to strictly control the corporate confidential information while at the same time
actively disclosing information as a corporate group that is open to society through implementing the principles
of “We will maintain a sound relationship with society through good communication” and “We will honor all
intellectual property and secure data and information in a proper manner” both stipulated in our commitment(comprised of six principles).
In accordance with the Disclosure Policy of the Kuraray Group which is a written outline of such basic stanceand the Company Disclosure Guidelines specifying the principles and practice of disclosure, the Company has
established the internal system as following in order to accurately execute the disclosure of “corporate information
required for disclosure” (hereinafter, “important corporate information”) as set forth in the rules of the Tokyo
Stock Exchange for timely disclosure.
2. The Timely Disclosure System of the Company’s Information(1) Organization in charge of disclosure
Corporate Communications Department, Corporate Management Planning Office takes charge as thedivision responsible for the disclosure of important corporate information of the Group.

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(2) Collection and control of information
Important information of the Group (determining events, occurring events, or information related to financial
results) is reported from each business execution organization to the top management and its staff, that is, theGeneral Manager of Corporate Management Planning Office. Matters requiring the judgment and determinationof the top management are presented for discussion at the Executive Committee.
Corporate Communications Department, Corporate Management Planning Office responsible for disclosure
obtains the important information in a timely manner via managers in charge of disclosure that are placed in eachbusiness execution organization, Corporate Management Planning Department of the Corporate Management
Planning Office, administrative organization of the Head Office and other divisions.
In the event of accidents, disasters and other emergencies, Corporate Communications Department, Corporate
Management Planning Office obtains the information in a timely manner via the communication network
provided in the “Corporate Emergency Headquarters Operating Specifications” or through the duties at theEmergency Headquarters.
(3) Judgment and Determination regarding Disclosure
Matters relevant to the important corporate information are disclosed in a timely manner by Corporate
Communications Department, Corporate Management Planning Office. Matters that are uncertain whether they
are relevant to the important corporate information are subject to the judgment by Manager of Corporate
Communications Department, Corporate Management Planning Office after discussion by the Corporate
Communications Department, the Corporate Management Planning Office and Legal Department, Corporate
Sustainability Division.
Even when information is not deemed to be relevant to the important company information, if such matters
are required to be disclosed in fulfilling the Group’s accountability to the society, President makes decision after
the discussion at Executive Committee. Notwithstanding the foregoing, in the event of emergencies, President
or an officer authorized by the President shall make decision regarding disclosure after the discussion withManager of Corporate Communications Department, Corporate Management Planning Office.

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(Note) The above is our corporate governance system as of December 28, 2021. Subsequent organizational changes
have not been reflected.

30

【Skills Matrix for Directors/Corporate Auditors】

Knowledge/Experience of Officers
Name

〇

〇

〇

〇

〇

〇

Sales andMarketing

HitoshiKawahara〇〇〇

Hiroaya Hayase〇

Masaaki Ito〇

Kenichi Abe〇

Keiji Taga
Matthias
Gutweiler〇

Nobuhiko Takai
Jun Hamano

OutsideKeiko Murata

OutsideKiyoto Ido

〇

〇

〇

〇

〇

〇

〇
〇

Satoshi Tanaka Outside

Corporate
Auditors

R&D

GlobalYoshimasa Sano

Directors

Production
and Equipment
Technology

Corporate
Management

〇

〇

〇

Naoya Uehara〇

Tomomi Yatsu

OutsideKenji Komatsu

Outside

〇

〇

〇

〇

〇

〇

〇

〇

〇
〇
〇

〇

〇
〇

〇

〇

〇

Human Resourcesand Labor
Management

〇

〇
〇

〇

Environment
and Society〇〇

OutsideOutsideFinance andAccounting〇

Kazuhiro
Nakayama

Mitsuhiro
Nagahama〇

Legal Affairs
and Risk Management〇〇*The above table shows up to 4 knowledge or experience possesed by Directors or Corporate Auditors.
The above table does not represent all knowledge or experience possesed by Directors or Corporate Auditors.

31〇