Corporate Governance Report
CORPORATE GOVERNANCE

AIR WATER INC.

Last Update:July 3, 2024
AIR WATER INC.

Chairman, Chief Executive Officer Kikuo Toyoda
Contact: Governance Office
TEL：06-6252-1757
Securities code: 4088
https://www.awi.co.jp/en/index.html

The corporate governance of [AIR WATER INC] (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 conducting fair corporate activities in accordance with social common sense and earning the trust of
all stakeholders, including shareholders, customers, local communities, and employees, is essential to the sustainable
development of a company and maximization of its corporate value. We also recognize that the enhancement of our corporate
governance, including internal control systems, is the most important management issue in earning the trust of stakeholders andfulfilling its corporate social responsibility.
We will build a management system that fully functions for proper management decision-making, appropriate and prompt
business execution based on such decision-making, as well as supervision and monitoring of such business execution. Along with
that, we will enhance corporate governance by ensuring management transparency through disclosure of a wide range of
information.

Reasons for Non-compliance with the Principles of the Corporate Governance Code
The Company complies with all of the principles of Japan’s Corporate Governance Code.

Disclosure Based on the Principles of the Corporate Governance Code【Update】[Principle 1-4] (Strategically held shares)
The Company holds shares for the purpose of maintaining relationships, expanding transactions, and creating business
opportunities with business partners. The Company’s decision to acquire new shares or to continue to hold such shares is madebased on whether the business relationship, partnership, collaboration, or other cooperative relationship with individual issuers
will contribute to the enhancement of the Group’s corporate value over the medium- to long-term.
<Verification of strategically held shares>
Every year, the Company’s Board of Directors closely examines strategically held shares per individual issuer to determine
whether the benefits and risks associated with holding such shares are worth the capital cost of the Company and whether holding
such shares serves the purpose of contributing to the Group’s corporate value over the medium- to long-term. If significance or1

rationality of holding an issue is not recognized, such shares are sold and reduced, or reviewed by other means.
<Criteria for exercising voting rights attached to strategically held shares>
As to whether or not to exercise voting rights attached to strategically held share, the Company makes decisions on a per-proposal
basis taking into consideration whether the content of the proposal will contribute to the sustainable growth and medium- tolong-term enhancement of corporate value of the investee and whether there is any risk of damaging the Group’s shareholder value.

[Principle 1-7] (Transactions between related parties)
In accordance with the Companies Act and other applicable laws and regulations as well as the Company’s “Rules of the Boardof Directors,” any competing transactions and conflict-of-interest transactions by directors require approval of the Company’s
Board of Directors. If any of these transactions is conducted, such material fact shall be reported to the Board of Directors without
delay. With regard to transactions between the Company and related parties, the Company investigates the details of eachtransaction and, in accordance with applicable laws and regulations, discloses the details of such transactions, if any, in the notes
to its financial statements and in the Securities Report.

[Supplementary Principle 2-4-1]
We will strengthen recruitment and training of female employees and foster a working environment that respects diversity topromote the empowerment of female employees and various other groups of employees to secure talented human resources andachieve business growth.
<Promotion of empowerment of women>
As a key initiative for building a diverse organization and achieving further growth of the Company, we have set a goal ofincreasing the ratio of female managers to at least 10% (actual ratio in FY2023: 5.5%). While we have been continuing efforts to
support career building through the mentoring system and enhance our female leader development program, we will also
introduce new efforts to change the awareness of those around female employees through training and lectures for supervisors ofcandidates for female managers.
In addition, as part of our efforts to promote women to management positions in the future, we are actively recruiting new
female graduates and appointing female assistant managers and senior staff members. The ratio of women among all new
graduate hires is more than 40% (45% in FY2024). In our selection process for employment, female applicants are interviewed by
our female employees to address their questions and concerns. We are actively disseminating information about the Company’s
working environment and systems to empower women through our website and recruitment platform.
<Acquisition rate of male employees taking childcare leave/absence>
In order to establish a workplace culture in which employees can achieve work-life balance regardless of gender, we aim toincrease the combined rate of male employees taking childcare leave and absence to 40% or more. Thanks to our efforts involving
not only eligible employees but also those around them, such as explaining the system to eligible employees and their supervisors,
encouraging them to take the leave/absence, conducting individual interviews with them, and promoting workstyle reforms, weare achieving steady progress in fostering a culture within the Company that encourages male employees to take childcare
leave/absence. In fiscal 2023, we have achieved an acquisition rate of 100% (21.9 days on average).
<Promotion of women, foreign nationals, and mid-career hires to management positions>
We evaluate performance and abilities of women, foreign nationals, and mid-career hires and assign them to managerial2positions in the same manner as other employees, based on the principle of placing the right person in the right job. (48
mid-career hires in FY2023 (including 19 in management positions), 17 foreign national employees (including 1 in management
position))[Principle 2-6] (Fulfilling functions as owner of corporate pension assets)
The Company has a system in place to fulfill its expected role in managing reserves in corporate pension funds (DB plan) by
assigning personnel with expertise to the Administrative Board, an executive body, and the Secretariat.
In addition, the Asset Management Committee is composed of personnel with expertise in such functions from the humanresources, accounting, and finance divisions, and a system is in place to confirm sound management of pension funds from theperspective of expertise and protection of beneficiaries.
All pension funds have been transferred to the defined contribution pension system (DCPS) after October 1, 2021.

[Principle 3-1] (Enhancement of information disclosure)(i) Our goals, Management strategy and Management plan
We have set and disclosed our Group’s Management Philosophy. For details, please see our website.
(https://www.awi.co.jp/en/company/idea.html)
We have also formulated and announced a new medium-term management plan, “terrAWell30 1st stage,” covering the three-year
period from fiscal 2022 to 2024. For details, please see our website.
(https://www.awi.co.jp/en/ir/management/plan.html)(ii)

Basic views on corporate governance

Please refer to I-1. “Basic Views” of this Report.

(iii) Policies and procedures for determining remuneration of senior management and directors
As for the composition of remuneration of directors, the proportion of base remuneration, performance-linked remuneration, andnon-monetary rewards for directors is set at 7:2:1 as a guide, based on the remuneration range of other companies in the same
industry or the same scale of operation.
In addition, the total amount of remuneration for individual directors is determined by the Board of Directors based on a
proposal prepared by the Nomination and Compensation Committee, a voluntary advisory body to the Board of Directors, after
thorough deliberation, within the range of the amount preliminarily resolved at the General Meeting of Shareholders. The
decision on the specific timing of payment and proportion of remuneration for each director shall be entrusted to Kikuo Toyoda,
Chairman and Representative Director, Chief Executive Officer (CEO).
Regarding the policies and procedures for determining remuneration of directors, please refer to II-1. “Organizational
Composition and Operation [Director Remuneration]” of this Report.
(iv) Policies and procedures for appointing/dismissing senior management and nominating candidates for directors and corporate
auditors
With respect to the appointment/dismissal of senior management and the nomination of candidates for directors and corporate
auditors, the Company’s policy is to nominate suitable candidates, regardless of gender, age, or nationality, who can fulfill theirroles and responsibilities toward the sustainable growth of the Group as well as the enhancement of its corporate value over the3

medium- to long-term, after comprehensively evaluating their personality, insights, abilities, and other factors.
The Company also factors in “the importance of fulfilling responsibilities entrusted by shareholders in corporate management as
director” when nominating director candidates and “the importance of auditing and the functions of corporate auditors incorporate management” when nominating candidates for corporate auditors.
As for the appointment/dismissal procedure, the Board of Directors, members of which include independent outside directors
with expertise and experience, discusses a wide range of opinions and makes decisions after thorough deliberation. In the eventthat any significant lack of qualification is observed in light of the above policy, etc., the Company considers dismissal by aresolution of the Board of Directors.
The Company has established the Nomination and Compensation Committee as a voluntary advisory body to the Board of
Directors. The Nomination and Compensation Committee deliberates on the appointment and dismissal of senior management
and the nomination of director candidates, and then the Board of Directors makes decisions based on the report of the Nomination
and Compensation Committee.

(V) Explanation of individual appointments/dismissals and nominations of candidates for directors and corporate auditors when
appointing/dismissing senior management and nominating candidates for directors and corporate auditors
Reasons for the individual appointments, dismissals and nominations of candidates for directors and corporate auditors aredisclosed in the reference materials of Notice of Convocation to General Meeting of Shareholders. For details, please refer topages 3-11 of the “Notice of the 24th Annual General Meeting of Shareholders and Reference Materials for General Meeting of
Shareholders” posted on our website.
(https://www.awi.co.jp/en/ir/news/news-2024061201/main/0/link/syousyuutsuuchisyo24c.pdf)[Supplementary principle 3-1-3](1) Our sustainability initiatives
Please refer to our website (https://www.awi.co.jp/en/sustainability.html) and Integrated Report(https://www.awi.co.jp/en/ir/library/report.html) for more information on our sustainability philosophy, policies, and initiatives.

(2) Investment in human capital, etc.
The Company places great importance on diversity throughout the Group and is committed to developing human resources tomake the most of diverse individuality. Recognizing that diverse human resources are essential for the continued corporate
growth through global business activities in a range of domains, we are implementing reforms in the four areas of “recruitment,”“human resource utilization and development,” “treatment and systems,” and “education, training, and health and productivity
management.” Please refer to our Integrated Report for more information on our initiatives.

(3) Investment in intellectual property
We have formulated our Sustainable Vision for 2050 toward a recycling-oriented society through coexistence with the earth andsociety. We will work on various development themes, especially on “decarbonization and resource recycling technology” and“telemedicine and sensing technology,” which will be elemental technology that will support the global environment business andwellness business to be focused on in the future. In addition, the Intellectual Property Strategy Dept. is strategically promoting

4

patent application and utilization for new inventions related to these themes. Please refer to our Integrated Report for the detailsof our initiatives.

(4) TCFD-based disclosure
Recognizing that addressing climate change is an important issue for a company to tackle, in August 2021 we expressed our
support for TCFD, an international disclosure framework. Our response to the TCFD recommendations will contribute to theenhancement of our corporate value over the medium to long term. In order to achieve sustainable growth, a company is required
not only to view its response to climate change issues as a “corporate social responsibility” but also link it to “opportunities for
growth.” Based on scenario analysis, we will work to assess the financial impact of risks and opportunities posed by climatechange and enhance information disclosure.
Please refer to our website for information disclosed in line with the TCFD framework.
(https://www.awi.co.jp/en/sustainability/environment/tcfd.html)[Supplementary Principle 4-1-1]
The Company has established the “Regulations of the Board of Directors” and the “Agenda Standard of the Board of Directors”
to clarify matters to be resolved and reported at the Board of Directors meetings, in addition to matters stipulated by laws andregulations and the Articles of Incorporation. The Board resolution is required for decisions on management plans, establishment
or abolition of important organizations, important personnel matters, important investments and loans, business transfers, andother matters. As for the division of duties and decision-making authority of executive directors and heads of organizations, thescope of delegation is clearly defined in the “Organizational Regulations” and the “Regulations on Administrative Authority.”[Principle 4-9] (Independence criteria and requirements for independent outside directors)
The Company appoints as independent outside directors those who meet the “Criteria for Independence of Outside Officers”
established by a resolution of the Board of Directors, in addition to the requirements and standards stipulated by the Companies
Act and financial instruments exchanges. In selecting candidates for independent outside directors, the Company places
importance on a high level of expertise and a wealth of experience to provide candid and constructive advice, etc. regarding
management of the Company.
Please refer to our website for the “Independence Judgment Criteria for Outside Officers .”(https://www.awi.co.jp/en/sustainability/governance/governance.html)[Supplementary Principle 4-10-1]
The Company established the Nomination and Compensation Committee on August 4, 2022, to increase the independence andobjectivity of the Board of Directors’ functions related to the nomination and compensation of directors, strengthen
accountability, thereby enhancing the Company’s corporate governance. The Nomination and Compensation Committee
maintains its independence and, in consultation with the Board of Directors, reviews particularly important matters, such as
nomination and compensation, and reports to the Board of Directors.

[Supplementary Principle 4-11-1]

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The Company’s Articles of Incorporation stipulate that the number of directors shall not exceed 20, and currently, the Board of
Directors consists of 9 directors, including 3 independent outside directors (including 1 female director). The Company’s Boardof Directors has created a skills matrix of eight basic areas of (1) corporate management, (2) finance and accounting, (3) risk
management and legal affairs, (4) business strategy and marketing, (5) technology and R&D, (6) human capital management, (7)ESG and sustainability, and (8) globalization, as the experience and skills required to cover each function and business domain of
the Company. Using this skills matrix, and from the viewpoint of placing the right person in the right job for proper and prompt
decision-making, we appoint multiple numbers of directors who are familiar with the Group’s businesses and independent outside
directors who have extensive experience and knowledge outside the Company, including those with experience in othercompanies as a manager and certified public accountants, in an effort to ensure that the balance and diversity of the Board of
Directors as a whole is optimized for the Company.
For skill matrix of our directors and corporate auditors, please refer to page 12 of the “Notice of the 24th Annual General Meetingof Shareholders and Reference Materials for General Meeting of Shareholders” posted on our website.
(https://www.awi.co.jp/en/ir/news/news-2024061201/main/0/link/syousyuutsuuchisyo24c.pdf)[Supplementary Principle 4-11-2]
When our directors and corporate auditors serve concurrently as an officer of other listed companies, the Company confirms thatsuch concurrent positions do not interfere with the performance of their duties as director or corporate auditor of the Company.
Concurrent positions held by our directors and corporate auditorsserving concurrently as an officer of other listed companies aredisclosed in Notice of the 24th Annual General Meeting of Shareholders and Integrated Report for information.
Notice of Convocation to the General Meeting of Shareholders: (https://www.awi.co.jp/en/ir/stock/investor.html)
Integrated Report: (https://www.awi.co.jp/en/ir/library/report.html)[Supplementary Principle 4-11-3]
For the purpose of improving the effectiveness of the Board of Directors as a whole, every year, the Company analyzes andevaluates the effectiveness of the Board of Directors as a whole through self-evaluation conducted by directors and corporate
auditors and by other means, and discloses a summary of the results.
In fiscal 2023, we conducted a questionnaire survey targeting all directors and corporate auditors who are members of the Boardof Directors as part of the self-evaluation, while obtaining knowledge from external organizations. In the questionnaire, we asked
respondents’ name, and the main question items included “operation of the Board of Directors”, “discussions at the Board of
Directors meetings”, “monitoring functions of the Board of Directors” and “support systems for directors and corporate auditors”.
Based on the results of the questionnaire, the Board of Directors analyzed and evaluated the current status and issues regarding
the effectiveness of the Board of Directors as a whole.
As a result, the Board of Directors of the Company received generally positive evaluations, including that the Board of Directors
has an appropriate size and diversity for deliberations, that it ensures sufficient time for the external directors and corporate
auditors to be briefed on the agenda in advance and for the Board of Directors to deliberate, leading to lively discussions, and thatthe remuneration system for the management team, which was an issue in the previous fiscal year, has been appropriately decided
after receiving a report from the Nomination and Compensation Committee, which was consulted by the Board of Directors.
In view of the above, it has also been confirmed that the Board of Directors as a whole is fulfilling its roles and responsibilities

6

as stipulated in the Corporate Governance Code, and that the effectiveness of the Board of Directors is sufficiently ensured.
Members of the Board of Directors continued to share issues to be considered for further improvement of effectiveness:
providing explanations of agenda items and reference materials in a more organized manner, monitoring the Board of Directors
resolutions, strengthening support systems for directors and corporate auditors, and other matters.
Based on this effectiveness evaluation, the Company’s Board of Directors will implement initiatives on a continual basis tofurther enhance the functions of the Board of Directors.

[Supplementary Principle 4-14-2]
For directors and corporate auditors to acquire and update the knowledge necessary to properly fulfill their roles andresponsibilities, the Company provides them with opportunities to participate in training sessions by outside experts, not only
when they take office but also after that, as necessary.
In addition, new outside directors and outside corporate auditors are given an opportunity to receive an explanation about theCompany’s management philosophy, business description, organization, etc. when they take office.

[Principle 5-1] (Policy on constructive dialogue with shareholders)
We recognize that, in order to achieve sustainable growth and enhance corporate value over the medium to long term, it isessential to build long-term relationships of trust with shareholders and investors by disclosing accurate information on ourmanagement, finance, etc. to them in a timely and fair manner and by engaging in constructive dialogue with them. Our
Disclosure Policy is also available on the Company’s website.
(https://www.awi.co.jp/en/ir/management/disclosurepolicy.html)
Administration officer in charge of investor relations oversees dialogue with shareholders and investors, and the Corporate
Communications Office, the department in charge of investor relations, plays a central role in organic cooperation with related
departments within the Company to provide appropriate information and set up opportunities for dialogue with the management.
We will disclose the details (main IR activities, themes of dialogue, etc.) on our website after mid-July this year.
Opinions and concerns about the Company’s management obtained through dialogue with shareholders and investors are reported
to the representative directors and other senior management as necessary.
When holding dialogue with shareholders and investors, the Company has set a “quiet period” during which it refrains from
dialogue with shareholders and investors prior to the announcement of financial results. Moreover, the Company has adopted
strict measures to prevent the leakage of insider information.

[Actions to achieve management conscious of capital cost and stock prices] [Disclosed in English]
Toward fiscal 2030, the Company is committed to increasing its corporate value in terms of both economic value and social value
as we create new value by solving social issues. Going forward, with even greater emphasis placed on profitability and capitalefficiency, we will strive to achieve an ROE of 12% or more and an ROIC of 8% or more over the medium to long term. We
believe that these levels are well above the cost of shareholders’ equity, which was estimated based on the characteristics of ourbusiness and the current stock market conditions.
With regard to dialogue with the capital market, we will pursue improvements in information disclosure to promote understandingof shareholders and investors to realize more constructive dialogue through disclosure of information on profitability and capital7efficiency, in addition to the business lines and areas of interest to the capital market.
The outline of our initiatives up to fiscal 2024 is disclosed in the medium-term management plan.
(https://www.awi.co.jp/en/ir/management/plan.html)

2.

Capital Structure
Foreign Shareholding Ratio

20% or more and less than 30%

Status of Major Shareholders【Update】
Name or Company Name

Number of Shares Owned

Percentage (%)

The Master Trust Bank of Japan, Ltd. (trust account）

29,194,300

12.74

Custody Bank of Japan, Ltd. (trust account)

13,756,600

6.01

Sumitomo Mitsui Trust Bank, Limited

7,936,000

3.46

NIPPON STEEL CORPORATION

6,900,000

3.01

Sumitomo Mitsui Banking Corporation

6,259,198

2.73

Air Water Customers’ Stockholding

6,115,248

2.67

STATE STREET BANK AND TRUST COMPANY 505001

5,661,466

2.47

National Mutual Insurance Federation of Agricultural Cooperatives

4,951,500

2.16

BNYMSANV AS AGENT/CLIENTS LUX UCITS NON TREATY 1

4,851,600

2.12North Pacific Bank, Ltd.

4,574,473

2.00

Name of Controlling Shareholder, if applicable(excluding Parent Company)
Name of Parent Company, if applicable
None

Supplementary Explanation
The number of shares held by Sumitomo Mitsui Banking Corporation includes 3,000,000 shares contributed by the bank as trust
assets for a retirement benefit trust, for which the bank retains the right to instruct the exercise of voting rights. The name on theshareholder registry for these shares is “SMBC Trust and Banking Corporation (Sumitomo Mitsui Banking Corporation Retirement
Benefit Trust Account).

8

3.

Corporate Attributes
Listed Stock Exchange and Market Segment

Prime Market, Sapporo Securities Exchange Main Market

Fiscal Year-End

MarchBusiness Sector

Chemicals

Number of Employees (Consolidated) as of the Endof the Previous Fiscal YearNet Sales (Consolidated) as of the End of thePrevious Fiscal Year
Number of Consolidated Subsidiaries as of the Endof the Previous Fiscal Year

4.

1,000 or more

¥1 trillion or more

100 or more and fewer than 300

Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling
Shareholder5.

Other Special Circumstances which May have Material Impact on Corporate Governance【Update】
Air Water Inc. is the parent company of Kawamoto Corporation, a listed company. The listing of our subsidiary is beneficial to
the subsidiary in securing the trust of business partners and also brings advantages to both companies, such as the development of
new customers through the nationwide sales networks of our medical-related business companies, mutual cooperation for thedevelopment of advanced medical hygiene material products and the provision of higher value-added services, and the expansionof Group synergy through the mutual expansion of product ranges by the supply of Kawamoto’s hygiene materials, medical
supplies and nursing care products to us. On the premise that the subsidiary’s unique corporate culture and autonomy inmanagement are maintained and the rights of minority shareholders are respected, we believe that the listing of both parent andsubsidiary is an effective option when we can maximize the corporate value of the entire Group including the subsidiary.
Regarding the personal relationship between Kawamoto and the Company, one of our advisors concurrently serves as a director(audit and supervisory committee member) of Kawamoto. One director of the Company concurrently serves as a director of
Kawamoto, which is less than half of 9 directors comprising the Kawamoto’s Board of Directors, and 3 outside directors who are
independent of the Company’s corporate group have also concurrent positions. Judging from the above, we believe that
Kawamoto is in a position to secure a certain degree of independence and to make their own management decisions as a listedcompany.

9II. Business Management Organization and Other Corporate Governance Systems regarding
Decision-making, Execution of Business, and Oversight in Management
1.

Organizational Composition and Operation
Corporate Governance System

Company with Audit and Supervisory Board

Directors
Number of Directors Stipulated in Articles of

20

Incorporation
Directors’ Term of Office Stipulated in Articles ofIncorporation

1 yearChairperson of the Board

Chairperson (excluding those concurrently serving as President)

Number of Directors

9Election of Outside Directors

ElectedNumber of Outside Directors

3

Number of Independent Directors

3Outside Directors’ Relationship with the Company (1)【Update】

Name

Relationship with the Company*

Attributes

Takao Matsui

CPA

Yoshihiro Senzai

From another company

Yuko Haga

Academic

a

b

c

d

e

f

g

h

i

j

k



*Categories for “Relationship with the Company”.
(Use “○” when the director presently falls or has recently fallen under the category; “” when the director fell under the category
in the past; “●” when a close relative of the director presently falls or has recently fallen under the category; and “▲” when a close
relative of the director fell under the category in the past.)
a. Person who executes business of the Company or a subsidiary
b. Person who executes business or a non-executive director of a parent company
c. Person who executes business of a fellow subsidiaryd. Person/entity for which the Company is a major client or a person who executes business for such person/entity
e. Major client of the Company or a person who executes business for such clientf. Consultant, accounting expert, or legal expert who receives large amounts of cash or other assets in addition to director/Audit
and Supervisory Board Member compensation from the Company
g. Major shareholder of the Company (in cases where the shareholder is a corporation, a person who executes business of thecorporation)h. Person who executes business for a client of the Company (excluding persons categorized as any of d, e, or f above) (applies
to self only)
i. Person who executes business for another company holding cross-directorships/cross-auditorships with the Company (applies
to self only)
j. Person who executes business for an entity receiving contributions from the Company (applies to self only)
k. Other10Outside Directors’ Relationship with the Company (2)【Update】

Name

Designation as
Independent
Director

Supplementary Explanation of
the Applicable Relationship

Reasons for Appointment
Mr. Takao Matsui has broad experience and thoroughknowledge accumulated over many years as a certified
public accountant, based on which he provides usefuladvice, etc. on the Company’s overall management.

Mr. Takao Matsui once worked
for KPMG AZSA LLC,
Accounting Auditor of the
Takao MatsuiCompany. He retired from thefirm in June 2018 and is not in aposition to be influenced by thefirm’s intentions.

Therefore, we believe that he is suitable to serve as an
outside director. Additionally, he does not fall under
any of the items that may create conflict of interest withgeneral shareholders stipulated by the Tokyo Stock
Exchange and satisfies the “Criteria for Independenceof Outside Officers” (see “[Matters Concerning
Independent Directors and Independent Audit andSupervisory Board Members] Other Matters
Concerning Independent Directors and Independent
Audit and Supervisory Board Members”) stipulated by
the Company. Considering the above, the Company
appointed him as an independent director.
Mr. Yoshihiro Senzai has long years of experience as amanager and engineer of another company. With his
extensive experience and broad insight, he provides
useful advice, etc. on overall management of theCompany, and therefore we believe that he is suitable
to serve as an outside director of the Company.
Additionally, he does not fall under any of the items

Yoshihiro
Senzaithat may create conflict of interest with generalshareholders stipulated by the Tokyo Stock Exchange
and satisfies the “Criteria for Independence of Outside
Officers” (see “[Matters Concerning Independent
Directors and Independent Audit and Supervisory
Board Members] Other Matters Concerning
Independent Directors and Independent Audit andSupervisory Board Members”) stipulated by theCompany. Considering the above, the Company
appointed him as an independent director.

11

Ms. Yuko Haga has professional expertise in M&A andcorporate governance as a researcher of corporate
strategy, in addition to extensive experience and broad
insight she has gained as a management consultant.
With her experience and insight, she is expected toprovide useful advice, etc. on overall management of
the Company, and therefore we believe that she issuitable to serve as an outside director of the Company.
Additionally, she does not fall under any of the items


Yuko Hagathat may create conflict of interest with generalshareholders stipulated by the Tokyo Stock Exchange
and satisfies the “Criteria for Independence of Outside
Officers” (see “[Matters Concerning Independent
Directors and Independent Audit and Supervisory
Board Members] Other Matters Concerning
Independent Directors and Independent Audit andSupervisory Board Members”) stipulated by theCompany. Considering the above, the Company
appointed her as an independent director.

Voluntary Establishment of Committee(s) equivalent toNomination Committee or Remuneration Committee

Established

Status of Voluntarily Established Committee(s), Attributes of Members Constituting the Committee and the Committee
Chair (Chairperson)
Committee’s
Name
Voluntarily
Established
Committee
Equivalent toNomination
Committee
Voluntarily
Established
Committee
Equivalent toRemuneration
Committee

All
Members

Full-timeMembers

InsideDirectors

OutsideDirectors

OutsideExperts

3

0

1

1

0

1

Inside Directors

3

0

1

1

0

1

Inside Directors

Other

Chairperson

Nomination andCompensation
Committee
Nomination andCompensation
Committee

Supplementary Explanation
One “Other” is an outside corporate auditor of the Company (independent officer).

12

Established on August 4, 2022 as a voluntary advisory body to the Board of Directors, the Nomination and Compensation
Committee performs the functions of both the Nomination Committee and the Compensation Committee aiming to enhance theindependence and objectivity of the Board’s functions related to the nomination and compensation of directors, as well as tostrengthen accountability, thereby enriching the Company’s corporate governance.

[Composition of the Nomination and Compensation Committee](1) The Committee shall consist of at least three (3) directors or corporate auditors elected by the Board of Directors.
(2) A majority of the Committee members shall be outside directors or outside corporate auditors (all of whom shall be
independent officers).

[Main roles of the Nomination and Compensation Committee]
The Committee shall deliberate and report to the Board of Directors on the following matters in response to consultations fromthe Board of Directors.
(1) Matters related to the proposals of election/dismissal of directors (general shareholder meeting agenda item)(2) Matters related to the proposals of election/dismissal of representative directors (board meeting agenda item after general
meeting of shareholders)(3) Matters related to the remuneration system and evaluation of directors(4) Matters related to succession planning

Audit and Supervisory Board Member**Referred to in Corporate Governance Code reference translation as "kansayaku"
Establishment of Audit and Supervisory Board
Number of Audit and Supervisory Board Members
Stipulated in Articles of Incorporation
Number of Audit and Supervisory Board Members

Established6
5

Cooperation among Audit and Supervisory Board Members, Accounting Auditors and Internal Audit Departments【Update】
Corporate auditors and KPMG AZSA LLC, the Accounting Auditor, meet regularly and exchange opinions whenever necessary.
Corporate auditors receive explanations from and exchange opinions with the Accounting Auditor regarding its audit plan, audit
implementation status, quarterly review results, and year-end audit results (including internal control audits related to financial
reporting). Corporate auditors explain to the Accounting Auditor the plans, status, and results of auditor’s audit, and exchange
opinions.
As regards cooperation between corporate auditors and internal audit departments, corporate auditors and the Internal Auditing
Office, which is our internal audit department, meet regularly and exchange opinions to ensure the effectiveness of theirrespective audits whenever necessary. In addition, corporate auditors receive explanations from the Internal Auditing Officeregarding the status of internal audits and audit results, exchange opinions, and when necessary, request the Internal Auditing
Office for investigations.

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Appointment of Outside Audit and Supervisory
Board Members
Number of Outside Audit and Supervisory Board
Members
Number of Independent Audit and Supervisory
Board Members

Appointed

33Outside Audit and Supervisory Board Members’ Relationship with the Company (1)【Update】

Name

Attributes

Kenji Yamada

From another company

Atsushi Hayashi

LawyerNobuo Hayashi

Academic

Relationship with the Company*
a

b

c

d

e

f

g

h

i

j

k

l

m



*Categories for “Relationship with the Company”.
(Use “○” when the director presently falls or has recently fallen under the category; “” when the director fell under the category
in the past; “●” when a close relative of the director presently falls or has recently fallen under the category; and “▲” when aclose relative of the director fell under the category in the past.)
a. Person who executes business of the Company or a subsidiaryb. A non-executive director or an accounting advisor of the Company or its subsidiaries
c. Person who executes business or a non-executive director of a parent company
d. An Audit and Supervisory Board Member of a parent company of the Company
e. Person who executes business of a fellow subsidiaryf. Person/entity for which the Company is a major client or a person who executes business for such person/entity
g. Major client of the Company or a person who executes business for such clienth. Consultant, accounting expert, or legal expert who receives large amounts of cash or other assets in addition to director/Audit
and Supervisory Board Member compensation from the Company
i. Major shareholder of the Company (in cases where the shareholder is a corporation, a person who executes business of thecorporation)j. Person who executes business for a client of the Company (excluding persons categorized as any of f, g, or h above) (applies
to self only)
k. Person who executes business for another company holding cross-directorships/cross-auditorships with the Company (applies
to self only)
l. Person who executes business for an entity receiving contributions from the Company (applies to self only)
m. OtherOutside Audit and Supervisory Board Members’ Relationship with the Company (2)【Update】

Name
Kenji
YamadaDesignation as
Independent
Director

Supplementary Explanation of the
Applicable Relationship

Mr. Kenji Yamada previously worked as an

Mr. Kenji Yamada has professional

operating officer of Sumitomo Mitsui Trustknowledge and experience obtained while

Bank, Limited, a major lender to the Group,working for a financial institution and based

but has already been retired from theon which he is expected to make usefulcompany for a considerable period of timesuggestions and proposals to ensure thesince March 2018 and is not in a position toappropriateness of business execution in the

be influenced by the company's intentions.

Company. We believe that he is qualified to

14

Reasons for Appointment

Although the Group has a businessserve as an outside corporate auditor of therelationship with Sumitomo Mitsui Trust

Company. Additionally, he does not fall

Bank, Limited, including borrowing ofunder any of the items that may create

funds, the management of the Company isconflict of interest with general shareholders

not affected by the bank because the Group

stipulated by the Tokyo Stock Exchange andhas transactions with multiple financial

satisfies the “Criteria for Independence ofinstitutions and is not prominently dependent

Outside Officers” (see “[Matters Concerningon the bank.He also works for SBI Sumishin

Independent Directors and Independent

Net Bank, Ltd. as an operating officer, but

Audit and Supervisory Board Members]

we have not received any loan from SBI

Other Matters Concerning Independent

Sumishin Net Bank, Ltd. in the past or at

Directors and Independent Audit andpresent.

Supervisory Board Members”) stipulated byendent on the bank.He also works for SBI

the Company. Considering the above, theSumishin Net Bank, Ltd. as an operating

Company appointed him as an independent

officer, but we have not received any loan

officer.

from SBI Sumishin Net Bank, Ltd. in thepast or at present.
He retired as Chairman and Representative
Director as of the close of the company’s
Ordinary General Meeting of Shareholders
on June 18, 2024.
Atsushi———

Mr. Atsushi Hayashi has abundant

Hayashiexperience and deep insight as a judge andlawyer and based on which he fully performs
the auditing function as we expect bymaking useful suggestions and proposals toensure the appropriateness of businessexecution in the Company. We believe that
he is qualified to serve as an outside
corporate auditor of the Company.
Additionally, he does not fall under any of
the items that may create conflict of interest
with general shareholders stipulated by the
Tokyo Stock Exchange and satisfies the“Criteria for Independence of Outside
Officers” (see “[Matters Concerning
Independent Directors and Independent
Audit and Supervisory Board Members]

15

Other Matters Concerning Independent
Directors and Independent Audit andSupervisory Board Members”) stipulated by
the Company. Considering the above, theCompany appointed him as an independent
officer.
Nobuo



———

Mr. Nobuo Hayashi has extensive experience

Hayashiand deep insight as a researcher of legal
systems and university professor and basedon which he fully performs the auditing
function as we expect by making usefulsuggestions and proposals to ensure theappropriateness of business execution in the
Company. We believe that he is qualified toserve as an outside corporate auditor of theCompany. Additionally, he does not fallunder any of the items that may create
conflict of interest with general shareholders
stipulated by the Tokyo Stock Exchange andsatisfies the “Criteria for Independence ofOutside Officers” (see “[Matters Concerning
Independent Directors and Independent
Audit and Supervisory Board Members]
Other Matters Concerning Independent
Directors and Independent Audit andSupervisory Board Members”) stipulated by
the Company. Considering the above, theCompany appointed him as an independent
officer.

Matters Concerning Independent Directors and Independent Audit and Supervisory Board Members
Number of Independent Directors and Independent
Audit and Supervisory Board Members

6

Other Matters Concerning Independent Directors and Independent Audit and Supervisory Board Members<Criteria for Independence of Outside Officers>

16

The Company deems an outside director and outside corporate auditor (hereinafter collectively referred to as “outside officer”) ora candidate for outside officer to have sufficient independence against the Company, if none of the following attributes applies to.
1.

A person who is a business executive1 of the Company and its subsidiaries (hereinafter collectively referred to as “theGroup”) or a person who was a business executive of the Group within the last 10 years

2.

A person who was a non-executive director or corporate auditor of the Group within the last 10 years and also served as an
executive of the Group within 10 years prior to his/her appointment as the aforementioned non-executive post3.

A person to whom the Company is a major business partner2, or a business executive of that person

4.

A major business partner of the Company3, or its business executive

5.

A major shareholder of the Company (a person who directly or indirectly holds 10% or more of the total number of voting
rights. The same applies hereinafter.), or its business executive

6.

A business executive of a person for which the Company is a major shareholder

7.

A person who belongs to an auditing firm that is the accounting auditor of the Group8.

A legal professional, certified public accountant, tax accountant, consultant, etc. who receives a large amount of money4 or
any other financial benefits from the Group other than executive remuneration(If the person receiving such financial benefits is an organization, such as corporation or association, a person who belongs tosuch organization.)9.

A person who receives a large amount4 of donation or grant from the Group, or a business executive of that person

10. When a business executive of the Group serves as an outside director of another company, the business executive of thatcompany or its parent company or subsidiary
11. A person who has fallen under any of the above 3. through 10. in the last three years
12. A spouse or a relative within the second degree of kinship of a person who falls under any of the above 1. through 11. and is
an important business executive5
Please note that, even in cases where none of the above attributes apply, an outside officer may not be designated as anindependent officer if there is sufficient ground for judging that he/she cannot fulfill his/her responsibilities as an independent
officer.

1

A business executive refers to an executive director, operating officer, executive officer, executive member, administration
officer, or any other person who executes the business of a person equivalent to these officers and employees.

2

A person to whom the Group is a major business partner refers to a person who has received 2% or more of its annual
consolidated net sales from the Group in any of the last three fiscal years.

3

A person who is a major business partner of the Group refers to a person who has paid 2% or more of its annual consolidated
net sales to the Group in any of the last three fiscal years, or a person who has provided the Group a loan worth 2% or moreof the Company’s consolidated total assets as of the end of the most recent fiscal year.

4

A “large amount” refers to an average amount of at least ¥10 million per year over the last three fiscal years for an individual,
or in the case of an organization, such as corporation or association, an amount equivalent to 2% of the consolidated net sales
or gross income of that organization or ¥10 million per year, whichever is higher.

5

An “important business executive” refers to a business executive who executes important business such as executive director,

17

operating officer, executive officer, and department head.
(Note) “Fiscal year” above shall be read as the year for which income tax is calculated in the case of individuals.

Incentives
Implementation Status of Measures related toIncentives Granted to Directors

Introduction of Performance-linked Remuneration Scheme, Other

Supplementary Explanation for Applicable Items
For details, please refer to “Disclosure of Policy on Determining Remuneration Amounts and the Calculation Methods Thereof”
below.

Persons Eligible for Stock Options

Supplementary Explanation for Applicable Items


Director Remuneration
Status of Disclosure of Individual Directors’
Remuneration

Disclosure for Selected Directors

Supplementary Explanation for Applicable Items【Update】
The amount of remuneration, etc. paid to directors (14 persons) and corporate auditors (5 persons) in the immediately preceding
fiscal year (fiscal 2023) was 601 million yen and 104 million yen, respectively. Of which, the amount of remuneration, etc. paid
to outside directors (7) was 88 million yen.

(Note 1) The above amount of remuneration, etc. for directors includes 55 million yen of monetary remuneration claims provided
to 10 directors as remuneration, etc. related to restricted stock, which was recorded as expenses for the current fiscal year.
(Note 2) The Company sets the calculation period for remuneration, etc. of corporate auditors from July following the Annual
General Meeting of Shareholders to June of the next year, and the total amount of remuneration, etc. of corporate auditors is
within the scope of the resolution of the Company’s General Meeting of Shareholders. The above amount of remuneration, etc. of
the corporate auditors is the total amount for the current fiscal year.

Policy on Determining Remuneration Amounts andthe Calculation Methods Thereof【Update】

Established

Disclosure of Policy on Determining Remuneration Amounts and the Calculation Methods Thereof
1. The maximum amount of remuneration for directors and corporate auditors is as follows.

18(1) The maximum amount ofremuneration for directors was resolved at the 22nd Annual General Meeting of Shareholders heldon June 28, 2022, to be 1,130 million yen or less per year (including 80 million yen or less for outside directors) (notincluding employee salaries of directors who also serve as employees.). As of the close of this Annual General Meeting of
Shareholders, the number of directors was 11 (including 4 outside directors).
(2) Aside from the maximum amount of remuneration for directors stated in (1) above, the 19th Annual General Meeting of
Shareholders held on June 26, 2019 resolved that the stock-based remuneration to be paid to directors (excluding outside
directors) should not be more than 100 million yen per year and the number of shares not more than 125,000 shares per year.
As of the close of this Annual General Meeting of Shareholders, the number of directors (excluding outside directors) was 18.
(3) The maximum amount of remuneration for corporate auditors was resolved at the 7th Annual General Meeting of
Shareholders held on June 28, 2007 to be 98 million yen per year. As of the close of this Annual General Meeting of
Shareholders, the number of corporate auditors was 4.

2. Matters concerning the policy for determining the amount of remuneration, etc. of directors and the calculation method thereof

Based on the resolution of the Board of Directors, the Company has set a basic policy to build a remuneration system for its
directors that functions sufficiently as an incentive for each director to play a maximum role in his/her duties and enables toattract and retain excellent human resources for the continuous improvement of its corporate value. Under this policy,
remuneration of each director shall be determined at an appropriate level in light of his/her role, responsibility, and businessperformance. Specifically, directors’ remuneration consists of base remuneration as fixed remuneration, performance-linked
remuneration, and stock-based remuneration (excluding outside directors).

Base remuneration is a monthly fixed remuneration, and is determined by taking into comprehensive consideration of theCompany’s business lineup and various fundamentals of the management environment, other companies’ standards in terms of
position and duties, the Company’s business performance, and employee’s pay standard.

Performance-linked remuneration shall be cash remuneration that reflects performance indicators as a short-term incentive toachieve business targets for each fiscal year. The Company pays an amount calculated based on the achievement percentage
against consolidated sales revenue, operating profit, each division’s targets (divisional operating profit and mission), etc. for eachfiscal year, as a bonus at a designated time each year. Target performance indicators and their values are set to be consistent withthe management plan at the time the plan is formulated, and are reviewed as needed to reflect changing circumstances.

As non-monetary rewards shall be paid in the form of restricted stock. The Company’s common shares are issued after adesignated period during which the transfer is restricted, for the purpose of promoting efforts to enhance corporate value over the
medium to long term and further pursuit of value sharing with shareholders.

The restricted stock shall be the Company’s common shares issued every year, in principle, and the number of which isdetermined according to the grantee’s position after a transfer restriction agreement (a restricted stock allotment agreement) is
concluded between the Company and the grantee. In order to realize the sharing of shareholder value over the medium to long19

term, the transfer restriction period starts from the share issuance date and ends on the date when a director retires or resigns boththe offices of director and any other position specified by the Board of Directors of the Company.

As for the composition of remuneration of directors, the proportion of base remuneration, performance-linked remuneration, andnon-monetary rewards for directors is set at 7:2:1 as a guide, based on the remuneration range of other companies in the same
industry or the same scale of operation. The remuneration for outside directors and corporate auditors is limited to baseremuneration only. The amount of remuneration for each corporate auditor is determined through discussions among thecorporate auditors within the range of the total amount of remuneration determined resolved by the General Meeting of
Shareholders.

3. Matters concerning delegation of decisions on the content of individual directors’ remuneration, etc.

The total amount of remuneration for each individual director shall be determined by the Board of Directors based on a proposal
prepared by the Nomination and Compensation Committee, a voluntary advisory body to the Board of Directors, after thoroughdeliberation, within the range of the amount preliminarily resolved at the General Meeting of Shareholders. The decision on thespecific timing of payment and proportion of remuneration for each director shall be entrusted to Kikuo Toyoda, Chairman and
Representative Director, Chief Executive Officer (CEO). The scope of such authority shall be the amount of base remuneration
and bonus and the number of shares of restricted stock for each director.
The reason for delegating such authority is that the Chairman and Representative Director is best suited to evaluate the areas of
responsibilities and duties of individual directors while keeping a bird’s-eye view of the Company’s overall performance.
The details of remuneration, etc. for each individual director for the current fiscal year were determined considering the above,and the Board of Directors believes that such details are in line with the policy for determining remuneration resolved by the
Board of Directors.

Support System for Outside Directors and/or Outside Audit and Supervisory Board Members
The Governance Office, the Secretariat of the Board of Directors, distributes materials related to agenda items and reporting items
at the Board of Directors meetings to outside directors in advance and, if necessary, provides explanations of the contents of suchmaterials in advance.
Corporate information and materials that are requested by outside corporate auditors or deemed necessary to be shared amongcorporate auditors are mainly communicated or submitted to outside corporate auditors by standing statutory auditors.

Status of persons who retired from the position of President and Representative Director, etc.
Names, etc. of (senior) advisors, etc. who have served as President and Representative Director, etc.【Update】

20

Working style and conditions
Name

Position / Status

Duties and(full-time or part-time,

Retirement date of

Responsibilities

with or without compensation,

President, etc.

Term

etc.)
Masahiro
ToyodaShiraiKiyoshi

Honorary
Senior Advisor
Senior Advisor

Advice to current

Part-time, remunerated

2023/03/31

1 year update

Part-time, remunerated

2023/03/31

1 year update

management
Advice to current
management

Total number of (senior) advisors, etc. whohave served as President and Representative2

Director, etc.【Update】
Other matters【Update】
Mr. Masahiro Toyoda and Mr. Kiyoshi Shirai provide advice, etc. to the incumbent management making use of
their knowledge accumulated through long years of experience in the management of the Company, but they do nothave any authority regarding managerial judgment or business execution of the Company.

2.

Matters Concerning Functions of Business Execution, Auditing and Supervision, Nomination, andRemuneration Decisions (Overview of Current Corporate Governance System)【Update】
The Company’s Board of Directors makes important management decisions and supervises the execution of business operations,and as a company with an Audit and Supervisory Board, our corporate auditors audit the directors’ performance of duties byattending the Board of Directors meetings and other important meetings.
The following summarizes each organization and department in the Company’s corporate governance system.
(1) Board of Directors
The Company’s Board of Directors consists of six (6) inside directors (including 1 female director) and three (3) outside
directors (including 1 female director), totaling nine (9) members. The Board of Directors makes decisions and reports onimportant matters related to the Group’s management and business execution, in addition to matters stipulated by laws andregulations or the Articles of Incorporation, and fulfills the function of mutual supervision and monitoring of directors.
Furthermore, the Company has appointed three (3) outside directors who provide useful advice to the Company’s managementfrom an objective outsider’s perspective, thereby strengthening the management supervisory function.
The term of office of directors is one year so we can flexibly build an optimal management structure in a rapidly changing
business environment and further clarify the management responsibilities of directors for each fiscal year.
(2) Corporate Management Committee
As an organization that supports right and prompt decision-making in the Group’s extensive business areas, the Corporate
Management Committee, which is composed of inside directors and managers of each business division, meets once a month in21

principle. The Committee conducts prior deliberates on matters to be discussed at the Board of Directors meetings from a broadand diverse perspective, and also deliberates on important matters related to the execution of the Group’s business operations.
(3) Corporate Auditors / Audit & Supervisory Board
The Company’s Audit & Supervisory Board consists of two (2) inside corporate auditors (including 1 female corporate auditor)
and three (3) outside corporate auditors (no female corporate auditors), totaling five (5) members. The Company is committed tostrengthening the monitoring and supervisory functions of management by receiving useful advice, etc. on its audit from the three(3) outside corporate auditors from an objective outsider’s perspective. In accordance with the audit policy, audit standards, andso on established by the Audit & Supervisory Board, corporate auditors are striving to grasp and monitor the status ofmanagement execution by attending the Board of Directors meetings and other important meetings. They also monitor and verify
the status of the development and operation of internal control systems, including internal control over financial reporting, toensure that the execution of duties by directors is in compliance with laws, regulations, and the Articles of Incorporation, and that
the Company’s business is being executed appropriately. Additionally, corporate auditors regularly receive explanations from the
Accounting Auditor and the Internal Auditing Office regarding the status and results of their audits, and exchange information andopinions with them.
(4) Internal Auditing Office
Regarding internal audit, the Internal Auditing Office comprising 11 members in total periodically audits the status ofcompliance with laws and regulations, as well as the appropriateness and validity of business process of the Group. The Internal
Auditing Office also serves as the department in charge of the evaluation of effectiveness of the construction and operation statusof the internal control system to ensure the reliability and appropriateness of financial reporting.
The Company also has the Compliance Office comprising 9 members in total as a dedicated department that manages andcontrols compliance, security and disaster prevention, environmental protection, food safety, etc. across the Group.
If any fact that may have a significant impact on the Company’s management is confirmed through each internal audit, theCompany has a system in place to report it to its corporate auditors and representative directors as appropriate. In addition, theCorporate Management Committee and the Board of Directors receive regular reports twice a year on the results of operational
audits and compliance issues.

(5) Accounting Auditor
The Company has signed an audit contract with KPMG AZSA LLC, which conducts audit of the Company. In fiscal 2023,
accounting audits of the Company were performed by three certified public accountants (designated limited liability partners andexecutive partners): Mr. Masashi Kanda, Mr. Ryosuke Koike, and Mr. Hiroto Fujimoto.
Currently, the Company has concluded contracts with each outside director and each corporate auditor to limit their liability fordamages under Article 423, Paragraph 1 of the Companies Act up to the minimum liability amount stipulated in Article 425,
Paragraph 1 of the Companies Act if they have performed their duties in good faith and without gross negligence.

3.

Reasons for Adoption of Current Corporate Governance System
We have adopted a company with auditors system because we believe that it enables us to ensure prompt and agile management22

in a rapidly changing business environment and to sufficiently ensure objectivity and neutrality in our management monitoringand supervisory functions through the corporate governance system described in 2. above.

III.
1.

Implementation of Measures for Shareholders and Other Stakeholders
Measures to Vitalize the Annual General Meeting of Shareholders and Facilitate Exercise of Voting

RightsSupplementary Explanation
In addition to the conventional written ballot, the Company has introduced aElectronic Exercise of Voting Rights

system that allows exercise of voting rights via the Internet (Electronic Voting
System).

Participation in a Platform for the Electronic
Exercise of Voting Rights and Other Initiatives

The Company participates in the Electronic Voting Platform for institutional

to Enhance Environment for Institutional

investors operated by ICJ, Inc.

Investors to Exercise Voting Rights
Provision of Notice (or Summary of Notice) of

The English version of the Convocation Notice (summary) is posted on thethe Annual General Meeting of Shareholders n

Electronic Voting Platform.

EnglishConvocation Notices, Notices of Resolutions, and the aggregate results of the
Other

exercise of voting rights are posted on the Company’s website.
Convocation Notice is posted on the Company’s website seven days before it issent by post.

2.

Status of IR-related Activities【Update】
Supplementary Explanation

Formulation and Publication ofAnnounced on our corporate website

Disclosure Policies(https://www.awi.co.jp/en/ir/management/disclosurepolicy.html)

Regular Investor Briefings held for

We hold briefings for individual investors on the Company’s

Individual Investors

corporate profile and growth strategy at least twice a year.

Explanation by arepresentative
director or arepresentative
executive officer

Not Held

As quarterly financial results briefing, the Company conducts
Regular Investor Briefings held for
Analysts and Institutional Investors

teleconferences, etc. for analysts and institutional investors. In
fiscal 2023, representative directors attended all theHeldteleconferences after the second quarter. The Company also
holds plant tours and other IR events from time to time.

Regular Investor Briefings held forOverseas Investors

The Company holds web conferences and face-to-face meetings
for overseas institutional investors to explain our management
policies and financial results. In fiscal 2023, our representative

23

Held

directors attended IR conferences in Japan and our director in
charge of IR attended IR conferences sponsored by securities
firms held overseas.
IR-related URL (https://www.awi.co.jp/en/ir.html)
The Company’s website contains financial results presentationmaterials, medium-term management plans, financial
Online Disclosure of IR Information

highlights, IR news, IR calendar, earnings summaries, annual
securities reports, quarterly reports, integrated reports,
information on general meetings of shareholders, shareholder
returns and dividends, shareholder reports, etc.

Establishment of Department and/or
Placement of a Manager in Charge of IR

3.

Department in charge: Corporate Communications Office
Responsible person: Aya Uesugi, Executive Officer, General
Manager, Corporate Communications Office

Status of Measures to Ensure Due Respect for Stakeholders
Supplementary Explanation
Establishment of Internal Rules Stipulating

As the Group-wide code of corporate ethics, we have established the “Air

Respect for the Position of Stakeholders

Water Group Code of Ethical Conduct” which stipulates that each and every
employee, including officers, shall act in a manner that respects and earns thetrust of shareholders, customers, business partners, employees, and otherstakeholders.

Implementation of Environmental Preservation

In its Basic Environmental Policy, the Group has established the corporate

Activities and CSR Activities, etc.

vision “a group to preserve our natural environment” and contributes to theglobal environment through its business activities by manufacturing and selling
products with reduced environmental impact and by making efforts to conserve
resources and energy. Moreover, we prepare integrated report once a year on
our basic stance on the environment, efforts to reduce environmental impact,
CSR activities, and other matters, which are introduced on our website.

Formulation of Policies, etc. on Provision of

As the Group-wide code of corporate ethics, we have established the “AirInformation to Stakeholders

Water Group Code of Ethical Conduct” which stipulates that information
related to the Company and its stakeholders be disclosed proactively in a fair,equitable and timely manner.

IV.
1.

Matters Concerning the Internal Control System
Basic Views on Internal Control System and Status of Development【Update】

The Company has set the following basic policy on the establishment of systems to ensure the appropriateness of operations of
the Company and its subsidiaries. Under the systems established based on this basic policy, the Company is striving to ensure theappropriateness and efficiency of operations executed by itself and its subsidiaries.

24

(1) System to ensure that the execution of duties by directors and employees complies with laws and regulations and the Articles
of Incorporation
a. As the basis of the compliance system, the Company shall establish the “Air Water Group Code of Ethical Conduct” as a codeof conduct for the Group’s officers and employees to comply with laws and regulations and to respect social ethics in theiractivities, provide training and raise the awareness of social ethics and legal compliance, and develop rules regarding legal
compliance.

b. The “Compliance Office”, an organization under the direct control of Representative Directors, shall be established as acontrolling department to centrally manage compliance issues within the Group. The “Compliance Office” shall appoint a
responsible person from among directors, executive officers, administration officers, etc. In addition, the “Compliance
Committee” shall be established as a body to discuss important compliance-related matters, and a whistleblower system shallbe established and operated for officers and employees of the Group to report directly to the “Compliance Office” and outside
attorneys, etc. and consult with them when they become aware of any act suspected of violations of compliance, etc., without
having to go through ordinary reporting lines.

c. Directors shall report on the execution of their duties at the Board of Directors meetings held regularly or as necessary andsupervise the execution of one another’s duties. In addition, corporate auditors shall attend meetings of the Board of Directors
and other important meetings in accordance with the auditing standards for corporate auditors established by the Audit &Supervisory Board, and conduct audits of business execution by directors of the Group through examinations of the businessexecution in the Group including its subsidiaries.

d. The “Internal Auditing Office”, an internal audit department, shall conduct internal audits to ensure the compliance of theGroup’s business activities with internal regulations and laws and regulations, etc., in accordance with the internal audit
regulations and internal audit plan. The results of internal audits shall be reported to Representative Directors and Corporate
Auditors.

e. With respect to compliance with the Antimonopoly Law, the Group shall regularly receive advice from outside experts,
continuously provide its officers and employees with training regarding the Antimonopoly Law, thoroughly control contacts
with other companies in the same industry. The “Compliance Office” shall regularly monitor the Group’s operation of internal
rules and regulations concerning compliance with the Antimonopoly Law as well as the status of compliance with such rules
and regulations.

(2) System concerning storage and management of information on the execution of duties by directors
Information on the execution of duties by directors, such as minutes of the Board of Directors meetings and approval
documents, shall be recorded in documents or electromagnetic media, and shall be stored and managed appropriately andsecurely in accordance with the internal rules for document management. Additionally, a system shall be put in place toimmediately submit such documents, etc. when requested by a director, corporate auditor, or Internal Audit Department for25

inspection.

(3) Regulation on the management of risk of loss and other systems
a. For the risks related to compliance, safety and disaster prevention, and environmental preservation, which are recognized as
particularly important in the Group’s business activities, the “Compliance Office” shall serve as the controlling department inmanaging such risks across the Group.

b. For individual risks related to information security, quality control, intellectual property, and contracts, the Company shallestablish a department in charge of each of these risks, establish internal rules, prepare manuals, provide training, and manage
such risks within the Group through preliminary reviews and approval systems.

c. The Company shall periodically hold a “Risk Management Review Meeting” with the “Compliance Office” as Secretariat, tograsp the state of risk management and promote the strengthening of risk management within the Group.

d. In the event of the occurrence of a risk that is likely to have a significant impact on its business activities, the Company shallimmediately establish a Crisis Management Committee within the Company in accordance with the “Crisis Management
Regulations” to promptly and appropriately address the risk that has occurred.

(4) System to ensure the efficient execution of duties by directors
a. The Company shall specify the division of duties and decision-making authority in the Organizational Regulations and theRegulations on Administrative Authority to ensure proper and efficient execution of duties, and clarify the authority andresponsibilities of each director, executive officer. A system according to the above shall be established at its subsidiaries as
well.

b. The Company shall expedite decision-making and clarify responsibilities for business execution in a wide range of businesses
and business areas by delegating authority to executive officersappointed by the Board of Directors. In order to build aflexible management structure that can quickly respond to changes in the business environment, the terms of office of
directors, executive officers, shall be one year, respectively.

c. For businesses of a certain size or above, the Business Unit system shall be introduced, whereby the head of each unit shall bedelegated the authority to execute the business and shall also be responsible for the consolidated business results, including
those of related subsidiaries.

d. The Board of Directors shall formulate a medium-term management plan and set major management goals based on the plan.
Along with that, the Board shall set business strategies and profit plans for each fiscal year by business unit, businessdivision, and subsidiary, and manage the results on a monthly basis to ensure the efficient execution of duties by directors.

(5) System to ensure the appropriateness of operations executed by the corporate group consisting of the Company and its

26

subsidiaries
a. Corporate auditors and the “Internal Auditing Office,” which is an internal audit department, shall periodically conduct audits ofsubsidiaries in cooperation with corporate auditors of subsidiaries to ensure the appropriateness of business execution in theGroup.

b. The Company shall have its subsidiaries ensure the appropriateness of business execution and the effectiveness of supervisory
function by, in principle, dispatching its director(s) and corporate auditor(s).

c. In the Affiliated Companies Regulations, the Company shall clearly specify the departments in charge of each subsidiary as
well as the matters that each subsidiary should report to and request prior approval from the Company, and establish areporting system from subsidiaries to the Company. Certain important matters relating to subsidiaries shall also be deliberated
at the Company’s Board of Directors meetings.

d. Pursuant to the Financial Instruments and Exchange Act, in order to ensure the reliability and appropriateness of the Group’s
financial reporting, the Company shall formulate a basic plan to establish an internal control system for financial reporting,and based on this plan, establish and appropriately operate an internal control system that facilitates effective and appropriate
evaluation.

(6) Matters related to employees when corporate auditors request the assignment of such employees for the assistance in theperformance of their duties, matters related to the independence of such employees from directors, and matters related toensuring the effectiveness of instructions given to such employees
The Company shall assign employees to assist the duties of corporate auditors. Such employees shall follow the instructions andorders of the corporate auditors without following the chain of command in the execution of business, and the appointment,
transfer, appraisal, etc. of such employees shall be determined with the prior consent of the Audit & Supervisory Board.

(7) System for reporting to corporate auditors by directors and employees of the Company and its subsidiaries, and other systems
for reporting to corporate auditors
a. The Company shall put in place a system whereby corporate auditors can attend the Board of Directors meetings and otherimportant meetings in order to gain a detailed understanding of important decision-making processes and the state of businessexecution, inspect approval documents and other documents related to business execution at any time, and request reports
from directors and employees on the state of execution of their duties as needed.

b. Directors and employees shall promptly report to corporate auditors or the Audit & Supervisory Board, in addition to legallyrequired matters, on the facts that may have a significant impact on the management of the Group, the implementation status
of internal audits, and the state of execution of duties reporting of which was requested in the course of audit.

c. Directors and employees of the Group who report to the Company’s corporate auditors shall not receive detrimental treatment
by reason of such reporting.

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(8) Matters concerning procedures for prepayment or indemnification of expenses incurred in the execution of duties bycorporate auditors, and policies concerning the treatment of other expenses or debts incurred in the execution of duties bythem
When a corporate auditor requests prepayment or indemnification of expenses incurred in the performance of his/her duties,
the Company shall promptly process the request, except in cases where such expenses or debts are not deemed necessary forthe corporate auditor’s execution of duties.

(9) Other system to ensure the effective execution of audits by corporate auditors
To ensure the effectiveness of audits, the Company shall establish a system for corporate auditors to regularly exchange
opinions with representative directors, Accounting Auditor, Internal Audit Department, and corporate auditors of subsidiaries,and exchange audit opinions and information.

2.

Basic Views on Measures for Eliminating Anti-Social Forces and Status of Development
In the “Air Water Group Code of Ethical Conduct,” the Company clearly declares its policy to take a resolute attitude against
antisocial forces that pose a threat to the order and safety of civil society and to have no relations with such forces.
Additionally, as the controlling department in charge of measures to cut off relationship with antisocial forces, the department incharge of general affairs is building close cooperative relationships with outside professional organizations such as attorneys andpolice, collects information on antisocial forces, and, as necessary, call attention to relevant departments within the Group, andprovides education on how to deal with such forces.

V.

Other

1.

Adoption of Anti-Takeover Measures
Adoption of Anti-Takeover Measures

Not Adopted

Supplementary Explanation for Applicable Items
2.

Other Matters Concerning the Corporate Governance System【Update】(1) Please refer to [Reference Material 1] for a schematic diagram of our corporate governance system, including an overview of
the internal control system.
(2) Overview of timely disclosure system

With respect to the management and disclosure of inside information, and the management of stock transactions by officers andemployees of the Company and its subsidiaries, etc., the Company has established the “Regulations for Management of Inside
Information and Insider Trading” as matters to be strictly observed.
The Regulations stipulate the reporting obligations and management responsibilities of the officers and employees of the28Company and its subsidiaries regarding inside information (undisclosed decisions, occurrence of material facts, and financial
results of the Company and its subsidiaries), as well as how we disclose our corporate information in accordance with the“Securities Listing Regulations” of the Tokyo Stock Exchange. Designation of “Information Management Manager” is also
stipulated as responsible person who oversees the internal management of inside information and the timely disclosure ofcorporate information. The Board of Directors appoints the Head of Governance Office as “Information Management Manager.”
In principle, corporate information is to be disclosed as early as possible by the “Information Management Manager” after the
Board of Directors resolves the details and timing of such disclosure. However, in urgent cases where there is no time to pass aboard resolution, a representative director shall handle the matter on an ad hoc basis. (Please refer to [Reference Material 2] for aschematic diagram of this system.)
Such information is disclosed by the Head of the Corporate Communications Office electromagnetically to the stock exchange
and through distribution of materials to the media, and is posted on the Company’s website promptly after disclosure.

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【Reference Material 1: Schematic Diagram】
General Meeting of Shareholders

Election/Dismissal

Election/Dismissal

Election/Dismissal

Management

Nomination andCompensation Committee
Consultation

Recommendation

Board of Directors
9 members (incl. 3 outside
directors)

Submitting
proposals/ReportSuperv ision

Audit & Supervisory Board
5 members (incl. 3 outside
corporate auditors)

Audit

Coordination

Coordination

Accounting Auditor

Operational Audit

Accounting Audit

ReportCorporate Management Committee

ReportRepresentative Directors

Superv ision andInstruction

Submitting proposals/Report
ReportBusiness Units / Business D ivisions / Corporate Administration / Technology Administration /Execution of Duties

Appointment/Dismissal

ReportInternal Audit

ReportInternal Auditing Office

Audit, Guidance, etc.

Compliance Office

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Internal Control

Group Companies

【Reference Material 2: Timely Disclosure System Schematic Diagram】

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