Ⅰ. Basic Stance on Corporate Governance, and Shareholder Structure, Corporate Data and Other

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1 April 4, 2017 LINE Corporation Takeshi Idezawa, Representative Director, President, Chief Executive Officer Contact: Corporate Development/Investor Relations Department Stock Code: 3938 The corporate governance of LINE Corporation is described below. Ⅰ. Basic Stance on Corporate Governance, and Shareholder Structure, Corporate Data and Other Basic Information 1. Basic Stance on Corporate Governance In order to continuously increase our earnings and raise our corporate value so as to ensure mutual benefit for our shareholders, we believe it is extremely important to prepare a business management structure that enables prompt decision-making and appropriate business execution, and to simultaneously strive to enhance our management monitoring system and improve management soundness and transparency. We strive to reinforce our corporate governance systems under this belief. We also believe that a strong corporate governance system is important for ensuring the trust of stakeholders. As we prepare our business management systems, we feel that it is essential that we ensure the transparency and objectivity of our business activities. In conjunction with our enhancement of our management monitoring systems, we will also make proper disclosures of information. [Reasons for Not Implementing Principles of Corporate Governance Code] Supplementary Principle 4-1 (3) Selection of directors (including the Chief Executive Officer ( CEO )), auditors and executive officers will be considered comprehensively from the perspective of the right person for the job, through studying the achievements and experiences of candidates at Board of Directors meetings with independent outside directors in attendance. When selecting a specific person among a certain number of candidates, independent outside directors will confirm the rationale for that selection, along with the appropriateness of the candidate based on their achievements and experience. Because this selection process has already been adopted for the appropriate selection of the CEO and other directors, we have not formulated any CEO succession plans. LINE strives to build training system frameworks for its management 1

2 staff. Principle 5-2 Due to the rapid changes in countries around the world, uncertainty exists in the smartphone and mobile application market that serves as the main pillar of business for our Group. Our Group s business performance is highly influenced by this, and so there is a limit to the usefulness of profitability and capital efficiency goals. Formulating precise targets is difficult. Because LINE is listed on the New York Stock Exchange in addition to the Tokyo Stock Exchange, we carefully consider risks relating to U.S. Securities regulations, and do not currently publish earnings forecasts. However, we do release qualitative forecast-related data. [Disclosure Based on Principles of Corporate Governance Code] Principle 1-4 From the perspective of corporate governance, our company does not conduct any simple cross-shareholding for the purpose of establishing LINE as a stable shareholder in another company. If we do ever hold shares, we only ever do so when it is judged that it will contribute to improved corporate value for both companies. Principle 1-7 The company has established a Related Party Transaction Management Policy, and in a case where the company or one of its subsidiaries was to engage in a transaction with our directors or major shareholders, or other relevant persons prescribed in the said policy, approval is gained via management committee. Transactions with relevant persons approved at management committees are reported to an advisory committee comprised solely of outside directors, and the most significant transactions undergo a more rigid review system, undergoing deliberation by the advisory committee, and finally requiring approval by the Board of Directors. Principle 3-1 (i) Company objectives (e.g., business principles), business strategies and business plans Our corporate mission is closing the distance, which means we want not only to bring people closer to each other, but also to bring people closer to a wide variety of information, services and products. We strive to create the world where users will have seamless online and offline access to all the people, information and services they need in their daily lives as if LINE is the gateway. We understand and will faithfully carry out this mission that will be the foundation for all of LINE Group s businesses and the basis of each individual s conduct. 2

3 (ii) Basic views and guidelines on corporate governance based on each of the principles of the Corporate Governance Code See I. 1. Basic Stance on Corporate Governance above. (iii) Board policies and procedures in determining the remuneration of the senior management and directors Total range of the remuneration to be paid to directors shall be approved by the general meeting of shareholders and within the approved range, the Board of Directors meeting will delegate the authority to the CEO to determine each director s remuneration. (iv) Board policies and procedures in the appointment of the senior management and the nomination of directors and corporate auditor candidates In order for the Board of Directors to fulfill their roles and responsibilities effectively, the Company, upon determining the strategic direction of the Company, believes there is a need for a certain number of persons familiar with our business and issues to serve as members of the Board of Directors. Furthermore the Company also believes that it is important to ensure a diversity of knowledge, experience and capabilities among the members of the board to maintain the board s independence and objectivity. For outside directors to be appointed after our IPO, we discuss potential appointments at Board of Directors meetings after deliberation by the outside director recommendation committee. See II.2. Matters Concerning Business Execution, Audit and Supervision, Nomination, Remuneration and Other Functions (Summary of Current Status of Corporate Governance System) below. For the selection of corporate auditor candidates, the Board of Directors, with the agreement of the board of auditors, is to discuss potential appointments at a Board of Directors meeting. (v) Explanations with respect to the individual appointments and nominations based on (iv) When appointing candidates for director or corporate auditor, LINE comprehensively considers not only whether a candidate possesses the necessary character, knowledge and ability of an executive, but also whether they are in sync with the culture of the LINE Group. For outside directors specifically, our policy is to select candidates from the perspective of whether or not they can actively recommend proposals or point out areas of concern related to minority shareholding protection and our company s business issues, while satisfying the independence standards set by the Tokyo Stock Exchange, Inc. as a prerequisite. Supplementary Principle 4-1 (1) Except for matters stipulated to be resolved by the Board of Directors, LINE, in accordance with the law, our Articles of Incorporation and Board of Director Regulations, relegates decisions relating to business execution to our CEO, management and the attending members of management committees with the aim of greater clarity of responsibilities in group management 3

4 and faster decision-making. Matters related to decision-making and approval authority are prescribed in the Board of Directors Regulations, the Management Meeting Policy, the Positional Authority Policy and the Decision-Making Authority Reference Table attached to Positional Authority Policy. Principle 4-8 We believe it is necessary to perform highly effective supervision of management from an independent, objective position, and in order to effectively wield the functions pertaining to such supervision, we believe that creating a Board of Directors that is one-third comprised of independent outside directors is appropriate. Currently three of our eight directors are independent outside directors, and we plan to maintain this one-third composition going forward. Principle 4-9 Regarding the independence of outside directors, with fulfilling the independence criteria set by Tokyo Stock Exchange, Inc. as a given, candidates are selected from the perspective of whether they can be expected to protect minority shareholders, actively offer recommendations for business issues and identify problems. Supplementary Principle 4-11 (1) See Principle 3-1(iv) above. Supplementary Principle 4-11 (2) We disclose the status of directors and corporate auditors significant concurrent positions through reference materials for notices of the annual general meeting of shareholders and business reports. Supplementary Principle 4-11 (3) The company has established systems to ensure that outside directors have the opportunity to attend, and thereby improves the effectiveness of the Board of Directors overall. We will strive to further improve this effectiveness by also reviewing the operational status of the Board of Directors once a year via an advisory committee comprised solely of outside directors. The Board of Directors will respect the results of their deliberations, and strive to comprehensively evaluate the board based on self-evaluations from each director. We are planning to disclose a summary of the board s assessment after one year from our IPO. For details regarding the advisory committee, see II.2. Matters Concerning Business Execution, Audit and Supervision, Nomination, Remuneration and Other Functions (Summary of Current Status of Corporate Governance System) below. 4

5 Supplementary Principle 4-14 (2) We provide ongoing training for directors and corporate auditors so that they can gain knowledge on relevant laws, compliance and the roles and responsibilities expected of them in their positions. We also make sure to amply explain the status of our business and financial situation as well as our organizational structure to our outside directors and corporate auditors. Principle 5-1 In our IR activities, our senior management and directors strive to reasonably participate in dialogue, so as to increase corporate value over the mid- to long-term through constructive dialogue with stakeholders. For specifics on the status of IR activities, see II. 2. Investor Relations (IR) Activities. Our policies concerning the measures and organizational structures aimed at promoting constructive dialogue with shareholders and investors are as follows: (1) For general dialogue with shareholders and investors, a member of the management or a director is assigned to oversee and ensure that constructive dialogue takes place, including the matters stated in items ii) to v) below; A Director in charge of CFO ( CFO ) oversees general dialogue with shareholders and investors and strives to ensure that it is constructive. Actual dialogue is conducted by the CFO, the department responsible for IR or a person appointed by the CFO, with consideration given to the wishes of the shareholders and investors and the major points of concern, and outside directors will also participate as necessary. (2) Measures to ensure positive cooperation between internal departments such as investor relations, corporate planning, general affairs, corporate finance, accounting and legal affairs with the aim of supporting dialogue; In consideration of shareholders and investors concerns from a mid- to long-term perspective, the department responsible for IR coordinates with relevant departments to support constructive dialogue and provide fair, timely and accurate information. (3) Measures to promote opportunities for dialogue aside from individual meetings (e.g., general investor meetings and other IR activities); Outside of general meetings of shareholders and individual meetings, constructive dialogue with shareholders and investors is implemented through results briefings and other meetings. These meetings are conducted from various perspectives, in consideration of shareholders and investors concerns from a mid- to long-term perspective, and we strive to make sure these 5

6 meetings are comprehensive and substantial. Documents are also posted on the IR section of our homepage. (4) Measures to appropriately and effectively relay shareholder views and concerns learned through dialogue to senior management and the board; The department responsible for IR reports on shareholders and investors opinions, views and concerns to the Board of Directors regularly and appropriately. The Board of Directors can request the department responsible for IR to provide an explanation of the details of the dialogue with shareholders and investors at any time. (5) Measures to control insider information when engaging in dialogue When engaging in dialogue, we comply with insider trading-related regulations, and do not selectively disclose undisclosed material information to any unauthorized persons. 2. Shareholder Composition Percentage of Foreign Shareholders 30% or more [Principle Shareholders] (As of December 31, 2016) Name NAVER Corporation (Standing proxy: LINE Number of shares Investment ratio (%)* Corporation, Corporate Development/Investor Relations Department (ex. Investor Relations 174,992, Office) MOXLEY & CO LLC (Standing proxy: Mizuho Bank, Ltd. Settlement Department 11,254, CBHK - KOREA SECURITIES DEPOSITORY SAMSUNG (Standing proxy: Citibank Japan 1,570, Ltd.) The Master Trust Bank of Japan, Ltd. (Trust Account) 995, BNY GCM CLIENT ACCOUNT JPRD AC ISG (FE - AC) (Standing proxy: The Bank of 806, Tokyo-Mitsubishi UFJ, Ltd.) Japan Trustee Services Bank, Ltd. (Trust Account) 698,

7 BNP PARIBAS SECURITIES LUXEMBOURG / JASDEC/ HENDERSON HHF SICAV (Standing proxy: Hong Kong Shanghai 543, Bank Tokyo Branch Custody Division) STATE STREET BANK WEST CLIENT - TREATY (Standing proxy: Mizuho 534, Bank, Ltd. Settlement Department) THE BANK OF NEW YORK (Standing proxy: Mizuho Bank, Ltd. 521, Settlement Department) RBC IST 15 PCT LENDING ACCOUNT - CLIENT ACCOUNT (Standing proxy: Citibank 474, Japan Ltd.) Total 192,390, * Any fraction of a percentage beyond the second decimal place will be cut off and disregarded. Controlling Shareholder Parent Company Stock exchange listing of parent company NAVER Corporation Overseas Notes NAVER Corporation is listed in Korea. 3. Corporate Data Stock exchange listing and market classification Fiscal year-end Business sector Number of employees at end of most recent fiscal year (consolidated basis) Sales for the most recent fiscal year (consolidated) Number of consolidated subsidiaries at end of Tokyo First Section December Information and Communications (Jyouhou tsuushin) Over 1, billion to less than 1 trillion yen subsidiaries 7

8 most recent fiscal year 4. Policy Regarding Measures for Protection of Minority Shareholders When Conducting Transactions with Controlling Shareholders The company has established a Related Party Transaction Management Policy, and in a case where the company was to engage in transactions with group companies of our parent company, NAVER Corporation, or otherwise conducts a related party transaction (not including transactions performed with the company s subsidiaries and affiliates) corresponding to a prescription in the said policy, the necessity and appropriateness of the transaction must be approved via a management committee. With a view towards strengthening corporate governance, we have put in place an advisory committee comprised solely of outside directors, but for the most significant related party transactions approved at management committees, further deliberation by the advisory committee and approval by the Board of Directors is required. Furthermore, the advisory committee, after deliberating on the formulation of policies for minority shareholder protection, can give vital recommendations to the Board of Directors, who give due respect to said opinion as they perform necessary management decisions. 5. Other Special Circumstances that Could Materially Affect Corporate Governance LINE is a subsidiary of the Korea-based NAVER Corporation, and it owns more than 80% of voting rights of LINE. However LINE makes decisions regarding our group policies and business development plans independently. LINE has set 98% as the voting rights ratio for becoming a special controlling shareholder that can request the sale of shares as prescribed by LINE's Articles of Incorporation and as recognized by Article 179 of the Companies Act. In addition to the above, LINE emphasizes the significance of our outside directors in a strong corporate governance system and has appointed three independent outside directors. So that these outside directors can provide effective supervision of business execution from an independent position (specifically, oversight from the perspective of whether it has properly planned for minority shareholder protection, etc.) and valuable advice on the company s business operations as a member of the Board of Directors, we have appointed one lawyer with professional knowledge of the Companies Act, a corporate finance specialist, and a professional experienced in corporate management who we anticipate will contribute to our business operations. 8

9 Ⅱ. Status of Management Organization Relating to Management Decision-Making, Execution and Supervision, and Other Corporate Governance Systems 1. Matters relating to Organizational Structure and Organizational Management Organizational structure Company with Board of Auditors Directors Number of directors in Articles of Incorporation Terms of office for directors in Articles of Incorporation Chairperson of the Board of Directors 3 to 8 directors 2 years Representative Director, President, Chief Executive Officer Number of directors 8 Appointment of Outside Directors Yes Number of Outside Directors 3 Number of Outside Directors designated as Independent Directors 3 Relationship with LINE Corporation (1) Name Tadashi Kunihiro Koji Kotaka Association Attorney Attorney Relationship with LINE Corporation (*1) a b c d e f g h i j k Rehito Hatoyama From another company *1 Items for selection regarding relationship with the Company a. A person who executes business in LINE Corporation or its subsidiary b. A person who executes business or a non-executive director in the parent company of LINE Corporation c. A person who executes business in a sister company of LINE Corporation d. An entity for which LINE Corporation is a key business partner, or, if the entity is a corporation, a person who executes business in the corporation e. A key business partner of LINE Corporation, or, if the partner is a corporation, a person who executes business in the corporation f. A consultant, professional accountant or lawyer who receives a large amount of money and other economic benefits other than officers compensation from LINE Corporation g. A major shareholder of LINE Corporation (if the major shareholder is a corporation, a person who executes business in the corporation) 9

10 h. A person who executes business (limited to the principal) in a corporation that is a customer of LINE Corporation other than customers falling under any category of d, e and f above i. A person who executes business (limited to the principal) in a corporation at which an outside officer of the Company concurrently has a position of outside officer j. A person who executes business (limited to the principal) in a corporation to which LINE Corporation offers a donation k. Others Relationship with LINE Corporation (2) Supplementary Name Independent Director information concerning Reason for appointment applicable items Tadashi T.Kunihiro & (Reason for Appointment) Kunihiro Co.Attorneys-at-Law As an attorney, Tadashi Kunihiro has broad Attorney Tokio knowledge about corporate crisis Marine & Nichido management and has served in an Fire Insurance Co., important role as an outside director by Ltd. Director providing sound and informative advice and (outside)mitsubishi recommendations relating to the development Corporation Audit of the crisis management process & Supervisory in particular. Board Member (Reason for Determination as Independent ) (outside) The relationship between Tadashi Kunihiro and LINE is not recognized as having any special attributes like those flagged by the regulations of the Tokyo Stock Exchange. His appointment has been identified as causing no conflict of interest with general shareholders, and as a result he has been appointed as an outside director who can act independently. Koji Koji Kotaka Law (Reason for Appointment) Kotaka Office Attorney As an attorney, Koji Kotaka has a broad range Monex Group, Inc. of legal knowledge, and extensive knowledge Outside & in the financial field as an investment banker. 10

11 Independent Director Japan Senior Living Investment Corporation Supervisory Director TradeStation Group Inc. Director FiNC inc. Outside Director In response to our decision-making, he provides sound and informative advice and recommendations based on his advanced expertise in finance, capital markets, etc. He has served in an important role as an outside director. (Reason for Determination as Independent ) The relationship between Koji Kotaka and LINE is not recognized as having any special attributes like those flagged by the regulations of the Tokyo Stock Exchange. His appointment has been identified as causing no conflict of interest with general shareholders, and as a result he has been appointed as an outside director who can act independently. Rehito Pigeon Corporation (Reason for Appointment) Hatoyama Outside Director With a focus on content and character transcosmos inc. businesses, Outside Director Rehito Hatoyama has abundant knowledge on Kabushiki Kaisha overseas business development and business Hatoyama Sogo management. Kenkyusho CEO In response to our decision-making, he provides sound and informative advice and recommendations from a practical perspective cultivated in corporate management. He has served in an important role as an outside director. (Reason for Determination as Independent ) The relationship between Rehito Hatoyama and LINE is not recognized as having any special attributes like those flagged by the regulations of the Tokyo Stock Exchange. His appointment has been identified as causing no conflict of interest with general shareholders, and as a result he has been appointed as an outside director who can act independently. 11

12 [Optional Committees] Establishment of Any Committees Corresponding to the Nominating Committee None or the Compensation Committee Details of Establishment, Members and Attributes of Chairperson Any Committees Corresponding to the Nominating Committee Name of Committee No. of Total Members No. of Full-time Members No. of In-house Directors No. of Outside Directors No. of Internal Experts Other Head of committee (chairperson) None Any Committees Corresponding to the Compensation Committee Name of Committee No. of Total Members No. of Full-time Members No. of In-house Directors No. of Outside Directors No. of Internal Experts Other Head of committee (chairperson) None Notes [Board of Auditors Members] Establishment of Board of Auditors Number of Board of Auditors Members in Articles of Incorporation Yes Up to 5 Number of Board of Auditors Members 3 Status of Cooperation between Board of Auditors Members, Accounting Auditors and Internal Audit Divisions Corporate Auditors hold meetings with the Internal Audit Department monthly to confirm details of the audit and exchange opinions. Explanations of the auditing plan and exchanges of opinions with accounting auditors are conducted quarterly. The three entities strive for better coordination through this information-sharing. The Internal Audit Department exchanges opinions with 12

13 accounting auditors at irregular times, providing information on vital events related to internal controls ascertained via Internal Audit and receiving guidance and advice when necessary. Appointment of Outside Board of Auditors Members Number of Outside Board of Auditors Members Yes 2 Number of Outside Board of Auditors Members Designated as Independent Board of 2 Auditors Members Relationship with LINE Corporation (1) Name Hitoshi Kurazawa Takashi Kanai Association From another company Attorney Relationship with LINE Corporation (*1) a b c d e f g h i j k l m *1 Items for selection regarding relationship with the Company a. A person who executes business in LINE Corporation or its subsidiary b. Non-executive director or accounting advisor of LINE Corporation or its subsidiary c. A person who executes business or a non-executive director in the parent company of LINE Corporation d. An Audit & Supervisory Board Member in the parent company of LINE Corporation e. A person who executes business in a sister company of LINE Corporation f. A supplier of which LINE Corporation is a major customer, or, if the supplier is a corporation, a person who executes business in the corporation g. A major customer of LINE Corporation, or, if the customer is a corporation, a person who executes business in the corporation h. A consultant, professional accountant or lawyer who receives a large amount of money and other economic benefits other than officers compensation from LINE Corporation i. Major shareholder of LINE Corporation (the company s Executive Officer if the said major shareholder is a corporation) j. A person who executes business (limited to the principal) in a corporation that is a customer of LINE Corporation other than customers falling under any category of f, g and h above k. Executive Officer (said person only) of an entity with which LINE Corporation mutually appoints outside directors l. A person who executes business (limited to the principal) in a corporation to which LINE Corporation offers a donation 13

14 m. Others Relationship with LINE Corporation (2) Supplementary Name Independent Director information concerning Reason for appointment applicable items Hitoshi Hanno Golf Club (Reason for Appointment) Kurazawa Director LINE has determined that Hitoshi Kurazawa, who has years of experience in corporate management and finance and accounting-related knowledge, can properly carry out the duties as an outside corporate auditor. (Reason for Determination as Independent ) The relationship between Hitoshi Kurazawa and LINE is not recognized as having any special attributes like those flagged by the regulations of the Tokyo Stock Exchange. His appointment has been identified as causing no conflict of interest with general shareholders, and as a result he has been appointed as an outside director who can act independently. Takashi Frantech Law (Reason for Appointment) Kanai Office LINE has determined that Takashi Kanai, Representative who has vast knowledge due to his active Musashino role as an attorney in the fields of franchise University businesses and venture company Department of Law management, can properly carry out the role Specially appointed of an outside director. professor (Reason for Appointment as Independent ) The relationship between Takashi Kanai and LINE is not recognized as having any special attributes like those flagged by the 14

15 regulations of the Tokyo Stock Exchange. His appointment has been identified as causing no conflict of interest with general shareholders, and as a result he has been appointed as an outside director who can act independently. [Independent Directors] Number of Independent Directors 5 Other Matters Relating to Independent Directors LINE designates as independent directors all outside directors who qualify as independent directors. [Incentive System] Incentive initiatives for directors Introduced stock options Supplementary Information Regarding Relevant Item Because the value of stock option certificates is linked to our company stock, by granting stock option certificates, we can reflect our medium-to-long-term performance in the remunerations of recipients, bringing the earnings of shareholders and LINE Group senior management into alignment. Through this, not only will management be further motivated and driven to improve business performance, but we will also be able to secure excellent talent. Stock options have therefore been introduced with the aim of raising the corporate value of the Group as a whole. Internal directors, executive officers, employees Eligible recipients of stock options of LINE and the directors, executive officers and employees of subsidiaries Supplementary information regarding relevant item LINE grants stock options to provide motivation to directors and executive officers of LINE and its subsidiaries to conduct management in alignment with the interests of shareholders and in balance with a medium to long-term perspective. [Disclosure Concerning Directors Remuneration] Degree of disclosure Partial disclosure only of individual items Supplementary Information Regarding Relevant Item For FY2016 compensation paid to the directors, we have disclosed the totals for each category of directors in our Annual Securities Report. In the report, individuals who receive consolidated 15

16 compensation of more than 100 million yen are disclosed. Has a policy for setting remuneration amounts and calculation method Yes Details of Policy for Setting Remuneration Amounts and Calculation Method Total range of the remuneration to be paid to directors shall be approved by the general meeting of shareholders and within the approved range, the Board of Directors meeting will delegate the authority to the CEO to determine each director s remuneration. Corporate auditor remunerations are determined by the board of auditors, within the total remuneration range approved at the general meeting of shareholders. [Support System for Outside Directors (Outside Auditors)] The department in charge of the arrangement of official meetings of the company and Secretary Department are responsible for assisting outside directors. These departments regularly provide communication regarding the convening of the Board of Directors and various other matters requiring contact. They also conduct business briefing sessions for outside directors so that they can deepen their understanding of our business. For corporate auditors, one dedicated staff person is in place to regularly provide communication regarding the convening of the Board of Directors and various other matters requiring contact. 2. Matters Concerning Business Execution, Audit and Supervision, Nomination, Remuneration and Other Functions (Summary of Current Status of Corporate Governance System) 1) Board of Directors The Board of Directors is comprised of eight directors (which include three outside directors), and in principle convenes once a month, otherwise meeting flexibly when necessary. As the highest decision-making body, in addition to making resolutions on important policies and matters prescribed in laws and the Article of Incorporation, they also oversee the status of business execution. 2) Board of Auditors The board of auditors is comprised of two outside corporate auditors and one internal auditor. Corporate auditors conduct their audits based on the contents of an auditing plan devised by the corporate auditors, and work to share information at a board of auditor meeting held, in principle, once a month. Via the audit, corporate auditors exchange opinions with the CEO, attend important meetings, look through important documents, study material assets, interview members of business departments, and study subsidiaries. Working together with the Internal Audit 16

17 Department and accounting auditors, they improve the effectiveness and efficiency of audits. 3) Management Committee At management committees, members conduct advance discussion of matters for resolution and reporting at Board of Director meeting, and discuss and make decisions regarding the progress of business execution based on strategies and policies decided at Board of Directors meetings. LINE regularly holds management committees attended by the CEO (Chief Executive Officer), the CFO (Chief Financial Officer), the CGO (Chief Global Officer) and the CSMO (Chief Strategy & Marketing Officer), the CPO/CISO (Chief Privacy Officer/ Chief Information Security Officer), the executive officer in charge of financial accounting, the executive officer in charge of HR, full-time corporate auditors and the executive officer in charge of internal audit, allowing for ample discussion and prompt decision making on important executive matters. 4) Investment Strategy Conference The investment strategy meeting is aimed at facilitating smoother and more streamlined business operations by providing a venue to discuss the disposal of certain company investments and assets (with the exception of matters required to be discussed at Board of Directors meetings or management committees). The meeting body is comprised of the CEO, CFO, CGO and CSMO. Full-time corporate auditors are provided an opportunity to attend and share their opinions. 5) Internal Audit The Internal Audit Department, which is directly under the CEO, is responsible for internal audits. The Internal Audit Department is comprised of a department head and eight internal audit representatives (as of January 1, 2017). An audit report describing the results of internal audits is submitted and reported to the CEO, full-time corporate auditors and, as necessary, to the heads of inspected departments. If some measures are necessary at that time, an action request form is also sent. In such cases, the Internal Audit Department receives back an action report form that compiles and details the policies from the inspected department regarding their handling, processing, plans, and implementation of plans for those measures, thereby contributing to improved business operations. They conduct meetings monthly with full-time corporate auditors and confirm audit details and exchange opinions. They exchange opinions with accounting auditors on an irregular basis, providing them with information and, when necessary, receive their instruction and advice. 6) Advisory Committee With a view towards minority shareholder protection, we have put in place an advisory committee 17

18 comprised solely of outside directors. Furthermore, the advisory committee deliberates and studies significant related party transactions and transactions involving conflicts of interest (including the transactions with our parent company, NAVER Corporation), the operational status of the Board of Directors and policies for minority shareholder protection, and the Board of Directors respects the opinions of the advisory committee. We review the operational status of the Board of Directors once a year via the advisory committee and will announce the results of the review publicly. 7) Outside Director Recommendation Committee We have created an outside director recommendation committee, comprised of three outside directors and the CEO. This committee deliberates on outside director candidates, the Board of Directors will respect their opinions, and they will propose the agenda concerning the appointment of outside director to the general meeting of shareholders. (8) Accounting Auditors As of January 1, 2015, LINE has appointed PricewaterhouseCoopers Aarata as accounting auditor, and concluded an accounting contract to that end. The names of certified public accountants who execute relevant work are as below. Under their direction, certified public accountants and other employees of PricewaterhouseCoopers Aarata support the execution of accounting auditor duties. Kentaro Iwao Yoshihisa Chiyoda 3. Reasons for Selecting Present Corporate Governance System Three outside directors have been elected to serve with our five internal directors (thereby making up more than one-third of all board members), who work with our three corporate auditors (with two outside corporate auditors) to ensure the transparency and fairness of our business management. Regarding the execution of duties by directors, in order to ensure thorough oversight by outside directors and outside auditors we appoint lawyers and verify compliance with laws and the Articles of Incorporation from a professional and objective perspective. With the main objective of protecting minority shareholders and ensuring common benefit of shareholders, we established an advisory committee and an outside director recommendation committee, which are both optional committee, enabling more precise discussions and recommendations from independent outside directors. 18

19 Ⅲ. Implementation of Initiatives Concerning Shareholders and Other Stakeholders 1. Measures to Ensure an Active Ordinary General Meeting of Shareholders and Smooth Exercise of Voting Shares Notes Early notification of convocation of general meetings of shareholders We strive to send notice prior to the statutory due date. In FY 2016, prior to mailing of the convocation notice, we made a public announcement electronically via our home page. Scheduling of general shareholders meeting that avoids conflict with other shareholders The meeting is held in March, but we strive to avoid dates when most other companies hold their general shareholder meetings. meetings Allows voting rights to be exercised via electromagnetic means We allow voting rights to be exercised via PC, smartphone or other internet-connected devices. Participation in an electronic voting platform, and other initiatives to enhance the voting environment for In addition to voting platform participation, we are implementing promotion activities to overseas and domestic institutional investors (real shareholders). institutional investors Provision of notice of convocation (summary) in English We post convocation notices on our homepage in Japanese and English. The basic policy of the shareholders' meeting is to allow shareholders, who are unable to attend the general shareholders meeting, to participate in the resolution process as much as possible, and to Other ensure direct communication between shareholders in attendance at the general shareholders meeting and senior management. We strive to create an environment where shareholders feel comfortable to express their opinions. 2. Investor Relations (IR) Activities Explanation by Notes representatives themselves 19

20 Creation and announcement of disclosure policy The company formulates a disclosure policy comprised of entries on information disclosure, disclosure methods, uncertainties and silence periods, and publishes the policy on the IR page of the company s website. Holds regular meetings for individual investors Holds regular meetings for analysts and institutional investors Holds regular meetings for overseas investors Posts IR materials on LINE Corporation s website Established an IR-related department (representative) Regular meetings for individual investors are considered when necessary. We hold briefing meetings for analysts and institutional investors in conjunction with quarterly results announcements. We hold briefing meetings for overseas investors in conjunction with quarterly results announcements. We disclose IR materials on the IR section of our homepage. We have put in place a Corporate Development/Investor Relations Department. Exist Exist Exist 3. Measures Concerning Respect of the Standpoint of Stakeholders Notes Prescriptions for the respect of the standpoint of stakeholders in LINE Group Code of Conduct has been established, with provisions for the respect of the standpoint of stakeholders. internal regulations, etc. Environmental protection and CSR activities The Public Policy Department is responsible for promoting CSR activities. One of their major activities is conducting lectures for minors, students, teachers and guardians at elementary, junior high and high schools across 20

21 Japan, to improve youth internet literacy and behaviors, so that younger generations can use the internet with greater safety and peace of mind. In collaboration with the National University Corporation Shizuoka University, LINE has developed educational materials on the ethical use of information or elementary to high school students, and is providing these materials free-of-charge. We have created a dedicated CSR page on our homepage where we disclose details of our CSR activities and contribution activities to our stakeholders. Formulated policy on the provision of information to stakeholders To increase the transparency of management, we follow the timely disclosure regulations prescribed by the securities exchange and make timely and appropriate disclosures to our stakeholders. Ⅳ. Matters Regarding Internal Control System 1. Basic Stance Regarding Internal Control System and Status of Establishment 1. System to Ensure the Execution of Duties by Directors and Employees Is in Conformity with Laws and Regulations and Articles of Incorporation (1) In order for directors and employees of the LINE Group to comply with the law and our Articles of Incorporation and execute their duties under sound social norms, we have formulated a LINE Group Code of Conduct and take steps to reinforce to directors and employees that legal compliance is a prerequisite for all business activities. (2) An Internal Audit Department has been put in place directly under the CEO, and it implements internal audits for the LINE Group. (3) In cases where an employee discovers an act that is potentially in direct violation of the law, a whistleblowing system is in place that allows for anonymous reporting. (4) A dedicated department has been established to promote and create compliance systems. (5)We do not have any connections with anti-social forces that threaten social order or safety. Responses to antisocial forces are thoroughly conducted group-wide, and we coordinate with external specialists to be resolute in this response. 2. System for the Storage and Management of Information Related to Directors Execution of Duties We have established Board of Director Regulations, a document retention policy and information security policy, and we store documents and electronic records of data relevant to the execution of duties by directors. 21

22 3. Regulations and Other Systems Concerning Management of Loss Risk (1) We have established a Basic Risk Management Policy to properly conduct risk management during times of normal operation. (2) A risk management committee has been put in place, with the CEO as committee head, to share risk information and study response measures. (3) A chief information security officer (CISO) and chief privacy officer (CPO) are appointed, with each officer the head of an organization aimed at protecting and managing information assets as well as appropriately managing risks related to information security. (4) Crisis Management Policy has been formulated to help ensure the performance of organization-wide risk management under the direction of the CEO and responsible directors in instances when a risk or potential risk arises that could affect business continuity. Furthermore, the Internal Audit Department, based on Internal Audit Policy, audits the effectiveness and appropriateness of risk management on a process-by-process basis, and reports significant results to the CEO and corporate auditors. 4. System for Ensuring that Directors Perform Duties Efficiently Important management-related decision-making is performed by the Board of Directors, with executive directors executing operations. Furthermore, an executive officer system has been adopted, whereby management and work execution can be divided by delegating a substantial portion of work execution to executive officers, with the aim of making decision-making and work execution more efficient. For individual jobs, the division of job authorities and job executions is appropriately performed according to internal regulations, with the aim of making work more specialized and advanced. 5. System for Ensuring the Suitability of Business Conducted by the Group (1) System for Reporting Execution of Duties by Directors of Subsidiaries to the Company Affiliate Management Policy has been formulated and matters related to the execution of duties by directors of subsidiaries are reported in a timely and proper manner by having material facts relevant to subsidiaries reported and discussed in advance. (2) Regulations and Other Systems Concerning Management of Loss Risk within Subsidiaries We exchange opinions from time to time with subsidiary personnel responsible for financial, legal and security matters in order to gain a grasp of risk management issues and issues from the perspective of financial reporting accuracy, and thereby manage loss risk for subsidiaries. (3) System for Ensuring that Directors of Subsidiaries Perform Duties Efficiently The company stays in close contact with subsidiaries, and takes measures to ensure autonomous 22

23 and appropriate operations, which enables the efficient performance of duties by subsidiary directors. (4) System to Ensure the Execution of Duties by Directors and Employees of Subsidiaries Is in Conformity with Laws and Regulations and Articles of Incorporation A LINE Group Code of Conduct has been formulated and compliance awareness is fostered and strengthened through regular training. A meeting body has been put in place to promote and monitor overseas compliance activities for the group. An internal reporting desk has been in place for incidents at subsidiaries suspected to be compliance violations and LINE promotes use of the desk so that information on incidents can be gathered quickly. (5) System to Prevent Harm to Shareholders via Related Party Transactions or Conflict of Interest Transactions An advisory committee comprised solely of outside directors has been put in place, and significant related party transactions and conflict of interest transactions are deliberated on in advance within the advisory committee, and the conclusions made by the board are respected by the Board of Directors. 6. Matters Relevant to Employees Put in Place to Assist in the Duties of an Corporate Auditor (1) When a corporate auditor requests an employee be put in place to assist in their duties, said employee will be appointed promptly. (2) For personnel transfers, evaluation, disciplinary actions and other HR-related issues relevant to employees in the preceding paragraph, we make careful considerations to ensure independence from the Board of Directors (such as by requiring the prior consent of corporate auditors) and ensure the viability of corporate auditors directions to said employees. 7. System Concerning Reporting to the Company s Corporate Auditors. (1) System to Enable Directors and Employees to Report to Corporate Auditors and Other Systems for Reporting to Corporate Auditors When a director or employee becomes aware of an act that violates laws, the Articles of Incorporation or the LINE Group Code of Conduct, or an act that could possibly cause serious loss or other matters that have a far reaching impact on the Group ( legal violations, etc. ), they quickly report said matter to corporate auditors. Reporting to corporate auditors is effectively implemented through corporate auditors attendance at Board of Directors meetings, full-time corporate auditor attendance at management committees, reporting of the result of internal audits to a full-time corporate auditor in the Internal Audit Department, and other deliberations between the directors and corporate auditors. (2) System to Enable Directors, Corporate Auditors and Employees at Subsidiaries (or Others 23

24 Receiving Reports from these Entities) to Report to the Company s Corporate Auditors Directors, Corporate Auditors and Employees at subsidiaries ( subsidiary directors, etc. ) discovering legal violations, etc. or others receiving reports of legal violations, etc. from subsidiary directors, etc. quickly report these matters to corporate auditors. (3) We ensure that persons who have submitted a report per the preceding paragraph are not treated disadvantageously as a result. 8. Items Concerning Policies for the Fees or Debt Disposals Arising from the Execution of Corporate Auditor s Duties The directors secure a sufficient budget in order to ensure the validity of audits of various expenses or obligations arising from the execution of auditor duties. 9. Other System for Ensuring that Corporate Auditor Audits Are Performed Efficiently The Board of Auditors implements meetings with CEO, directors, and the auditing company that serves as our accounting auditor to exchange opinions, and the full-time corporate auditor coordinates with the Internal Audit Department to perform effective and efficient work on the selection audit items, when investigating the status of the company s business and assets, and executing other audit-related tasks. 2. Basic Stance and Development Status Relating to Exclusion of Antisocial Forces In the Basic Policies for the Establishment of Internal Control Systems, LINE prescribes that no relationship should be maintained with antisocial forces that threaten social order or safety, that responses to antisocial forces should be conducted group-wide, and that any such relationships should be cut off resolutely. The Prevention of Influence by Anti-Social Forces Policy prescribes that LINE should not have any relationships with antisocial forces. At LINE, the Compliance/Risk Management Department is the responsible department for eliminating relationships with antisocial forces, and it responds appropriately to any illegitimate demands and collects information on antisocial forces. Furthermore, LINE is a supporting member of a specialized center working to eliminate anti-social forces ( kouekizaidan hojin bouryokudan tsuihou undou suishin tomin center ), and we work with the center as part of our normal everyday operations. Under the above system, the Compliance/Risk Management Department, in principle, performs checks of new business partner s before doing business together as it strives to eliminate anti-social forces. Furthermore, in regards to eliminating relationships with antisocial forces, when LINE concludes a contract with a business partner, the Legal Department gives thorough attention to ensuring that contracts are not concluded with anti-social forces, primarily through the inclusion of a company-prescribed provision on the elimination of organized crime groups, and 24