Corporate Governance Report

Transcription

1 Corporate Governance Report (Translation) Last Update: August 24, 2017 Mitsubishi Motors Corporation Osamu Masuko, Member of the Board, CEO Contact: IR Office Securities Code: The corporate governance of Mitsubishi Motors Corporation (the Company ) is described below. I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information 1. Basic Views The Company considers compliance to be its highest priority, and works for the ongoing strengthening and improvement of corporate governance as a priority issue for management with the aim of sustainable growth and improvement of its corporate value to meet the expectations of all of its stakeholders, including its shareholders and customers. [ Reasons for Non-compliance with the Principles of the Corporate Governance Code ] Supplementary Principle Oversight of Succession Planning for the CEO and Other Top Executives by the Board of Directors The representative directors of the Company are responsible for succession planning for the CEO and other top executives. [ Disclosure Based on the Principles of the Corporate Governance Code ] Principle 1-4. Cross-Shareholdings The Company conducts cross-shareholdings only in cases where it has judged the holding of such shares to be necessary for maintaining and strengthening business partnerships in the course of the Company s business operations. In addition, the status, purpose and other matters pertaining to shares of listed companies that are held as cross-shareholdings are periodically reported at the Board of Directors meeting. When exercising voting rights related to cross-shareholdings, rather than uniformly making decisions for approval or disapproval using a fixed standard, with regard for the management policies, strategies and other guidelines of the investee company, the Company approves resolutions that it has determined will contribute to increasing corporate value, and votes against resolutions that it has determined will impair value. Principle 1-7. Related Party Transactions The same as in the case of transactions with other parties, the Company conducts transactions with related parties such as its officers or major shareholders based on checks among multiple related parties and the approval of the person in charge as stipulated in the provisions for delegation of authority after sufficiently considering economic rationality so that there is no harm to the common interests of the Company and its shareholders. In addition, the rules of the Board of Directors stipulate that directors with a special interest in a resolution of the Board of Directors shall not participate in such resolution. Principle 3-1. Full Disclosure (1) Company objectives, business strategies and business plans 1) Initiatives to restore trust The Company takes seriously the improper conduct committed in fuel efficiency tests, as well as past problems with quality, and began drastically reforming and strengthening its internal controls and governance

2 First, to facilitate communication and accelerate decision-making, the Company restructured its former pyramid organization along functional axes to flatten the organization and simplify its hierarchy. To streamline decision-making and clarify responsibilities, the Company also changed the delegate of the authority of the Board of Directors from the Executive Committee to the CEO, positioned the Executive Committee as an advisory body to the CEO, and established detailed provisions for delegation of authority for each level of its hierarchy. In addition, the Company appointed an officer in charge of global risk control to manage compliance and operational risks, and to regularly report to the Board of Directors on measures to improve governance. To enhance and raise the efficiency of all types of dealing with internal controls based on laws and regulations, the Company established a framework in which internal control of financial reporting pursuant to the Financial Instruments and Exchange Act is dealt with by the J-SOX Promotion Committee directly under the CFO, and internal control pursuant to the Companies Act is conducted by the Internal Control Committee with a new structure chaired by the CEO. In addition, the Structural Reform Promotion Office, which was established as of July 1, 2016, is steadily conducting measures to prevent the reoccurrence of 31 items, including by implementation of a revised development process. At the same time, the Company is conducting Performance Revolution (PRev) Activities, which are drastic structural reforms to put in place support for reform of organizations, structures, culture and technologies in the Company, mainly in the development departments where improper conduct came to light, and will broaden these activities beyond the development departments. The Company will continue to place the highest priority on compliance in the future, intends to further strengthen governance, and will continue its constant efforts to restore the trust of customers and society at an early stage with improvements and enhancements in areas including compliance with laws and regulations, and ensuring the appropriateness and efficiency of business execution. 2) Toward a V-shaped recovery Fiscal 2017 will be a critical point for the Company as it enters the first fiscal year of its next mid-term business plan aiming for a V-shaped recovery. There are two major management issues for achieving growth. First is increasing sales. Growth is the necessary driving force for the Company, which will continuously work for growth together with the improvement of business efficiency. This will require sales using an appropriate pricing and grade structure, brand improvement from strengthening marketing strategy, and enhanced performance by sales companies based on analysis using clear evaluation criteria. It is also important to secure both the development and production of quality for the launch of new vehicle models. Through the thorough monthly management by top management that was established during the current fiscal year, the Company will promote improvement in its profit structure to generate income. In addition, the Company will accelerate the generation of short- and medium-term synergies with Nissan Motor Co., Ltd., centered on cost savings and sharing of resources related to facilities and development, among others. The Company has gained the potential to realize substantial synergies by joining with Renault and Nissan in the world s third largest automotive alliance, with annual sales volume of around 10 million vehicles. Until now, the Company has been promoting selection and concentration and investing in fields where it can compete with other companies on its own with limited resources. Going forward, the power of the alliance will enable expanded opportunities in fields such as product development, purchasing, technology, production, market expansion and services. The Company believes that utilizing the new technological assets of self-driving and connected cars and further development of electric vehicles to provide more attractive products and technologies to its customers will present an opportunity to maximize its potential. Currently, the Company is formulating a mid-term business plan for fiscal 2017 onward based on these ideas. As soon as formulation of the plan is completed, the Company plans to disclose it in an appropriate form. (2) Basic views and guidelines on corporate governance As presented in 1. Basic Views above. (3) Policies and procedures for determining the remuneration of directors Remuneration of directors consists of three types: monthly remuneration paid based on the roles and responsibilities of each individual director; performance-linked remuneration paid according to the status of achievement of business results and other factors; and stock-related remuneration. (4) Policies and procedures for the appointment of senior management and the nomination of director and Audit & Supervisory Board Member candidates When appointing senior management and nominating director and Audit & Supervisory Board Member candidates, the Chairman of the Board and the CEO prepare proposals of personnel and, after receiving - 2 -

3 advice from the Non-Executive Directors, submit proposed resolutions for appointment or nomination to the Board of Directors. For Audit & Supervisory Board Member candidates, resolutions are submitted to the Board of Directors after obtaining the prior consent of the Audit & Supervisory Board. For director candidates and senior management, the Board of Directors nominates persons who possess decisiveness and a sense of balance as a manager beyond his or her field of specialty, while taking into account the nominee s career history and capabilities. For Audit & Supervisory Board Member candidates, the Board of Directors nominates persons who maintain a fair and impartial attitude at all times and are able to act based on their own convictions, while taking into account the nominee s career history and capabilities. (5) Explanations with respect to the individual appointments and nominations of director and Audit & Supervisory Board Member candidates The reasons for nominations of Non-Executive Director candidates and outside Audit & Supervisory Board Member candidates are presented in the Notice of the general meeting of shareholders. For appointments and nominations of directors and Audit & Supervisory Board Members, individual biographies are displayed on the Company website and in the Notice of the general meeting of shareholders. Notices of General Meetings of Shareholders: Officer Biographies: Supplementary Principle Roles and Responsibilities of the Board of Directors Items that require a resolution of the Board of Directors pursuant to laws, regulations or provisions of the Articles of Incorporation, items delegated by resolution of the General Meeting of Shareholders, and necessary items related to business management are resolved by the Board of Directors. Details of items that require a resolution of the Board of Directors and items that require reporting at the Board of Directors meeting are stipulated in the rules of the Board of Directors. Principle 4-8. Effective Use of Independent Non-Executive Directors The Company has appointed four Non-Executive Directors, two of whom are independent Non-Executive Directors. Based on their considerable experience and knowledge as a corporate manager and an administrative officer, respectively, these independent Non-Executive Directors provide supervision and oversight of matters including management policies, management plans, appointment and dismissal of senior management, and other important decision-making by the Board of Directors, and express their opinions from a standpoint independent from the management. Principle 4-9. Independence Standards and Qualification for Independent Non-Executive Directors The Company stipulates standards for evaluating the independence of outside officers separately from the standards stipulated by the Tokyo Stock Exchange. Specifically, the Company provides notification to the Tokyo Stock Exchange as an independent officer for persons who are not any of the following: (1) An executive of a principal shareholder of the Company (2) An executive of a major business partner of the Company or such business partner s parent company or subsidiary (3) A consultant, an accounting professional such as a certified public accountant, or a legal professional such as an attorney-at-law who receives a large amount of monetary consideration or other property other than officer remuneration from the Company (in the event such property is received by a corporation, association or other group, then any person belonging to such group) (4) A person to whom any of (1) through (3) has applied during the past 5 years (excluding non-key persons) (5) A person with a close relative (second degree of kinship) to whom any of (1) through (4) applies (6) Other persons for whom the possibility of a relationship with the Company appears strong under substantive and comprehensive consideration of the situation The Company believes that the two independent Non-Executive Directors make lively comments at Board of Directors meetings and on other occasions based on their considerable experience and knowledge as a corporate manager and an administrative officer, respectively, and sufficiently fulfill their duties as independent Non-Executive Directors. Supplementary Principle Preconditions for Effectiveness of the Board of Directors and the Audit & - 3 -

4 Supervisory Board The Company s Board of Directors consists of 11 directors and five Audit & Supervisory Board Members. Of the 16 attendees at Board of Directors meetings, more than half (10 persons) are outside officers (6 Non-Executive Directors and 4 outside Audit & Supervisory Board Members). The Company believes that these outside officers make lively comments at Board of Directors meetings and on other occasions based on their considerable experience and knowledge as a corporate manager, administrative officer, attorney-at-law, or accountant and sufficiently fulfill their duties as independent Non-Executive Directors. The Company will continue to build a structure with awareness of the balance and diversity of knowledge, experience and capabilities, as well as the scale, of the Board of Directors as a whole. Supplementary Principle Preconditions for Effectiveness of the Board of Directors and the Audit & Supervisory Board The status of concurrent service of Non-Executive Directors and outside Audit & Supervisory Board Members at other companies is disclosed each year through the notice of the general meeting of shareholders, the Yuka Shoken Hokokusho (Annual Securities Report), the Corporate Governance Report and other means. There is a person with concurrent positions at more than three companies other than the Company. But 2 of the 10 outside officers hold no concurrent positions outside the Company, and 6 limit their concurrent service to only one company other than the Company as their major concurrent positions. The Company believes that all are able to give their undivided attention to their work as directors and Audit & Supervisory Board Members. Supplementary Principle Preconditions for Effectiveness of the Board of Directors and the Audit & Supervisory Board The Company conducted an evaluation survey covering all directors and Audit & Supervisory Board Members, and made a report after tabulating the results in February, In the current fiscal year, the Company will once again conduct an evaluation questionnaire survey of all directors and Audit & Supervisory Board Members and carry out activities to further enhance the effectiveness of the Board of Directors. An overview regarding the previous survey is as follows. The Company s corporate governance, centered on the Board of Directors, is viewed as a positive point, with Non-Executive Directors who have diverse backgrounds expressing their opinions in a lively manner and other factors. On the other hand, measures to vitalize the Board of Directors and enhance the content of proposed resolutions to further raise the effectiveness of Board of Directors meetings could be considered an issue. Supplementary Principle Director and Audit & Supervisory Board Member Training Officer training is held once yearly for Members of the Board and executive officers. Matters to be resolved at Board of Directors meetings are deliberated on beforehand at Executive Committee, in principle, so that Members of the Board and full-time Audit & Supervisory Board Members understand their content before attending Board of Directors meetings. Furthermore, the Company provides Non-Executive Directors and Audit & Supervisory Board Members other than full-time Audit & Supervisory Board Members with opportunities to prepare to attend Board of Directors meetings by distributing the agenda items of Board of Directors meetings and explanatory materials beforehand and conducting individual explanations as necessary. Principle 5-1. Policy for Constructive Dialogue with Shareholders At the Company, dialogue (management meetings) with shareholders and investors is handled by the department in charge of investor relations (for institutional investors) and the department in charge of general affairs (for individual investors). In addition, the Company regularly conducts measures including participation by senior management in visits to institutional investors and conferences held by securities companies. (1) Designation of a Director in Charge of Dialogue with Shareholders CFO is the officer in charge of investor relations, and conducts dialogue with shareholders. (2) Measures for Cooperation among Internal Departments The department in charge of investor relations and the department in charge of general affairs cooperate to conduct various measures to promote understanding of the Company by shareholders and investors, and communicate with the public relation, finance, accounting and legal departments

5 (3) Efforts to Enhance Methods of Dialogue Other than Individual Meetings The Company works to provide thorough explanations using the general meeting of shareholders, factory tours and corporate briefings for investors as methods other than individual meetings. The Company enhances its website for investors to disseminate more easily understandable information outside the Company. (4) Measures for Effective Feedback of Shareholder Views and Concerns Matters of concern for analysts and institutional investors are regularly (at least once each quarter) reported to senior management, and a report is made each time a report is issued by an analyst. In addition, the content of dialogue with individual investors is regularly (at least one each half-year) reported to senior management, depending on its importance. Moreover, senior management gain a direct understanding of the views and concerns of investors from their participation in investor visits and conferences held by securities companies, quarterly presentations of financial results and other means. (5) Measures to Control Insider Information The types of information to be disclosed, basic principles, responsible persons, division in charge, timely disclosure process and other matters of the policy for timely disclosure of material information are presented on the website. For a silent period, the Company shall make absolutely no comments regarding its business performance estimates during the two weeks immediately preceding announcements of the full-year and quarterly financial results. In addition, insider information is managed by thoroughly and clearly specifying its confidential classification. 2. Capital Structure Foreign Shareholding Ratio From 10% to less than 20% [ Status of Major Shareholders ] Name / Company Name Number of Shares Owned Percentage (%) Nissan Motor Co, Ltd. 506,620, Mitsubishi Corporation 137,682, Mitsubishi Heavy Industries, Ltd. 124,293, The Bank of Tokyo-Mitsubishi UFJ, Ltd. 48,717, Japan Trustee Services Bank, Ltd. (Trust account) 26,466, The Master Trust Bank of Japan, Ltd. (Trust account) 24,103, MHI Automotive Capital. LLC 2 23,768, CREDIT SUISSE SECURITIES (USA) LLC SPCL. FOR EXCL. 17,951, BEN Japan Trustee Services Bank, Ltd. (Trust account 9) 14,023, JP MORGAN CHASE BANK ,911, Controlling Shareholder (except for Parent Company) Parent Company None None Supplementary Explanation - 5 -

6 3. Corporate Attributes Listed Stock Market and Market Section Fiscal Year-End Type of Business Number of Employees (consolidated) as of the End of the Previous Fiscal Year Sales (consolidated) as of the End of the Previous Fiscal Year Number of Consolidated Subsidiaries as of the End of the Previous Fiscal Year Tokyo Stock Exchange, First Section March Transportation Equipment More than 1,000 More than 1 trillion From 10 to less than 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 II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management 1. Organizational Composition and Operation Organization Form Company with an Audit & Supervisory Board [ Directors ] Maximum Number of Directors Stipulated in Articles of Incorporation No regulations Term of Office Stipulated in Articles of Incorporation Chairperson of the Board of Directors Number of Directors 11 Appointment of Non-Executive Directors Number of Non-Executive Directors 6 Number of Independent Directors 2 1 year Chairman of the Board (except in cases where the chairman concurrently serves as President) Appointed - 6 -

7 Non-Executive Directors Relationship with the Company (1) Name Attribute Relationship with the Company* a b c d e f g h i j k Harumi Sakamoto From another company Shunichi Miyanaga From another company Ken Kobayashi From another company Takeshi Isayama From another company Hitoshi Kawaguchi From another company Hiroshi Karube From another company * Categories for Relationship with the Company * 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; when a close relative of the director fell under the category in the past a. Executive of the Company or its subsidiaries b. Executive or Non-Executive Director of a parent company of the Company c. Executive of a fellow subsidiary company of the Company d. A party whose major client or supplier is the Company or an executive thereof e. Major client or supplier of the listed company or an executive thereof f. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as an officer g. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a legal entity) h. Executive of a client or supplier company of the Company (which does not correspond to any of d, e, or f) (the director himself/herself only) i. Executive of a company, between which and the Company outside officers are mutually appointed (the director himself/herself only) j. Executive of a company or organization that receives a donation from the Company (the director himself/herself only) k. Others Non-Executive Directors Relationship with the Company (2) Name Designation as Independe nt Director Supplementary Explanation of the Relationship Harumi Sakamoto Reasons for Appointment Reason for Appointment as Non-Executive Director To reflect her considerable experience and knowledge as an administrative officer and corporate manager in the management of the Company. Reason for Designation as an Independent Officer, etc. There are no reasons that would damage independence in any of the main elements for determining independence, such as a parent company or sibling company relationship with the Company, business partner relationship, or immediate family relationship. Ms. Sakamoto has neither received considerable control from the management of the Company nor is she able to exert considerable control over the management of the Company. Accordingly,

8 the Company has determined that Ms. Sakamoto has independence from its management and has designated her as an independent officer. Shunichi Miyanaga Reason for Appointment as Non-Executive Director To reflect his considerable experience and knowledge obtained in corporate management in the manufacturing industry in the management of the Company. Reason for Appointment as Non-Executive Director Ken Kobayashi To reflect his considerable experience, achievements and insight on global business management nurtured through his career as a corporate manager at a general trading company that operates worldwide. Reason for Appointment as Non-Executive Director The Company expects him to utilize his considerable insight and experience in the automobile business in the management of the Company. Takeshi Isayama Nissan Motor Co., Ltd., where Mr. Isayama served as Vice Chairman, is a major shareholder of the Company. However, because vehicle sales and other transactions constitute less than 6% of the Company s net sales, and more than 10 years have passed since his retirement from Nissan Motor Co., Ltd., the Company has determined that his independence is not affected. Reason for Designation as an Independent Officer, etc. There are no reasons that would damage independence in any of the main elements for determining independence, such as a parent company or sibling company relationship with the Company, business partner relationship, or immediate family relationship. Mr. Isayama has neither received considerable control from the management of the Company nor is he able to exert considerable control over the management of the Company. Nissan Motor Co., Ltd., where Mr. Isayama served as Vice Chairman, is a major shareholder of the Company. However, because vehicle sales and other transactions constitute less than 6% of the Company s sales, and more than 10 years have passed since his retirement from Nissan Motor Co., Ltd., the Company has determined that his independence is not affected. Accordingly, the Company has determined that Mr. Isayama has independence from its management and has designated him as an independent officer. Hitoshi Kawaguchi - Reason for Appointment as Non-Executive Director The Company expects him to utilize his considerable insight and experience in the automobile business in the management of the Company

9 Hiroshi Karube - Reason for Appointment as Non-Executive Director The Company expects him to utilize his considerable insight and experience in the automobile business in the management of the Company. Voluntary Establishment of Committee(s) Corresponding to Nomination Committee or Remuneration Committee Not Established [Audit & Supervisory Board Members] Establishment of Audit & Supervisory Board Maximum Number of Audit & Supervisory Board Members Stipulated in Articles of Incorporation Number of Audit & Supervisory Board Members Established No regulations 5 Cooperation among Audit & Supervisory Board Members, Accounting Auditors and Internal Audit Divisions Cooperation between Audit & Supervisory Board Members and Accounting Auditors The Audit & Supervisory Board Members held 35 meetings with the Accounting Auditors in FY2016, including reports of quarterly reviews and the fiscal year-end auditing report. The Audit & Supervisory Board Members worked for mutual exchange of information by receiving explanations of the auditing system, auditing plans and the status of implementation of audits from the Accounting Auditor, and at the same time explaining their own auditing plans and status of implementation of audits. Moreover, the Accounting Auditors also attend regular meetings with the Internal Audit Department, which is one of the internal audit divisions, which are used effectively as forums for information exchange. Details of compensation for audit certification based on an auditing contract the Company and its consolidated subsidiaries have concluded with Ernst & Young ShinNihon LLC are as follows. The Company pays 345 million as compensation based on the services (audit certification services) specified in Article 2, Section 1 of the Certified Public Accountants Act. Cooperation between Audit & Supervisory Board Members and Internal Audit Divisions Within the Internal Audit Office, the Company has established the Internal Audit Department and the Quality Audit Department as internal audit divisions of the Company. The Audit & Supervisory Board Members regularly hold meetings with the Internal Audit Department to receive explanations regarding the status of the results of internal audits within the Company and at its affiliated companies in Japan and overseas, and to provide feedback to the Internal Audit Department on the status of the Audit & Supervisory Board Members audits. The Audit & Supervisory Board Members also regularly hold meetings with the Quality Audit Department to receive explanations regarding action plans and audit results. Appointment of Outside Audit & Supervisory Board Members Appointed Number of Outside Audit & Supervisory Board Members 4 Number of Independent Audit & Supervisory Board Members 3-9 -

10 Outside Audit & Supervisory Board Members Relationship with the Company (1) Name Attribute Relationship with the Company* a b c d e f g h i j k l m Katsunori Nagayasu From another company Toshimitsu Iwanami From another company Yaeko Takeoka Attorney-at-law Yoshitsugu Oba Accountant * Categories for Relationship with the Company * when the Audit & Supervisory Board Member presently falls or has recently fallen under the category; when the Audit & Supervisory Board Member fell under the category in the past * when a close relative of the Audit & Supervisory Board Member presently falls or has recently fallen under the category; when a close relative of the Audit & Supervisory Board Member fell under the category in the past a. Executive of the Company or its subsidiary b. Non-Executive Director or accounting advisor of the Company or its subsidiaries c. Non-Executive Director or executive of a parent company of the Company d. Audit & Supervisory Board Member of a parent company of the Company e. Executive of a fellow subsidiary company of the Company f. A party whose major client or supplier is the Company or an executive thereof g. Major client or supplier of the Company or an executive thereof h. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as an officer i. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a legal entity) j. Executive of a client or supplier company of the Company (which does not correspond to any of f, g, or h) (the Audit & Supervisory Board Member himself/herself only) k. Executive of a company, between which and the Company Non-Executive Directors/Audit & Supervisory Board Members are mutually appointed (the Audit & Supervisory Board Member himself/herself only) l. Executive of a company or organization that receives a donation from the Company (the Audit & Supervisory Board Member himself/herself only) m. Others Outside Audit & Supervisory Board Members Relationship with the Company (2) Name Designation as Independent Audit & Supervisory Board Member Supplementary Explanation of the Relationship Reasons for Appointment Katsunori Nagayasu Reason for Appointment as Outside Audit & Supervisory Board Member To reflect his considerable experience and knowledge as a corporate manager in the management of the Company. Toshimitsu Iwanami NEC Corporation, where Mr. Iwanami concurrently serves as an Executive Advisor, conducts transactions with the Company including consignment of systems Reason for Appointment as Outside Audit & Supervisory Board Member To reflect his considerable experience and knowledge as a corporate manager in the management of the Company. Reason for Designation as an Independent Officer, etc

11 development, buts such transactions constitute less than 1% of the Company s net sales, and the Company has determined that it does not affect Mr. Iwanami s independence. Yaeko Takeoka There are no reasons that would damage independence in any of the main elements for determining independence, such as a parent company or sibling company relationship with the Company, business partner relationship, or immediate family relationship. Mr. Iwanami has neither received considerable control from the management of the Company nor is he able to exert considerable control over the management of the Company. NEC Corporation, where Mr. Iwanami concurrently serves as an Executive Advisor, conducts transactions with the Company including consignment of systems development, but such transactions constitute less than 1% of the Company s net sales, and do not affect Mr. Iwanami s independence. Accordingly, the Company has determined that Mr. Iwanami has independence from its management and has designated him as an independent officer. Reason for Appointment as Outside Audit & Supervisory Board Member To reflect her considerable experience and knowledge as a legal professional in the management of the Company. Reason for Designation as an Independent Officer, etc. There are no reasons that would damage independence in any of the main elements for determining independence, such as a parent company or sibling company relationship with the Company, business partner relationship, or immediate family relationship. Ms. Takeoka has neither received considerable control from the management of the Company nor is she able to exert considerable control over the management of the Company. Accordingly, the Company has determined that Ms. Takeoka has independence from its management and has designated her as an independent officer. Yoshitsugu Oba Deloitte Touche Tohmatsu LLC, where Mr. Oba was a partner until June 2016, has consulting transactions with the Company. However, such transactions constitute less than 1% of the Company s net sales, Reason for Appointment as Outside Audit & Supervisory Board Member Although Mr. Oba does not have experience of direct involvement in the management of a company, he has abundant specialist knowledge and deep insight on accounting and audit accumulated over many years as a certified public accountant. As such, the Company proposes him as Outside

12 and the Company has determined that it does not affect Mr. Oba s independence. Audit & Supervisory Board Member so that he can provide appropriate recommendations from the viewpoint of adequacy and appropriateness with the Company. Reason for Designation as an Independent Officer, etc. There are no reasons that would damage independence in any of the main elements for determining independence, such as a parent company or sibling company relationship with the Company, business partner relationship, or immediate family relationship. Mr. Oba has neither received considerable control from the management of the Company nor is he able to exert considerable control over the management of the Company. Accordingly, the Company has determined that Mr. Oba has independence from its management and has designated him as an independent officer. [ Independent Officers ] Number of Independent Officers 5 Other Matters relating to Independent Officers All outside officers who meet the qualifications to be an independent officer are designated as independent officers. [ Incentives ] Incentive Policies for Directors Introduction of Performance-linked Remuneration System, and Stock Option System Supplementary Explanation In December 2016, the Company conducted revisions for an officer remuneration system that helps to strengthen the management structure. Overview of New Remuneration System for Directors 1. Monthly remuneration The Company will determine and pay an amount as remuneration based on the roles and responsibilities of the directors, while also referring to remuneration surveys by external specialists. 2. Performance-linked remuneration The Company will pay remuneration to applicable directors in accordance with their status of achievement of business results and other factors. Indicators for evaluation of status of achievement of business results and other factors shall include performance indicators such as the Company s plan for the fiscal year and performance indicators specified by the department controlled by the applicable director. 3. Stock-related remuneration The Company shall pay to applicable directors monetary remuneration for newly granting shares with a restriction on transfer or stock acquisition rights, or monetary compensation linked to future stock price

13 Recipients of Stock Options Inside directors Supplementary Explanation [ Director Remuneration ] Disclosure of Individual Directors Remuneration No Individual Disclosure Supplementary Explanation Details of Officer Remuneration Remuneration, etc., paid to directors and Audit & Supervisory Board Members during the one-year period from April 1, 2016 to March 31, 2017 was as follows. A total of 367 million was paid as fixed compensation to 13 directors (excluding Non-Executive Directors). A total of 36 million was paid as fixed compensation to 2 Audit & Supervisory Board Members (excluding outside Audit & Supervisory Board Members). A total amount of 122 million was paid as fixed compensation to 12 outside officers. Note: The above includes six directors, one Audit & Supervisory Board Member and one Non-Executive Directors who retired on June 24, 2016 (the date of the 47th Ordinary General Meeting of Shareholders), and two directors and one Non-Executive Directors who retired on December 14, 2016 (the date of an extraordinary shareholders meeting). Policy on Determining Remuneration Amounts and Calculation Methods Established Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods Directors Maximum remuneration of directors of the Company (Resolved at an extraordinary shareholders meeting held on December 14, 2016) Monthly remuneration and performance-linked remuneration: 2 billion Stock-related remuneration: 1 billion The specific timing and allocation of payment to each applicable director is decided at the Board of Directors meeting. Total annual remuneration for fiscal 2016 is as shown above. Audit & Supervisory Board Members Individual remuneration of Audit & Supervisory Board Members is determined through discussions among Audit & Supervisory Board Members. The monthly remuneration of Audit & Supervisory Board Members was set at an upper limit of 10 million per month in total by resolution of the 45th Ordinary General Meeting of Shareholders held on June 25, 2014 and the total annual payment made in fiscal 2015 was as shown above. [ Supporting System for Non-Executive Directors and/or Outside Audit & Supervisory Board Members ] * Non-Executive Directors The Company provides advance explanations of matters on the agenda at Board of Directors meetings through the Board of Directors Secretariats. From the perspective of sharing information, the Company reports important matters that arise within the Mitsubishi Motors Group to Non-Executive Directors whenever they occur

14 * Outside Audit & Supervisory Board Members The 6 staff members of the Audit & Supervisory Board Members Office of the Company constitute a system for support of duties such as investigation, liaison and information collection related to the auditing duties of the Audit & Supervisory Board Members. Moreover, the various duties undertaken upon attendance at the Board of Directors meetings and other important meetings are taken charge of by the division holding such meetings. From the aspect of sharing information, the full-time Audit & Supervisory Board Members and others provide explanations of important matters that arise within the Mitsubishi Motors Group whenever they occur. 2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration Decisions (Overview of Current Corporate Governance System) To increase the flexibility of business execution, clarify management responsibilities and appropriately oversee business execution, the Company has introduced a structure of various committees including the Executive Committee and an executive officer system, in addition to statutory organizations, with the intention of improving and strengthening corporate governance. The Board of Directors makes decisions on important management issues and oversees the business execution of the individual directors, and consists of 11 directors, 6 of whom oversee business execution as Non-Executive Directors with characteristics including considerable experience and a high level of insight. To increase the speed of decision-making, the Company has also established and operates a structure of various committees that deliberate or report on important management issues. In addition, in order to separate management oversight and business execution functions to promptly and flexibly respond to changes in the business environment, the Company has introduced an executive officer system and intends to expedite management decision-making by delegating authority and other measures. Moreover, to conduct appropriate audits of business execution, the Company has established an Audit & Supervisory Board consisting of 5 members. 4 of the members are outside Audit & Supervisory Board Members, thus establishing a highly independent auditing system. Role and Function of Non-Executive Directors in the Company Unlike Members of the Board, Non-Executive Directors do not execute Company business, but they make important management decisions for the Company and oversee the execution of the duties of the Members of the Board and executive officer as members of the Board of Directors. Audit & Supervisory Board Audits and Internal Audits The Audit & Supervisory Board Members carry out audits of the status of business execution of the Mitsubishi Motors group by attending important Company meetings, such as Board of Directors meetings, and receiving reports on the status of business activities from directors and other corporate officers. They also review key internal documents and internal audit reports from internal audit divisions, the Accounting Auditors and affiliated companies. In accordance with auditing policies established by the Audit & Supervisory Board, important auditing items for each fiscal year, allocation of duties and other matters, the Audit & Supervisory Board Members conduct interviews of the top executives of each internal department and hold visiting audits at each factory and affiliated companies in Japan and overseas, and, based on the results, hold discussions at Audit & Supervisory Board meetings and exchange opinions with CEO and COO. As internal audit departments, the Company has established the Internal Audit Department and the Quality Audit Department in the Audit Division, which is an independent organization reporting directly to the CEO. The Internal Audit Department conducts planned internal audits to determine whether operational management of the Company and affiliated companies in Japan and overseas is being conducted with transparency using appropriate processes. The Quality Audit Department conducts audits regarding the proper execution of the quality-related work of the Company and its affiliated companies inside and outside Japan. Audit results are reported directly to CEO. The Audit & Supervisory Board regularly exchanges information and works to strengthen cooperation with the Audit Division and the Accounting Auditors. Measures to Strengthen the Functions of the Audit & Supervisory Board

15 Audit & Supervisory Board Members regularly conduct special audit activities separate from the Audit & Supervisory Board, and also collect information from the Audit Division, the Compliance Department, the Legal Department and other departments, and promptly reflects it in its auditing activities. Status of Development of a Risk Management Framework The Company has established a risk management system for its entire Group and is promoting its improvement through three risk management activities: priority risk management, departmental risk management and affiliated company risk management. For priority risk management, the Company selects risks faced by the entire Group with a high level of potential impact and high urgency, and is working to minimize risk at as early a stage as possible by establishing a risk owner for each risk at the executive officer level or higher. For departmental risk management, under the risk supervisors appointed at headquarters and each manufacturing site, the Company goes through the PDCA cycle of identification of each inherent risk, evaluation, planning and implementation of countermeasures, and monitoring, with the intention of minimizing risk. For affiliated company risk management, the Company regularly checks the status of activities such as measures for various risks at its affiliated companies and strengthening of its system for legal and regulatory compliance regulations, and proposes and guides improvements as necessary. These risk management initiatives are regularly reported to the Board of Directors as major internal control activities. In addition, the Company operates an emergency information contact system to enable swift communication of information to senior management and speedy and accurate response in the event unforeseen circumstances occur. In particular, to establish a crisis management system when a serious incident occurs, the Company has created an emergency response manual that includes the setup of an emergency response organization and the clarification of the chain of command, and has prepared a system to take appropriate measures. The Company s basic policy in times of disaster such as earthquake or other natural disaster or an outbreak of infectious disease is to ensure the safety of customers and employees and their families, and to assist local communities. The Company prepares disaster countermeasures and business continuity plans (BCPs) to this end. As disaster countermeasures, the Company conducts drills in communicating among various manufacturing facilities and Group companies on the basis of a presumed emergency. As preparations against the possibility that employees will be unable to return to their homes and to stay at the headquarters for a three-day period, the Company conducts initiatives for communicating with local municipal authorities in order to ensure means through which they can communicate with their families and emergency supplies. As BCPs, the Company has formulated plans of operation that assume a large-scale earthquake or major outbreak of infectious disease. The Company works to improve these BCPs through regular drills and communication among individual regions. 3. Reasons for Adoption of Current Corporate Governance System Presented in 2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration Decisions (Overview of Current Corporate Governance System) above

16 III. Implementation of Measures for Shareholders and Other Stakeholders 1. Measures to Vitalize the General Shareholder Meetings and Smooth Exercise of Voting Rights a. Scheduling AGMs Avoiding the Peak Day Held to avoid the peak day. Supplementary Explanations b. Allowing Electronic Exercise of Voting Rights c. Participation in Electronic Voting Platform d. Providing Convocation Notice (Summary) in English e. Other The Company has enabled the electronic exercise of voting rights (via the Internet) since the 45th Ordinary General Meeting of Shareholders held on June 25, The Company has been participating in an electronic voting platform for institutional investors operated by Investor Communications Japan, Inc. (ICJ) since the 45th Ordinary General Meeting of Shareholders held on June 25, The Company posts the convocation notice in English on its website as well as on the Timely Disclosure Network (TDnet) operated by the Tokyo Stock Exchange and the voting platform for institutional investors operated by ICJ in an effort to disclose information to overseas and foreign investors. Convocation notices for Ordinary General Meetings of Shareholders and other materials related to shareholder meetings are presented on the Company s website. To ensure a sufficient period of time for shareholders to consider the proposal, the convocation notice for the Ordinary General Meeting of Shareholders is posted on the Company s website, the Timely Disclosure Network (TDnet) operated by the Tokyo Stock Exchange and the electronic voting platform for institutional investors operated by ICJ at least three weeks prior to the shareholders meeting and before notices are dispatched. At the Ordinary General Meeting of Shareholders, the Company presents an easily understood business report using slides. The Ordinary General Meeting of Shareholders is streamed live on the Internet. (Japanese version only) The Company makes available videos of the meeting for approximately one year from the close of the meeting. (Japanese version only) 2. IR Activities a. Preparation and Publication of Disclosure Policy b. Regular Investor Briefings for Individual Investors c. Regular Investor Briefings for Analysts and Institutional Investors d. Regular Investor Briefings for Overseas Investors e. Posting of IR Materials on Website Supplementary Explanations The Company has prepared a Policy on Timely Disclosure of Material Information and publishes it on its website. The Company holds yearly and quarterly financial results meetings. The Company holds overseas roadshows (visits to investors) as appropriate. The Company presents a top message, stock price and share information, business performance information (including streaming presentations of financial results), credit rating information, annual reports, fact books, Yuka Explanation by Representativ e in Person Yes Yes

17 Shoken Hokokusho (Japanese version only), shareholder reports (Japanese version only), convocation notices for Annual General Meetings of Shareholders, notices of resolutions of Annual General Meetings of Shareholders, its policy on timely disclosure of material information, corporate governance and other information in the Information for Shareholders and Investors (IR) section of the Company website. f. Establishment of Department and/or Manager in Charge of IR g. Other The Company has established an IR Office as a specialized department. There are four staff members as of June 30, The Company holds factory tours, test drive events and other events for shareholders, analysts and institutional investors as appropriate to deepen understanding of its business activities. 3. Measures to Ensure Due Respect for Stakeholders Supplementary Explanations a. Stipulation of Internal Rules for Respecting the Position of Stakeholders The Company aims to build good relations with all its stakeholders based on its corporate philosophy, We are committed to providing the utmost driving pleasure and safety for our valued customers and our community. On these commitments we will never compromise. This is the Mitsubishi Motors way. The Company sets forth practical guidelines by type of stakeholder to meet the expectations and demands of society in the Mitsubishi Motors Business Ethic, a pamphlet for officers and employees. Measures for Corporate Social Responsibility (CSR) As a company that makes CSR its first priority, the Company is working proactively to continue and enhance its former compliance and CSR activities and to act with an awareness of moving towards a sustainable future. Main measures are as follows. 1. In June 2008, the Company announced Drive@earth, a corporate tagline that expresses its commitment to building vehicles that demonstrate the synergy between dynamic and environmental performance, and in this way building a connection to customers, to communities, and ultimately to the natural world around us. b. Implementation of Environmental Activities, CSR Activities, etc. 2. The Company will carry out a major role in preservation of the global environment, with corporate management for the environment as its highest priority. 3. The Company has created a corporate citizenship policy to tackle support for the next generation, traffic safety, environmental preservation, and participation in local communities as the main themes of its corporate citizenship activities. 4. The Company works for forest preservation and education in Japan through activities to preserve and rejuvenate the Pajero Forest. 5. The Company has exhibited at KidZania Tokyo and KidZania Koshien, Japan s first events for children providing hands-on learning about jobs. In addition, the Company proactively conducts activities to support the next generation including a program of hands-on classes for elementary school students in each region and ongoing plant tours at each factory to promote greater understanding of the automobile industry. [Environmental Preservation] The Company is promoting the formulation of a medium-term Environment

18 Initiative Program for the realization of the Environmental Vision set forth below. Until fiscal 2015, the Company promoted activities under plans for each five-year period and formulated and undertook a one-year plan in fiscal 2016, having positioned it as a transition period to the next Environment Initiative Program. To increase the feasibility of the next Environment Initiative Program, the Company is considering a form that is linked with the content of the mid-term business plan for the three years beginning fiscal 2017, and plans to compile the program in autumn Mitsubishi Motors Group Environmental Vision 2020 The Company announced its policy for measures for dealing with the environment, Leading the EV* Era, Toward a Sustainable Future in The Company is promoting initiatives from the three standpoints of products & technology, business activities and collaboration with society. * EV: Electric vehicles, plug-in hybrid electric vehicles and other electric-powered vehicles 1. Products & Technology: In addition to promoting the development of EV technology, reduce environmental impact during the life cycle of all products, including improvement of engine fuel consumption, development of more lightweight vehicle bodies and other technologies. 2. Corporate Activities: Step up corporate activities to promote widespread use of EVs in all aspects from product planning to development, production, sales, service and other areas, and raise the level of environmental protection activities by setting new standards for each field of business activity, including production, distribution, procurement, sales and at offices and elsewhere. 3. Collaboration with Society: Create a pleasing and low-carbon society by working together with customers and society at large. Step up contribution to protecting the global environment by environmental conservation activities with local communities. Pamphlets, etc. The Company distributes the Mitsubishi Motors Business Ethics pamphlet and the Mitsubishi Motors Code of Conduct (a carry-along manual covering the Company s business ethics, environmental policy, product quality policy and other matters) to all employees including mid-career hires and new employees. The Company prepares a CSR Report (renamed the Corporate Social Responsibility Report in 2014) and discloses it inside and outside the Company on its website (until fiscal 2015, it distributed a printed version). The Company also produces a simplified pamphlet that presents an overview of its CSR measures, and has been distributing it inside and outside the Company since fiscal c. Development of Policies on Information Provision to Stakeholders For appropriate and timely disclosure of information that may exert an effect on the investment decisions of investors, the Company has prepared and announced its Policy on Timely Disclosure of Material Information, which stipulates the types of information to be disclosed, basic rules for disclosure, persons and departments in charge, the disclosure process and other matters. In addition, primarily for customers, the Company provides information related to product data, services, accidents, defects, complaints and other matters through customer contact points, advertisements, the media, its web page and other means

19 IV. Matters Related to the Internal Control System 1. Basic Views on Internal Control System and the Progress of System Development Based on the Basic Policy on the Establishment of Internal Control Systems as passed by resolution of the Board of Directors, the Company strives to improve and strengthen its monitoring of the status of operations and its internal control systems in the Internal Control Committee, with the CEO as chairman and the newly established officer in charge of global risk control as vice chairman. The Basic Policy on the Establishment of Internal Control Systems (partial revision passed by resolution of the July 2017 meeting of the Board of Directors) is as follows. 1. System to ensure that execution of duties of directors and employees of the Company conforms to laws and the Articles of Incorporation (1) In addition to establishing standards of conduct, building an organizational framework and conducting education and training for the observance of laws, Articles of Incorporation, social rules and manners, the Company has established an internal contact point and uses such information for prevention, correction and prevention of recurrence. (2) The Company appoints Non-Executive Directors to supervise management. (3) The Company s internal audit divisions strictly audit whether the operational performance of the Company is in violation of law, the Articles of Incorporation, company regulations or other rules. If such departments find a problem, they report it to the related director or other parties and thereafter regularly confirm the status of improvement. (4) The Internal Control Committee chaired by CEO and assigned Global Risk Control Officer as a vice chairman shall be established as a core organization that oversees matters related to internal control in compliance with Companies Act. 2. Rules and other systems concerning management of risk of losses by the Company (1) For risks in the course of the Company s business, the Company has clearly established standards for resolutions at the Board of Directors meeting and the Executive Committee in the regulations of the Board of Directors and the Executive Committee, respectively, and operates based on them. (2) The Company appoints a person responsible for risk management at the organizational level in each department or other division, and works to establish and strengthen its risk management system centered on such person. (3) The Company has established an organization responsible for risk management, and works to set up and strengthen a companywide risk management framework. (4) To prepare in the case of the occurrence of an unforeseen incident, information is promptly conveyed to directors and others to set up a system that can respond promptly and accurately. 3. System to ensure that directors of the Company efficiently execute their duties (1) The Company works to maintain and improve management efficiency by establishing companywide management plans and clarifying specific business targets and execution methods for functional organization for the achievement of such plans. The Board of Directors regularly receives reports on the status of implementation. (2) The Company makes clear the responsibilities and authority of the directors, and promotes the efficient execution of the duties of the Board of Directors meeting and the Executive Committee based on the regulations of the Board of Directors, the Rules of the Executive Committee and other rules. (3) The Company integrates the instruction systems of its organizations and sets up a system for efficient organizational operation and business execution to ensure that the directors performance of duties is conducted efficiently. (4) The Company shall introduce an objective and transparent delegation of authority procedure for the purpose of expedited and clear decision making processes as well as ensuring consistent decisions making. 4. System for preservation and management of information concerning the execution of duties of the directors of the Company Based on internal regulations and other rules, the Company prepares information on the execution of the

20 directors duties as written documents and electronic data, and appropriately manages it by establishing a person in charge of management and stipulating preparation method, preservation method, preservation period, copying and disposal method, and other methods according to the importance of the information. 5. System to ensure the proper operation of business in the business group consisting of the Company, its parent company and its subsidiaries (1) The Company ensures the proper operation of the business of its business group by stipulating the supervisory organization of each of its subsidiaries, and the responsibilities and authority, management method and other matters related to management of its subsidiaries through its internal regulations and other rules. (2) The Company works to set up and enhance frameworks for proper business execution, observance of the code of conduct established by the Company and business audits by the officers and employees of its subsidiaries in conformance with laws and the Articles of Incorporation through guidance and management of its subsidiaries in accordance with the subsidiary s size, business conditions and other factors. (3) The Company strives to set up and strengthen risk management systems at its subsidiaries through guidance for the subsidiary on implementation of risk management and other means, in accordance with the subsidiary s size, business conditions and other factors. (4) The Company works to promote the strengthening, development and rationalization of its subsidiaries through guidance and management of the subsidiary and other means in line with its rules for managing the business of affiliated companies and other internal regulations and rules in accordance with the subsidiary s size, business conditions and other factors. (5) The Company establishes rules for managing the business of affiliated companies and other internal regulations and rules so that prior or subsequent explanations and reports are made to the Company concerning its subsidiaries business, results, financial condition and other important information. (6) The Company and its subsidiaries ensure the adequacy of their respective financial information by setting up the necessary organizations, internal regulations and other rules for the preparation and disclosure of reliable financial reports. 6. Employees to be assigned if Audit & Supervisory Board Members of the Company request staff to assist in their duties The Company has established an organization for assisting in the duties of Audit & Supervisory Board Members, and dispatches full-time staff. 7. Independence of employees in the preceding paragraph from directors of the Company and ensuring effectiveness of instruction by Audit & Supervisory Board Members to such employees (1) Employees who assist Audit & Supervisory Board Members in their duties are not concurrently employees of any other division, and carry out such duties by receiving instructions exclusively from the Audit & Supervisory Board Members. (2) The Company seeks the prior opinion of Audit & Supervisory Board Members concerning transfers of dedicated personnel to assist in the Audit & Supervisory Board Members duties. In addition, the Audit & Supervisory Board Members conduct an evaluation of such full-time staff. 8. System for directors and employees of the Company, and directors, Audit & Supervisory Board Members and other officers and employees of the Company s subsidiaries, or persons receiving reports from the foregoing parties, to report to Audit & Supervisory Board Members of the Company, and other systems for reporting to Audit & Supervisory Board Members of the Company (1) Audit & Supervisory Board Members of the Company attend meetings of the Board of Directors and other important meetings. (2) The Company is thorough in setting up and operating a framework for reliably providing Audit & Supervisory Board Members with information from within the Company and its subsidiaries on management, compliance and other matters. (3) Officers and employees of the Company and its subsidiaries promptly make appropriate reports on items related to the execution of duties of the Audit & Supervisory Board Members when required to do so. 9. System to ensure that persons who have made reports in paragraph 8 shall not receive any disadvantageous

21 treatment due to submission of such reports The Company prohibits disadvantageous treatment of officers and employees of the Company or its subsidiaries who have made reports directly or indirectly to the Audit & Supervisory Board Members for the reason of having given such report, and makes this prohibition generally known among officers and employees of the Company and its subsidiaries. 10. Procedure for advance payment or reimbursement of expenses incurred in the execution of duties by Audit & Supervisory Board Members of the Company, and other policies for processing expenses and debts incurred in the execution of such duties When an Audit & Supervisory Board Member requests advance or other payment for expenses from the Company for the execution of duties pursuant to Article 388 of the Companies Act, the Company promptly processes such expenses or debt after deliberation by the department in charge, except in cases where it is proven that the expenses or debt in such request were not necessary for the execution of the duties of such Audit & Supervisory Board Member. 11. System to ensure that other audits by Audit & Supervisory Board Members are conducted effectively Audit & Supervisory Board Members of the Company work for proper communication and effective performance of their auditing duties by engaging in regular exchanges of views with CEO and by working to cooperate with the internal audit divisions and the Accounting Auditor. 12. System to exclude anti-social forces The Company and its subsidiaries take a resolute stance and response as an organization in its entirety, against illegal demands from anti-social forces that threaten to disrupt the order and safety of our society and will take measures to reject any relationship with anti-social forces. 2. Basic Views on Eliminating Anti-Social Forces As stated above in paragraph 12, System to exclude anti-social forces. V. Other 1. Adoption of Anti-Takeover Measures Adoption of Anti-Takeover Measures Not Adopted Supplementary Explanation 2. Other Matters Concerning to Corporate Governance System Outline of Organization for Timely Disclosure The Company shall conduct timely disclosure based on the below Policy on Timely Disclosure of Material Information. Policy on Timely Disclosure of Material Information 1. Objectives of the Policy The Company believes that, in order to fulfill its corporate social responsibility (CSR), it is important that it achieves accountability by disclosing timely and appropriate information to its stakeholders. Furthermore, the Company believes that achieving this will contribute to increasing management transparency

22 Therefore, the Company has decided to carefully comply with the Rules Concerning Timely Disclosure of the Tokyo Stock Exchange (hereinafter referred to as TSE ) and to formulate and carefully follow a policy which clearly states the types of information to be disclosed, the basic principles of disclosure, the responsible persons, division in charge, the disclosure process, etc. 2. Types of Disclosed Information The information covered by this policy shall include information related to the Company s business, operations, or performance which has a significant effect on securities investment decisions (hereinafter referred to as material information ) that the TSE requires to be disclosed in a timely and appropriate manner based on its Rules Concerning Timely Disclosure. 3. Basic Principles of Disclosure The Company shall comply with the following four basic principles when engaging in the timely disclosure of material information. (1) Transparency Disclose information in accordance with the facts regardless of its content. (2) Timeliness Disclose information in a timely manner and without delay. (3) Fairness Endeavor to ensure that information is transmitted fairly to our various stakeholders. (4) Continuity Ensure continuity of the contents of the information disclosed. 4. Person Responsible for the Timely Disclosure of Material Information The person responsible for handling information appointed in accordance with the TSE rules shall be the person responsible for the timely disclosure of material information. 5. Roles of the Division in Charge of Timely Disclosure The division in charge of IR activities shall also be in charge of timely disclosure and shall fulfill the following roles. (1) Liaison with the TSE Liaison with the TSE regarding the timely disclosure of material information. (2) Disclosure of material information The persons responsible shall disclose information for decisions on material information, facts which occur regarding material information and Company earnings information in a timely and appropriate manner. They shall carry out the process from the gathering to the disclosure of material information as shown in the attachment. (3) Maintenance of the timely disclosure structure Preparation and improvement The persons responsible shall prepare and improve the disclosure structure, for example by establishing information transmission routes, etc. for the timely and appropriate disclosure of material information. Enlightenment about the significance of timely disclosure Enlighten executives and regular employees about the significance of timely disclosure of material information. 6. Other Policies (1) Handling the spread of market rumors As a general rule, the Company shall not comment on inquiries about market rumors. However, if the Company judges that not responding to the rumor could have a serious impact on the Company, it shall correspond with external parties in an appropriate manner. (2) Establishment of a silent period The Company shall make absolutely no comments regarding its business performance estimates during the two weeks immediately preceding announcements of the full-year and quarterly business results

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