Corporate Governance Report

Transcription

1 Corporate Governance Report Last Update: July 20, 2017 Kubota Pharmaceutical Holdings Co., Ltd. Ryo Kubota, Representative Executive Officer, Chairman, President and CEO Contact: IR Department, Securities Code: The corporate governance of Kubota Pharmaceutical Holdings Co., Ltd. ( Kubota Holdings ) is described below. I. Basic Views on Corporate Governance and Capital Structure, Corporate Profile and Other Basic Information 1. Basic Views Kubota Holdings is a clinical stage ophthalmology company that specializes in identifying and developing novel therapeutics to treat and slow the progression of sight threatening ophthalmic diseases affecting millions of people worldwide. As a listed company, we believe that enhancing the soundness and transparency of corporate management while improving operational efficiency will help improve our corporate value and result in benefitting stakeholders, including shareholders, in the long run. We believe it is an important management issue to reinforce corporate governance to enhance the soundness and transparency of management. [Reasons for Non compliance with the Principles of the Corporate Governance Code] Kubota Holdings will adopt all the General Principles of the Corporate Governance Code. 2. Capital Structure Percentage of Foreign Shareholders Over 20% but less than 30% [Status of Major Shareholders] Name / Company Name Number of Shares Owned Percentage (%) SBI Incubation Co., Ltd. 14,486, Dr. Ryo Kubota, M.D., Ph.D. 10,250, Otsuka Pharmaceutical Co., Ltd. 1,888, Otsuka Pharmaceutical Factory, Inc. 1,515, Tokyo Weld Co., Ltd. 278, Japan Securities Finance Co., Ltd. 230, Shin Etsu Chemical Co., Ltd. 222,

2 DNP Holding USA Corporation 222, Morgan Stanley Smith Barney LLC Clients Fully Paid SEG Account 153, Fumiyuki Furuya 102, Controlling Shareholder (except for Parent Company) Parent Company - - Supplementary Explanation Above status of Major Shareholders is based as of June 30, 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 (or TSE ) Mothers December Pharmaceutical Less than 100 Less than 10 billion 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 Kubota Holdings must comply with reporting and governance requirements of applicable Japanese law and the listing rules of the TSE. Kubota Holdings will continue to be subject to the U.S. Securities and Exchange Commission s reporting requirements, the mandates of the Sarbanes Oxley Act of 2002 and the Dodd Frank Wall Street Reform and Consumer Protection Act for at least a certain period following the Redomicile Transaction. II. Business Management Organization and Other Corporate Governance Systems regarding Decision making, Execution of Business, and Oversight in Management - 2 -

3 1. Organizational Composition and Operation Organization Form Company with Three Committees (Nominating, Audit and Compensation) [Directors] Maximum Number of Directors Stipulated in Articles of Incorporation 7 Term of Office Stipulated in Articles of Incorporation One year Chairperson of the Board President Number of Directors 5 [Outside Directors] Number of Outside Directors 4 Number of Independent Directors 3 Outside Directors Relationship with the Company (1) Name Attribute Relationship with the Company* a b C d e f g h i j k Shintaro Asako From another company Shiro Mita From another company O Eisaku Nakamura From another company Robert Takeuchi From another company a. Executive of the Company or its subsidiaries b. Non executive director or executive of a parent company of the Company c. Executive of a fellow subsidiary company of the Company d. A party whose major client or supplier is the Company or an executive thereof e. Major client or supplier of the Company or an executive thereof f. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as a director g. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a legal entity) h. Client or supplier 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 directors 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 - 3 -

4 Outside Directors Relationship with the Company (2) Name Shintaro Asako Membership of Committees Compensatio n / Audit Designation as Independent Director Supplementary Explanation of the Relationship Reasons of Appointment Yes None Mr. Asako should serve as a member of our Board based on his executive management experience as well as a strong background in finance and financial accounting, including those regulations for publicly listed companies in the US and Japan. Shiro Mita Nominating / Audit No Client or supplier of the Company He also fulfills the requirements for Independent Directors under standards established by the Tokyo Stock Exchange and New York Stock Exchange*. Dr. Mita brings to the Board extensive experience in the biotechnology and pharmaceutical fields, both as a researcher and an executive officer. Eisaku Nakamura Nominating / Compensatio n Yes None Mr. Nakamura brings to the Board relevant investment management and capital markets experience, which we believe will be important as Kubota Holdings and its subsidiaries continue to grow. He also fulfills the requirements for Independent Directors under standards established by the Tokyo Stock Exchange and New York Stock Exchange*

5 Robert Takeuchi Compensatio n / Audit Yes None Mr. Takeuchi brings to the Board significant capital market, private equity and investment advisory experience. He also fulfills the requirements for Independent Directors under standards established by the Tokyo Stock Exchange and New York Stock Exchange*. *The Board of Kubota Holdings is comprised of a majority of directors who, in the business judgment of the Board, qualify as independent directors ( Independent Directors ) under the applicable rules, regulations, and listing rules of the New York Stock Exchange ( NYSE ) so long as U.S. Securities and Exchange Commission (SEC) reporting requirements continue. The rules of the SEC require that Kubota Holdings identify which directors are independent using a definition for independence for directors of a national securities exchange (such as the NYSE) or inter dealer quotation system which has requirements that a majority of the board of directors be independent. The Board will at least annually assess the independence of its directors. [Committees] Committee s Composition and Attributes of Chairperson Nominating Committee Compensatio n Committee Audit Committee All Committee Members Full time Members Inside Directors Outside Directors Chairperson Inside Director Outside Director Outside Director [Executive Officers (Shikkoyaku)] Number of Executive Officers (Shikkoyaku) 2 Status of Additional Duties Name Representative Authority Audit Committee Member Additional Duties as Director Nominating Committee Member Compensation Committee Member Ryo Kubota Yes No Yes No No John Gebhart No No No No No Additional Duties Employee as [Auditing Structure] Appointment of Directors and/or Staff to Support the Audit Committee Not Appointed - 5 -

6 The Reason for not appointing Directors and/or Staff to support the Audit Committee We do not appoint directors or employees who support the performance of the audit committee. We believe that current corporate governance structure is appropriate to the size and activities of Kubota Holdings. Cooperation among Audit Committee, Accounting Auditors and Internal Audit Departments The members of the audit committee, accounting auditor, internal audit division and Chief Financial Officer attend the quarterly audit committee meeting. At such meeting, reporting and discussion with regards to the audit plan of the audit committee, accounting auditor and internal audit division, their audit implementation, issues and progress in improvement take place. The policy of the audit committee is to provide consent to decisions on the compensation, etc. of an accounting auditor, or permissible services provided by qualified accounting firms and consultants. These services may include audit services, audit related services, tax services and other services. Consent on such services is detailed as to the particular service or category of services and is generally subject to a specific budget. The accounting firm, consultants and management are required to periodically report to the audit committee regarding the extent of services provided by the accounting firm and consultants in accordance with this consent, and the fees for the services performed to date. Kubota Holdings has appointed BDO Sanyu & Co. as its accounting firm to act as the accounting auditor (kaikei kansanin) [Independent Directors] Number of Independent Directors 3 Matters relating to Independent Directors The Board is comprised of a majority of directors who, in the business judgment of the Board, qualify as independent directors ( Independent Directors ) under the applicable rules, regulations, and listing rules of the TSE and New York Stock Exchange ( NYSE ), including Section 303A.02 of the NYSE Listed Company Manual, as such rules, regulations and listing rules may be amended from time to time, and these Corporate Governance Guidelines. The Board will at least annually assess the independence of its directors

7 [Incentives] Incentive Policies for Directors and/or Executive Officers (Shikkoyaku) Performance linked Compensation / Stock Options Supplementary Explanation The compensation committee determines appropriate levels of compensation for directors and executive officers and their compensation structure to stay competitive in the search for and retention of directors and executive officers and to appropriately incentivize them towards improving performance of Kubota Holdings and its subsidiaries. Under this policy, Kubota Holdings generally compensates directors and executive officers with stock options and other share based compensation as well as executive officers with bonus and other performance linked compensation, while taking the management situation, each director's or executive officer s position and duties and employees' standard salaries into consideration. Recipients of Stock Options Inside Directors / Outside Directors/ Executive Officers (Shikkoyaku) / Employee / Subsidiaries Directors / Subsidiaries Executive Officers / Subsidiaries Employee / Others Supplementary Explanation Stock options are granted in order to remain competitive within our industry peer group in our ability to attract and retain qualified directors, executive officers and employees of Kubota Holdings and its subsidiaries, as well as to incentivize them to improve performance of Kubota Holdings and its subsidiaries. [Compensation for Directors and Executive Officers (Shikkoyaku)] Disclosure of Individual Directors Compensation No Individual Disclosure Disclosure of Individual Executive Officers Yes (Shikkoyaku) Compensation Supplementary Explanation Kubota Holdings disclosed total amount of directors compensation in Annual Securities Report etc. In addition, Kubota Holdings also disclosed the individual compensation more than 100 million Japanese yen. These disclosure documents are available on our website. Policy on Determining Compensation Amounts and Calculation Methods Established Disclosure of Policy on Determining Compensation Amounts and Calculation Methods In general, Kubota Holdings compensates its non employee directors with a combination of cash and equity - 7 -

8 awards. Employee directors are not paid additional compensation for their services as directors. In addition, Kubota Holdings compensates its executive officers with salaries, bonus, other financial benefits and share based compensation; provided that if an executive officer of Kubota Holdings also serves as an officer or an employee of Acucela Inc., such executive officer is generally compensated by Kubota Holdings and Acucela Inc.in such proportion as reasonably determined by the compensation committee. The amount and the composition of compensation for each director and executive officer is determined by the compensation committee while taking the management situation, each director's or executive officer s position and duties and employees' standard salaries into consideration. In addition, compensation of each director and executive officer is determined, using a benchmarking study provided by an independent consultant. This study provides insight into competitive peer group compensation practices and other market factors in order to attract and retain qualified directors and executive officers. The compensation committee performs an annual review of director and executive officer compensation through benchmarking in relation to the compensation practices of peer group companies. [Supporting System for Outside Directors] Kubota Holdings distributes materials with regards to such resolution and reports in advance, in holding every board of directors' meeting 2. Matters on Functions of Business Execution, Auditing, Oversight, Nominating and Compensation Decisions (Overview of Current Corporate Governance System) I. Current Corporate Governance System 1. Overview In order to separate its executive and supervisory functions and to allow executive officers to make swift and decisive business decisions as well as to ensure management transparency, Kubota Holdings has adopted the Three Committee system, under which the Board of Directors effectively supervises and monitors the business execution of Kubota Holdings, by coordinating with a nominating committee, an audit committee, and a compensation committee (collectively, Committees ). Each Committee is comprised entirely of directors, the majority of which consist of outside directors, while the decision making on the business operation may be largely delegated to executive officers, thereby enabling prompt decision making on the company management. To enhance this, Kubota Holdings has adopted the Corporate Governance Guidelines, which provide a common set of expectations as to how the Board of Directors, and its various committees, individual - 8 -

9 directors and management should perform their functions. In addition to the statutory committees as described above, Kubota Holdings has the executive board, which provides operational leadership and management in accordance with laws and regulations. 2. Board of Directors The Board of Directors of Kubota Holdings consists of one internal director (Dr. Ryo Kubota), and 4 outside directors (Shintaro Asako, Dr. Shiro Mita, Eisaku Nakamura, and Robert Takeuchi), each of whom currently also serves as a director of Acucela US. Kubota Holdings has executed the liability limitation agreements with 4 outside directors, pursuant to which such directors will generally not be liable to Kubota Holdings in excess of the minimum liability amount permissible by law. The Board will meet at least once every three months and hold extraordinary meetings when necessary. The Board is responsible for making decision concerning important management issues including management policy and establishing a system to ensure the appropriateness of the operation of its group as well as overseeing business execution, and the authority to make business decision is delegated as much as possible to executive officers. 3. Nominating Committee The nominating committee consists of three directors, of whom two are outside directors; Dr. Ryo Kubota (chair), Dr. Shiro Mita and Eisaku Nakamura. The nominating committee determines any agenda item concerning the appointment or removal of directors to be submitted to general meetings of shareholders. In addition, the nominating committee takes the lead in organizing Board and its committee membership and evaluations of the directors. 4. Audit Committee Kubota Holdings audit committee consists of three outside directors, Shintaro Asako (chair), Dr. Shiro Mita and Robert Takeuchi. Shintaro Asako (chair) serves as the audit committee financial expert. The audit committee (1) audits the performance of duties by the company s directors and prepares audit reports and (2) determines any agenda item concerning the appointment, removal or refusal of reappointment of accounting auditors to be submitted to general meetings of shareholders. Kubota Holdings audit committee receives reports from the accounting auditor on the accounting audit when such report is necessary. In addition, the audit committee resolves matters pertaining to audit policies, audit plans and audit methods and receives reports from other accountants, consultants and experts as is deemed necessary and appropriate by the committee in the administration of its duties. The audit committee reports to the Board on the results of audits and investigations conducted by instructing - 9 -

10 accountants, consultants and experts or by performing additional or separate direct focused inquiry. 5. Compensation Committee The compensation committee consists of three outside directors, Robert Takeuchi (chair), Shintaro Asako and Eisaku Nakamura. The compensation committee determines the compensation, bonus or other financial benefits received by each executive officer and director from Kubota Holdings as consideration for his or her services (including, in the case of any executive officer who concurrently serves as an employee of Kubota Holdings, the compensation, bonus or other financial benefits received by him or her as consideration for his or her service as employee). 6. Executive Board Kubota Holdings forms the executive board, consisting of two executive officers. The executive board will meet at least once every three months and hold extraordinary meetings when necessary, to carry out the strategy and operating plans approved by the Board of Directors, and discuss all the business activities and issues to facilitate, develop and promote their operations. 7. Internal Audit In light of its size and activities, Kubota Holdings outsources its internal audit function to accounting firms and qualified consultants. The Chief Financial Officer of Kubota Holdings or his or her designee receives periodic reports from such accounting firms and qualified consultants and evaluates the appropriateness of the internal control of the structure comprehensively and objectively, and gives recommendations for addressing selected issues and makes follow ups by working together with the accounting auditor of Kubota Holdings on practical level. 8. Accounting Audit Kubota Holdings has appointed BDO Sanyu & Co. as its accounting firm to act as the accounting auditor (kaikei kansanin). 3. Reasons for Adoption of Current Corporate Governance System Kubota Holdings has adopted a Three Committee system as allowed by the Japanese Companies Act. In view of Kubota Holding s business scale and type, we believe that enhancing the efficiency of business execution by executive officers while ensuring supervision of management and the advisory function of outside directors and each committee is the key to establishing a highly effective corporate governance structure. Based on such a belief, the current structure has been adopted

11 Four of the five directors of Kubota Holdings elected are outside directors. These directors approve Kubota Holdings policies and strategies and are responsible for the evaluation of the performance of the chief executive officer, other executive officers and the directors. In the event the offices of the Chair and the Chief Executive Officer are held by the same Board member, or if the office of Chair is otherwise held by a director who is not an Independent Director, the Independent Directors shall appoint an Independent Director to serve as Lead Independent Director. The Lead Independent Director s role is to ensure that the Board can operate independently of management and that directors have an independent leadership contact. The Lead Independent Director also assists in enhancing the Board s effectiveness by acting as a liaison between management, the Board and other stakeholders as appropriate. The Lead Independent Director also chairs all Executive Sessions. In general, the agenda for every regularly scheduled Board meeting shall include a meeting of the independent directors, in executive session. In any event, the independent directors shall meet in executive session at least four times per year to discuss, among other matters, the performance of the Chief Executive Officer. The independent directors will meet in executive session at other times at the request of any independent director. Absent unusual circumstances, these sessions shall be held on the same date as regularly scheduled Board meetings. III. Implementation of Measures for Shareholders and Other Stakeholders 1. Measures to Vitalize the General Shareholder Meetings and Smooth Exercise of Voting Rights Scheduling AGMs Avoiding the Peak Day Allowing Electronic Exercise of Voting Rights Providing Convocation Notice in English Supplementary Explanations The general meeting of shareholders of Kubota Holdings are to be held in May every year under the Articles of Incorporation. Kubota Holdings will adopt an internet based electronic voting system. Kubota Holdings publicizes convocation notices of the general meeting of shareholders and notices of resolutions thereof in Japanese and English on its website. 2. IR Activities Regular Investor Briefings for Individual Investors Supplementary Explanations A regular informational meeting for Individual investors is held once a year in Japan. In addition, Kubota Holdings also actively participates in the Explanation by the representative Yes

12 Regular Investor Briefings for Analysts and Institutional Investors Regular Investor Briefings for Overseas Investors Posting of IR Materials on Website Establishment of Department and/or Manager in Charge of IR Other meetings held by security companies, IR conferences for individual investors, etc. Kubota Holdings holds regular informational meetings for analysts and institutional investors, small and large, once per calendar quarter. Kubota Holdings plans to implement non deal roadshows overseas, and participate in overseas healthcare conferences etc. Kubota Holdings will post materials for timely disclosure concerning statutory facts and facts of incidents, brief statements of accounts, annual securities reports, quarterly securities reports, business reports, notices of the general meeting of shareholders and notices of resolutions thereof, presentations at financial results briefings, etc. URL: Officer in charge of IR: John Gebhart, executive officer of Kubota Holdings Person in charge of contact with TSE: Yasuo Ishikawa, Director of Financial Reporting Kubota Holding will endeavor to issue reports to shareholders for each fiscal year and engage in public relations activities that enhance stakeholder s understanding both in Japan and overseas. Yes Yes 3. Measures to Ensure Due Respect for Stakeholders Supplementary Explanations Stipulation of Internal Rules Kubota Holdings has instituted internal rules, a Code of Business Conduct for Respecting the Position of Stakeholders and Ethics for promoting integrity throughout the organization with responsibilities to stakeholders both inside and outside of Kubota Holdings. Implementation of Environmental Activities, CSR Activities etc. Acucela Inc., which is a subsidiary of Kubota Holdings, donates to both academic and medical research institutions as a part of its CSR activities. In 2016, donations toward medical research included Richard E. Hoover Rehabilitation Services for Low Vision and Blindness. Acucela Inc. also donates to academic research, including The National Bureau of Asian

13 Development of Policies on Information Provision to Stakeholders Research. Kubota Holdings has adopted internal rules for Communication Policy, which provides for a guideline on providing information to stakeholders. IV. Matters Related to the Internal Control System 1. Basic Views on Internal Control System and the Progress of System Development 1. Status of development of the internal control system In order to ensure that business execution by executive officers and employees complies with laws, regulations and the Articles of Incorporation of Kubota Holdings, the Board has established the internal control and governance framework of Kubota Holdings, including the following framework. Kubota Holdings will continue to evaluate and improve such framework going forward, as appropriate. a. The Board, in general, and the audit committee, specifically, consider the adequacy of Kubota Holdings internal controls. The audit committee shall consult periodically with Kubota Holdings accounting auditor, out of the presence of management, about internal controls and the completeness and accuracy of Kubota holdings financial statements. b. Kubota Holdings establishes the internal audit division, which evaluates the appropriateness of the internal control of the structure comprehensively and objectively, and provides recommendations for addressing selected issues to the audit committee and makes follow ups by working together with the accounting auditor on practical level. c. To promote compliance, Kubota Holdings has established internal rules in accordance with laws and regulations thoroughly disseminates such rules among executive officers and employees. Kubota Holdings also provides necessary related education and training opportunities. d. In order to discover violations of compliance at an early stage and correct such issues as early as possible, Kubota Holdings has confidential internal reporting rules that are reinforced by providing a confidential internal reporting system to ensure protection to the reporter of such a violation. e. Kubota Holdings has formulated "Insider Trading Prevention Rules" to prevent insider transactions which stipulate the fundamentals with regard to management of inside information obtained by directors, executive officers, auditors or employees concerning business activities; the control/regulation of sales and purchases of stocks and securities and other transactions by directors, executive officers, auditors or employees; and a required code of conduct for directors, executive officers, auditors and employees. f. Kubota Holdings shall not have any relation with antisocial forces that pose threats to the order and safety of civil society. Kubota Holdings shall act as one in refusing connection with such forces adamantly. 2. System Concerning Retention and Management of the Information Related to Executive Officers' Execution of Duties

14 Kubota Holdings formulates rules related to the retention and management of the information with regard to the business execution of directors, executive officers and employees and the handling of confidential information. Based on these rules, Kubota Holdings shall retain and manage documents and media containing such information appropriately and accurately. 3. System for Managing Risk of Loss The Kubota Holdings Board shall be actively involved in the oversight of risk management process. The Kubota Holdings Board does not have a standing risk management committee, but administers this oversight function directly through the Kubota Holdings Board as a whole, as well as through its standing committees that address risks inherent in their respective areas of oversight. In particular, Kubota Holdings audit committee has the responsibility to consider and discuss our major financial risk exposures and the steps the management has taken to monitor and control these exposures, Kubota Holdings compensation committee assesses and monitors whether any of Kubota Holdings compensation policies and programs has the potential to encourage excessive risk taking, Kubota Holdings nominating committee monitors our major legal compliance risk exposures and Kubota Holdings program for promoting and monitoring compliance with applicable legal and regulatory requirements, and the Kubota Holdings Board is responsible for monitoring and assessing strategic risk exposure and other risks not covered by the committees. The full Kubota Holdings Board, or the appropriate committee, receives reports on risks facing the company from Kubota Holdings Chief Executive Officer or other members of management to enable it to understand Kubota Holdings risk identification, risk management and risk mitigation strategies. 4. System to ensure the efficient execution of duties by executive officers a. The executive officers system is adopted and an adequate number of executive officers are maintained to ensure the efficient execution of duties by executive officers. b. A regular meeting of the Board is held, to make decisions on important managerial matters and supervise business execution by executive officers and employees. c. To reinforce the functions of the Board and improve management efficiency, a meeting of the executive board is held at least once every three months, attended by the Chief Executive Officer and Chief Financial Officer, to ensure timely decisions on basic and important matters related to business execution and deliberate on important projects. Depending on the content of such deliberations, decisions may be escalated for additional consideration by a committee or the Board. 5. The Current Status of Development of System to ensure the Appropriateness of Business Operation of Subsidiaries

15 In order to ensure the appropriateness of business operation of its subsidiaries, Kubota Holdings has adopted the Rules and Procedures for Management of Subsidiaries, under which its subsidiaries are required to provide applications for approval to Kubota Holdings with respect to the fundamental management matters. Kubota Holdings will also ensure that subsidiaries are conducting appropriate risk management, compliance control over directors, executive officers and employees and internal audits as well as comprehend, strengthen and maintain the management standard of the group. 6. Status of Audit by Audit Committee In light of the size and activities of Kubota Holdings as holding company, we do not appoint directors, executive officers and employees who directly support the performance of the audit committee. Kubota Holdings provides reimbursement or an advance for any expense which any member of the audit committee reasonably incurs or will reasonably incur in connection with their execution of the duties of the committee as defined within the Regulations of the Audit Committee, upon request of the committee members. Kubota Holdings audit committee receives reports from the accounting auditor on the accounting audit when such report is necessary. In addition, the audit committee resolves matters pertaining to audit policies, audit plans and audit methods and receives reports from such other accountants, consultants and experts as are deemed necessary and appropriate by the committee in the administration of its duties. The audit committee reports to the Board on the results of audits and investigations, which may be conducted by instructing accountants, consultants and experts or by performing additional or separate direct focused inquiry. The members of the audit committee, accounting auditor, internal audit division and Chief Financial Officer attend the quarterly audit committee meeting. At such meeting, reporting and discussion with regards to the audit plan of the audit committee, accounting auditor and internal audit division, their audit implementation, issues and progress in improvement take place. The policy of the audit committee is to provide consent to decisions on the compensation, etc. of an accounting auditor, or permissible services provided by qualified accounting firms and consultants. These services may include audit services, audit related services, tax services and other services. Consent on such services is detailed as to the particular service or category of services and is generally subject to a specific budget. The accounting firm, consultants and management are required to periodically report to the audit committee regarding the extent of services provided by the accounting firm and consultants in accordance with this consent, and the fees for the services performed to date. 7. System for directors, executive officers and employees to report to the audit committee

16 In case actions that violate laws, regulations and/or Kubota Holdings Articles of Incorporation or facts that could pose tremendous losses on Kubota Holdings are recognized, or if there is a possibility that such facts could occur, executive officers of Kubota Holdings and its subsidiaries shall report such finding to the Board, including the audit committee members, in a timely and appropriate manner. Employees should report known and suspected violations of (1) laws, governmental rules and regulations, (2) internal accounting controls or accounting and auditing practices and policies or (3) any other policies of Kubota Holdings and its subsidiaries, to their supervisors and managers. This includes complaints or reports received from persons outside Kubota Holdings and its subsidiaries and complaints regarding third parties who provide services to the Kubota Holdings and its subsidiaries. Supervisors and managers shall promptly consider the information submitted to them and take appropriate action in accordance with the law, governmental rules and regulations and otherwise consistent with good business practice. They shall also provide any such information to the Chief Financial Officer of Kubota Holdings (or his or her designees) acting as the compliance officer, who shall then provide it to the chair of the audit committee. If an employee is not comfortable discussing the suspected violation with any of their direct supervisors or managers, the employee may report the suspected violation directly to the audit committee, by hotline, or letter on a confidential and anonymous basis. The audit committee will take whatever steps it deems necessary to respond to a report that it receives. In addition, the Board and the audit committee, whenever necessary, can ask the directors, executive officers and employees of Kubota Holdings or its subsidiaries to submit additional reports and provide documents concerning items which the audit committee determines it necessary to check to fulfill their duties. 2. Basic Views on Eliminating Anti Social Forces Kubota Holdings will not have any relation with antisocial forces and organizations that pose threats to the order and safety of civil society. Kubota Holdings will take thorough measures against such forces. The fundamentals are stipulated in Kubota Holdings' guidelines of business conduct and thoroughly disseminated among directors, executive officers and employees; moreover, necessary education and training are provided. With its administrative department as the contact that handles this matter, Kubota Holdings collects necessary information. Should any antisocial group contact Kubota Holdings, it will take actions in cooperation with the police and other external professional organizations

17 V. Other 1. Adoption of Anti Takeover Measures Adoption of Anti Takeover Measures Not Adopted 2. Other Matters Concerning to Corporate Governance System Kubota Holdings disclosure policy and process of timely disclosure (1) In the event that a person responsible for each division obtains information that is considered to be a fact of incidence, he/she must promptly report it to the Chief Financial Officer. The Chief Financial Officer will determine whether the information falls under the criteria of timely disclosure provided for, in the rules of the TSE. (2) The Chief Financial Officer will convene and hold a meeting of the executive board as the necessity arises, to deliberate on information provided, necessary escalation and disclosure

18 Kubota Holdings Governance Structure (Reference Information) General Meetings of Shareholders Nominating Committee Board of Directors Compensation Committee Audit Committee Executive Board CEO, CFO Independent Accountant