Corporate Governance

1.Corporate Governance Structure

Corporate Governance Structural Diagram

The schematic diagram below shows the structure of corporate governance, including internal control systems, within Kuriyama Holdings Corporation.

Corporate Governance Structural Diagram
(Note) Everything enclosed in the dotted line is within the scope of internal controls.

Board of Directors

The Board of Directors is comprised of six members: three directors who are not Audit and Supervisory Committee members and three directors who are Audit and Supervisory Committee members, with two of the Audit and Supervisory Committee member directors being outside directors. The Board of Directors holds regular meetings, as well as extraordinary meetings when needed, to engage in careful yet expeditious decision-making about Group management and business operations. At the same time, the three directors who are Audit and Supervisory Committee members, in addition to attending and contributing to decision-making, also monitor the execution of business operations. In order to ensure clarity with regard to managerial responsibilities in each business year, the term of appointment for directors (excluding those who are members of the Audit and Supervisory Committee) has been shortened to one year. Directors who are members of the Audit and Supervisory Committee are appointed for two years.

Audit and Supervisory Committee

The Audit and Supervisory Committee is comprised of three members: one internal director and two outside directors. Members of the Audit and Supervisory Committee attend regular Board of Director meetings and other important meetings, where they provide their input and opinions, and they also monitor the job performance of the other directors. The Audit and Supervisory Committee annual meeting schedule is determined in advance, with meetings held regularly, with extraordinary sessions being held whenever necessary.

Group Management Council

The Group Management Council meets at least once a year and is comprised of Kuriyama Holdings Corporation's CEO, directors the presidents of the Group's core operating companies. This council facilitates the sharing of Group management policy and deliberates on business challenges as a Group. In addition, operating company management council meetings are held once a month where Kuriyama Holdings Corporation directors and operating company department representatives meet to deliberate on specific business challenges relating to business operations at core operating companies in order to improve and enhance business efficiency.

Auditing Department

The Auditing Department has been established as an independent entity under the oversight of Kuriyama Holdings Corporation's CEO in order to perform reasonable and systematic internal auditing of Kuriyama Holdings Corporation and its affiliates, in line with company rules and regulations. These audits are conducted in collaboration with the Audit and Supervisory Committee and the Accounting Auditor to contribute to management system improvement and innovation.

The following table shows the constituent membership of the aforementioned bodies. (Presiding Officer, Chairperson indicated by ◎)

Title Name Board of Directors Audit and Supervisory Committee Group Management Council
President and Chief Executive Officer Hironobu Nose
Director (Managing Executive Officer) Shigehiko Konuki
Director Nobuhiko Omura
Director Hisato Miyachi
Outside Director Tetsuya Izumoto
Outside Director Seigaku Nanayama
Executive Officer Yuzo Motoki
Executive Officer Brian Dutton

Brian Dutton

We have incorporated an audit and supervisory committee into our corporate governance structure in order to improve managerial transparency and expedite proper decision-making which remains responsive to the trust which our shareholders, customers, local communities and other stakeholders place in us.

Current Status of Internal Control Systems

We have established the Kuriyama Group Corporate Code of Conduct to ensure that all Kuriyama Group executive officers and employees are in strict compliance with laws, regulations and corporate ethics and conduct themselves in a manner appropriate to social norms. Of particular note is the "Compliance Code," which we created to help with building, maintaining and improving compliance structures, and we appoint compliance administrators who oversee daily compliance, as well as work to improve all employees' awareness and understanding of compliance. In addition, we have set up an internal reporting system which allows employees to directly report any conduct which violates, or which may violate, the Compliance Code. This system is designed to protect the anonymity of those submitting reports and to shield them from any negative repercussions. When the situation calls for it, such as in important matters of law and taxes, the opinions of lawyers, certified tax accountants and other outside specialists will be sought and appropriate, careful action will be taken, based on their recommendations and guidance.

Compliance

Current Status of Risk Management Systems

We have established the Kuriyama Group Corporate Code of Conduct to ensure that all Kuriyama Group executive officers and employees are in strict compliance with laws, regulations and corporate ethics and conduct themselves in a manner appropriate to social norms. Of particular note is the "Compliance Code," which we created to help with building, maintaining and improving compliance structures, and we appoint compliance administrators who oversee daily compliance, as well as work to improve all employees' awareness and understanding of compliance. In addition, we have set up an internal reporting system which allows employees to directly report any conduct which violates, or which may violate, the Compliance Code. This system is designed to protect the anonymity of those submitting reports and to shield them from any negative repercussions. When the situation calls for it, such as in important matters of law and taxes, the opinions of lawyers, certified tax accountants and other outside specialists will be sought and appropriate, careful action will be taken, based on their recommendations and guidance.

Current Status of Systems to Ensure Appropriateness of Subsidiary Business

At Kuriyama Holdings Corporation, we have created the Kuriyama Group Corporate Code of Conduct, which we utilize as part of our efforts aimed at strengthening compliance among subsidiaries. From Kuriyama Holdings Corporation, we also appoint subsidiary executive officers, and, with regard to important matters, we have established rules requiring prior approval from us, as well as put in place a system facilitating review and guidance of subsidiary business implementation on an as-needed basis in order to ensure its appropriateness.

Overview of Contracts for Limitation of Liability

Based on Article 427-1 of the Companies Act, our outside directors are subject to agreements which limit liability for damages according to Article 423-1 of the same Act. The amount of damages for which they are liable is the minimum total liability specified in Article 425-1 of the Act. This limitation on liability only applies in situations where the damages in question are not the result of an outside director executing his or her duties in bad faith or exhibiting gross negligence.

2.Matters Relating to Directors

Number of Directors

As per our articles of incorporation, the maximum number of directors shall be nine (excluding Audit and Supervisory Committee members), and the maximum number of Audit and Supervisory Committee member directors shall be four.

Requirements for Appointment of Directors

As per our articles of incorporation, director appointments shall be confirmed by a majority vote among shareholders, when a quorum of one-third of all shareholders with voting rights has been achieved; also, confirmation of director appointments is not carried by cumulative voting.

3.Shareholders Meeting Resolution Matters on Which the Board of Directors May Vote

Acquisition of Own Shares

In line with Article 165-2 of the Companies Act, and as established in our articles of incorporation, Kuriyama Holdings Corporation may acquire treasury stock on the market or via other such transactions following approval by the Board of Directors and for the purpose of facilitating more flexible capital policies.

Interim Dividends

In line with Article 454-5 of the Companies Act, and as established in our articles of incorporation, Kuriyama Holdings Corporation may provide interim dividends following approval by the Board of Directors and for the purpose of facilitating more flexible dividend policies.

Exemption of Directors and Others from Liability

In line with Article 426-1 of the Companies Act, and as established in our articles of incorporation, the Board of Directors may vote to exempt from liability for damages arising from the negligent performance of their duties, to the extent allowed by law, directors (including former directors) and auditors from before our transition to an audit and supervisory committee-based corporate governance structure. This exemption is provided in order to encourage directors and other relevant executive officers to fully engage in their expected roles and duties.

4.Shareholders Meeting Resolution Matters

Requirements for Shareholders Meeting Special Resolutions

In line with Article 309-2 of the Companies Act, and as established in our articles of incorporation, approval of special resolutions at shareholders meetings shall be confirmed by a two-thirds majority vote among shareholders, when a quorum of one-third of all shareholders with voting rights has been achieved. This is intended to ease the quorum requirements for special resolutions at shareholders meetings, thereby better facilitating the running of shareholders meetings.