Daifuku : Notice of Disclosure of "Corporate Governance Report"and Formulation of "Daifuku Group's Basic Policy on Corporate Governance”

FOR IMMEDIATE RELEASE

November 26, 2021

Daifuku Co., Ltd. (Stock code: 6383)

Representative: Hiroshi Geshiro, President and CEO

Contact: Hideaki Takubo, Managing Officer

Corporate Functions Head

Tel: [phone]

Notice of Disclosure of "Corporate Governance Report"

and Formulation of "Daifuku Group's Basic Policy for Corporate Governance"

Daifuku Co., Ltd. has discussed the content of its Corporate Governance Report to submit to the Tokyo Stock Exchange by the end of 2021, along with the revision of Japan's Corporate Governance Code (hereinafter, the "Code") at meetings of the Board of Directors, etc. We are pleased to announce that we have formulated the Daifuku Group's Basic Policy for Corporate Governance based on the Code at the Board of Directors meeting held on Friday, November 26, 2021, and disclosed it together with the Corporate Governance Report. The Board of Directors has resolved to select the Prime Market when the Tokyo Stock Exchange will move to the new market segment on April 4, 2022.

1. Main contents of the Corporate Governance Report

1. Reasons for non-compliance with the Principles of the Code
   The Company implements all the Principles of the Code revised on June 11, 2021.
2. Summary of our response to main points of the revised Code
3. 1. Enhancing board independence
   2. 1. Ensure that at least one-third of directors are independent outside directors as a company listed on the Prime Market
         As a result of the ordinary general meeting of shareholders held in June 2021, nine directors, four of whom were independent outside directors, were elected. At 44%, this exceeds the one-third (44%) of independent outside directors required for Prime Market listed companies. The election of a majority of independent outside directors will be examined as a future issue.
      2. Establish a nomination committee and remuneration committee
         We have established a voluntary Advisory Committee (nomination/remuneration).

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The Committee consists of at least one representative director and three or more members, including one or more outside directors, and meets at least three times a year.

In fiscal 2021, the Committee comprises one representative director and all four independent outside directors, and is chaired by one of these outside directors.

1. 1. Disclose a skill matrix of board members conforming to the company's business strategy
      The Board of Directors identifies the skills that it should prepare in the medium to long term through the formulation of the management philosophy and three- or four-year business plan.
      When appointing candidates, we consider the balance of knowledge, experience, and skills of the Board as a whole, diversity including gender and international aspects, and the optimization of board size, according to the social and business environment. The makeup of the Board after the ordinary general meeting of shareholders is shown as a skill matrix in the convening notice.
   2. Appoint independent directors having managerial experiences at other companies Of the four independent outside directors, two have management experience in other companies.
2. Ensuring diversity in the core human resources of the company
3. 1. Disclose a policy and voluntary measurable targets for ensuring diversity in managerial positions by promoting women, foreign nationals and mid-career professionals

- Policies and goals for promoting women to managerial positions

To facilitate the active participation of women, we are developing and expanding a support system. In addition to increasing the ratio of female employees, the number of female employees working as practical leaders and section managers is increasing and their field of activity is expanding. In addition, in the general employer action plan based on the Act on Promotion of Women's Participation and Advancement in the Workplace, we have set a target of increasing the number of female managers to 30 or more by April 1, 2023, compared with the previous target of 24 or more by March 31, 2025. We will increase the number of female executives who are involved in management decision-making in the future. 

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- Policies for promoting foreign nationals to managerial positions

With the globalization of our business, the number of foreign employees is increasing each year through both regular hiring and mid-career hiring. In addition to graduates of Japanese universities, we also carry out regular recruitment of graduates of overseas universities.

Of the regular hires in fiscal 2021, 6.5% are foreign employees. We will continue to actively hire foreign employees. Four foreign managers are employed as of April 1, 2021. We expect that the number of foreign managers will continue to increase in line with globalization.

- Policies for promoting mid-career professionals to managerial positions

We are actively hiring mid-career personnel, and the ratio of mid-career hires among full-time employees is 42.7% as of April 1, 2021. The same applies to promotions to managerial positions. Mid-career hires accounted for 46.2% of assistant managers and 35.1% of managerial positions. Going forward, we will continue to introduce a professional system (a system different from the conventional remuneration system) in response to the sophistication of duties and actively hire mid-career personnel as qualified managers.

1. 1. Disclose policies for human resources development and internal environment development to ensure diversity, as well as the status of their implementation Under the three-yearbusiness plan Value Transformation 2023 with the themes of adopting diverse human resources management systems and creating a global corporate culture, we are working to develop and promote human resources and improve employee engagement.
2. Dealing with sustainability issues
3. 1. Enhance the quality and quantity of climate-related disclosure based on the TCFD recommendations or equivalent international disclosure frameworks for Prime Market listed companies
      In 2019, we expressed our assent to the TCFD recommendations and in May 2020 we disclosed information on the impact of climate change risks and opportunities on our business activities and profits.
   2. Develop a basic policy on sustainability and disclose our initiatives

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The Group positions its three-year business plan Value Transformation 2023 and the Sustainability Action Plan as the two wheels of its business strategy. We will contribute to realizing a sustainable society through our business activities. From an environmental standpoint, Daifuku has set and disclosed a goal of creating material handling systems with zero environmental impact by 2050 and has established targets for identified issue areas to be achieved by 2030 as stated in its Environmental Vision 2050, which was formulated in conjunction with the business plan.

1. 1. Main issues other than the above
      Promote the use of electronic voting platforms and disclose in English at Prime Market listed companies
      We have already been using the Electronic Voting Platform.
      We disclose financial statements, financial results briefing materials, corporate governance reports, convening notices (convening notices in a narrow sense, reference documents), timely disclosures, Daifuku Report, etc. in English.
      We will begin disclosure of business reports in the convening notice in English in fiscal 2022.
2. Our unique approach to improve corporate governance
   In line with the revision of the Code, we have clarified the Daifuku Group's Basic Policy for Corporate Governance and summarized the status of our initiatives for all items of the Code. The Policy is created as a reorganization of the conventional Daifuku Corporate Governance Guidelines and begins with our basic approach to corporate governance, organizes the specific response status in code order, and introduces reference points for the latest securities report (in Japanese) and Daifuku Report as integrated reporting. For details, please refer to the following references.
3. References
4. • Daifuku Group's Basic Policy for Corporate Governance
   • For our corporate governance report, please see our website:www.daifuku.com/ir/policy/governance

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Daifuku Group's Basic Policy for Corporate Governance

General Provisions

(Objectives)

Daifuku Group (hereinafter, the "Group") actively strives to enhance its corporate governance so as to achieve the sustainable growth of the Company and increase corporate value over the medium to long term. Accordingly, the Daifuku Group's Basic Policy for Corporate Governance (hereinafter, the "Policy") has been clarified, and the status of the initiatives the Group is taking on all items of the Japan's Corporate Governance Code revised in 2021 has been summarized. The Policy is created as a reorganization of the conventional Daifuku Corporate Governance Guidelines and begins with our basic approach to corporate governance, organizes the specific response status in code order, and introduces reference points for the latest securities report (prepared in Japanese) and Daifuku Report as integrated reporting.

(Our basic approach to corporate governance)

Under the company creed, as an unchanging corporate stance, and the spirit of its management philosophy, which is based on changes in the social and business environment, the Group will contribute to the development of society and the economy as a whole, continuously enhancing the effectiveness of corporate governance to achieve sustainable growth and increase corporate value over the medium to long term.

Hini Arata

Today we are doing better than we were yesterday. Tomorrow we will be growing ahead of where we are today.

Automation that Inspires

Inspire society, deliver prosperity and enhance well-being through our core competence―automated material handling technology.

We will

1. strive to realize a sustainable society that minimizes burdens on people and the environment, respects human rights, and encourages responsible manufacturing.

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