Murata Manufacturing : Corparate Governance Report

Corporate Governance Report

Last Update: July 1, 2021

Murata Manufacturing Co., Ltd.

Norio Nakajima

President and Representative Director

Contact: Junichi Yamamoto

General Manager of General Administration Department

(Phone: [phone])

Securities Code: 6981 https://corporate.murata.com/en-global/

I. Basic Views on Corporate Governance, Capital Structure, Corporate Attributes and Other Basic Information

1. Basic Views

Murata considers corporate governance to be one of the highest priorities in management, and we work constantly to establish and operate optimal management systems that will realize sound corporate growth and development while taking into consideration every stakeholder.

The Company's basic principles on corporate governance are set out in the "Corporate Governance Guidelines," which are posted on the Company's website.

*Corporate Governance Guidelines: https://corporate.murata.com/en-global/company/corporate_governance

[Reasons for Non-compliance with the Principles of the Japan's Corporate Governance Code]

[Principle 1.4 Cross-Shareholdings]

(1) Policy regarding strategic shareholdings

In the electronics industry, with rapid changes in the market environment and technological innovation, to aim for sustainable improvement in corporate value, it is necessary to have cooperative relationships with various companies in all areas of development, procurement, production, and sales. The Company holds stock in such counterparties with the aim of maintaining and strengthening transactional relationships with counterparties that will contribute to the maintenance and improvement of the Company's corporate value.

(2) Objectives and rationale for strategic shareholdings

For all primary strategic shareholding stocks, the Board of Directors, in consideration of the risks and returns, conducts examination each fiscal year as to whether or not the holding of such stocks over the medium to long term will contribute to the maintenance and improvement of the Company's corporate value. We believe decisions on whether or not to hold these stocks are appropriate.

(3) Standards on exercise of voting rights

Regarding the exercise of voting rights for strategic shareholdings that the Company holds in a counterparty company, the Company determines to vote for or against a proposal upon individually investigating the effects on the improvement of corporate value for both the Company and the relevant counterparty company from a medium- to long-term viewpoint.

- 1 -

[Disclosure Based on the Principles of the Japan's Corporate Governance Code] [Principle 1.7 Related Party Transactions]

Concerning transactions involving conflicts of interests with Members of the Board of Directors, approval is required from the Board of Directors under the Companies Act, and after implementation, reports are made to the Board of Directors. The presence of transactions between the Company and Members of the Board of Directors and relatives of these persons is confirmed with Members of the Board of Directors. Additionally, transactions with related parties are disclosed in line with laws and regulations.

[Principle 2.6 Roles of Corporate Pension Funds as Asset Owner]

The Murata Corporate Pension Fund handles the management of assets accumulated for the Company's corporate pension.

Decisions related to the asset management are made by the Board of Representatives, following deliberation by the Asset Management Committee. Members of the Asset Management Committee and the Board of Representatives include general managers of the Company's Human Resources, Accounting & Controller, and Finance departments, as well as other personnel with appropriate qualifications. Members also include leaders of the labor union, as representatives of the beneficiaries.

Furthermore, to ensure the appropriate monitoring of asset managers, the Company assigns and cultivates personnel having the necessary experience and credentials and takes advice from outside experts.

[Principle 3.1 Full Disclosure]

(i)-a: Management philosophy

The Company has established the basic philosophy of its management as its "Murata's Philosophy," which all executives and employees share and aim to enact. Murata's Philosophy is available on the Company's website.

*Murata's Philosophy: https://corporate.murata.com/en-global/company/philosophy

(i)-b: Management strategy, management plan

The Company formulates its Mid-term Direction in three-year increments, and the Mid-term Direction for the three years from fiscal 2019 to fiscal 2021 is available on the Company's website. In the Mid-term Direction 2021, the Company has identified the ratio of operating income to net sales and return on invested capital (ROIC) as important financial targets, and has set three company-wide issues, including the implementation of portfolio management, to be addressed in order to achieve the targets.

*The Mid-term Direction: https://corporate.murata.com/en-global/company/mid-term-direction-2021

1. Basic views and policies on corporate governance As stated in "1. Basic Views" above.
2. Policies and procedures in determining remuneration of Members of the Board of Directors Please see "Director Remuneration" "Disclosure of Policy for Determining Remuneration Amounts or Calculation Methods Thereof" in "1. Organizational Composition and Operation" and "2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration Decisions (Overview of Current Corporate Governance System)" of "II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management" below.

- 2 -

1. Policies and procedures in the appointment and dismissal of senior management, and the nomination of candidates for Members of the Board of Directors

Please see "2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration Decisions (Overview of Current Corporate Governance System)" of "II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management" below.

(v) Explanations with respect to the individual appointments and dismissals of candidates for Members of the Board of Directors

Reasons for the appointment of candidates for Members of the Board of Directors and the dismissal of Members of the Board of Directors are disclosed in the Convocation Notice for the Ordinary General Meeting of Shareholders and other disclosures.

*Convocation Notice for the Ordinary General Meeting of Shareholders: https://corporate.murata.com/en-global/ir/info/meetings

[Supplementary Principle 4-1-1: Duties of the Board of Directors and Definition of Range of Entrustment to Management]

The Board of Directors carries out functions including decision-making regarding management policy and execution of important operations as well as supervising the execution of duties by Members of the Board of Directors, and proposals and reports for the Board of Directors are defined within the Regulations of the Board of Directors.

To enable swift and resolute decision-making by the Executive Directors, certain individual decisions on important business execution, such as acquisition and disposal of important assets, or organization or personnel matters, are delegated to the Executive Directors.

[Principle 4-8: Effective Use of Independent Directors]

[Principle 4-9: Independence Standards and Qualification for Independent Directors]

In addition to requirements for outside directors stipulated by the Companies Act and independence standards stipulated by the Tokyo Stock Exchange, five Independent Outside Directors have been appointed based on the Company's Independence Criteria (Criteria for Independence of Outside Directors), and they have been submitted to the Tokyo Stock Exchange as Independent Directors.

The Criteria for Independence of Outside Directors of the Company are as follows.

1. The person is not an executive of the Company or its current subsidiary or a company that was a subsidiary within the past three years.
2. The person is not currently a major shareholder or an executive of a major shareholder.
3. The person is not an executive of a company, etc., that is currently a significant client or supplier or was a significant client or supplier within the past three years with the Company or its current subsidiary.

• "Significant client or supplier" refers to one with which the Company has transactions of 2% or more of consolidated net sales of the Company or of the client or supplier.

1. The person is not an executive of an organization that has received within the past three years a donation or grant of over 10.00 million yen per annum from the Company or its current subsidiary.
2. The person is not an executive of a company or a subsidiary of that company, that employs or has employed within the past three years a Board Member, Statutory Auditor, or Vice President of the Company or its current subsidiary.
3. The person does not have any significant transaction relationship with the Company, such as a consulting or advisory agreement, and has not had any significant transaction relationship in the past.
4. The person is not an executive of the Independent Auditor of the Company.
5. • 3 -

1. The person is not the spouse or a relative within the second degree of kinship, etc., of a Member of the Board of Directors, Statutory Auditor, or Vice President of the Company or its current subsidiary.
2. The person does not carry the risk of creating a constant substantial conflict of interest between the Company's general shareholders as a whole for reasons other than those considered in (1) through (8) above.

[Supplementary Principle 4-11-1: Overall Balance of Expertise, Experience, and Capabilities of the Board of Directors and View Regarding Diversity and Scale]

Please see "2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration Decisions (Overview of Current Corporate Governance System)" of "II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management" below.

[Supplementary Principle 4-11-2: Status of Members of the Board of Directors Concurrently Serving as Officers of Other Listed Companies]

The Company nominates candidate Members of the Board of Directors who are able to dedicate the time and energy required to appropriately carry out the duties and obligations of a Member of the Board of Directors, and they do so in practice.

Significant concurrent positions of Members of the Board of Directors of the Company are stated in the "Convocation Notice for the Ordinary General Meeting of Shareholders."

*Convocation Notice for the Ordinary General Meeting of Shareholders: https://corporate.murata.com/en-global/ir/info/meetings

[Supplementary Principle 4-11-3:Analysis and Evaluation of Effectiveness of the Board of Directors] The Company endeavors to improve the effectiveness of the Board of Directors by conducting an analysis and evaluation of the effectiveness of the Board of Directors as a whole once a year and discloses an overview of the procedure and results.

(1) Process of the analysis and evaluation

A questionnaire for all Members of the Board of Directors and interviews with Outside Directors were conducted and the analysis and evaluation was conducted through multiple discussions in the Board of Directors, making reference to the results of the questionnaire and interviews.

Through conducting the questionnaire and interviews, various confirmations were carried out regarding the composition of the Board of Directors, agenda items submitted to meetings, status of deliberation, personal participation of Director, and other matters regarding the operation of the Board of Directors. The implementation, tallying, analysis, etc. of the questionnaire was carried out by a third party.

(2) Results of the analysis and evaluation, and recognition of challenges

With use of the analysis and reports of the questionnaire results and interview content, the Board of Directors of the Company has been assessed to be functioning with sufficient overall effectiveness in consideration of its duties and obligations.

Proposals have been sufficiently submitted to the Board of Directors, and in particular, the evaluation showed that an atmosphere that enables Directors to speak out freely and openly is being cultivated and broadminded and constructive discussions and exchanges of opinion are taking place. In addition, the evaluation showed that there was certain improvement in discussions on business risks and materials for the Board of Directors meetings.

On the other hand, it was recognized that mainly for the following points, there are some challenges and problems, and that more improvements are expected, and further efforts are needed in the future.

- 4 -

・Improvement of reporting on ESG-related initiatives

The outline of discussions at the committee that promotes sustainability (CSR Management Committee) is reported to the Board of Directors twice a year. This year, in addition to this, efforts to stimulate discussions, such as providing explanations to Outside Directors, have produced results, and we will continue our efforts to further enhance and stimulate discussions.

・Enhancement of discussions on risk approach

There was certain improvement in the discussions on business risks, but we aim to enhance the reports and discussions with a more bird's eye view approach.

・Improvement of reporting and discussions on internal control systems, and expansion of discussion time ・Further improvement of the quality of discussions

• Review of contents and methods of reporting, expansion of discussion time on portfolio strategies and risks
• Continue efforts to improve materials for the Board of Directors meetings, etc.

1. Future initiatives

Based on the results of these evaluations and challenges to be considered, the Company will mainly take the following actions in the fiscal year under review.

・Enhancement and stimulation of ESG-related discussions ・Addition of agenda items related to risk management

・Enhancement of reporting on internal control systems

・Improvement of time utilization in Board of Directors meetings

・Establishing opportunities for Outside Directors and management to exchange opinions and share views outside of Board of Directors meetings

The Company will continue working to further improve the effectiveness of the Board of Directors.

[Supplementary Principle 4-14-2: Policy on Training for Members of the Board of Directors]

The Company's Members of the Board of Directors ensure that they acquire, verify and update the knowledge deemed necessary for carrying out their roles and responsibilities.

To acquire and verify knowledge deemed necessary for carrying out their roles and responsibilities, newly appointed Members of the Board of Directors undergo external training upon assuming office.

The Company provides opportunities for training in corporate governance, compliance and internal controls, etc. to Members of the Board of Directors.

The Company provides opportunities other than the Board of Directors meeting for the acquisition of knowledge relating to status of the Company's business and management issues, etc. to Outside Members of the Board of Directors.

[Principle 5-1: Policy for Constructive Dialogue with Shareholders]

Please see "2. IR Activities" of "III. Implementation of Measures for Shareholders and Other Stakeholders" below.

- 5 -