PeptiDream : Corporate Governance Report 07/08/2020

Corporate Governance Report

Last Update: August 7, 2020

PeptiDream Inc.

Patrick C. Reid Representative Director, President & CEO Contact: Toshiyuki Iwata Head of Investor Relations Securities Code: 4587 https://www.peptidream.com/

The corporate governance of PeptiDeam Inc. (the "Company") is described below.

1. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and

Other Basic Information

1. Basic Views

The fundamental basis of our corporate governance is to fulfill our social responsibilities as a listed company under the business philosophy of developing therapeutics using non-standard peptides by applying our proprietary Peptide Discovery Platform System (PDPS), The Company strives to support people around the world who are suffering from diseases, as well as to improve the soundness and efficiency of our corporate management and to sustainably enhance our corporate value.

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

【Principle 4-11 (1): Preconditions for the effectiveness of the Board of Directors and Board of Corporate

Auditors】

Our basic approach to organizing the Board of Directors is that it consists of members deemed appropriate, with consideration for balanced knowledge, experience and skills in our drug research and development business. The number of members is within the range of seven directors and four external directors (Audit and Supervisory Committee members) specified in the Articles of Incorporation. One of our Audit and Supervisory Committee members is a certified public accountant with adequate knowledge of financial affairs and accounting.

Regarding internationalization, our president is American and two executive directors have years of experience working overseas for foreign-based companies. Therefore, they help to achieve a high ratio of diversity and balance in ideas and ways of thinking. Meanwhile, the Company recognizes that gender diversity is a momentous challenge for us and will continue to proactively consider recruiting female directors from the perspective of effectiveness and appropriate size. A female director was appointed as substitute member of the Audit and Supervisory Committee at the 14th Ordinary General Meeting of Shareholders held on 27th March 2020.

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[Disclosure Based on the Principles of the Corporate Governance Code]

【Principle 1-4:Cross-shareholdings】

The Company does not hold shares of other listed companies as strategic shareholdings.

【Principle 1-7: Related party transactions】

The Company complies with the procedures specified in the Companies Act for transactions with directors that result in a conflict of interest and these transactions require reporting and approval by the Board of Directors.

The Company regularly checks with directors whether there are transactions between related parties and disclose the results in our securities reports.

【Principle 2-6: Roles of corporate pension funds as asset owners】

The Company has not adopted a corporate pension program; therefore, there will not be a case in which corporate pension funds perform the role as asset owners.

【Principle 3-1: Full disclosure】

(i) Company objectives (e.g., business principles), business strategies and business plans:

Our business philosophy is posted on our website. Our business strategies and plans are presented in the summaries of financial results, the presentation materials for financial result briefings, securities reports and other documents.

(https://www.peptidream.com/esg/data_en.html)

(ii) Basic views and guidelines on corporate governance:

These are presented in our corporate governance reports and "Our Approach to Sustainability (ESG)" on our website.

1. Board policies and procedures in determining the remuneration of the senior management and directors: See the "Policy for determining the amount of remuneration or calculation method" section in the "Directors' remuneration" in the corporate governance report.
2. Board policies and procedures in the appointment/dismissal of the senior management and the nomination of director and corporate auditor candidates:
   The Board of Directors comprehensively evaluates and assesses experience, knowledge, specialization and other qualities and determines candidates in accordance with our business philosophy and business strategies.
3. Explanations with respect to the individual appointments/dismissals and nominations based on (iv):

The Company discloses the reasons for selecting the candidates for directors, who are members of the Board of Directors and Audit and Supervisory Committee members, in the reference materials for the Ordinary General Meeting of Shareholders.

【Supplementary Principles 4-1 (1) Roles and responsibilities of the Board】

Detailed standards for proposals are established according to the level of importance and these decisions are to be made by the Board of Directors or "Ringi", a system to make a request for decision making. The Company entrusts the president with decision-making through the Ringi system concerning matters other than decisions to be made by the Board of Directors. Job authority and division of duties for persons responsible for operations and the heads of departments are defined in internal rules, and the Company has constructed a system that is being constantly revised according to reorganization, etc.

【Principle 4-9: Independence standards and qualification for independent directors】

The Company selects candidates for independent external directors based on the standards for independency established by the Tokyo Stock Exchange.

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【Principle 4-11 (2): Preconditions for the effectiveness of the Board of Directors and Board of Corporate

Auditors】

External directors, directors and directors who are Audit and Supervisory Committee members dedicate their time and labor to the duties of directors and Audit and Supervisory Committee members to appropriately perform their roles and fulfill responsibilities while limiting concurrent positions outside of the Company to a reasonable range. The status of concurrently held jobs is disclosed in the business reports and securities reports.

【Principle 4-11 (3): Preconditions for the effectiveness the Board of Directors and Board of Corporate

Auditors】

In October 2018, the Board of Directors conducted a questionnaire and individual interviews of all seven directors to evaluate the effectiveness of the Board of Directors. The survey consisted of 34 questions, including the composition of the Board of Directors, operation of the Board of Directors, agenda at meetings of the Board of Directors and the system that supports the Board of Directors. All directors returned their responses with their names on them. As a result, the Company determined that the composition, operation, information materials, deliberations and responsibilities of the Board of Directors were appropriate and, as a whole, high effectiveness was maintained. Meanwhile, the respondents shared concerns such as challenges in the raising transparency of the process of appointing and dismissing directors as well as the process of determining remuneration. Based on these results, the Company will continue to ensure the effectiveness of the Board of Directors.

【Supplementary Principles 4-14 (2): Training of directors and corporate auditors】

The Company provides our directors, including the Audit and Supervisory Committee members, with opportunities to acquire knowledge such as external training when they assume the position of director. Even during their term of office, the Company encourages them to participate in study sessions and external seminars provided by outside experts corresponding to revisions of laws.

【Principle 5-1: Policy for constructive dialogues with shareholders】

The Company places importance on constructive dialogues with our shareholders and other parties as we believe that this contributes to the company's sustainable growth and medium to long-term increase in corporate value. In particular, the corporate management and the Head of the Investor Relations Department work to hold dialogues with shareholders and investors at a variety of opportunities.

The Company holds two financial result briefings with the participation of the corporate management each year and hold meetings with institutional investors in and outside Japan as necessary. The Company also conducts telephone interviews, briefings for individual investors multiple times a year, and carry out overseas IR activities.

The results are reported to the Board of Directors as appropriate. In the dialogues with shareholders, the Company ensures that leakage of insider information is prevented.

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2. Capital Structure

Foreign Shareholding Ratio	More than 30%

[Status of Major Shareholders]

	Name / Company Name			Number of Shares			Percentage (%)
			Owned
Kiichi Kubota	14,106,400	11.20
Hiroaki Suga	11,022,804	8.75
The Master Trust bank of Japan, Ltd. (as a	7,289,500	5.79
trustee)
Northern Trust Co. (AVFC) Sub A/C	5,467,337	4.34
Nontreaty
Japan Trustee Services Bank, Ltd. (as a	5,324,700	4.22
trustee)
Patrick C. Reid	4,657,400	3.69
SSBTC Client Omnibus Account	3,762,096	2.98
SMBC Trust Bank Ltd. (as a trustee for	2,400,000	1.90
regulated securities)
The Bank of New York, Non-Treaty JASDEC	2,202,000	1.74
Account
State Street Bank West Client - Treaty	2,194,000	1.74
505234
	Controlling Shareholder (except for Parent		―
	Company)
	Parent Company		None

Supplementary Explanation

• Foreign Shareholding Ratio and Status of Major Shareholders set forth above are as of 30 June 2020.
• The shareholding ratio is calculated by subtracting 52 treasury shares. The number of treasury shares does not include the 193,600 shares of the company held by Trust & Custody Services Bank, Ltd. (Trust Account E) as trust property for Board Benefit Trust.

3. Corporate Attributes

	Listed Stock Market and Market Section		Tokyo Stock Exchange First Section
	Fiscal Year-End		December
	Type of Business		Pharmaceutical
	Number of Employees (consolidated) as of the		From 100 to less than 500
	End of the Previous Fiscal Year
	Sales (consolidated) as of the End of the		Less than ¥10 billion
	Previous Fiscal Year

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Number of Consolidated Subsidiaries as of the

End of the Previous Fiscal Year

Less than 10

1. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder
   ―
2. 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 Auditing Committee
[Directors]
		Maximum Number	of Directors	Stipulated in	11
		Articles of Incorporation
		Term of Office	Stipulated in	Articles	of	1 Year
		Incorporation
		Chairperson of the Board			President
		Number of Directors			7
		Number of Outside Directors			3
		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

Michio Sasaoka

From another company

Toshio Nagae

From another company

Yukinori Hanafusa

CPA

• 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
• • 5 -

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 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 a director

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 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

Outside Directors' Relationship with the Company (2)

Membership

Designation

Supplementary

of

as

Name

Explanation of

Reasons of Appointment

Supervisory

Independent

the Relationship

Committee

Director

Michio Sasaoka

〇

〇

Dr. Sasaoka was appointed as

an External Director for his

experience

and

extensive

knowledge

of

corporate

management as well as his

broad global insight. He is

deemed to have no conflict of

interest

with

our

General

Shareholders and is qualified as

an independent officer.

Toshio Nagae

〇

〇

Mr. Nagae was appointed as an

External

Director

for his

experience

and

extensive

knowledge

of

corporate

management as well as his

broad global insight. He is

deemed to have no conflict of

interest

with

our

General

Shareholders and is qualified as

an independent officer.

Yukinori Hanafusa

〇

〇

Mr. Hanafusa was appointed as

an External Director because,

as a certified public accountant,

he is well-versed in finance and

accounting. He is deemed to

have no conflict of interest with

our General Shareholders and

is qualified as an independent

officer.

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[Supervisory Committee]

Committee's Composition and Attributes of Chairperson

All Committee

Full-time

Inside Directors

Outside

Chairperson

Members

Members

Directors

Supervisory

3

1

0

3

Outside Director

Committee

Appointment of Directors and/or Staff to

Appointed

Support the Supervisory Committee

Matters Related to the Independence of Such Directors and/or Staff from Executive Directors

Although there are no dedicated employees who assist the Audit and Supervisory Committee, the person in charge of internal audits assists with the duties of the Committee as needed. To ensure independence, the personnel changes, evaluations and other matters of these employees are determined with the consent of the Committee.

Cooperation among Supervisory Committee, Accounting Auditors and Internal Audit Departments

The Audit and Supervisory Committee receives audit reports from the accounting auditor and works with them to exchange information and opinions appropriately. In addition, the Committee works closely with the person in charge of internal audits by requiring them to attend the Committee meetings to exchange information as needed, and by asking them to report to the Committee as needed.

[Voluntary Establishment of Nomination/Remuneration Committee]

Voluntary Establishment of

Committee(s)

Corresponding to Nomination Committee or

Established

Remuneration Committee

Committee's Name, Composition, and Attributes of Chairperson

Committee

Corresponding

to

Committee

Corresponding

to

Nomination Committee

Remuneration Committee

Committee's Name

Nomination

and Compensation

Nomination

and

Compensation

Committee

Committee

All Committee Members

4

4

Full-time Members

0

0

Inside Directors

2

2

Outside Directors

2

2

Outside Experts

0

0

Other

0

0

Chairperson

Outside Director

Outside Director

Supplementary Explanation

At the Board of Directors meeting held on July 18, 2019, the Nomination and Compensation Committee was established as a voluntary advisory body to the Board of Directors. In order to ensure the independence and objectivity of the procedures concerning the nomination and compensation of directors and to further enhance

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corporate governance, the chairman of this committee shall be the independent outside director (Michio Sasaoka), and members shall consist of 4 people in total- 2 internal directors (Patrick Reid, President and Kiyofumi Kaneshiro, Executive Vice President) and 2 independent outside directors (Michio Sasaoka, Independent Outside Director and Toshio Nagae, Independent Outside Director)

[Independent Directors]

Number of Independent Directors	3

Matters relating to Independent Directors

The Company designates all qualified independent officers as independent officers.

[Incentives]

Incentive Policies for Directors	Performance-linked Remuneration / Stock Options /

Supplementary Explanation

The Company employs a stock option system, with the aim of raising the motivation and morale of employees to improve our business performance and to help enhance our corporate value by securing talented human resources. In addition, the Company employs a performance-linked stock compensation scheme called the Board Benefit Trust (BBT) to raise awareness of shareholders towards contributing to the medium to long- term improvement of business performance and increasing corporate value. The Company promotes this by further strengthening the link between the directors' remuneration, our company's performance and stock value and sharing by our directors not only the benefits of rising stock prices but also the risk of falling stock prices by our directors.

Recipients of Stock Options	Inside Directors / Employee / Other

Supplementary Explanation

The Company offers stock options to our directors (excluding those who are members of the Audit and Supervisory Committee) and employees, with the aim of raising the motivation and morale of employees to improve our business performance as well as to help enhance our corporate value by securing talented human resources.

[Director Remuneration]

Disclosure of Individual Directors'

Remuneration

Supplementary Explanation

No Individual Disclosure

The individual amount of remuneration is not disclosed, because no employee has total remuneration of 100 million yen or more. However, the total amounts of remuneration for directors, directors who are members of the Audit and Supervisory Committee and corporate auditors are disclosed.

The total amounts of remuneration for our directors, directors who are members of the Audit and Supervisory Committee and corporate auditors (for the fiscal year ended December 31, 2019) are as follows.

Remuneration for directors:96,750 thousand yen

Remuneration for directors who are members of the Audit and Supervisory Committee and corporate auditors: 7,800 thousand yen

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Policy on Determining Remuneration Amounts

and Calculation Methods

Established

Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods

Remuneration for directors is determined within the total amount of remuneration decided by resolution of the general meeting of shareholders, while remuneration for directors excluding Audit and Supervisory Committee members is decided by the Board of Directors, and that for directors who are Audit and Supervisory Committee members is decided by resolution of the Audit and Supervisory Committee.

In addition, for directors excluding those who are Audit and Supervisory Committee members and external directors, we employ a performance-linked stock compensation scheme, Board Benefit Trust (BBT), to raise awareness of shareholders towards contributing to the medium to long-term improvement of business performance and increasing corporate value. The Company promotes this by further strengthening the link between the directors' remuneration, our company's performance and stock value and sharing by our directors not only the benefits of rising stock prices but also the risk of falling stock prices.

[Supporting System for Outside Directors]

Our Business Administration Department or the person in charge of internal audits supports our external directors and provides necessary support such as notification and distribution of materials related to the Board of Directors.

[Retired presidents/CEOs holding advisory positions (sodanyaku, komon, etc.)]

Others

Kiichi Kubota was appointed as a member of the Board, the Chairman without right of representation on September 26, 2019.

2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration Decisions (Overview of Current Corporate Governance System)

At the 9th Ordinary General Meeting of Shareholders held on September 18, 2015, the Company resolved to change the Articles of Incorporation to become a company with an Audit and Supervisory Committee. Accordingly, we transformed from a company with a Board of Corporate Auditors to one with an Audit and Supervisory Committee. The Audit and Supervisory Committee is composed of three directors (all of whom are external directors) who are members of the Audit and Supervisory Committee. Directors who are members of the Audit and Supervisory Committee regularly hold Audit and Supervisory Committee meetings and attend Board of Directors' meetings, which creates a prompt and fair audit and monitoring system.

The Board of Directors consists of seven members: one representative director and three directors (excluding those who are Audit and Supervisory Committee members) and three directors who are Audit and Supervisory Committee members. The Board of Directors maintains a prompt and efficient management monitoring system by holding a regular board meeting once a month and an extraordinary board meeting as needed.

The Audit and Supervisory Committee is composed of three directors who are Audit and Supervisory Committee members. According to their roles, the directors attend the Board of Directors and actively exchange opinions with top management, view documents that require managerial approval and other documents in a timely manner, and audit the execution of operations by directors.

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In terms of internal audits, one full-time employee in charge of internal audits systematically conducts audits and reports the results to the representative director. The officer conducts highly effective audits by providing feedback on audit results to the audited departments and requiring them to report improvement policies and other matters in response to the matters for improvement and guidance given.

In addition, the Audit and Supervisory Committee, the person in charge of internal audits and the accounting auditor collaborate to share information such as issues and matters for improvement under a three-pronged audit system, in order to conduct efficient and effective audits.

Regarding accounting audits, we are audited by KPMG AZSA LLC under our contract with the audit corporation.

At the Board of Directors meeting held on July 18, 2019, the Nomination and Compensation Committee was established as a voluntary advisory body to the Board of Directors. In order to ensure the independence and objectivity of the procedures concerning the nomination and compensation of directors and to further enhance corporate governance, the chairman of this committee shall be the independent outside director (Michio Sasaoka), and members shall consist of 4 people in total- 2 internal directors (Patrick Reid, President and Kiyofumi Kaneshiro, Executive Vice President) and 2 independent outside directors (Michio Sasaoka, Independent Outside Director and Toshio Nagae, Independent Outside Director)

3. Reasons for Adoption of Current Corporate Governance System

The Company is a company with an Audit and Supervisory Committee, and have a Board of Directors, an Audit and Supervisory Committee, a Nomination and Compensation Committee and an accounting auditor organization. Under the current system, three members of the Audit and Supervisory Committee with voting rights at the Board of Directors are engaged in decision making for management, which enables us to strengthen the audit and supervisory functions of our Board of Directors and further enhance our corporate governance and improve efficiency of management.

III. Implementation of Measures for Shareholders and Other Stakeholders

1. Measures to Vitalize the General Shareholder Meetings and Smooth Exercise of Voting Rights Supplementary Explanations

	Early Notification	of General	The notice is sent three weeks before the Ordinary General Meeting of
	Shareholder Meeting		Shareholders.
	Scheduling	AGMs	Avoiding	We convene the Ordinary General Meeting of Shareholders
	the Peak Day			avoiding the Peak Day so that as many shareholders as possible
					may attend the meeting.
	Allowing Electronic	Exercise	From the exercise of voting rights pertaining to the 13th Ordinary General
	of Voting Rights			Meeting of Shareholders held in September 2019, shareholders may exercise
					voting rights by an electromagnetic method.
	Participation	in	Electronic	The Company has participated in an electronic voting platform and enabled
	Voting Platform			its use since the voting at the 13th general meeting of shareholders held in
					September 2019.
	Providing Convocation Notice	The notice and reference materials for the Ordinary General Meeting of
	in English				Shareholders are provided in English.
	Other				In order to facilitate a smooth exercise of voting rights, the Company will
				disclose the notice of convocation on its website before its shipment.

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2. IR Activities

				Supplementary Explanations
	Preparation and Publication of		They are posted on our website.
	Disclosure Policy
	Regular Investor Briefings for		Company briefings for individual investors are held several times a year.
	Individual Investors
	Regular Investor Briefings for		Briefings are held twice a year after the announcement of financial results for
	Analysts and	Institutional		the six months and the full fiscal year. Also, individual meetings are held with
	Investors			analysts and institutional investors in Japan and overseas as needed.
	Regular Investor Briefings for		The Company attends domestic conferences, respond to individual meeting
	Overseas Investors			requests from overseas, and hold meetings with overseas institutional
				investors in the U.S., the U.K. and Hong Kong and such as needed.
	Posting of IR Materials on		Financial results information, timely disclosure information other than
	Website			financial results information and related press releases, materials for company
				briefings and other documents are posted in Japanese and English.
	Establishment of	Department		There is a person in charge of IR in the IR & Public Affairs Department.
	and/or Manager in Charge of
	IR
	Other			Head of Investor Relations runs a blog dedicated to PeptiDream's IR and
			other corporate activities

3. Measures to Ensure Due Respect for Stakeholders

			Supplementary Explanations
Stipulation of	Internal Rules	The Company will advance efforts to assist our stakeholders in deepening
for Respecting the Position of	their understanding of our business by actively disseminating information
Stakeholders			through measures such as holding financial results briefings and posting
			materials on our website.
Implementation	of	The Company is committed to promoting ESG (environmental, social and
Environmental Activities, CSR	governance) initiatives and proactively disclosing our policy and information
Activities etc.			related to these initiatives. The Company has set up the ESG WEB site
			(https://www.peptidream.com/esg/index_en.html )
			In June 2019, the Company expressed support for the recommendations of the
			Task Force on Climate-related Financial Disclosures (TCFD).
Development	of Policies	on	The Company has established the Disclosure Policy to disclosing appropriate
Information	Provision	to	information at the appropriate timing.
Stakeholders

IV. Matters Related to the Internal Control System

1. Basic Views on Internal Control System and the Progress of System Development

At the Board of Directors, we resolved the System for Ensuring the Properness of Operations stipulated in the Companies Act and the Ordinance for Enforcement of the Companies Act. The outline is as follows.

1. System for ensuring that the execution of duties of directors and employees conforms to laws and regulations and the Articles of Incorporation

i. The Board of Directors shall establish a Corporate Code of Conduct and familiarize all employees with it.

1. The Board of Directors shall formulate rules on compliance and establish a system for directors and employees to promote compliance.
2. • 11 -

1. Directors who are members of the Audit and Supervisory Committee (hereinafter referred to as "Audit and Supervisory Committee members") shall attend meetings of the Board of Directors and audit the execution of duties by directors through surveys on their business execution status and so forth, based on the audit and other standards of the Audit and Supervisory Committee.
2. The internal auditor shall regularly audit whether employees carry out operations in accordance with the laws and regulations, the Articles of Incorporation and company rules, provide feedback to the employees on the results of the audit, and report the results to the representative director and president.

(2) System for storing and managing information related to the execution of duties by directors

For legal documents, such as the minutes of the General Meeting of Shareholders and the Board of Directors, and documents and information related to the execution of important duties by directors, we shall establish the necessary rules including document management rules. We shall store and manage information appropriately in accordance with these rules and allow the necessary parties to view these documents and information.

(3) Rules and other systems for the management of risk of loss

To prepare for risks that have a significant impact on management, the Board of Directors shall establish rules on risk management, identify possible risks, formulate preventive measures and develop a crisis management system to respond to risks when they occur.

(4) System for ensuring efficient execution of duties by directors

i. The Board of Directors shall formulate a medium-term business plan and an annual business plan, and each department shall implement appropriate operation activities to achieve these plans.

1. The Board of Directors shall establish rules on the division of duties, job authority and requests for managerial decisions, among others, and transfer its authority to employees based on these rules, and clarify the decision- making authority to facilitate the execution of duties.
2. To manage and supervise business execution, a regular Board of Directors' meeting shall be held monthly, and an Extraordinary Board of Directors' meeting shall be held as needed.
3. At the regular Board of Directors' meetings, directors analyze and evaluate monthly performance and take necessary measures.

1. System for ensuring the appropriateness of operations in the corporate group consisting of the company concerned, its parent company and subsidiaries

Currently, the Company does not have any subsidiaries, but if we were to set up one in the future, we shall establish a necessary system to ensure thorough internal control company-wide.

1. Matters concerning directors and employees who should assist with the duties of the Audit and Supervisory Committee

The Company shall assign employees who will assist with the duties of the Audit and Supervisory Committee. We shall consult with the Committee on the specifics (including organization and number of employees) for the assignment and give due consideration to its opinions before assigning them.

1. Matters concerning the independence of directors and employees who should assist with the duties of the Audit and Supervisory Committee from directors (excluding those who are Audit and Supervisory Committee members)

i. To ensure the independence of directors and employees who should assist with the duties of the Audit and Supervisory Committee, employees who have received an order necessary for an audit from the Committee shall not receive any instructions from directors (excluding those who are Audit and Supervisory Committee members) and department and other managers regarding the order.

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1. Personnel changes, evaluations and other matters of the employees shall be decided with prior consent of the Audit and Supervisory Committee.

1. System for directors and employees to report to the Audit and Supervisory Committee, and other systems for them to report to the Audit and Supervisory Committee

i. Directors and employees shall report the status of business execution at the request of the Audit and Supervisory Committee.

1. Directors and employees shall immediately report to the Audit and Supervisory Committee if they discover a fact that could cause significant damage to the company.

1. The Company shall not unfavorably treat directors and employees who reported a fact that could cause significant damage to the company, on the grounds of reporting based on our whistleblower system or reporting on the status of execution of duties and other matters to the Audit and Supervisory Committee.

(9) Other systems for ensuring that audits by the Audit and Supervisory Committee are conducted effectively

i. The Audit and Supervisory Committee shall attend the Board of Directors' meetings based on the audit and other standards of the Audit and Supervisory Committee, and view important documents related to operations such as minutes and requests for managerial decisions, and may request explanations of these documents to directors or employees as necessary.

1. The representative director shall meet with the Audit and Supervisory Committee as needed.
2. The Audit and Supervisory Committee shall meet with the accounting auditor as needed, receive explanations on the details of accounting audits and work together by exchanging information.
3. The Audit and Supervisory Committee shall continue working closely with internal auditors and exchange information as needed.
4. The Company shall respond to the Audit and Supervisory Board members if they request the payment of reasonable expenses for the execution of their duties.

(10) System for ensuring the credibility of financial reports

To ensure the credibility of financial reports, we shall formulate a basic policy on internal control over financial reporting. We shall organizationally promote the development and operation of the systems and schemes necessary to create appropriate financial information, evaluate the effectiveness of control activities on a continual basis, and review control activities as needed.

(11) Basic policy for eliminating antisocial forces and its development status

i. The Company believes that having a relationship with antisocial forces, which threatens the order and security of civil life and hinders the development of a sound economic and social life, has a significant impact on the business continuity of a company. Therefore, we shall take a firm stance against antisocial forces and declare in our Charter of Corporate Behavior that we have no relationship with antisocial forces at all.

1. To prevent antisocial forces from becoming involved in our management activities and any damage they may cause, we shall establish rules for the elimination of antisocial forces and promote the development of an internal system to eliminate them.

2. Basic Views on Eliminating Anti-Social Forces

Our policy concerning the elimination of antisocial forces is stipulated in our Charter of Corporate Behavior and Basic Policy on the Development of an Internal Control System.

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In accordance with these standards, we have established Rules for the Elimination of Antisocial Forces and are promoting the development of an internal system for eliminating them.

As measures based on these, we carry out prior examinations, assign persons responsible for preventing unreasonable demands, collaborate with external specialized organizations for the purpose of eliminating antisocial forces, and collect information related to antisocial 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

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