Corporate Governance

Basic Corporate Governance Policy

Chapter 1: Corporate Governance Principles

Article 1 (Principles)

The Company places its management top priority on the enhancement of corporate governance under the management philosophy of Toyo Seikan Group (Management Policy, Creed and Vision) to enhance its corporate value and keep new growth and improvements while contributing to the society through business activities. The Company will continuously address this issue.

Management Policy

We will constantly create new and innovative values, aspire to achieve a sustainable society and contribute to people’s happiness.

Creed

We will honor dignity and always strive to be fair and unbiased in every way.
All of us will fully demonstrate our own strengths and expertise, and contribute to social prosperity while we grow and thrive as an individual, a corporation or a group.

Vision

We will aim to become the Group which can provide unique and innovative technologies and products that will meet global expectations.

Chapter 2: Corporate Governance System

Article 2 (Corporate Governance System of the Company)

1.
The Company, as a company with an Audit and Supervisory Board, shall determine the execution of important business matters and supervise the performance of duties by the Directors, Audit and Supervisory Board Members, and Audit and Supervisory Board which are independent from the Board of Directors. Further, the Board of Directors and the Audit and Supervisory Board will respectively elect Outside Directors and Outside Audit and Supervisory Board Members whose independence and neutrality are guaranteed, to retain highly effective management monitoring and supervision functions.
2.
The Company has implemented the Executive Officer System with the aim of clearly distinguishing the management's decision-making and supervisory functions from the business execution functions.

Article 3 (Role of the Board of Directors)

1.
The Board of Directors supervises the performance of duties by Directors while determining the management strategy, management plan and execution of important business matters of the Company and the Group for ensuring sustainable growth of the Company and enhancing the corporate value in the mid-to-long term.
2.
The Board of Directors shall determine the execution of particularly important business matters set forth in the laws and regulations, Articles of Incorporation and the Board of Directors Rules.
3.
The authority to determine the execution of important business matters other than the previous items shall be delegated to President and Director and Executive Officers pursuant to the Company's relevant rules after deliberation at the Management Executive Meeting or Management Strategy Meeting comprised of Directors and Executive Officers, etc.

Article 4 (Composition of the Board of Directors)

1.
The Board of Directors shall, regardless of gender, nationality or age, be comprised of members in appropriate consideration of knowledge, experience and competence. The number of Directors shall be no more than 15 as set forth in the Articles of Incorporation, including independent Outside Directors.
2.
An Outside Director who meets the “Independence Criteria for Outside Directors and Auditors, which are set separately, shall be qualified as an “Independent Outside Director” of the Company.

Article 5 (Policy and Procedures for Appointing the Senior Management and Directors)

The Company considers that candidates for its Directors and senior management members shall have sufficient understanding of business environment required to develop management strategies, experience and competence to properly execute management strategies formulated by the Board of Directors, and experience and expertise needed to deliberate the appropriateness of and potential risks in the management strategies from various perspectives. Based on these viewpoints and the preceding Article, the President and Director of the Company shall nominate the candidates, and the Board of Directors shall grant final approval with appropriate involvement and advice of Independent Outside Directors through prior discussions at the Company’s Governance Committee, which consists of the President and Independent Outside Directors. The appointment and dismissal of senior management members shall be resolved by the Board of Directors based on the evaluation of the Company's business performance and other factors, with appropriate involvement and advice of Independent Outside Directors through the Governance Committee.

Article 6 (Successors to the Senior Management)

The Company will nurture potential successors to the senior management including CEO by conducting systematic management training to them and encouraging their participation in key management projects.

Article 7 (Evaluation of the Board of Directors' Effectiveness)

The Board of Directors shall analyze and evaluate the effectiveness of the Board of Directors as a whole such as by seeking the opinion of each Director and Audit and Supervisory Board Member concerning the Board of Directors, and disclose such details.

Article 8 (Related Party Transactions)

1.
The Company shall obtain an approval of the Board of Directors pursuant to the laws and regulations, when a Director engages in competitive transactions and/or conflicting interest transactions and report such important information to the Board of Directors following the transactions.
2.
The Company shall disclose related party transactions pursuant to the laws and regulations and report important transactions to the Board of Directors. The Company shall have a regular inspection every year on whether or not Directors, Audit and Supervisory Board Members, Executive Officers and their relatives within second degree have any related party transaction with the Company.

Article 9 

(Role of the Audit and Supervisory Board Members and Audit and Supervisory Board)

1.
The Audit and Supervisory Board Members and Audit and Supervisory Board, which are independent from the Board of Directors, shall supervise the performance of duties by Directors based on the Audit Standards determined by themselves.
2.
The Audit and Supervisory Board shall establish standards for appropriately evaluating the Accounting Auditor candidates and confirm whether the Accounting Auditor's independence and professionalism are ensured even after the appointment.

Article 10 (Composition of the Audit and Supervisory Board)

The Audit and Supervisory Board is comprised of members in appropriate consideration of their knowledge, experience and competency, regardless of gender, nationality and age. The number of members shall be no more than 5 as set forth in the Articles of Incorporation and more than half of them shall be Outside Audit and Supervisory Board Members.

Article 11 

(Policy and Procedures for Appointing Audit and Supervisory Board Members)

Candidates for the Audit and Supervisory Board Members shall be well-versed in the Company’s business or have knowledge of key areas including financing, accounting and legal affairs or abundant experience of business management. Based on these viewpoints and the preceding Article, the President and Director of the Company shall nominate the candidates, and the Board of Directors shall grant final approval with the consent of the Audit and Supervisory Board, with appropriate involvement and advice of Independent Outside Directors through the Governance Committee.

Article 12 (Role of the Accounting Auditor)

The Accounting Auditor shall be independent and have professional competence to ensure reliable financial reporting of the Company.

Article 13 (Policy and Procedures for Appointing Executive Officers)

Executive Officers shall, regardless of gender, nationality and age, be well-versed in the company’s business and deemed qualified to execute important business matters. President and Director will submit a proposal for approval at the Board of Directors.

Article 14 (Policy and Procedures for Determining Compensation of Directors, etc.)

1.
Compensation of Directors is comprised of base compensation and bonus. Base compensation is fixed by title, etc. respectively for Directors and Outside Directors. The bonus will be performance-based payment which reflects the target management indices defined in the management plan, etc.
2.
The Compensation of Directors shall be within the amount resolved by the General Meeting of Shareholders and determined by the Board of Directors with appropriate involvement and advice of Independent Outside Directors through the Governance Committee.
3.
Compensation of Audit and Supervisory Board Members consists of base compensation and bonus and shall be determined within the amount resolved by the General Meeting of Shareholders through discussion among the Audit and Supervisory Board Members.
4.
Compensation of Executive Officers shall be determined by the Board of Directors.

Article 15 (Education and Training of Directors, etc.)

The Company will, upon the appointment of Directors, Audit and Supervisory Board Members and Executive Officers, provide training opportunities as necessary, and upon the appointment of Outside Directors and Outside Audit and Supervisory Board Members, provide briefing on the Company’s business, finance and organization, etc. The Company will provide them opportunities to acquire knowledge required to perform their duties and responsibilities including external training even after appointment, and reimburse such cost.

Chapter 3. Relationship with Stakeholders

Article 16 (Relationship with Stakeholders)

1.
The Company understands that collaboration with stakeholders is essential for achieving sustainable growth of the Company and enhancing its corporate value in the mid-to-long term and that its major stakeholders include customers, business partners, shareholders, investors, employees, local communities and global environment. The Company shall separately establish the “Group CSR Basic Policy”to specify how to respond to its shareholders and shall implement the policy.
2.
The Company will create an environment where employees with diverse values, regardless of gender, nationality and age, can demonstrate their skills, including the advancement of women in the workplace.
3.
The Company shall establish an external hotline system independent from the senior management to enable employees to report information about illegal or inappropriate activity without fear of suffering from disadvantageous treatment. The Board of Directors shall supervise its operation.

Article 17 (General Meeting of Shareholders)

The Company is aware that the General Meeting of Shareholders is the highest decision-making body and a forum for constructive dialogue with shareholders. The Company will develop an environment where shareholders can appropriately execute their voting rights by securing shareholders sufficient time for execution.

Article 18 (Basic Strategy for Capital Policy)

1.
The Company formulates its capital policy focused on optimizing the balance of ensuring financial stability, enhancing capital efficiency and increasing shareholders return, with the view of achieving sustainable corporate growth and enhanced corporate value in the mid- to-long term.
2.
In case of raising funds which might cause significant dilution of shares, the Company shall consider the necessity and rationale at the Board of Directors so as not to unfairly impair the interests of existing shareholders, and shall fully explain to shareholders.

Article 19 (Strategic Shareholding Policy)

1.
The Company engages in cross-shareholding for the purpose of maintaining and strengthening trust of various stakeholders of the Company and stable, long-term relationships with its business partners. The significance of the cross-shareholding shall be examined at the Board of Directors annually in light of the mid- to long-term economic rationality and future prospects. If the Board of Directors concludes there is little significance in cross-holding of certain shares, the Company will consider the sale of such cross-held shares.
2.
In exercising the voting rights pertaining to cross-held shares, the Company shall scrutinize management policies and strategies, etc. of issuing companies with comprehensive consideration of such factors as the common interests of shareholders and the potential impact on the Group. If a proposal that could lead to any loss of corporate value and shareholder value of the Company is submitted to the shareholder meeting of a company, the Company shall not vote for the proposal whether or not the proposal is made by the company or a shareholder.

Article 20 (Takeover Defense Measure)

1.
A person who would make a large-scale acquisition of the shares in the Company in a manner that does not contribute to the corporate value of the Company or the common interests of its shareholders would be inappropriate to control decisions on the Company’s financial and business policies. The Company shall ensure the corporate value of the Company and the common interests of its shareholders by taking necessary and reasonable countermeasures against a large-scale acquisition by such person.
2.
Takeover defense measure is not intended to protect the interest of the senior management and the Board of Directors.

Article 21 (Ensuring Appropriate Disclosure and Transparency)

In addition to appropriate disclosure pursuant to the laws and regulations, the Company shall strive to disclose its financial information (e.g. business performance) and non-financial information (e.g. management philosophy and management plans) in a timely and appropriate manner from the viewpoint of achieving effective corporate governance while ensuring transparency and fairness of the management.

Article 22 (Dialogue with Shareholders and Investors)

The Company shall separately formulate the “Basic IR Policy” with the awareness that constructive dialogue with shareholders and investors will contribute to sustainable growth of the Company and enhancement of its corporate value in the mid-to-long term.

Chapter 4: Miscellaneous

Article 23

This basic policy will be revised and abolished by the resolution of the Board of Directors. However, General Manager of General Affairs Department can make a minor revision at his discretion.

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