TPR : Corporate Governance

Corporate Governance

Last Updated: November 11, 2021

TPR Co., Ltd.

Masanobu Kishi Contact: 81-3-5293-2811 Securities Code: 6463

https://www.tpr.co.jp/tp_e/index.html

The corporate governance of TPR Co., Ltd. (the "Company") is described below.

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

1. Basic Views

With our spirit of Monozukuri, or "making things," as our starting point, represented by material, processing and surface treatment technologies that we have cultivated since the foundation in 1939, we, as the Company, are driving the business toward our corporate philosophy: "Realizing a clean environment and a sophisticated global society." To this end, we are striving to enhance our corporate governance, believing that it is essential to achieve sustainable growth by offering unmatched technologies and products with superior value, as wells as by forging good relationships with shareholders, customers, and other stakeholders such as trading partners, local society, employees.

Specifically, we are working to raise the effectiveness of corporate governance through the basic policies set forth below.

1. Respect the rights of shareholders and ensure fairness.
2. Cooperate appropriately with all stakeholders, including shareholders, employees, trading partners and local society.
3. Ensure transparency by appropriately disclosing corporate information.
4. Ensure directors and audit & supervisory board members recognize their fiduciary responsibility and accountability to shareholders and appropriately fulfill the respective roles and obligations expected of them.
5. Make efforts to engage in constructive dialogue with shareholders.

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

The Company complies with all principles of Japan's Corporate Governance Code.

[Disclosure Based on the Principles of Japan's Corporate Governance Code] [Updated]

[Principle 1.4 Cross-Shareholdings]

1. Policy on shareholdings
   The Company believes that it is essential to have cooperative relationships with various companies in the interest of business expansion and sustainable growth.
   In order to maintain cooperative relationships while boosting corporate value, we follow a policy of holding shares when there is a reasonable basis for doing so from a medium- to long-term perspective, giving comprehensive consideration to such factors as materiality on a business strategy level, business relationship with trading partners, and profitability with capital costs taken into account. Each year, the Board of Directors
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examine each individual stock held and consider the appropriateness of holding it based on this policy. When a stock is found by the Board of Directors to be held without reason, that holding will be reduced.

1. Exercise of voting rights as to shareholdings
   When exercising voting rights of stock held, the Company will ensure each individual proposal is examined in line with the criteria set forth below.
2. 1. Whether such holdings will contribute to increases in the corporate value of the Company as a shareholder over the medium- to long-term
   2. Whether there are matters that give rise to concerns over behavior that violates laws and regulations or goes against corporate ethical principles

[Principle 1.7 Related Party Transactions]

Concerning transactions by Directors that are competitive or involve a conflict of interest, the Company ensures compliance with the procedures stipulated by the Companies Act to ensure that such transactions do not damage the Company or the shareholders' common interest, requires that approval for such transactions are obtained from the Board of Directors beforehand, and makes sure reports are periodically given to the Board of Directors to explain the status of the transactions.

Each Director and Audit & Supervisory Board Member is required to submit a "related party declaration" each accounting period, and this is used to ascertain the existence of transactions or receivables/payables between the Director, Audit & Supervisory Board Member or immediate family member and a company in the TPR Group.

Note that when determining conditions for transactions with major shareholders, they will the same as those for transactions with third parties.

[Supplementary Principle 2.4(1) Ensuring Diversity in the Company, Including Active Participation of Women]

The Company promotes the hiring and promotion of diverse human resources regardless of gender, nationality, age or race, and strives to realize a meaningful workplace that can create new value through the enhancement of each other's value. To promote diversity, the Company has set a goal of 40% for the percentage of women, foreign nationals and mid-career hires among the total number of managers.

Furthermore, the Company will develop self-driven employees who recognize and enhance each other's value and who are able to carry out tasks to the end. We will utilize a career declaration system in order to create an environment in which employees can work with a sense of purpose and fulfillment, and conduct training, etc. for developing next-generation leaders, and we will work to support career development so that each and every employee can play an active role.

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

The Company entrusts the management of the defined corporate pension fund to an asset administration and management institution ("Trustee") that declares its acceptance of the stewardship code. The Company appoints multiple staff members representing administrative departments such as human resources and accounting to perform monitoring once every interim accounting period to ascertain based on the report received periodically from the Trustee whether the objectives of the asset management are being achieved and whether the asset structure is being reviewed as appropriate. The Company ensures that a summary of operations concerning the defined benefit corporate pension fund is disclosed to employees once a year pursuant to laws and regulations.

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[Principle 3.1(i) Company Objectives (e.g., Corporate Philosophy, etc.), Management Strategies and Management Plans]

For details of our corporate philosophy and Medium-Term Management Plan, please refer to the Company's website as follows:

Corporate philosophy: https://www.tpr.co.jp/tp_e/company/philosophy.html

Medium-Term Management Plan*: https://www.tpr.co.jp/ir/pdf/core20setumei.pdf

[Principle 3.1(ii) Basic Views on Corporate Governance]

Basic views on corporate governance are described in "1. Basic Views."

[Principle 3.1(iii) The Board of Directors' Policies and Procedures in Determining the Compensation of the Senior Management and Directors]

The policies and procedures in determining the compensation of the senior management and Directors are stated in "II-1. [Director Remuneration] Disclosure of Policy for Determining Remuneration Amounts or Calculation Methods Thereof" in this report.

[Principle 3.1(iv) The Board of Directors' Policies and Procedures in the Appointment of the Senior Management and the Nomination of Candidates for Director and Audit & Supervisory Board Member]

• When nominating candidates for Director, each individual's knowledge, experience and capability is considered and candidates are selected from the standpoint of finding the right person for the position based on criteria of being capable at accurate and swift decision-making and having good discernment regarding compliance with laws and regulations.
• When nominating candidates for Audit & Supervisory Board Member, candidates are selected from the standpoint of their knowledge in finance and accounting and their capability to monitor the corporate governance structure.
• In accordance with the above policy, the nomination of Director candidates and Audit & Supervisory Board Member candidates is decided by the Board of Directors based on discussions held at the Nomination and Remuneration Committee, of which Outside Directors account for the majority of the members.
  Note that nominations for Audit & Supervisory Board Members are determined after obtaining prior consent from the Audit & Supervisory Board.
• In the event of dismissal of a Director or Audit & Supervisory Board Member, the decision for dismissal is carried out based on discussions held at the Nomination and Remuneration Committee in accordance with criteria established beforehand.

[Principle 3.1(v) Individual Explanation on Appointment, Nomination and Dismissal of Directors and Audit & Supervisory Board Members]

• In the convocation notice of the general meeting of shareholders, the individual reasons for each individual's appointment or dismissal, the career summary for each individual and other information are stated.

[Supplementary Principle 3.1(3)] Enhancement of Information Disclosure

The TPR Group has set "contribute to realizing a clean environment and a sophisticated global society by offering unmatched technologies and products with superior value" as its corporate philosophy and is working to solve social issues. In addition, the Company established a system for promoting sustainable management, aiming to systematically promote these activities, identified materialities and, through company-wide efforts, is contributing to the realization of a sustainable society while aiming to achieve sustainable growth as a company.

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The Company believes that addressing corporate sustainability issues is an important element of risk management, while also an important management issue that can lead to earning opportunities, and practices management that fulfills its corporate social responsibility from the perspective of medium- to long-term corporate value enhancement in consideration of financial, environmental and social aspects.

In addition, the Company has established the Sustainability Promotion Committee, chaired by the Chairman & CEO, that works to strengthen sustainability initiatives through deliberations on activities related to materialities and KPIs.

For details, please refer to the Company's website. https://www.tpr.co.jp/csr/activity/

Regarding human capital, the Company's management commitment states that "We shall realize a meaningful workplace for our staff by educating and learning from people" and the Company has positioned the realization of a diverse and rich workplace as a materiality. Based on this approach, the Company has established securing and developing human resources, work-style reforms, promotion of diversity, and is working on investments in human capital and the allocation of management resources with employee health management as KPIs.

In addition, regarding intellectual property, the Company has positioned the development of superior environmentally friendly technologies and products that meet diverse needs, the acquisition of rights globally according to the business, catching up by acquiring advanced technology through industry-academia-government collaboration, and protecting and avoiding infringing on patent rights and other rights as priority issues, and is working to achieve "a commanding top position in powertrain products" and "active development of new businesses" based on the Medium-Term Management Plan. Regarding the goal of "realizing a clean environment and a sophisticated global society" stated in the corporate philosophy, the Company will continue to invest in intellectual property going forward.

The Company considers addressing climate change to be one of its top priorities. As such, the Company has set a goal of being carbon neutral by 2050, and is striving to reduce its environmental impact through measures such as developing and offering products with low environmental impact and switching to alternative fuels. The contents of the initiatives will be disclosed based on the TCFD recommendations or an equivalent framework.

[Supplementary Principle 4.1(1) Overview of Scope of Matters Delegated to Management]

The Company has established in the Board of Directors Regulations, in addition to matters provided for under laws and regulations or the articles of incorporation, which matters shall be determined by the Board of Directors, or reported to the Board of Directors, such as management policies, business plans, investment plans, subsidiary establishment or investment. The other individual matters of business execution are entrusted to the decision- making authority of executive officers from the Chairman and CEO down, based on the regulations for division of duties and delegation of authority.

In addition, the Company has established the Management Meeting and the Budget Committee (convening monthly, yearly, respectively) as organs of business execution made up of Executive Officers with ranks of Managing Executive Officer and higher, and while striving to enhance discussions of important management issues stipulated as targets for discussion under the regulations for delegation of authority, the Company has established various cross-sectional meetings, such as the Compliance Committee and the Risk Management Committee, and while carrying out examination and monitoring of important management issues from various perspectives, the Company strives to realize optimal decision-making.

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[Principle 4.9 Independence Standards and Qualification for Independent Outside Directors]

The independence standards for Outside Directors of the Company are stated in "II-1. [Independent Officers] Matters relating to Independent Officers" in this report.

[Supplementary Principle 4.10(1)] Use of Optional Approach

The Company's Board of Directors is composed of nine Directors, three of whom are independent Outside Directors.

In addition, the Company has established a Nomination and Remuneration Committee as an advisory body for the Board of Directors for the purpose of strengthening corporate governance from the standpoint of achieving greater transparency and objectivity. The committee discusses matters regarding nomination and dismissal of Directors and Audit & Supervisory Board Members, matters regarding the policy on composition of compensation, etc. of Directors and Audit & Supervisory Board Members, and other important matters.

The Nomination and Remuneration Committee is composed of three independent Outside Directors and one inside Director, and independence and objectivity are enhanced since a majority of the members are independent Outside Directors.

[Supplementary Principle 4.11(1) Policy on Appointment of Directors]

Under the Articles of Incorporation of the Company, the number of Directors is set as ten or less, which is believed to be an appropriate size for the continuous promotion of swift decision-making.

When nominating a Director candidate, we create a matrix that lists each candidate's skills, work experience and expertise, and comprehensively review individuals from the perspective of assigning the right person to the right position regardless of nationality or gender, giving consideration to the knowledge, experience, capability and so forth of the candidate, such as their capability of accurate and swift decision-making in the Board of Directors, their capability to conduct appropriate business management from a global standpoint, their capability to monitor the business execution of other Directors, their capability to take charge of the general operations of the business division under one's control, and so on. The matrix is shown on page 10 of the "Notice of the 88th Annual General Meeting of Shareholders." When appointing Directors, we plan on continuing to respect the balance and observe the existing size and rationale in the future.

[Supplementary Principle 4.11(2) Significant Concurrent Positions Outside the Company of Directors and Audit & Supervisory Board Members]

We will continue to practice annual disclosure of significant concurrent positions outside the Company of Directors and Audit & Supervisory Board Members in "II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Supervision in Management" of this report and in disclosure material such as the reference materials for convocation notices of general meetings of shareholders, the business report, the annual securities report, and so forth.

[Supplementary Principle 4.11(3) Analysis and Evaluation of Effectiveness of the Board of Directors]

To analyze and evaluate the effectiveness of the Board of Directors, we implemented a survey of each individual, targeting all Directors and Audit & Supervisory Board Members. As a result of such analysis and evaluation, the evaluation results showed that effectiveness was ensured. Looking forward, we will strive to further raise the level of effectiveness.

[Supplementary Principle 4-14(2) Training of Directors and Audit & Supervisory Board Members]

New and incumbent Directors and Audit & Supervisory Board Members have deepened their understanding of their roles and responsibilities as a critical governance body at a listed company, and should endeavor to acquire and update necessary knowledge and skills. Accordingly, the Company has provided and arranged training opportunities suitable to each Director and Audit & Supervisory Board Member along with financial support for

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