Hanwa Co., LTD.

Corporate Governance

Basic Corporate Governance Policy

We aim to fulfill our social responsibilities as a good corporate citizen so that we can gain and retain the respect from stakeholders and be recognized as a valuable enterprise. We work to establish a high degree of transparency in management systems to ensure full legal and regulatory compliance and respect for social norms.
In addition to participating in many corporate social responsibility (CSR) activities, we have established the CSR Committee and use a commitment to CSR management to make our corporate brand even more respected.

Basic overview of the corporate governance structure

We have adopted a corporate auditors' system, which includes the Board of Auditors that comprises five corporate auditors (of whom three are outside corporate auditors) selected at the General Shareholders' Meeting. The system is used to audit and perform oversight on the Board of Directors, and to monitor the performance of duties by the Company's administrative organizations operating under the Management Committee. We then report our findings at the General Shareholders' Meeting after completing our own reviewing process.
The Board of Directors meets once a month as a rule to deliberate and decide on important business plans and proposals concerning the Hanwa Group, and to oversee business operations.
In April 2012, we introduced an executive officer system to establish a system that enables more detail-oriented business operations and to promote more efficient and quicker decision-making.
As a rule, the Management Committee meets twice a month. The members of this committee, all of whom are executive officers, discuss issues of significance concerning management and reach decisions. They also submit issues to the Board of Directors that involve the Group's management and promote the efficientperformance of duties in accordance with the management policy determined by the Board of Directors.The Officers Evaluation Committee, chaired by the president, conducts an evaluation of the directors' performance. The Compensation Committee, which determines each director's compensation, and the Selection Committee, which governs the selection of directors, both operate under the Evaluation Committee.
The Officers Evaluation Committee meets once a year to perform a comprehensive evaluation of the directors' performance. This includes an assessment of the level of commitment and motivation of each director and a mutual evaluation process for all the directors.
The results of the evaluation provided by the Officers Evaluation Committee are used by the Compensation Committee, which includes outside directors, to determine each director's compensation. The fixed monthly compensation is then submitted as a regular salary plan to the Board of Directors. In terms of the directors' bonuses, we use a system that awards a bonus directly linked to profits and clearly reflects each individual director's achievement level. The Board of Directors approves this profitbased calculation model after the Officers Evaluation Committee reviews it. The corporate auditors have also approved this system.
To select directors, the Selection Committee, which includes outside directors, reviews the coming year's members based on their evaluation and their performance. A draft is then submitted to the Board of Directors. A proposed list of candidates is then forwarded to the Regular General Shareholders' Meeting.

[The Corporate Governance Structures]

Internal Control Policy

Hanwa is committed to using an effective corporate governance system to achieve sustained growth and other progress while reducing exposure to risks associated with achieving business goals. To accomplish this, we need to work on the establishment and operation of a system of internal controls for performing business activities properly and efficiently.
Our goal of internal control systems is to achieve (1) operational effectiveness and efficiency; (2) reliability in financial reporting; (3) strict compliance with laws and regulations in operating activities; and (4) appropriate preservation of assets.

[Flowchart (Design, Operation and Assessment of Internal Control)]

UK Tax Strategy

The publication of this strategy statement is regarded as satisfying the duty under Paragraph 16(2),Schedule 19, Finance Act 2016 in UK.

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