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.
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.
The Board of Directors, consist of directors elected at the General Shareholders' Meeting ,meets once a month as a rule to make decisions on matters stipulated by laws and articles of incorporation, important business plans and to oversee business operations.
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 each decision. They also submit issues to the Board of Directors that involve the Group's management and promote the efficient performance of duties in accordance with the management policy determined by the Board of Directors.
Regarding director's selection and compensations, we have introduced a three-committees’ system of the Officer Evaluation Committee, the Nomination Advisory Committee and the Remuneration Advisory Committee, and adopted the following procedures.
Regarding the director's evaluation we have introduced the Officer Evaluation Committee, which is chaired by the President and consist of members that include outside directors and outside corporate auditors as advisors. As a rule, the Officer Evaluation Committee meets twice a year and performs evaluation of the directors’ performance including self-evaluation and mutual evaluation for all directors. then the evaluation results are provided to the Nomination Advisory Committee and the Remuneration Advisory Committee.
Based on the results of director's evaluations and personnel evaluations of employees,the Nomination Advisory Committee, where outside directors and an outside corporate auditor join as voting members, examines the composition of officers for the next fiscal year and create a draft. A draft is then submitted to the Board of Directors , and the Board of Directors proposes candidates for directors to the Ordinary General Meeting of Shareholders.
The results of the director's evaluation provided by the Officers Evaluation Committee are used by the Remuneration Advisory Committee, which is chaired by the President and the majority of the members are outside directors and outside corporate auditors, to determine each director's compensation. The fixed monthly compensations 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 profit-based calculation model after the Officers Evaluation Committee examines it. We have introduced the effectiveness evaluation of the Board of Directors.The Board of Directors Evaluation Committee, which is chaired by one of the full-time corporate auditors and consist of all outside directors and corporate auditors, report the evaluation results to the board of directors and propose improvement plans.

Evaluation of the effectiveness of the Board of Directors

We have been analyzing and evaluating the effectiveness of the Board of Directors since fiscal 2019, and are working to further improve the functions of the Board of Directors. The summary and results of the effectiveness evaluation of the Board of Directors for fiscal 2019 are as follows.

Evaluation method
The Board of Directors Evaluation Committee, which is chaired by one of the full-time corporate auditors and consists of all corporate auditors and all outside directors, conducts an anonymous questionnaire survey of all directors and corporate auditors, and based on the results of the survey and analysis, the Board of Directors deliberated on the effectiveness of themselves and made the final decision on the evaluation.

Questionnaire contents
1) Questions regarding the functions and roles of the Board of Directors
2) Questions about Board materials
3) Questions concerning deliberations at the Board of Directors
4) Questions regarding the composition of the Board of Directors
5) Questions regarding the management and support system of the Board of Directors
6) Questions about Officer evaluation committee, Officer nomination committee and Officer compensation committee

Evaluation results
It was confirmed that the Board of Directors appropriately discusses factors and viewpoints that directors and corporate auditors should emphasize in decision-making and supervision concerning basic management policy, business strategy and important business execution. And the Board of Directors Evaluation Committee evaluated that the effectiveness of the Board of Directors is ensured. In addition, the following matters were confirmed for further improvement of the effectiveness of the Board of Directors.
 
[1] Allow sufficient time to discuss major themes related to company management.
[2] Further enhancement of the deliberation process for investment projects.
[3] Further development and improvement of management personnel.

We will continue to strive to improve the effectiveness of the Board of Directors, strengthen its functions ,and continuously improve corporate value.



[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.