We recognize that reinforcing corporate governance is an indispensable managerial subject to ensure our future growth and development. We are aiming to improve the corporate value of the entire Tsukishima Kikai Group by fulfilling CSR and winning the confidence of stakeholders including shareholders, customers, employees, communities, and suppliers.

We have established the following corporate policy as the foothold of our business.

• -1.To make contribution to the society,the company will dedicate to the industry development and environmental protection by making advantage of its leading edge technology.
• -1. Primarily targeting satisfaction of market demand,the company will provide best products and services possible to customers.
• -1. While adhering to originality- and vitality-based sustainable development,the company is proud to be a profitable enterprize that deserves the loyalty of its staff.

As we understand that it is important for the “Board Meeting” to grasp all aspects of board members’ performance and that both business judgment and implementation based on the judgment need prompt action, board members who are in charge of business operation serve concurrently as executive officers. In order to effectively oversee and inspect operations, we have “external board members” who do not serve concurrently as executive officers. Our articles of incorporation stipulate that the company has up to eleven board members; and as of now, we have eight board members, of which one is an external board member.

We are a company organizing Board of Auditors, having five corporate auditors. Three out of the five are “external corporate auditors.” Corporate auditors are to attend board meetings and express opinions when necessary, thus assuring both the promptness and transparency of business judgment. Corporate auditors regularly hold “informal meetings” with the President & CEO, while holding separate informal meetings with the auditing firm.

As for the management of our group companies, while respecting the independence of each company, we request them to submit periodical reports and to get our prior approval on important matters based on our “Managerial Standards for our Affiliated Companies (Related companies).” In order for us to grasp and properly supervise their activities, we have appointed one of our board members as the “supervisor of related companies.”

Also, in order to oversee and check the operations of each of our group companies, we have assigned our board members and corporate auditors to each of them.

Important matters related to the management of our company as well as our group companies are to be discussed for approval or reported for consent by the “Executive Committee,” usually held once a week, which consists of board members & executive officers based on our internal rules. Among matters discussed at the Executive Committee, matters designated to be discussed at board meetings according to the administrative authority rules as well as matters which would gravely influence the business of the group are to be discussed for approval or reported for consent by board meetings.

In addition, we have adopted a system to enhance goal-attainment levels and to ensure operational effectiveness by reviewing, at each monthly “Progress Review Meeting,” the performance level of each division and section’s targets as shown in the medium-term business plan and yearly plan, which is based on the medium-term plan. We also have a follow-up system to review each company’s goal-attainment level against planning at the quarterly “Group Progress Review Meeting.”

Our company’s accounting audit is performed by certified public accountants (CPAs), Mr. Hideo Kayashima and Mr. Kenji Sato, who belong to Inoue Auditing Co., Inc. Two other CPAs and one assistant accountant assist the company’s accounting audit.

The basic policy for our group companies’ internal control system was adopted at the board meeting held on May 17, 2006, and has since been implemented. The basic policy was reviewed thereafter taking into account the state of implementation as well as evaluation of the internal audit and requirement of auditing related to financial reporting based on Financial Products Exchange Law, and the revision was adopted at the board meeting held on March 28, 2007.

2. Amount of remuneration paid to the auditing firm

The amount of remuneration the company pays to the auditing firm for audit certification: ¥21 million

Note:
Aside from the remuneration for audit certification stipulated in Article 2-1 of Certified Public Accountant Law, the company does not need to pay any other remuneration to the auditing firm.

External board member Mr. Kunihiko Sawa is Senior Advisor to Fuji Electric Holdings Co., Ltd. Although Fuji Electric Holdings Co., Ltd. is our major shareholder, no external board member has any direct personal stake in the company.

External corporate auditors Mr. Takeo Takaishi, Mr. Toshitake Akamatsu and Mr. Seishiro Takenobu do not have any specific personal stake in the company.

Contracts were signed between the company and its external board members as well as external corporate auditors to limit liability for reparation which is stipulated in Article 423-1 of Corporation Law. The ceiling amount of liability for reparation based on the contract is set to be whichever is bigger, the predetermined amount of ¥9.5 million or more, or the minimum amount stipulated by the law.

We have established “Corporate Conduct Code of Tsukishima Kikai Group” which should be observed by all officers and employees of our company as well as of our group companies. In order to substantiate the Standards for Corporate Behavior, details are prescribed in various company regulations such as Private Information Protection Rules, Trade Secret Control Rules, Antitrust Law Compliance Program, Insider Trading Prevention Rules, etc. Also in order to secure the effectiveness of these internal rules, we have assigned an “Officer in Charge of Ethics” and organized “Compliance and Internal Audit Group” in CSR Dept. They have been making efforts towards the prevention and early detection of potential malpractices incompatible with laws and the articles of incorporation by establishing a “Corporate Ethics Help Line,” and appointing an external lawyer as one of those who receive inquiries made over the Corporate Ethics Help Line.

In terms of risk management, to avert any conceivable loss affecting our company and group companies, we have established “Tsukishima Kikai Group Risk Management Rules.” In case of emergency, a “Risk Management Committee” is convened, consisting of board members, which tackles risk management controlling our group companies. On a daily basis, the “Risk Management Committee Secretariat,” a permanent organization consisting of Administration Department and other related sections, engages in risk analysis and central control of risk-related information, while performing preventive management observing priority order.

Also, in order to reinforce the auditing function of business operations, we have established “CSR Dept.” which is to implement “internal audits” and report the results to the Board Meeting as well as to the Auditor’s Meeting.

The articles of incorporation stipulate that the resolution of appointing board members “should be approved only by the affirmative vote of a majority of the voting rights held by the shareholders present at the meeting at which shareholders holding in aggregate not less than one-third of the total number of the Company’s voting shares for the time being issued and outstanding are present.”

In order to exercise agile dividend policy and capital policy, the articles of incorporation stipulate that “the Board Meeting is authorized to decide by resolution the matters listed under Article 459-1 of Corporation Law, including appropriation of retained earnings, except as otherwise provided.”

The term of office for our board members is one year, clarifying management responsibility of the relevant business year.

As for requirements for special resolution at shareholders’ meetings, the articles of incorporation stipulate that “special resolution should be approved by 2/3 or more of voting rights at a shareholders’ meeting attended by shareholders who as a whole have 1/3 or more of all voting stocks.”