Murata Manufacturing : Update of Corporate Governance Report (Tokyo Stock Exchange)

Corporate Governance Report

Last Update: September 20, 2022

Murata Manufacturing Co., Ltd.

Norio Nakajima

President and Representative Director

Contact: Toshiyuki Kambayashi

General Manager of General Administration Department

(Phone: [phone])

Securities Code: 6981 https://corporate.murata.com/en-global/

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

1. Basic Views

The Company's mission is to carry out operations based on the following "Murata Philosophy" which is the most important management principles of the Company, and to contribute to the advancement of society and culture through the provision of products and services.

We contribute to the advancement of society by enhancing technologies and skills

applying scientific approach

creating innovative products and solutions being trustworthy and,

together with all our stakeholders, thankful for the increase in prosperity. (Established in 1954, revised in 1979)

Based on this management principles, Murata considers corporate governance to be one of the highest priorities in management, and we work constantly to establish and operate optimal management systems that will realize sound corporate growth and development while taking into consideration every stakeholder.

With the purpose of contributing to sustainable growth and increase corporate value over the mid- to long-term, the Company's basic principles on corporate governance are set out in the "Corporate Governance Guidelines," which are posted on the Company's website.

*Corporate Governance Guidelines: https://corporate.murata.com/en-global/company/corporate_governance

[Reasons for Non-compliance with the Principles of the Japan's Corporate Governance Code] The Company implements all principles of the Corporate Governance Code (revised June 11, 2021).

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

[Principle 1.4 Cross-Shareholdings]

(1) Policy regarding strategic shareholdings

In the electronics industry, with rapid changes in the market environment and technological innovation, to aim for sustainable improvement in corporate value, it is necessary to have cooperative relationships with various companies in all areas of development, procurement, production, and sales. The Company holds stock in such counterparties with the aim of maintaining and strengthening transactional relationships with counterparties that will contribute to the improvement of the Company's corporate value over the mid- to long-term.

(2) Objectives and rationale for strategic shareholdings

For all strategic shareholding stocks, the Board of Directors comprehensively examines the appropriateness of holding stocks every year from qualitative aspects such as the purpose of holding and transaction status, as well as quantitative aspects such as profitability relative to the cost of capital. For stocks for which the appropriateness of holding cannot be confirmed, the Board of Directors will engage in dialogue with the relevant party and reduce the number of stocks strategically held.

(3) Standards on exercise of voting rights

Regarding the exercise of voting rights for strategic shareholdings, the Company determines to vote for or against a proposal upon individually investigating whether the contents of each proposal do not fall under violation of laws and regulations, anti-social activities, or events that may be detrimental to shareholder value, or whether the proposal may lead to improvement of corporate value for the Company and the companies whose stocks are held by the Company from a medium- to long-term viewpoint through maintaining and strengthening business and cooperative relationships.

[Principle 1.7 Related Party Transactions]

Concerning transactions involving conflicts of interests with Members of the Board of Directors, approval is required from the Board of Directors under the Companies Act, and after implementation, reports are made to the Board of Directors. The presence of transactions between the Company and Members of the Board of Directors and relatives of these persons is confirmed with Members of the Board of Directors. Additionally, transactions with related parties are disclosed in line with laws and regulations.

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[Supplementary Principle 2-4-1: Ensuring Diversity in the Promotion to Core Human Resources] The Company Group regards diversity and inclusion as accepting and leveraging not only visible diversity such as gender, age and race, but also qualities and strengths such as thoughts, knowledge, experiences, and viewpoints. We are implementing initiatives to develop a culture focused on mutual trust and cooperation.

・The Company has set targets proportion of women in managerial positions: 10% by the end of fiscal 2030. The Company has newly introduced a specialty managerial level to provide more opportunities as managers in fiscal 2019, also endeavors to establish a female network through medium to long-term career development support and discussion sessions.

・In fiscal 2007, we launched a rotation system to hire such human resources and promote hiring of individuals to positions suited to their skills on the global level. Under the rotation system, we dispatch local employees at overseas sites to affiliates in Japan or in other countries. We will manage the organization with a greater focus on autonomy, collectiveness and evolution through developing human resources with diverse viewpoints and experiences.

・Mid-career hires, including those who joined the Company through mergers and acquisitions (M&A), are playing an active role in diverse fields. For example, there are currently 342 mid-career hires (as of March 31, 2022) serving as managers in the Company and its subsidiaries in Japan. Going forward, we will create a workplace environment in which mid-career hires can work comfortably with a sense of fulfillment.

For details, please refer to the Company's website. https://corporate.murata.com/en-global/csr/people/employees

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

The Murata Corporate Pension Fund handles the management of assets accumulated for the Company's corporate pension.

Decisions related to the asset management are made by the Board of Representatives, following deliberation by the Asset Management Committee. Members of the Asset Management Committee and the Board of Representatives include general managers of the Company's Human Resources, Accounting & Controller, and Finance departments, as well as other personnel with appropriate qualifications. Members also include leaders of the labor union, as representatives of the beneficiaries.

Furthermore, to ensure the appropriate monitoring of asset managers, the Company assigns and cultivates personnel having the necessary experience and credentials and takes advice from outside experts.

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[Principle 3.1 Full Disclosure]

(i)-a: Management philosophy

The Company has established the basic philosophy of its management as its "Murata's Philosophy," which all executives and employees share and aim to enact. Murata's Philosophy is available on the Company's website.

*Murata's Philosophy: https://corporate.murata.com/en-global/company/philosophy

(i)-b: Management strategy, management plan

The Company formulates its Mid-term Direction in three-year increments, and the Mid-term Policy for the three years from fiscal 2022 to fiscal 2024 is available on the Company's website. In the Mid-term Direction 2024, the Company has identified economic value indicators, which place emphasis on the ratio of operating income to net sales and return on invested capital (ROIC), and social value indicators, which include greenhouse gas emissions and the percentage of power from renewal energy sources, and has set four mid-term management issues, including the promotion of management reform, to be addressed in order to achieve those indicator targets.

At the same time, the Company has also formulated Vision2030, its Long-term Direction for 2030, and is working to disseminate information.

*Vision2030: https://corporate.murata.com/en-global/company/business-strategy/vision2030*Mid-term Direction 2024: https://corporate.murata.com/en-global/company/business-strategy/mid-term-policy

1. Basic views and policies on corporate governance As stated in "1. Basic Views" above.
2. Policies and procedures in determining remuneration of Members of the Board of Directors Please see "Director Remuneration" "Disclosure of Policy for Determining Remuneration Amounts or Calculation Methods Thereof" in "1. Organizational Composition and Operation" of "II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management" below.
3. Policies and procedures in the appointment and dismissal of senior management, and the nomination of candidates for Members of the Board of Directors

Please see "2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration Decisions (Overview of Current Corporate Governance System)" of "II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management" below.

(v) Explanations with respect to the individual appointments and dismissals of candidates for Members of the Board of Directors

Reasons for the appointment of candidates for Members of the Board of Directors and the dismissal of Members of the Board of Directors are disclosed in the Convocation Notice for the Ordinary General Meeting of Shareholders and other disclosures.

*Convocation Notice for the Ordinary General Meeting of Shareholders: https://corporate.murata.com/en-global/ir/info/meetings

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[Supplementary Principle 3-1-3: Initiatives on Sustainability]

(1) Initiatives on Sustainability

In keeping with the spirit of Murata's Philosophy, the Company Group's management philosophy, it is committed not only to compliance with laws and regulations, but also to highly transparent governance, respect for human rights, health and safety, social contribution, environmental preservation, etc.

In addition, recent changes in society, as represented by SDGs and the Paris Agreement, require that companies pursue not only economic value, but also integrated value in harmony with people and nature. Seeing this as an opportunity for further strengthening of the management foundation and growth, the Company Group has set key issues as initiatives in the mid-term management plan and is promoting daily activities.

Based on high corporate ethics, the Company Group will continue to develop together with its stakeholders by contributing to the transformation of society and solving social issues through its unique technologies and services.

For details of initiatives in Sustainability, please refer to the Company's website. *Initiatives in Sustainability https://corporate.murata.com/en-global/csr

*Murata Value Report https://corporate.murata.com/en-global/ir/library/report

(2) Investments in Human Capital

The Company Group, we regard CS and ES* as important values, and we seek to realize innovation through continuous emphasis and improvement in the areas. To us, CS means "continuing to create and provide value that is recognized by the customer." And ES means that "every employee achieves satisfaction and continuing growth through the performance of their work duties." We strive to be a company in which these goals can be realized in employees' jobs daily. In addition, we have set employee engagement as a medium- to long-term KPI, and we will continue to foster diverse environments and implement a range of initiatives toward the cultivation of this type of corporate culture.

For details, please refer to the Company's website. https://corporate.murata.com/en-global/csr/people/employees

*CS and ES

Generally speaking, CS means "customer satisfaction," and ES means "employee satisfaction." At Murata, however, we define CS as "creating and providing value" and ES as "motivation and growth."

(3) Investments to Intellectual Capital

In our Company Group, after establishing the Basic Policy of Intellectual Property Activities, employees collaborate beyond the organization framework so as to engage in the intellectual property activities that would benefit the business.

For details of measures regarding Intellectual Property, please refer to the Murata value report and the Company's website.

https://corporate.murata.com/en-global/csr/governance/ip

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