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

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Corporate Governance Report

Last Update: May 29, 2023

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).

[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

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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.

[Supplementary Principle 2-4-1: Ensuring Diversity in the Promotion to Core Human Resources]

With diversity, equity, and inclusion, the Company Group will continue to work to create an environment in which diverse human resources can excel, with the aim of creating innovations that will lead to the development of society.

• Diversity at the Company
  In addition to diversity that can be seen, such as ethnicity, nationality, gender, and age, we recognize that there is diversity that cannot be seen, such as thought, knowledge, experience, and perspective. We view all of these as unique aspects of an individual worth respecting.
• Equity at the Company
  We recognize that it becomes easier for inequalities to occur as an organization becomes more diverse. We also recognize that each employee has a different starting point. We are committed toward establishing working environments and support systems that allow all of our diverse employees to stand side by side at the starting line. We also endeavor to foment an awareness of this among our employees. At Murata, we are implementing diversity-related initiatives that cannot be realized only by Equality. Diversity is increasing at an accelerated rate in Murata through M&As, hiring more mid-career employees, providing more opportunities to disabled individuals, and promoting women in the workplace. We will continue to establish systems and environments and raise awareness, so that each of our employees can gain fair access to opportunities and resources, while becoming further aware of the distinction between Equity and Equality.
• Inclusion at the Company
  In order for diverse individuals to work closely together and build trust and relationships outside of their individual teams while enhancing the overall strengths of the organization, we believe it is crucial to establish an organizational culture that accepts and makes positive use of diverse opinions and thoughts, and to share a vision aligned with our management philosophy (Murata Philosophy).
• Murata Manufacturing has set targets for proportion of women in managerial positions: 10% by the end of fiscal 2030. An interim KPI of 4% by fiscal 2024 was added in 2022. The Company has newly introduced in 2019 a specialty managerial level to provide more opportunities as managers, and also endeavors to establish a network for women through medium to long-term career development support and discussion sessions.
• In fiscal 2007, we launched a job rotation system to empower human resources and promote putting the right person in the right place on a global level 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-careerhires, including those who joined the Company through M&A, are playing an active role in diverse fields. For example, there are currently 370 mid-career hires (as of March 31, 2023) 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

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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.

[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

(ii): Basic views and policies on corporate governance As stated in "1. Basic Views" above.

(iii): 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.

(iv): 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.

The composition of the Board of Directors and main skills, experiences, and knowledge held by each Member of the Board of Directors, as well as their definitions and reasons for selection, will also be published 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

[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

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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

(4) Responses to climate change

The Company Group has set "Strengthening climate change measures" as a materiality and is working to meet the various demands of society, and will contribute to the reduction of greenhouse gases in manufacturing through business operations in line with Science Based Targets (SBT), the recommendations of the Task Force on Climate-related Financial Information Disclosure (TCFD), and the RE100.

Specifically, the Climate Change Committee, chaired by the director in charge, promotes measures such as energy conservation and renewable energy. In addition, we have established the Climate Initiatives Subcommittee, Renewable Energy Subcommittee, and Energy-saving Subcommittee under the Committee to discuss the strengthening of SBT, TCFD and RE100, the strengthening of renewable energy initiatives, including solar power, and the strengthening of effective energy-saving initiatives.

For details of responses to climate change and TCFD measures, please refer to "Responses to climate change" at the Company's website.

https://corporate.murata.com/en-global/csr/environment_murata/climate_change#id2

[Supplementary Principle 4-1-1: Duties of the Board of Directors and Definition of Range of Entrustment to Management] The Board of Directors carries out functions including decision-makingregarding management policy and execution of important operations as well as supervising the execution of duties by Members of the Board of Directors, and proposals and reports for the Board of Directors are defined within the Regulations of the Board of Directors.

To enable swift and resolute decision-making by the Executive Directors, certain individual decisions on important business execution, such as acquisition and disposal of important assets, or organization or personnel matters, are delegated to the Executive Directors.

[Principle 4-9: Independence Standards and Qualification for Independent Directors]

Please see "Independent Directors" "Matters relating to Independent Director" 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.

[Supplementary Principle 4-11-1: Overall Balance of Expertise, Experience, and Capabilities of the Board of Directors and View Regarding Diversity and Scale]

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.

[Supplementary Principle 4-11-2: Status of Members of the Board of Directors Concurrently Serving as Officers of Other Listed Companies]

The Company nominates candidate Members of the Board of Directors who are able to dedicate the time and energy required to appropriately carry out the duties and obligations of a Member of the Board of Directors, and they do so in practice.

Significant concurrent positions of Members of the Board of Directors of the Company are stated in the "Convocation Notice for the Ordinary General Meeting of Shareholders."

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

[Supplementary Principle 4-11-3: Analysis and Evaluation of Effectiveness of the Board of Directors]

The Company endeavors to improve the effectiveness of the Board of Directors by conducting an annual analysis and evaluation of the effectiveness of the Board of Directors as a whole and discloses an overview of the procedure and results.

(1) Process of the analysis and evaluation

A questionnaire for all Members of the Board of Directors and interviews with Outside Directors were conducted and the analysis and evaluation were conducted through multiple discussions in the Board of Directors, making reference to the results of the questionnaire and interviews.

Through conducting the questionnaire and interviews, various confirmations were carried out regarding the composition of the Board of Directors, agenda items submitted to meetings, status of deliberation, participation stance of the Directors, operation of each committee including voluntary advisory committee, and other matters regarding the operation of the Board of Directors. These were carried out by a third party.

1. Major challenges and improvements recognized in the previous evaluation of effectiveness and efforts to address them In the previous evaluation of effectiveness, the following points were recognized as having some challenges and problems and expected further improvement.

• Measures to examine the desired direction of the Board of Directors and further enhance and energize discussions

With the aim of allocating more time for strategic discussions and discussions from a wider perspective, we will revise the balance between decision-making functions, oversight functions and advisory functions.

• Necessity to further enhance communications among Directors

Aiming to eliminate the information gap between Inside Directors and Outside Directors, and facilitate smooth communications among Directors, the Company is conducting various initiatives by providing meeting opportunities outside of the Board of Directors meetings, including providing explanations and company information to Outside Directors in advance, holding meetings between the Outside Directors and management, and holding meetings for only the Outside Directors as meeting opportunities outside of the Board of Directors meetings. By clarifying the objectives of each type of meeting,, the Company strives for more effective utilization of these initiatives.

Based on the above, we have mainly promoted the following initiatives in fiscal 2022.

• Examination of schemes to strike balance between the decision making function, oversight function and advisory function and to improve the effectiveness of the respective functions
• Based on the above examination, organizing the roles expected of Outside Directors and the positioning of meetings outside the Board of Directors (pre-meeting explanations, provision of company information, Board of Outside Directors Meetings, etc.)
• Measures to conduct more strategic discussions and discussions from a wider perspective
• • Improvement of operation of pre-meeting explanations
  • Review of agenda items and agenda criteria for Board of Directors meetings
• Strengthening the PDCA cycle to improve the operations of the Board of Directors
• • Setting a time for Directors to review Board of Directors meetings immediately after the meetings
  • Strengthening cooperation between the Chairperson and other inside directors and the Secretariat of the Board of Directors

(3) Results of the analysis and evaluation, and recognition of challenges

With use of the analysis and reports of the questionnaire results and interview content conducted as described in (1) above, and discussions held by the Board of Directors in reference thereto, the Board of Directors of the Company has been assessed to be functioning with sufficient overall effectiveness in consideration of its duties and obligations.

• The number of Directors and their diversity, etc., composition of Board of Directors, as well as the selection of agenda items are generally appropriate.
• Under the appropriate leadership of the Chairperson, each member demonstrates his or her skills, experience, and knowledge, and an atmosphere that enables Directors to speak out freely and openly is being cultivated and broadminded and constructive discussions and exchanges of opinion are taking place.
• Outside Directors actively provide advice from their expert perspectives and ask effective questions. In addition, there is adequate communication with Inside Directors.