TAIYO YUDEN

Internal Control System

Basic Stance

TAIYO YUDEN's internal control activities form an integral part of the management framework and indeed management itself to ensure accurate reporting of financial results, compliance with laws and regulations, protection of assets and effective and efficient execution of business operations. Securing the effectiveness of internal controls is a top-level, important management priority at TAIYO YUDEN.

Internal Control System

1.System for ensuring that Directors, Operating Officers and employees perform their duties in accordance with laws, regulations and the Articles of Incorporation, as well as a system for ensuring the appropriate business operations within the company group (the "Taiyo Yuden Group") consisting of the Company and its subsidiaries

1)
The Board of Directors shall resolve important matters in accordance with laws, regulations and the Articles of Incorporation, as well as the "Board of Directors Regulations" and other internal regulations.
2)
The Board of Directors shall strengthen the management system for risk factors surrounding the management and supervise the execution of duties by Directors.
3)
Audit & Supervisory Board Members shall monitor the appropriateness of resolutions by the Board of Directors, as well as the execution of duties by Directors and Operating Officers.
4)
A Internal Control Committee shall be established as a system to promote the Group's compliance activities. The committee shall designate a responsible person for each of the items set forth in the "Taiyo Yuden Group CSR Code of Conduct" and conduct compliance activities on an ongoing basis in accordance with the compliance management system.
5)
A whistleblower system shall be operated for early detection of compliance-related problems of the Group. The detected problems shall be investigated and corrective measures shall be taken to prevent a recurrence.
6)
Corporate information and other materials relating to the Group shall be swiftly and appropriately disclosed to shareholders and investors.
7)
A firm and uncompromising stance will be taken on an organizational basis against antisocial movements or groups.
8)
Internal control shall be streamlined and operated for the purpose of ensuring the reliability of financial reports in accordance with the Financial Instruments and Exchange Act.
9)
As for the execution of business operations at subsidiaries, the relevant operating division/departments of the Company shall be the contact to grasp the circumstances thereof, and sufficient exchange of information and coordination of interests shall be conducted with regard to important information in accordance with the "Group Management Rules" to ensure appropriateness of business operations while respecting the management intentions of the respective subsidiaries.

2.System for the storage and management of information with regard to the execution of duties by Directors and Operating Officers of the Company

1)
The Company shall record the statutory documents such as the minutes of the General Meetings of Shareholders, the minutes of the Meetings of the Board of Directors, and the minutes of other important meetings concerning the execution of duties by Directors and Operating Officers in the form of documents or electromagnetic media, and store and manage them together with relevant materials, in accordance with laws and regulations, as well as the respective meeting rules.
2)
The Company shall maintain an environment that enables Directors and/or Audit & Supervisory Board Members to access said information at any time in accordance with the respective meeting rules.

3.Rules for managing risks of loss with respect to the Company and other systems

1)
A Internal Control Committee shall be established as a system to promote risk management activities. The committee shall designate a responsible person for each risk category. Risk management activities, which consist of risk identification, evaluation of risk levels, decision and execution of risk countermeasures and monitoring/review of the status of implemented countermeasures, shall be continuously performed as per the Group risk management system.
2)
As per the Company's Group Business Continuity and Risk Management Regulations, the effects on business activities resulting from the occurrence of any risks including natural disasters shall be preassumed, an emergency task force shall be formed depending on the scale of expected adverse effects and preventive measures shall be taken in advance during peacetime. In case a business continuity problem arises, countermeasures shall be taken in compliance with the BCP (Business Continuity Plan) put in place to enable the early resumption of business activities.

4.System for ensuring the duties of Directors of the Company are efficiently performed

1)
To ensure that decision making by the Board of Directors are appropriate and efficient, a collegial body to deliberate important matters regarding the execution of business operations and personnel affairs shall be established.
2)
To improve the efficiency of the execution of duties by Executive Directors, Operating Officers shall be in place.
3)
An Internal Control Committee shall be established as a collegial body that deliberates on the internal control system and evaluates its activities, and a person responsible for promotion shall be designated for each item set forth in this resolution. The Internal Control Committee shall regularly receive reporting from the aforementioned persons responsible for promotion on the activity achievements and report the achievements to the Board of Directors.
4)
The decision-making process shall be simplified and accelerated by proactively leveraging various computer systems for such applications as workflows, video conferences, the sharing of information and information management by leveraging IT technology.

5.System for ensuring appropriate business operations within the Taiyo Yuden Group

1)
System for reporting to the Company on matters concerning the execution of duties by Directors of the subsidiaries of the Company and other persons with similar authority
ⅰ)
The status of the performed business operations at subsidiaries shall be reported as per the Company's "Group Management Rules" to encourage the sharing of information with relevant departments of the Company.
ⅱ)
The Company shall strive to understand the management circumstances of its subsidiaries by dispatching some of its Operating Officers and/or employees to the relevant subsidiaries.
2)
Rules for managing risks of loss with respect to any subsidiary of the Company and other systems
ⅰ)
As per the Group risk management system, the subsidiary shall continuously perform its risk identification, evaluation of risk levels, decision and execution of risk countermeasures and monitoring/review of the status of implemented countermeasures.
ⅱ)
As per the Company's Group Business Continuity and Risk Management Regulations, the subsidiary shall preassume circumstances in which effects on business activities could result from the occurrence of risks including natural disasters, determine the possible formation of an emergency task force depending on the scale of expected adverse effects and take preventive measures in advance during peacetime. In case a business continuity problem arises, the subsidiary shall take countermeasures in compliance with the BCP (Business Continuity Plan) put in place to enable the early resumption of business activities.
3)
System for ensuring the duties of Directors, etc., of any subsidiary of the Company are efficiently performed
ⅰ)
The Company shall formulate its "Group Management Rules" to help subsidiaries handle their decision making efficiently, whereas the subsidiaries shall put the rules into practice.
ⅱ)
The Internal Audit Office of the Company monitors whether business operations of subsidiaries are conducted appropriately and efficiently from an independent standpoint. The monitoring results shall be provided appropriately as feedback to the relevant subsidiaries and to the Chief Executive Officer of the Company. The information therein also shall be shared with the Audit & Supervisory Board Members of the Company.
4)
System for ensuring that Directors and employees of any subsidiary of the Company perform their duties in accordance with laws, regulations and the Articles of Incorporation of said subsidiary
ⅰ)
As for important matters, the system to ensure the appropriateness of business operations at subsidiaries shall be streamlined and maintained as per the Company's "Group Management Rules."
ⅱ)
As a system to promote compliance activities, a responsible person for each of the items set forth in the "Taiyo Yuden Group CSR Code of Conduct" shall be designated to conduct compliance activities on an ongoing basis in accordance with the compliance management system.

6.System for ensuring effective audits by the Audit & Supervisory Board Members of the Company

1)
Matters regarding the employees appointed to support Audit & Supervisory Board Members of the Company (Independence of said employees from Directors, ensuring effectiveness of the direction of Audit & Supervisory Board Members, etc.)
ⅰ)
As dedicated staff who support Audit & Supervisory Board Members' auditing operations under the control of the Audit & Supervisory Board, employees who serve as secretariat members (the "Secretariat Staff") shall be in place.
ⅱ)
Designation, transfer, performance evaluation, promotion, disciplinary actions, etc., of the Secretariat staff shall be consulted with the Audit & Supervisory Board in advance to obtain its accord.
2)
Treatment of expenses that derive from the execution of duties by Audit & Supervisory Board Members of the Company
 
Unless otherwise recognized that such costs are not necessary with regard to the Audit & Supervisory Board Members' duties, the Company shall incur costs that have been caused in relation to the audits by Audit & Supervisory Board Members.
3)
Other systems for ensuring effective auditing by the Audit & Supervisory Board Members of the Company
ⅰ)
Audit & Supervisory Board Members shall participate in important meetings on managerial matters and audit the decision making of Directors, as well as the execution of duties by Directors and Operating Officers.
ⅱ)
Audit & Supervisory Board Members shall timely collect information necessary for their audits through communication with Directors, Operating Officers, and employees. Audit & Supervisory Board Members shall also request, as necessary, reports therefrom regarding the execution of their duties and inspect the relevant documents.
ⅲ)
Audit & Supervisory Board Members shall periodically exchange information with the Internal Audit Office, and take close cooperation therewith.
ⅳ)
Audit & Supervisory Board Members shall periodically, or on an as needed-basis, exchange information with the Accounting Auditor, and request reporting therefrom, as necessary.

7.System for reporting to Audit & Supervisory Board Members of the Company

1)
System for reporting to Audit & Supervisory Board Members of the Company by Directors, Operating Officers and employees of the Company
ⅰ)
Directors, Operating Officers and employees of the Company, if any of them recognize a fact that violates any laws, regulations, the Articles of Incorporation and/or internal regulations, or a considerably improper fact that could be such a violating fact, or a fact that is feared to cause significant damage to the Company, shall immediately report thereof to the Audit & Supervisory Board Members.
ⅱ)
The system that allows any Director, Operating Officer or employee of the Company to directly report to an Audit & Supervisory Board Member of the Company shall be streamlined and maintained as per the Company's internal whistleblowing rules.
2)
System for reporting to Audit & Supervisory Board Members of the Company by Directors and employees of any subsidiary of the Company
ⅰ)
The subsidiaries of the Company shall streamline and maintain the system that allows Directors, etc., and employees of any subsidiary to directly report to Audit & Supervisory Board Members of the Company with regard to the violation of laws, regulations and/or internal regulations by Directors, etc., as per their respective internal whistleblowing rules.
ⅱ)
The full-time Audit & Supervisory Board Members of the Company shall seek to maintain an environment conducive to collecting information and performing audits through communication with Directors and employees of the subsidiaries by sharing the tasks with each other.
3)
System for ensuring that anyone who has reported to an Audit & Supervisory Board Member does not suffer from detrimental treatment for the reason of having made said report
 
The Group shall stipulate a scheme to fully protect informants in its internal rules, and streamline and maintain a preventive system, under which anyone who has used the whistleblower system to report to the Audit & Supervisory Board and/or the Audit & Supervisory Board Members shall not be unfavorably treated.

Basic Policy for Exclusion of Anti-social Forces and State of Implementation of a System for Exclusion of Anti-social Forces

Basic Policy for Exclusion of Anti-social Forces

TAIYO YUDEN has determined to resolutely and systematically oppose anti-social forces and organizations that pose a threat to the order and safety of civil society. (This content is taken from a Board of Directors resolution on the Basic Policy on Internal Control.)

State of Implementation of a System for Exclusion of Anti-Social Forces

The TAIYO YUDEN Group CSR Code of Conduct sets forth the following matters pertaining to the severing of relations with anti-social forces.

1.Severing of relations with anti-social forces

TAIYO YUDEN resolutely rejects involvement with gang organizations, terrorist groups, religious cults, or other anti-social forces and organizations that pose a threat to the order and safety of civil society.

1)
Observe the three principles of dealing with anti-social forces and maintain a resolute posture: "Don't pay them," "Don't use them," and "Don't fear them."
2)
Be duly careful about contact from unknown outside parties. Report any such contact to the concerned department and seek advice.
3)
Take measures such as refusing receipt of unexpected mail and reject unreasonable demands.

2.State of establishment of a response management department and person responsible for preventing unreasonable demands

The officer in charge of general administration is the person responsible and the general administration department of each plant handles unreasonable demands and other matters.

3.Cooperation with external agencies and the gathering and management of information

Individual TAIYO YUDEN business sites are members of the Federation for Prevention of Special Violence under Jurisdiction of the Metropolitan Police Department, Ueno Area Special Violence Prevention Measures Council, Gunma Prefecture Company Defense Measures Council, Takasaki Area Workplace Police Liaison Council, and other organizations.
We participate in periodic training sessions held by above external agencies and gather and exchange necessary information. Up-to-date information concerning anti-social forces is managed and shared within the general administration departments.

4.State of preparation of a response manual

We have prepared a response manual that lists response methods and response checklist items for use in face to face or telephone contact, case examples, and other information and strive to ensure understanding by distributing the manual to the head office and general administration departments and explaining the contents.

5.During CSR training, we provide easy-to-understand explanations and familiarize employees with the severing of relations with anti-social forces using the CSR Code of Conduct Handbook.