Guidance for Collaborative Value Creation

1 Guidance forCollaborative Value CreationMay 29, 2017 METI(Ministry of Economy, Trade and Industry)National wealthFinancial assets, Intellectual Assets, Human Capital, etc. (stock)ReinvestmentProfitInvestmentIncom e growthCapital gainsIncome gainsInvestmentCompanies InvestorsFinancial institutionsConsumption growthReturn on investmentAs Japan faces a rapid aging of society and population shrinkage, it is essentialto grow its national wealthover the long term by enhancing capital efficiency concerning various capitals (financial, human,intellectual capital, etc.)that are available only in limited of a virtuous cycle andsustainable growththroughthe overall optimization of the economy sinvestment chain(*)is crucial.

2 In such an investment chain, companies deliver sustained Value Creation andgenerate returns on long-term investments by enhancing theirearning power.(*) The investment chain refers to the various paths and processes of capital flowing from its providers to the companies that allocate it to business Optimization of the investment chain2<Overview of related measures>Board of directorsManagers, exchanges, sell-side analysts, managersPension funds, etc. (asset owners)BeneficiariesIndividual investorsCompanies Market participantsEmployeesInstitutional investorsCompetitiveness and Incentives for Sustainable Growth: Building Favorable Relationships between Companies and Investors Project (Ito Review)Stewardship CodeGPIF reformNISA and defined-contribution pensionsRevision of the Companies ActCorporate Governance CodePromoting dialogue between companies and investors Dialogue-based general shareholders meetings Promoting integrated disclosureJPX Nikkei Index 4002.

3 Overview of measures related to the investment chainIn order for companies to enhance their earning power and deliver sustainable corporate Value Creation , it isimportant toensure that appropriate governance exercisedand toencourage constructive dialogue betweencompanies and their flowPension Funds(Asset Owners)Securities exchanges Sell-side Analysts IntellectualCapitalHumanCapitalManufactu redCapitalNaturalCapitalSocial CapitalFinancialCapitalOptimization of investment in allocation of capitals from a long-term perspectiveConsumersBeneficiariesPrivate InvestorsDialogue/EngagementAsset ManagersInstitutional Investors Institutional Investors Financial MarketFinancial MarketCompaniesCompaniesCreating earning power Sustainable corporate Value creationGovernanceProcessingof expensesProcessingof expensesLump-sum processing of expenses putting downward pressure on profitsProduct/Service MarketsProcessingof expensesProcessingof expensesGenerating returns on long-term

4 InvestmentsIt is pointed out that strategic investment in intangible assets and efforts involving ESG factors are recognized as expenditures which drive profits downward in the short creating corporate Value , corporate governance, optimization of investments in allocation of various types of capital based on long-term Corporate investment in the investment chainThe Study Group on Long-term Investment (Investment Evaluating ESG Factors and Intangible Assets) was established at the Ministry of Economy, Trade and Industry (*) in August 2016.(*) The Financial Services Agency and other entities are participating in the group as only from the standpoint of promoting investments based on ESG (environment, society andgovernance)

5 Factors, the Government will also considerthe way in which corporatemanagement and investments creating sustainable corporate Value should be and how suchvalue should be evaluated,andthe mechanism of governancefacilitating the optimization ofinvestments in human, intellectual, manufacturing and other capital resources based onlong-termmanagement strategies, and how managers should make investment decisions and howinvestors should evaluate those decisions, as well as how information should be provided,andreach conclusionon what policy measures the Government should take to encourageoptimization of investmentsby the end of this fiscal Revitalization Strategy 2016(i) Strengthening the initiatives that promote effective governance reformA) Promoting sustainable corporate Value Creation and mid/long-term investment 54.

6 Establishing a study group based on the Japan Revitalization Strategy 2016 Based on the Japan Revitalization Strategy 2016, the Study Group examined management decisions, governance systems, investmentdecisions by investors, and information sharing that optimize investment in human and intellectual capital, etc. as measures to promotesustainable corporate Value Creation and mid/long-term investment and conducted a study on measures that will optimize Study Groupheld the first meeting on August 24, 2016and has held monthly meetings since ninth meeting was heldon May 25, ItoProfessor, Graduate School of Commerce and Management, Hitotsubashi University ChairmanIzumi KobayashiBoard member, International Integrated Reporting Council (IIRC)Toshio ArimaUnited Nations Global Compact Board Member/Executive Advisor, Fuji Xerox Co.

7 , SampeiHead of Engagement, Fidelity International, JapanSatoshi AndoDirector, OMRON CorporationMegumi SutoProfessor, Graduate School of Business and Finance, Waseda UniversityGeorge IguchiGeneral Manager of Equity Investment Department / Head of Corporate Governance, Nissay Asset Management CorporationMitsuru TakahashiDirector of the Board, Corporate Executive Vice President, Chief Financial Officer, Fuji Heavy Industries IchikawaGeneral Manager, Investor Relations Department, Rakuten, TakegaharaExecutive Officer, Deputy Chief Research Officer, Development Bank of Japan EraVice President, Head of Investment Stewardship, BlackRock Japan Co., HamaguchiChief Investment Officer, Pension Fund Association, JapanYuri OkinaVice Chairman, The Japan Research Institute, HirotaMember of the Board, Executive Vice President, Corporate Functional Officer, Mitsubishi CorporationKazushige Okuno Managing Director (CIO), Norinchukin Value Investments Co.

8 , MatsushimaChief Research Advisor, Equity Research Department, Equity Research Division, Mitsubishi UFJ Morgan Stanley Securities Co., Oguchi Representative Director, Governance for Owners Japan KKHiromichi MizunoExecutive Managing Director and Chief Investment Officer, Government Pension Investment Fund, JapanTetsuya KikutaExecutive Officer, Chief General Manager, Investment, The Dai-ichi Life Insurance Company, MiyagawaDean and Professor, Faculty of Economics, Gakushuin UniversityMasaharu Kubo Representative Director Member of the Board, Executive Vice President, Mitsui Chemicals, Inc. Observers The Financial Services Agency (FSA), the Ministry of the Environment (MOE), Japan Exchange Group, Inc.

9 , and Japan Business Federation KEIDANREN 5. Study Group on Long-term Investment(Investment Evaluating ESG Factors and Intangible Assets) Releasing the Guidancewhich serves as a reference for how companies should bothdisclose information and engage in dialogue with investors in order to create Value overthe long term A framework under which companies can present and explain information that should be taken intoconsideration, such as business models, sustainabilityand growth potential, strategy, performance andKPIs, and governance, under a Value - Creation scenarioReleasing the Guidance for Integrated Corporate Disclosure and Company-Investor Dialogues for Collaborative Value Creation ( Collaborative Value Creation Guidance )

10 As asource of competitivenessthat enables companies to create sustained corporate Value under the Fourth Industrial Revolution is a robust business model and astrategy for connecting the model to sustainable growth, it is important forcorporate management to measure strategic investmentnot only in tangible assets but alsoin intangible assets, such as human resources, technology and knowledge. It is also important toappropriately explain the Value of these management strategies inorder to attract long-term investors. However, (i) Japanese corporate information disclosure methods, which also communicate Value to investors, are inconsistent between companies, and (ii) there arecomplaints about a lack of disclosure concerning information on management strategies and non-financial information on ESG and other matters, whichareoftenthebases for long-term investment decisions.