terms m

The Company's basic compliance policy, such as codes, policies, and systems related to sustainability

Wacom strongly believes that it can contribute towards the realization of a sustainable society, by seeking for various possibilities of "Life Long Ink" which is believed to be a value to be offered to society through business activities. Wacom shall have ethical and responsible business activities based on "Wacom Code of Ethics and Business Conduct" to turn such belief into action. Also, as part of responsible procuring activities as a company which consigns approximately 99% of its production activities to suppliers, Wacom aims for continuous contributions for a better society with suppliers (partners) based on "Wacom Supplier Code of Business Conduct" for the next generation. These codes are very important for Wacom's efforts aiming for a sustainable society.

Wacom Code of Ethics and Business Conduct
Wacom Suppliers Code of Conduct
Environmental Activities
Corporate Governance

Basic Views on Corporate Governance
Outline of Corporate Governance Systems
Composition of the Board of Directors
Monitoring each Directors’ performance of the role by the Board of Directors
Composition and Activity of the Committees (the Audit Committee, the Nominating Committee and the Compensation Committee)
Policy of Nominating the member of Board of Directors and training after Nomination
Independence and Qualifications of independent Outside Directors
Policy on Determining Compensation
Evaluate the Effectiveness of the Board of Directors
Basic Views on the Internal Control System and the Progress of System Development
Audit Framework with the Internal Audit and the Audit Committee
Preconditions for ensuring the effectiveness of the Board of Directors
Cross-Shareholdings

Compliance

Basic Compliance Policy
Compliance and "Wacom Code of Ethics and Business Conduct"
Compliance Management System
Internal Reporting System (Wacom Speak-up Line)
Compliance Training
Countermeasures Against Anti-Social Forces

Risk Management

Basic Policy for Risk Management
Risk Management System
Identify Risks
Information Security
BCP (Business Continuity Planning)

 

 

 

Wacom Code of Ethics and Business Conduct

Wacom shall establish "Wacom Code of Ethics and Business Conduct" to ensure that all directors and employees abide by these standards and guidelines to ethically and legally judge and conduct their business.

"Wacom Code of Ethics and Business Conduct" shall be applied not only to Wacom directors and employees but also to Wacom partners, suppliers which undertake Wacom's business, consultants, and others. Wacom shall also request all partners and suppliers to abide by the principles specified in it.

Contents of “Wacom Code of Ethics and Business Conduct” are as follows;

1. Compliance with the Law

Importance of Compliance with the Law

Protecting Wacom’s Assets

Preventing Insider Trading

No Involvement with Criminal Organizations or Individuals

Preventing Money Laundering

Compliance with Export and Import Controls

Anti-Corruption and Anti-Bribery Measures

Compliance with Anti-Trust Regulations

2. Work and Environment

Maintaining Equal Employment Opportunity

Preventing Harassment and Bullying

Cautions against Drugs and Alcohol Use

Health and Safety Measures

Respecting Human Rights

Taking Environmental Responsibility

3. Cautions when Representing Wacom

Avoiding Conflicts of Interest

Committing Wacom

Rules of Distribution and Acceptance of Gifts

Cautions against Unauthorized Lobbying Activities

Guidelines on using Social Media

Route for Communication and Public Statements

Outside Employment

Community Involvement and Contributions

4. Managing Information and Assets

Keeping Accurate Accounts and Records

Treating Competitive Information

Protection of Information and Intellectual Property

Protecting Data Privacy

Protecting Company Assets and Information

Guideline on using Email, Internet, Information systems

5. Implementation of the Code

Importance of “Speak up”

Guide to Wacom Speak-up Line

Process of Reports and Investigations

Commitment to No Retaliation

Serious Consequences for Not Following the Code

Waivers

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Wacom Suppliers Code of Conduct

Wacom established Wacom Suppliers Code of Conduct (the “Code of Conduct”) that conforms to the RBA Code of Conduct (Version 6.0 of the Responsible Business Alliance Code of Conduct) formulated and released by the RBA (Responsible Business Alliance). Wacom suppliers (“Suppliers”) are requested to comply with the principles set forth in this Code of Conduct.

Wacom is also encouraging our Suppliers to request their supply chain and subcontractors (including labor agents/contractors) support and implement each item indicated in this Code of Conduct.

Wacom Suppliers Code of Conduct contains following items:

A. LABOR

Suppliers are committed to uphold the human rights of workers, and to treat them with dignity and respect as understood by the international community. This applies to all workers including temporary, migrant, student, contract, direct employees, and any other type of worker.

B. HEALTH and SAFETY

Suppliers recognize that in addition to minimizing the incidence of work-related injury and illness, a safe and healthy work environment enhances the quality of products and services, consistency of production and worker retention and morale. Suppliers also recognize that ongoing worker input and education is essential to identifying and solving health and safety issues in the workplace.

C. ENVIRONMENTAL

Suppliers recognize that environmental responsibility is integral to producing world class products. In manufacturing operations, adverse effects on the community, environment and natural resources are to be minimized while safeguarding the health and safety of the public.

D. ETHICS

To meet social responsibilities and to achieve success in the marketplace, Suppliers and their agents are to uphold the highest standards of ethics.

E. MANAGEMENT SYSTEMS

Suppliers shall adopt or establish a management system whose scope is related to the content of this Code. The management system shall be designed to ensure: (a) compliance with applicable laws, regulations and customer requirements related to the supplier’s operations and products; (b) conformance with this Code; and (c) identification and mitigation of operational risks related to this Code.

Please refer to the below website for the details about Wacom Suppliers Code of Conduct.
https://www.wacom.com/en-jp/suppliers-code-of-conduct

Initiatives to promote understanding of and compliance with the Wacom Suppliers Code of Conduct

Wacom established the “Wacom Suppliers Code of Conduct” as part of its responsible procurement activities. Wacom is taking the following steps to ensure that business partners understand and comply with the Code:
For new business partners, Wacom conducts credit checks, quality and environmental management system surveys, and plant inspections. Wacom distributed the latest version of the Wacom Suppliers Code of Conduct to major suppliers to familiarize them with our ESG initiatives. It has also been distributed to approximately 50 of our major business partners together with a request for them to endorse the Code and to cooperate in its implementation.Wacom also holds an annual ceremonial banquets and suppliers meetings for major partners; these events allow us to explain our business policies and strengthen our partnerships with them.

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Environmental Activities

Wacom strives to reduce the environmental impact of its business activities and makes effort to create products and technologies thinking of the environmental sustainability. Please refer to the following webpage for the details.

https://www.wacom.com/en-jp/eco-initiatives

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Corporate Governance

Basic Views on Corporate Governance

Wacom believes that corporate governance is a foundation for sustainable growth of corporate value, to fulfill social responsibility as well as its compliance to legislation as a listed company conducting business globally, and to enhance transparency of management and reliability of disclosure, which will bring benefits to its shareholders, customers, and other stakeholders.

Therefore, Wacom believes that the most important responsibilities of every business group is to fully commit to compliance and to establish and operate an effective internal control system that should continuously enhance corporate governance.

Please refer to the following links for more information about Wacom’s Corporate Governance.

Corporate Governance Report

https://contents.xj-storage.jp/xcontents/AS95168/5075675f/99c1/440e/a802/2208db205943/20201109112356385s.pdf

Annual Report

https://contents.xj-storage.jp/xcontents/AS95168/22b57751/736c/4e4b/9f87/b9e0a9f85bd7/20200831160941292s.pdf

Notice of Ordinary Shareholders’ Meeting

https://contents.xj-storage.jp/xcontents/AS95168/7334bf60/0701/4968/83c9/a939e2bb609f/20200601082917634s.pdf

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Outline of Corporate Governance Systems

In June 2015, Wacom changed to a Company with Audit Committee, from a Company with Corporate Auditors.

The Board of Directors shall be operated, based on the Board of Director’s regulations, and shall have responsibility of construction and promotion of internal controls, formulation and implementation of management policies, and business plans that conform to the laws and regulations of the Articles of Incorporation. The Audit Committee shall be operated, based on the Audit Committee’s regulations, and shall monitor the decision making and business operations of the directors.

The Board of Directors shall ensure that the directors and employees abide by the laws and regulations and such other rules, establish “Wacom Code of Ethics and Business Conduct”, fulfill their duties under sound social norms, and shall ensure especially that they do not have any associations with anti-social forces and groups, which threaten social order and the sound activities of business, with a resolute attitude.

The Board of Directors shall elect the Representative Director as the persons with the highest responsibility for executing business, and the Representative Director shall also serve concurrently as the group CEO who supervises the entire group of Wacom companies. The group CEO shall have responsibilities of planning management strategy and planning and implementing management plans for the Wacom group of companies, and on promoting and strengthening internal controls, under the policies of the Board of Directors.

Wacom shall designate/appoint a Responsible Person from each business unit to Group Management, clarifying the responsibilities for business operations and for aiming to improve efficiency. Each Responsible Person of each business unit shall support the group CEO and shall contribute on planning and implementation of management strategies and shall have responsibilities of promoting and strengthening the internal controls, along with overall responsibility of business operations of the department in charge.

Wacom shall clarify the process and authority on business settlements by means of “Delegation of Authority (DOA)” and such other regulations, and shall strive to reduce risks with checks and balances.

Wacom shall establish Internal Audit as a division under the group CEO, and Internal Audit shall monitor whether the members of Wacom and business operations are abiding by the laws, the Articles of Incorporation, rules and regulations.

Wacom shall maintain the following four committees;

■ Executive Committee

The Executive Committee is the advisory organization of the group CEO. The Executive Committee will meet regularly, and shall review the progress of business plans and the challenges of business operations and shall formulate necessary responses. The executive committee shall formulate strategies for achieving the fiscal year target, along with maintaining and promoting the medium- to long-term growth of Wacom.

■ Policy Process and Controls Committee (PPC)

The PPC shall develop regulations and policies, develop business processes, and shall grasp and deliberate significant challenges on information security, J-SOX and other material challenges on internal controls, and shall implement countermeasures, according to the results, or shall implement necessary notices or instructions to the directors and employees.

■ Compliance Risk Committee (CRC)

The CRC shall share risk information globally, including overseas operations, to implement countermeasures related to risk management, such as consideration and implementation of countermeasures against definite risk events, establishment of disaster response plans, and organization of emergency contact networks.

■ Human Resource Committee (HR Committee)

The HR Committee shall investigate employees conducting any violation of the laws, the Articles of Incorporation or rules and regulations. The Committee shall properly proceed with appropriate disciplinary actions based on the employment regulations to deter recurrence.

Wacom shall establish Wacom Speak-up Line being operated by an external third party organization in each group company, as a contact point for reporting an event where directors and employees find issues and other matters related to compliance, aiming to maintaining internal control and for improving the self-purging process. Notification may be conducted anonymously, and Wacom shall ensure that such informer shall not face any discrimination for such notification.

【Schematic diagram of internal control system and risk management system】

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Composition of the Board of Directors

The eight directors of Wacom include three outside directors who are also Audit Committee members. These directors, appointed from inside and outside of the Company, have rich experience, deep insight, and advanced specialties. They are responsible for supervising the performance of management by examining the implementation of management policies, the establishment of execution plans and the progress of implementation.

【Position and Responsibility of Directors and important Concurrent Position】

Position

Name

Responsibility / Concurrent Position

Representative Director, President

Nobutaka Ide

Chief Executive Officer

Director

Yoichi Machida

Chief Financial Officer

Director

Sadao Yamamoto

Chief Technology Officer

Director

Yukio Usuda

In charge of Corporate Strategy

Outside Director

Ken Inazumi

Director, Senior Corporate Executive Officer of Transcosomo Inc.

Outside Director
(Audit Committee Member)

Shigeki Higashiyama

Full Time Audit Committee Member

Outside Director
(Audit Committee Member)

Takashi Kamura

Representative of Urbantry Law Office

Outside Director
(Audit Committee Member)

Osamu Hosokubo

Founder & CEO, Great Asia Capital & Consulting LLC

 

 

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Monitoring each Directors’ performance of the role by the Board of Directors

The Board of Directors have a meeting at least once every month and make prompt and appropriate decisions covering a whole range of corporate management issues.

The Board of Directors shall ensure that the directors and employees abide by the laws and regulations and such other rules; establish “Wacom Code of Ethics and Business Conduct”; fulfill their duties under sound social norms; and shall ensure especially that they do not have any association with anti-social forces and groups, which threaten social order and the sound activities of business.

The Board of Directors shall elect the Representative Director, in compliance with the Board of Directors’ regulations, as the person with the highest responsibility for executing Wacom’s business, and the Representative Director shall serve concurrently as the group CEO who supervises the entire Wacom group of companies. The group CEO shall have responsibilities on planning management strategy and planning and implementing management plans for the Wacom group, and on promoting and strengthening internal controls, as dictated by the policies of the Board of Directors.

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Composition and Activity of the Committees (the Audit Committee, the Nominating Committee and the Compensation Committee)

In June 2015, the Company changed to a Company with Audit Committee, from a Company with Corporate Auditors.

All three Audit Committee members are outside directors and each Audit Committee member attends important meetings, such as the meeting of the Board of Directors to monitor execution of duties by directors. In addition, the Audit Committee annually formulates programs and policies for audit and discusses with the group CEO.

In April 2017, the Company established the Nominating Committee, of which an outside director takes office as a chairperson, to formulate selection criteria for candidates for the Representative Director, directors of the Board of Directors and important executive managers and make proposal to the Board of Directors.

In November 2018, Wacom established the Compensation Committee, of which an outside director takes office as a chairperson, to advise and make proposals for the formulation of Compensation Policy for the Representative Director and directors of the Board of Directors, as well as the institutional design of the compensation scheme. The Committee is mainly focusing on the design of the institutional compensation scheme as well as implementation of performance-linked compensation utilizing treasury stocks.

【Committee Composition and Chairperson】

< ◎ represents chairperson or head of the committee >

Title

Name

Board of Directors

Audit Committee
Nominating Committee Compensation Committee
Executive Committee

Representative Director, President and CEO

Nobutaka Ide

     

Director, Chief Financial Officer

Yoichi Machida

   

Director, Chief Technology Officer

Sadao Yamamoto

   

Director

Yukio Usuda

     

Outside Director

Ken Inazumi

 

Outside Director (Audit Committee Member)

Shigeki Higashiyama

 

Outside Director (Audit Committee Member)

Takashi Kamura



Outside Director (Audit Committee Member)

Osamu Hosokubo



 

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Policy of Nominating the member of Board of Directors and training after Nomination

The term of office for directors who are not an Audit Committee member are set as one year in order to demonstrate and realize high transparency and fairness from the management of Wacom towards its shareholders.

With regards to the Representative Director and directors of the Board of Directors, as well as executive managers, the Nominating Committee headed by an outside director sets the criteria for candidate selection and shall make a candidate proposal to the Board of Directors for Nominating.

To select a candidate, the Board of Directors comprehensively takes into account understanding and sympathy for corporate vision and strategies, leadership and the candidate’s qualification, ability of business execution and the candidate’s expertise, and job experience in a listed company or global company, regardless of nationality or gender, or whether they are internal or external.

The Board of Directors is working to give its members the opportunity to attend beneficial trainings and workshops. Also, it provides its directors and Audit Committee members with the necessary training and materials related to the contents considered required knowledge. Furthermore, it exchanges information on other companies’ information and management practices at the Board of Director level. It shall make an annual training plan in the future, aiming to improve effectiveness.

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Independence and Qualifications of independent Outside Directors

Four directors out of eight directors are outside directors and all qualify as independent outside directors, who have high experience in listed companies, professional knowledge and experience as a lawyer. All outside directors qualify for independent director and have been designated as independent director. The Company believes that these independent outside directors can contribute to medium- and long- term improvement of corporate value.

An independent outside director each serves as chairperson of the Audit Committee, the Nominating Committee, and the Compensation Committee respectively.

【 Reasons of Appointment of Outside Directors 】

Name

Member of Audit Committee

Designated as Independent Director

Reason of Appointment


Ken Inazumi


Mr. Inazumi accumulated his experience as an executive, such as Representative Director and President of business corporations. Currently, he has been leading business execution as a Director, Senior Corporate Executive Officer of a business corporation.
The Company judged that he can give advice and guidance to the executive directors of the Company with his knowledge and experience in the IT industry.

Takashi Kamura

Mr. Kamura has legal knowledge and considerable experience as a lawyer. He has been an auditor of Wacom and has been a member of the Audit Committee after the transition to the Company with Audit Committee.
Wacom judged that he can carry out his duties properly with his considerable experience and knowledge as a lawyer, Wacom’s auditor, and director who is a member of the Audit Committee. He also acts as a chairperson of the Nominating Committee.

Shigeki Higashiyama

Mr. Higashiyama had been responsible for various departments such as planning and personnel affairs at Nomura Research Institute, Ltd. He also has considerable overseas work experience of as well as in a global business environment.
Wacom judged that he can carry out his duties properly given his experience and considerable knowledge in management. He acts as full-time outside director as well as chairperson of the Audit Committee and the Compensation Committee

Osamu Hosokubo

Mr. Hosokubo assumed the role of President & CEO, after serving as Executive Director at Japan Asia Investment Co., Ltd., which invests in and provides business support for domestic and overseas venture companies. After retirement, he founded and assumed the role of CEO of Great Asia Capital & Consulting LLC, which conducts the same type of business.
Wacom judged that he can carry out his duties properly with his experience and abundant knowledge in investment and business support for domestic and overseas companies, as well as management as outside director at operating companies.

For more details about the Standards for Independence and Qualifications of Independent Directors, please refer to the Corporate Governance Report in the following link;

https://contents.xj-storage.jp/xcontents/AS95168/974f5944/8a79/47ee/a6dd/22f13e1ce700/20200227112509864s.pdf

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Policy on Determining Compensation

The President & Representative Director of the Board of Directors and Chairperson of the Compensation Committee shall decide individual compensation for directors (excluding Audit Committee members) within the total amount of compensation approved at the Shareholders’ Meeting. This decision must be made according to the calculation method which was proposed by the Compensation Committee and resolved at the Board of Directors.

The Audit Committee shall decide individual amounts of compensation for Audit Committee members within the total amount of compensation approved at the Shareholder’s Meeting. Compensation for members of the Board of Directors are comprised of a performance-linked and non-performance-linked portion, and the proportion is determined by each position.

Performance-linked compensation is applied to members of the Board of Directors excluding outside directors and directors who are members of Audit Committee, and are composed of a “short-term incentive” and a “long-term incentive.”

The “Short-term incentive” is designed to reflect the attainment of financial targets by Wacom as well as individual performance for a single financial year and are paid once a year.

The “Long-term incentive” is designed to reflect middle- to long-term financial targets as well as the stock price of Wacom in order to align common interests with the shareholders.

Non-performance-linked compensation is fixed, paid monthly, and applied to all members of the Board of Directors.

Multiple financial indices were set for the short-term incentive, centered on consolidated operating profit. The long-term incentive was not enacted in this financial year.

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Evaluate the Effectiveness of the Board of Directors

Since 2016, Wacom has conducted self-evaluation on the effectiveness of the Board of Directors, for the purpose of identifying and solving issues while recognizing the current situation of the Board of Directors.

As pertains to the evaluation method, Wacom shall explain the aim of the evaluation and so forth to each director, while distributing questionnaires to each of them, then shall implement detailed interviews based on the opinions obtained from their replies. The result shall be reported to the Board of Directors to analyze and evaluate the effectiveness of the Board of Directors.

In 2019, evaluations were implemented not only on the Board of Directors, but also on the entire governance system, including the representative director, new management body, the chairman of the Board, the Nominating Committee, and the Compensation Committee. They achieved high marks in general, especially with the recognition of duties and missions by the directors and the Board of Directors, as well as the performance of the independent duties of the directors. It was therefore confirmed that the Board of Directors play an effective role for important decision making.

For the summary of the evaluation on the Board of Directors based on a self-evaluation, please refer to the link below:

https://contents.xj-storage.jp/xcontents/AS95168/84013fd4/7e72/4eac/8a44/1c293d4dfa49/20200227112710778s.pdf

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Basic Views on the Internal Control System and the Progress of System Development

Wacom shall develop the system to ensure the appropriateness (hereinafter referred to as the “internal control”), based on the Companies Act and the Ordinance for Enforcement of the Companies Act, as follows:

1. The system ensuring the execution of duties by directors and employees complies with the laws and regulations and the Articles of Incorporation

2. The system concerning the preservation and management of information executed by the directors

3. Regulations or other systems concerning the management of risk of loss

4. The system for ensuring that the execution of duties by directors shall be effective

5. The system for ensuring proper business actions/transactions in any entity comprised of the registered stock company that includes the parent company and subsidiaries

6. Matters relating to the directors and the employees to assist with the duties of the Board of Directors

7. Matters for being independent from the directors (excluding audit committee members) for the employees in the preceding item

8. The scheme regarding the system for the directors and employees to report to the audit committee and other issues of pertinence for the audit committee

9. Matters on policies related to the claim for fees-in-advance or reimbursement processes or debt processing that arise from the execution of duties by the audit committee members

10. The system to ensure that other audits of the Board of Directors will be effective

For more details about Wacom’s Internal Control System, please see “IV. Internal Control System” in “Corporate Governance Report”

https://contents.xj-storage.jp/xcontents/AS95168/974f5944/8a79/47ee/a6dd/22f13e1ce700/20200227112509864s.pdf

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Audit Framework with the Internal Audit and the Audit Committee

As a division under the group CEO, the internal audit shall be in charge of Wacom's internal audits. Following instructions from the group CEO, the internal audit shall monitor the affiliated companies in an appropriate manner, shall grasp material challenges on information security, J-SOX and other material challenges related to internal control, and shall implement necessary notices/guidance/advise to improve the business of applicable departments, then report to the group CEO. Also, in cooperation with the Audit Committee, the internal audit shall implement internal audits when requested by the Audit Committee members, and shall report the results to the Audit Committee.

The Audit Committee shall implement audits, following the audit policies and program formulated by the Audit Committee. The Audit Committee members shall attend important meetings such as the meetings of the Board of Directors, and shall hear opinions about the conduct of duties directly from directors and each department's managers, in order to implement adequate audits. Furthermore, to implement audits of the Audit Committee, they shall work in cooperation with the internal audit and accounting auditors, with the exchange of information and so on. In addition, the Audit Committee shall regularly exchange opinions with the group CEO, as well as with the auditing firm which is designated as the accounting auditor.

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Preconditions for ensuring the effectiveness of the Board of Directors

Wacom set the policy to select the most suitable candidate for director based on the standard of a “person who can understand and promote corporate vision, management policy and values, and contribute to future-growth of corporate value from a long-term perspective”, regardless of nationality or gender, or whether they are internal or external.

Each of current directors has significant business experiences abroad and one of the directors and Audit Committee members is a lawyer who is familiar with corporate legal affairs.

Wacom conducts an evaluation of the effectiveness of the Board of Directors once a year in a questionnaire format, in order to improve its functioning.

Wacom designates a full-time director from one of the directors who is also an Audit Committee member, so that said person shall be able to focus time and effort on duties necessary to execute roles and responsibilities properly. If a director concurrently serves as a director or equivalently of another listed company, Wacom considers that the number of concurrent offices should be limited to the extent where the said director can ensure attendances at the Board of Directors of the Company, and shall disclose the status of concurrent offices and the number of attendances at the Board of Directors in the Notice of Ordinary Shareholders’ Meeting of the Company.

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Cross-Shareholdings

Wacom may engage in cross-shareholdings if it finds a positive synergy effect from the viewpoint of business strategy and economic rationale when it mainly looks into the possibility of meaningful opportunity to realize its future businesses. However, Wacom shall not hold shares only for the purpose of short-term dividends nor capital gains.

If Wacom engages in cross-shareholdings, it shall regularly check its business relation with the issuer and shall proceed to explore the sale of shares in case it concludes that the cross-shareholding does not contribute to the enhancement of the business relation.

Regarding the exercise of voting rights pertaining to cross-shareholdings, Wacom shall take into consideration whether each proposal will contribute to improve the corporate value of the cross-shareholding Company, and not solely based on the business relation with the issuer.

When the shareholder engaged in cross-shareholding with Wacom conveys its intention to sell the shares issued by Wacom, Wacom shall not enforce retention of the shares by changing business conditions to the detriment of the shareholder.

Wacom shall regularly check business relation with the shareholder and ensure that no unfair trade attributable to the cross-shareholding has been conducted.

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Compliance

Basic Compliance Policy

All directors and employees of Wacom (including all corporations part of the Wacom group of companies) shall be responsible for maintaining trust with the customers and partners.

Wacom's business is based on its compliance with legislation, sincerity, and publicness, and therefore Wacom and the Wacom Brand may be significantly affected if any of these are lacking. Wacom believes that the directors and employees must constantly and ethically make decisions and conduct their business in compliance with legislation.

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Compliance and "Wacom Code of Ethics and Business Conduct"

Wacom shall establish "Wacom Code of Ethics and Business Conduct" to ensure that all employees abide by these standards and guidelines to ethically and legally judge and conduct their business.

In order to request not only Wacom employees but also Wacom partners, suppliers which undertake Wacom's business, consultants, and others, to abide by the principles specified in it, Wacom shall also establish "Wacom Supplier Code of Business Conduct" to request all suppliers to abide by it.

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Compliance Management System

As a compliance management system, Wacom shall establish Internal Audit as a division under the group CEO, in order to implement internal audits and evaluate on the internal control. Internal Audit shall monitor whether the members of Wacom and business operations are abiding by the laws, the Articles of Incorporation, rules and regulations.

Furthermore, the Company shall establish the Policy Process and Controls Committee and the Compliance Risk Committee under the group CEO, aiming for full commitment to compliance.

The Policy Process and Controls Committee shall develop policy, develop business processes, and shall grasp and deliberate material challenges to information security, J-SOX and other material challenges related to internal control periodically, and shall implement countermeasures or necessary notices/guidance, according to the results.

The Compliance Risk Committee shall share risk information globally, including overseas bases, in order to take countermeasures related to risk management, such as consideration and implementation of countermeasures against concrete risk events, establishment of disaster response plans, and organization of emergency contact networks.

In addition, Wacom shall establish the Wacom Speak-up Line operated by an external third party, as explained in “Internal Reporting System” below.

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Internal Reporting System (Wacom Speak-up Line)

Wacom shall establish the Wacom Speak-up Line operated by a global external third party, as a contact point for immediate reporting or immediate notification , in the event where directors and employees of Wacom and its group companies find issues and other matters related to compliance, in order to maintain the internal control and improve the purification process.

Wacom shall establish in-house the Compliance Response Team (CRT) immediately after receiving reports or notifications through the Wacom Speak-up Line, in order to implement necessary investigations and appropriate actions, and respond to the informers. Reports or notifications may be conducted anonymously in general, and Wacom shall ensure that such informers shall not suffer any discrimination or prejudice for such reports or notifications.

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Compliance Training

Wacom holds compliance training on a regular basis for the directors and employees, to deepen their understanding about compliance, and as a guideline to ethically and legally judge and conduct their business.

In 2019, Wacom held group trainings about e-Learning related to the protection of personal information and about harassment.

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Countermeasures Against Anti-Social Forces

Wacom shall ensure the directors and employees abide by the laws and regulations and such other rules, by establishing "Wacom Code of Ethics and Business Conduct", to fulfill their duties in accordance with sound social norms, and especially ensure that they do not have any associations with anti-social forces or groups which threaten social order or the sound activities of business.

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Risk Management

Basic Policy for Risk Management

Wacom's basic policy is to properly grasp and manage various risks associated with business activities, for the purpose of maintaining and improving sound finance and company values.

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Risk Management System

As the risk management system, Wacom shall establish the Compliance Risk Committee under the group CEO, to share information about risk globally, including overseas bases, to implement countermeasures related to risk management, such as consideration and implementation of countermeasures against definite risk events, establishment of disaster response plans, and organization of emergency contact networks.

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Identify Risks

Wacom shall examine the following items as risks that can be a challenge to business, and plan countermeasures against them.

(1) Risk Related to Business Environments

① Exchange Rate Fluctuations

Despite the Company's efforts to avoid currency exchange risks while comprehensively considering sales trends and currency exchange fluctuations; given the high overseas ratio of Wacom products in sales and production, Wacom is exposed to currency exchange fluctuations which may affect business results.

(2) Risk Related to Business Activities

① Seasonal Changes of Business Results

There is a risk that the business results of Wacom Group will experience seasonal change, including, amongst other, year-end shopping, the increase in year-end demand, and product launch periods. Also, each quarter's business results may vary for a variety of factors.

② Changes in Market Environments

The global sales activities of Wacom Group may be affected by each country's economic trends, industry trends, PC market trends, software development trends, or any other trends.

③ Overseas Expansion and Global Activities

The business results of Wacom Group, which has global production and sales activities, may be affected by regional conflicts and political turmoil from a geopolitical viewpoint, or labor management issues at the outsourcing companies.

④ Dependence on Specific Sales Contacts

The Wacom Group may be indirectly affected by change of demand, management strategy, or any other changes at its main sales contacts.

⑤ Competition

The business results of Wacom Group may be affected by its competitors, with their extreme market strategies in specific regions, or trade barriers utilizing protective policies for domestic industries. Furthermore, with regard to technological development, the business results may be affected if Wacom's technology becomes obsolete in the short term, or by the appearance of products with entirely different technologies.

⑥ Dependence on Production by External Companies

As the Wacom Group consign most of production to overseas manufacturers, the business results may be affected if continuous production becomes difficult due to managerial issues at such outsourcing companies, or due to unexpected accidents including natural disasters, or if the Company needs to change consignees.

⑦ Supply and Price of Key Parts

In the future, the business results may be affected by increased cost of key parts due to increased prices of raw materials, supply shortages due to an imbalance between supply and demand, or difficulties in continuous supply due to natural disasters or the like.

⑧ Product Defects or Quality Issues

The Company makes the best efforts to maintain quality, however the business results may be affected if defects are found which lead to product liability compensation or large-scale recalls, where significant costs will be incurred in compensation and such other costs, and reliability/evaluation of such products will be seriously diminished.

(3) Risk Related to Legal Restrictions, Litigation, and Others

① Infringement/Violation of Intellectual Property Rights

Despite Wacom's best efforts to prevent violation of intellectual property rights when developing/launching new products, there is still the possibility of claims and lawsuits. Meanwhile, the Company shall also take firm action when its rights are violated by other companies, however this may affect the business results depending on the progress.

② Legal Regulations and Restrictions

In spite of the Company's efforts to monitor changes in legal regulation and restrictions in each country and to take prompt action, business results may be affected in cases where adequate actions cannot be taken against new establishments or changes of such regulations or restrictions; export/import controls are changed in production outsourcing countries; supervisory authorities change their interpretations of laws and ordinances on tariffs and others, or change regulations, restrictions, tax rates, and others.

③ Application of Antitrust Laws and Others

Business results may be affected in the case where Wacom's share in the pen tablet market increase in major region of the world, and Governments in such region conclude that Wacom is harming technological development or free competition, or damaging market development or customers profits.

④ Compliance Risk

In spite of the Company's efforts, including establishment of a compliance promotion system, as well as information campaigns to deepen the understanding of directors and employees, it is still difficult to completely eliminate compliance risks, and therefore the business results may be affected if situations occurs where the Company fails in complying with related laws and regulations.

For more details, please refer to the Annual Report 2019 “Business and Other Risks”.

https://contents.xj-storage.jp/xcontents/AS95168/cc604c1a/e62e/4f36/9620/a57817d61c86/20200226141318775s.pdf

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Information Security

Efficient operation as a global company requires the use of various information systems, platforms, machines, networks, and services. Wacom shall make efforts to secure and maintain information security, as well as its compliance with related legislations, while recognizing that the very use of such information technology will create risk.

Furthermore, Wacom shall establish and implement "Policy for Personal Information Protection" regarding the handling of personal information, and shall ensure that the directors, employees, and all those concerned are familiarized with this policy. While recognizing the social responsibility of properly handling personal information, Wacom shall properly manage the personal information of its stakeholders including the customers, shareholders, partners, and suppliers which undertake Wacom's business, in accordance with the Company's policy, and makes efforts to maintain and improve its personal information protection activities.

Please refer to the following link to see more details of Wacom Privacy Policy. https://www.wacom.com/en-jp/privacy

In Japan, Wacom has been granted the use of “Privacy Mark” for business activities since August 2010, as it passed the inspection by the inspection organization designated by the General Incorporated Foundation Institute for Promotion of Digital Economy and Community, as a company with a sound personal information protection system which is conformable to "JIS Q 15001 Personal Information Protection Management System - Requirements" of the Japanese Industrial Standards.

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BCP (Business Continuity Planning)

Wacom has developed an emergency response manual, with conduct guidelines under emergency situations such as earthquakes and fires, what actions to take when business activities are interrupted by natural disasters or sudden artificial hazards.

The fundamental principles are as follows;

① Avoid injuries and deaths, by placing priority on human life.

② Keep damage at a minimum.

③ Continue business so that the Company remains unaffected by the damage as much as possible. Continue business to meet the requests of customers or restore it quickly.

④ Make the best efforts to rescue neighborhoods and cooperate with each other, while working to recover regional support.

Furthermore, make proper requests to the supply chains, OEMs, and ODMs to develop appropriate BCPs, while monitoring the current status.

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