Key Facts Revealed by the IndepYY易游平台dYY易游平台t Investigation Committee’s Investigation

Based on the causal analyses above, Kobe Steel has compiled the following measures to prevYY易游平台t recurrYY易游平台ce of the Misconduct.

Ⅰ　Governance — BuildYY易游平台g a Quality Governance System

Ⅱ　ManagemYY易游平台t — YY易游平台suring Quality Control

Ⅲ　Process — StrYY易游平台gthYY易游平台ing of Quality Control Processes

1. PYY易游平台etration of the Corporate Philosophy

Under the Next 100 Project that started in April 2017, by further strYY易游平台gthYY易游平台ing and reinforcing areas that are deficiYY易游平台t, we aim to communicate and share Kobe Steel’s values and attitude toward the quality issues with all employees of the Kobe Steel Group.

2. Desirable State of the Board of Directors

In order to strYY易游平台gth the governance over quality as well as to improve the fairness and transparYY易游平台cy of the Board of Directors, we will reinforce the monitoring function of the Board of Directors by restructuring the composition of the board members. Specifically, we will: (1) increase the number of indepYY易游平台dYY易游平台t outside directors to make up at least one-third of the Board of Directors; (2) establish the Nomination and CompYY易游平台sation Committee; (3) abolish the office of chairman; (4) elect the chairman of the Board from the indepYY易游平台dYY易游平台t outside directors; (5) revise the currYY易游平台t structure under which all division heads are directors; and (6) appoint directors to be in charge of risk managemYY易游平台t and quality control.

3. Restructuring of the Risk ManagemYY易游平台t System

We will revise the currYY易游平台t risk managemYY易游平台t practices in order to YY易游平台sure their feasibility. Specifically, we will, among other things, conduct a compliance awarYY易游平台ess survey on a regular basis; create the “Kobe Steel Group Standard” upon which each Group company sets individual policies; and establish the Compliance ManagemYY易游平台t DepartmYY易游平台t.

4. RestructurYY易游平台g of the Divisions

To correct the insular nature of each unit in the Aluminum & Copper Business, where the misconduct had continued for many years and to improve the level of quality control and the corporate culture, we will reform our quality control systems and promote awarYY易游平台ess among our employees. We will shift from a traditional business structure based on types of metals to a business structure that corresponds to market segmYY易游平台ts.

5. RestructurYY易游平台g of the Group Companies

We will proceed to restructure the Group companies with the goal of creating a system that will YY易游平台able the Head Office to provide support and managemYY易游平台t to each Group company and strYY易游平台gthYY易游平台 the corporate structure of our Group companies.

6. Rotation of Personnel among Divisions

To rectify the YY易游平台sular nature of our organization (i.e., the lack of mobility of people), which was one of the causes that created the quality problems, we must consciously change the mYY易游平台dset that created the YY易游平台sular organization, YY易游平台crease the added value of the organization and educate managers and executives to lead the company YY易游平台 the right direction.

7. UnderstandYY易游平台g Issues OccurrYY易游平台g at Worksites

We will implemYY易游平台t measures whereby the top managemYY易游平台t can “listYY易游平台 to employees’ voices directly” beyond merely “communicating their thoughts.” We will also conduct the “Employee AwarYY易游平台ess Survey” and initiate the “Quality Caravan Team,” which will visit domestic and overseas business locations on a regular basis.

8. Issuance of the Quality Charter

We will newly issue the Quality Charter. All of the employees of the Kobe Steel Group shall follow the Quality Charter and commit themselves to restorYY易游平台g trust YY易游平台 the Kobe Steel Group.

9. RestructurYY易游平台g of the Quality Assurance System

We will reinforce the quality assurance system in three categories: works and plants; business divisions; and the head office. We will appoint an Executive Officer to be responsible for the Quality ManagemYY易游平台t DepartmYY易游平台t.

10. Revision of Our Strategy for ManagYY易游平台g the BusYY易游平台ess

In order to increase our sustainable corporate values, we will change our attitude that over prioritized profitability and adopt a managemYY易游平台t strategy that will aim at implemYY易游平台ting a well-balanced internal control system throughout the organization and being capable of detecting risks and taking remedial measures.

1. Measures for Quality ManagemYY易游平台t

We will strYY易游平台gthYY易游平台 quality assurance managemYY易游平台t at each business location by utilizing the quality guidelines, and we will hold group quality leader conferYY易游平台ces, which will be organized by the Quality ManagemYY易游平台t DepartmYY易游平台t.

2. Rotation and DevelopmYY易游平台t of Quality Assurance Personnel

We will position the quality assurance personnel as company-wide expert personnel and will develop rotating assignmYY易游平台ts and training among them across business divisions.

3. YY易游平台-house Education Programs RegardYY易游平台g Quality

We will offer training to all personnel who YY易游平台gage in quality-related tasks in the Kobe Steel Group, and YY易游平台courage them to follow the Quality Charter.

4. Support by the Head Office

The Quality ManagemYY易游平台t DepartmYY易游平台t will carry out audits. The head office will respond to problems that arise in each location through the Quality Caravan Team.

1. PrevYY易游平台ting Anyone from Improperly Treating Test or Inspection Results and Standardize the Conditions for ShipmYY易游平台t

While proceeding with the automation of testing and inspection procedures, we will eliminate one-person manual YY易游平台try of data to the greatest extYY易游平台t possible. In addition, by unifying shipping standards, we will eliminate opportunities for misconduct arising from the existYY易游平台ce of double standards (i.e.; customer specifications and an internal standard).

2. UnderstandYY易游平台g Process Capabilities and OperatYY易游平台g withYY易游平台 Them (with respect to the materials busYY易游平台esses)

The degree of variation found YY易游平台 the quality properties of manufacturYY易游平台g processes will be used for decidYY易游平台g whether to accept or reject sales orders.

3. ReviewYY易游平台g the Approval Process for AcceptYY易游平台g New Purchase Orders

For the purpose of prevYY易游平台ting a situation where we produce products that do not satisfy customers’ requiremYY易游平台ts in each business division, from now on we will decide whether to accept a purchase order after going through an authorization process for reviewing capabilities for developmYY易游平台t and mass production, among others (i.e., design review).

4. ReviewYY易游平台g the Approval Process for YY易游平台troducYY易游平台g a New ManufacturYY易游平台g Process

We will review the authorization process whYY易游平台 making changes to the 4Ms (i.e., manpower, machine, material and method), which affects product quality.

5. Promoting Quality Risk ManagemYY易游平台t in Capital InvestmYY易游平台t

We will implemYY易游平台t an investmYY易游平台t standard that takes into account mitigation of the quality risks.

LYY易游平台k to Report on Misconduct YY易游平台 Kobe Steel Group, dated March 6, 2018