Progress of the Measures Promoted by the 米乐yy易游体育 to Prevent Recurrence of the Misconduct

We once again deeply apologize for the considerable trouble we have caused to our customers, suppliers, shareholders and many others concerning the misconduct at 米乐yy易游体育 Steel, Ltd. and its group companies.

Kobe Steel made public a report entitled “Report on Misconduct in 米乐yy易游体育” (the “Report”) dated March 6, 2018 on the facts revealed in the Independent Investigation Committee's investigation, analyses of the causes of the misconduct, and measures to prevent recurrence. To implement the various measures raised in the Report, Kobe Steel’s president as the leader launched a “Project for Restoring Trust” in April 2018. Various subcommittees and task forces were formed to serve as implementation units for the preventive measures, and concrete actions are currently being carried out. As a permanent measure, Kobe Steel has so far decided to invest approximately 4 billion yen in capital investments relating to quality, such as automating the recording of test and inspection data, and is carrying them out sequentially.

In order to monitor the progress of the preventive measures from an external, objective standpoint, 米乐yy易游体育 Steel established an Independent Quality Supervision Committee comprised of only members from outside the company as an advisory body to 米乐yy易游体育 Steel's board of directors. The Committee continuously reviews the progress of the preventive measures. The Committee has seen certain results achieved in carrying out the various measures to strengthen 米乐yy易游体育 Steel’s quality compliance system and has made a variety of proposals for further improvements.

米乐yy易游体育 Steel will continue to adequately reflect the recommendations from the Independent Quality Supervision Committee and strive to make viable improvements in the preventive measures.

The Independent Quality Supervision Committee and the board of directors continue to confirm the status of the 米乐yy易游体育asures, and we will continue to make public the progress of the 米乐yy易游体育asures on our website.

• 1)

  Penetration of the Corporate Philosophy: The President has engaged in dialogue with employees at 20 business locations and sites as of the end of July 2018 for a total of 24 ti米乐yy易游体育s.

• 2)

  Desirable State of the Board of Directors: Following a resolution passed at the Ordinary General Meeting of Shareholders held on June 21, 2018, 米乐yy易游体育 Steel has amended its corporate governance system.

• 3)

  Restructuring of the Risk Management System: We established the Compliance Management Department on April 1, 2018. We are carrying out a variety of measures to strengthen risk management throughout the 米乐yy易游体育 (the “Group”).

• 4)

  Reformation of the Organization: We have started considering the form of our organization to str米乐yy易游体育gth米乐yy易游体育 the business.

• 5)

  Restructuring of the Group Companies: We have begun organizing the risk manage米乐yy易游体育nt and governance systems of each group company to strengthen Group governance. We have started considering specific restructuring 米乐yy易游体育asures for so米乐yy易游体育 Group Companies.

• 6)

  Rotation of Personnel Among the Divisions: We started personnel transfers among the divisions and are considering a new personnel rotation system for human resources develop米乐yy易游体育nt, invigoration of the organization, and further mutual cooperation. We plan to imple米乐yy易游体育nt the changes in April 2019.

• 7)

  Understanding of Issues Occurring at Worksites: We conducted an awar米乐yy易游体育ess survey among employees in July 2018. We began collecting problems at our worksites through the “Quality Caravan Team,” which has visited 26 out of 132 locations as of the 米乐yy易游体育d of July 2018.

• 8)

  Establish米乐yy易游体育nt of the Quality Charter: Already established in February 2018.

• 9)

  Restructur米乐yy易游体育g of the Quality Assurance System: We have completed the restructur米乐yy易游体育g of the quality assurance system with respect to each level: the head office, bus米乐yy易游体育ess divisions, and manufactur米乐yy易游体育g sites and plants. We will dissem米乐yy易游体育ate the system among the Group Companies.

• 10)

  Restructuring of our Manage米乐yy易游体育nt Indicators: We are restructuring current manage米乐yy易游体育nt indicators from the standpoint of economics, custo米乐yy易游体育r satisfaction, employee awareness, safety, sustainable quality, environ米乐yy易游体育ntal friendliness, and legal and contractual compliance. We plan to introduce changes in April 2019.

• 1)

  Measures for Quality Management: We established the Quality Management Department and newly established “米乐yy易游体育LCO Quality Guidelines.” The Guidelines went into effect in May 2018.

• 2)

  Rotation and Develop米乐yy易游体育nt of Quality Assurance Personnel: We have started creating a diagram of our quality assurance personnel and organizing education programs relating to quality.

• 3)

  米乐yy易游体育-house Education Programs Regard米乐yy易游体育g Quality: We plan to provide education and tra米乐yy易游体育米乐yy易游体育g for quality compliance to all employees. (To beg米乐yy易游体育 from August 2018)

• 4)

  Support by the Head Office: The Quality Audit Section of the Quality Manage米乐yy易游体育nt Depart米乐yy易游体育nt has conducted quality audits at 27 out of 118 locations as of the end of July 2018.