corporate social responsibility information · digest 13f nagoya hirokoji building. 2-3-1 sakae,...

2018

Corporate Social Responsibility Information

Digest

13F Nagoya Hirokoji Building.2-3-1 Sakae, Naka-ku, Nagoya, Aichi 460-0008, JAPAN

DAIDO METAL CO., LTD.

● Universal Design Fonts are utilized to ensure good visibility and legibility.

［ Contacts ］● For enquires regarding environmental or safety issues:　Environmental & Safety Management Dept.　TEL 81-568-61-2976 FAX 81-568-62-1361● Other CSR-related inquiries:　General Affairs Dept.　TEL 81-52-205-1400 FAX 81-52-205 -1408

http://www.daidometal.com

■ Sales

The CSR activities of DAIDO METAL CO., LTD and some of its affiliated companies are detailed in this report. Those activities are based on the CSR policy specified on page 6. This report also aims to facilitate communication with our stakeholders as well as raising awareness of all DAIDO METAL employees.

Company Name

Established

Headquarters

Representatives

Common Stock

Sales Amount

Number of Employees(Regular Employees)

Main Business Operations

Main Domestic Production Facilities

Main Domestic Sales Offices

Affiliates

(As of 31 March 2018)

North America

Japan

Asia

ChinaEurope

DAIDO PLAIN BEARINGS CO., LTD.NDC CO., LTD.DAIDO INDUSTRIAL BEARINGS JAPAN CO., LTD.DAIDO METAL SAGA, CO., LTD.DAIDO METAL SALES CO., LTD.IINO MANUFACTURING CO., LTD.ATA CASTING TECHNOLOGY JAPAN CO., LTD.


DAIDO METAL U.S.A. INC.

ISS AMERICA, INC.

NORTH AMERICAN TECHNICAL CENTER

CHUNG YUAN DAIDO CO., LTD.

EUROPEAN TECHNICAL CENTRE (UK)　

DAIDO METAL EUROPE GmbH

DAIDO METAL RUSSIA LLC

DAIDO METAL CZECH s.r.o.

DAIDO METAL KOTOR ADEUROPEAN TECHNICAL CENTER

PT. DAIDO METAL INDONESIA

DAIDO PRECISION METAL (SUZHOU) CO., LTD.IINO (FOSHAN) TECHNOLOGY CO., LTD.

BBL DAIDO PRIVATE LIMITED

DONGSUNG METAL CO., LTD.KOREA DRY BEARING CO., LTD.

DAIDO INDUSTRIAL BEARINGS EUROPE LTD.DAIDO METAL EUROPE LTD.

CHUNG YUAN DAIDO (GUANGZHOU) CO., LTD.

DAIDO METAL MEXICO S.A. DE C.V.

ISS MEXICO MANUFACTURING S.A. DE C.V.

DAIDO METAL MEXICO SALES, S.A. DE C.V.

DYNA METAL CO., LTD.

PHILIPPINE IINO CORPORATION

PT. IINO INDONESIA

ATA CASTING TECHNOLOGY CO., LTD.

CON TENTS Company Outline

(As of 31 March 2018)

Based on FY2017 results

Major Products by Business Segment (Summary of businesses / share of sales)

Global Network

Automotive engine bearings

Summary ofbusinesses





Automotive engine bearings (for cars, trucks, race cars), motorcycle engine bearings, engine component bearings (turbochargers, balancers, fuel injection pumps), etc.

Half bearings Thrust washer Bearings for turbochargers

Main products

Other automotive bearings

Automotive bearings(for transmission, shock absorbers, air conditioning compressors, steering columns)

Shock absorber bushes Starter bushes Injection moldedbearings

Main products

Non-automotive bearings

Bearings for diesel ship engines, power generation equipment (water mill, turbine), and industrial equipment (compressor, acceleration/reduction gear)

Bearings for low speed diesel engines

Large marineengine bearings

Bearings forpower generators

Main products

Other automotive components

Die-cast aluminum products for automobiles, Formed pipes, Knock pins, Numerical control (NC) machine products

Machined products

Other products2.1%

Automotiveengine bearingsOther automotive

bearings

Non-automotivebearings

Other automotivecomponents

Converter cases

Main products

Other products

Electrode sheets for electric double layer capacitor, Metallic non-lubricated (dry) bearings, Rotary pumps for food/beverage/cosmetics, Centralized lubrication equipment for machine tools

Rotary pumpsCentralized lubrication equipment (MR-LUB)

Electrode sheets for electric double-layer capacitors

Main products

(Share of total sales)

Bearings for mediumand high speed diesel engines

Turbo machinerybearings(for turbines, etc.)

Dry bearings

Bearings for constructionequipment and small &medium sized ships

Bearings forindustrial machinery

120,000

90,000

60,000

30,000

02013 2014

58,97858,978

77,350

67,269

85,015

2015

64,665

81,400

2016

63,345

85,073

2017

66,413

106,648

Policy

This report covers the activities of DAIDO METAL CO., LTD and some of its subsidiaries.

Scope

February 2019(Next edition will be released in autumn 2019.)

Publication date

Fiscal year 2017 (April 2017 - March 2018)Some information is updated to reflect the latest activities.

Period under review

ISO26000Ministry of the Environment’s “Environmental Reporting Guidelines 2012”

Reference guidelines

14.6%14.6%

8.7%8.7%

13.4%13.4% 61.2%


4 November 1939

■ Nagoya Office13F Nagoya Hirokoji Building 2-3-1 Sakae,Naka-ku, Nagoya, Aichi 460-0008, JAPAN

■ Tokyo Office17F Tennozu Central Tower 2-2-24 Higashi Shinagawa,Shinagawa-ku, Tokyo 140-0002, JAPAN

Seigo Hanji, Chairman & Chief Executive Officer (CEO)

Kotaro Kashiyama, President & Chief Operating Officer (COO)

JPY 7,273 million

JPY 106,648 million (Consolidated)JPY 66,413 million (Non-consolidated)

6,728 (Consolidated)1,271 (Non-consolidated)

● Automotive engine bearings● Other automotive bearings● Non-automotive bearings● Other automotive components● Other products

Inuyama Factory (Located on Inuyama site)Maehara Factory (Located on Inuyama site)Bimetal Division Plant (Located on Inuyama site)Gifu Factory (Located in Gifu prefecture)TMBS (Turbo Machinery Bearing Systems) Factory(Located on Inuyama site)

Tokyo Branch, Nagoya Branch, Osaka Branch, Kita Kanto Sales Office, Hamamatsu Sales Office, Hiroshima Sales Office, Kyushu Sales Office

● 11 domestic subsidiaries● 27 overseas affiliated companies

Company Outline Major Products by Business SegmentGlobal Network

Message from Management

Daido Metal Group CSR Policies

Special Feature 1

Midterm Business plan 2018-2023Raise Up “Daido Spirit”Ambitious, Innovative, Challenging

Special Feature 2

New business: Introducing eco-friendlyproducts and technologiesOrganizational Governance

Human Rights/Labor Practices

Environment

Consumer Issues

Fair Operating Practices

Community Involvement and Development

・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 1～2・・・・・・・・・・・・・・ 3～5

・・・・・・・・・・・・・ 6

・・・・・・・・・ 7～8

・・・・ 9

・・・・・・・・・・・・・・・・・ 10・・・・・・・・ 11～13

・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 14～15・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 16

・・・・・・・・・・・・・・・・ 17～18

・・・・・・・・・・・・・・・・・・・・・・・・ 19～20

(JPY million)

(FY)

Non-consolidated Consolidated

Sales LocationsProduction Locations

R&D centers

DAIDO METAL CSR Report 2018 2DAIDO METAL CSR Report 20181

Introduction

The DAIDO METAL GROUP traces its history back seventy-nine years to 1939, when the company was founded in Nagoya. On 4 November 2019 we will mark the company’s 80th anniversary.The DAIDO METAL GROUP is the only major company in the world that specializes in producing a full lineup of plain bearings, not only for the automotive industry, which is our largest client sector, but also for ships, construction equipment, general purpose machinery and other industry sectors. The Group is also taking steps to develop core operations in sectors other than plain bearings, with the addition of two new consolidated subsidiaries to the DAIDO METAL GROUP in 2017 ‒ Iino Holding Ltd. and ATA Casting Technology Japan Co., Ltd. Global operations are expanding steadily. The DAIDO METAL GROUP now operates 38 facilities in 15 countries worldwide.DAIDO METAL is a global leader in the field of tribology ‒ the science and technology of friction, wear resistance and lubrication. The DAIDO METAL GROUP provides a multitude of advanced, top-quality products that have earned the appreciation of customers worldwide and helped the Group establish a strong network of business partners. 2018 marks the 150th year since the Meiji Restoration in Japan and the current Emperor is planning to abdicate next year, so together with these historic milestones DAIDO METAL will be marking its 80th anniversary in November 2019.

Results of the previous Midterm Business Plan (“Together To The Top”) and start of the new plan (“Raise Up Daido Spirit”)

The DAIDO GROUP’s last Midterm Business Plan, entitled “Together To The Top”, spanned the six-year period from FY2012 through FY2017. During that period the DAIDO GROUP established solid production and sales networks in five regions worldwide, and made strides into new areas of business with the acquisition of subsidiaries Iino Holding Ltd. and ATA Casting Technology Japan Co., Ltd., in 2017. This allowed the DAIDO GROUP to surpass its sales target for the final year of the plan. However, profits fell short of the goals set out in the plan, due to industry slumps in the shipbuilding and construction machinery sectors, decelerating economic growth in emerging markets, as well as adverse exchange rate trends and rising raw materials costs. In addition, a surge of orders at the production facility in Mexico led to increased personnel costs and shipping expenses, which also weighed on profitability.After reflecting upon the results of the previous Plan, DAIDO METAL announced its new Midterm Business Plan covering the period from FY2018 through FY2023, entitled “Raise Up Daido Spirit - Ambitious, Innovative, Challenging.” The Plan, which is discussed in greater detail in the Feature section on pages 7- 8, was drawn up with the participation of every individual in the DAIDO METAL GROUP. The new Plan is based on a full consideration of issues we found during the previous Midterm Business Plan period, as well as an effort to address the risks posed by changes in the business environment. It places an emphasis on the following four objectives.

Action line 1

Strengthen current business lines further- True leader in Tribology

The company aims to capture the top global market share in all categories of plain bearings, and establish a firm business foundation in every sector of this business. In addition to the markets for automotive engine bearings, automotive turbocharger bearings and bearings for large-sized marine engines, where DAIDO METAL already holds the top global share, the company will aim to capture the largest share of markets for bearings used in small and medium-sized ship engines, construction equipment engines, hydroelectric, combustion and wind power generators, and industrial machinery bearings including polymer bearings. This objective is a carry-over from the last Midterm Business Plan, and reflects the Group’s continued progress towards the goal of industry dominance.

Action line 2

Creating / fostering new business lines- Define new business areas and foster them.

As part of its effort to “develop new core businesses to complement the bearing business,” the DAIDO METAL GROUP added two subsidiaries with exposure to new industry segments ‒ Iino Holding Ltd. and ATA Casting Technology Japan Co., Ltd. For years DAIDO METAL has been building a large network of sales channels and business partners that can help cultivate these new businesses into Group’s core business area. The

Group has also been steadily expanding investment in research and development, working in close collaboration with customers and industry-government-academic collaboration. In this way, the company aims to develop new businesses in markets with good growth potential. These efforts are helping the Group to address the current paradigm shift in the automotive industry (from combustion engines to electric and hybrid motors) while expanding its presence in special bearings for non-automotive use, as well as entirely new industry sectors.

Action line 3

Enhance management / operational control platforms- Strengthen various platforms including production, IT, HR, financial reporting.

Under the Group’s previous Midterm Business Plan it succeeded in establishing a production and sales network in five regions worldwide. However, in order to develop a truly solid global organization and management structure there are still a multitude of challenges to address. It is necessary to conduct a thorough strategic review of all production and sales operations in the Group for optimal global balance, strengthen global research and development activities, and leverage the capabilities of the “Internet of Things” (IoT) to create a new production infrastructure. To this end, the Group will focus all efforts on addressing these issues under the new Midterm Business Plan with flexibility, to deal with dramatic changes in the business environment.

Action line 4

Energetic organization with animated communication and motivation- To develop people and organization which can adapt to rule changes in the business.

DAIDO METAL is taking steps to promote diversity in its global workforce in order to attract the personnel that can help the Group take business growth to the next level. In addition to providing education and trainings we are working to develop open and effective communications channels and atmosphere to invigorate the organization and promoting an environment in which all employees can actively discuss the issues that affect our future growth, all personnel enjoy a healthy balance between work and their personal life.

Promote CSR activities as a central management issue

As stated in the DAIDO METAL GROUP CSR Policies, the Group, as a responsible corporate citizen, continues to serve the society through its business, and strives to be a trustworthy partner with customers, shareholders, employees, business partners and the communities in which we operate, with our high standard of compliance and the contribution to the community. The Group develops new products and new materials that are energy-efficient and environmentally friendly. Furthermore, DAIDO METAL is constantly working to improve the product quality globally.The Group promotes sales of its environment-friendly products through various trade shows and PR activities. We are steadily reducing CO2 emissions, energy consumption and industrial waste in our global production network, and are engaged in ongoing environmental risk management activities. The Group’s communications with stakeholders include

numerous IR events mainly in Kanto and Tokai area. DAIDO METAL takes an active role in community activities in the towns where production facilities are located. For example, we hold a summer festival for residents of Inuyama and co-sponsor the “Fureai Trio Concert,” and hold many factory tours. We will continue seeking opportunities to build ties with the local community.In the Midterm Business plan that begins in FY2018, the Group placed an importance on ESG (Environment, Society, Governance) management as a key driver to increase corporate value. There is huge potential in the field of Environment. There are many aspects in the field of Society, and we aim to create a working environment and structure where each employee can realize their potentials, promoting diversity in the workplace and better working hour management. In the Governance area, we continue to observe compliance requirements, and review our governance structure in view of new Corporate Governance Code. In this way, we promote and strengthen each element of our CSR activities.

Increasing corporate value over the longer term with the concerted effort of the Group

In September 2018 the company made a public offering which brought in additional capital from many investors. To meet the expectations of shareholders and other Group stakeholders, the entire DAIDO METAL GROUP needs to work in concert to increase corporate value over the mid-long term. Naturally, given the rapidly changing business environment in which we operate, it is necessary to redouble efforts to enhance our profitability. It is also essential that we increase disclosure of our nonfinancial accomplishments and the Group’s efforts in the “ESG” arena to provide our stakeholders with a full and accurate picture of our corporate value. We trust that these efforts will earn the confidence and continued support among our stakeholders.

Message from Management

Every member of the DAIDO METAL GROUP has a role to play in the new Midterm Business Planentitled “Raise Up Daido Spirit”, to help elevate corporate value and contribute to sustainable growth.Seigo Hanji Chairman &

Chief Executive Officer (CEO)


Introduction

The DAIDO METAL GROUP traces its history back seventy-nine years to 1939, when the company was founded in Nagoya. On 4 November 2019 we will mark the company’s 80th anniversary.The DAIDO METAL GROUP is the only major company in the world that specializes in producing a full lineup of plain bearings, not only for the automotive industry, which is our largest client sector, but also for ships, construction equipment, general purpose machinery and other industry sectors. The Group is also taking steps to develop core operations in sectors other than plain bearings, with the addition of two new consolidated subsidiaries to the DAIDO METAL GROUP in 2017 ‒ Iino Holding Ltd. and ATA Casting Technology Japan Co., Ltd. Global operations are expanding steadily. The DAIDO METAL GROUP now operates 38 facilities in 15 countries worldwide.DAIDO METAL is a global leader in the field of tribology ‒ the science and technology of friction, wear resistance and lubrication. The DAIDO METAL GROUP provides a multitude of advanced, top-quality products that have earned the appreciation of customers worldwide and helped the Group establish a strong network of business partners. 2018 marks the 150th year since the Meiji Restoration in Japan and the current Emperor is planning to abdicate next year, so together with these historic milestones DAIDO METAL will be marking its 80th anniversary in November 2019.

Results of the previous Midterm Business Plan (“Together To The Top”) and start of the new plan (“Raise Up Daido Spirit”)

The DAIDO GROUP’s last Midterm Business Plan, entitled “Together To The Top”, spanned the six-year period from FY2012 through FY2017. During that period the DAIDO GROUP established solid production and sales networks in five regions worldwide, and made strides into new areas of business with the acquisition of subsidiaries Iino Holding Ltd. and ATA Casting Technology Japan Co., Ltd., in 2017. This allowed the DAIDO GROUP to surpass its sales target for the final year of the plan. However, profits fell short of the goals set out in the plan, due to industry slumps in the shipbuilding and construction machinery sectors, decelerating economic growth in emerging markets, as well as adverse exchange rate trends and rising raw materials costs. In addition, a surge of orders at the production facility in Mexico led to increased personnel costs and shipping expenses, which also weighed on profitability.After reflecting upon the results of the previous Plan, DAIDO METAL announced its new Midterm Business Plan covering the period from FY2018 through FY2023, entitled “Raise Up Daido Spirit - Ambitious, Innovative, Challenging.” The Plan, which is discussed in greater detail in the Feature section on pages 7- 8, was drawn up with the participation of every individual in the DAIDO METAL GROUP. The new Plan is based on a full consideration of issues we found during the previous Midterm Business Plan period, as well as an effort to address the risks posed by changes in the business environment. It places an emphasis on the following four objectives.

Action line 1

Strengthen current business lines further- True leader in Tribology

The company aims to capture the top global market share in all categories of plain bearings, and establish a firm business foundation in every sector of this business. In addition to the markets for automotive engine bearings, automotive turbocharger bearings and bearings for large-sized marine engines, where DAIDO METAL already holds the top global share, the company will aim to capture the largest share of markets for bearings used in small and medium-sized ship engines, construction equipment engines, hydroelectric, combustion and wind power generators, and industrial machinery bearings including polymer bearings. This objective is a carry-over from the last Midterm Business Plan, and reflects the Group’s continued progress towards the goal of industry dominance.

Action line 2


As part of its effort to “develop new core businesses to complement the bearing business,” the DAIDO METAL GROUP added two subsidiaries with exposure to new industry segments ‒ Iino Holding Ltd. and ATA Casting Technology Japan Co., Ltd. For years DAIDO METAL has been building a large network of sales channels and business partners that can help cultivate these new businesses into Group’s core business area. The

Group has also been steadily expanding investment in research and development, working in close collaboration with customers and industry-government-academic collaboration. In this way, the company aims to develop new businesses in markets with good growth potential. These efforts are helping the Group to address the current paradigm shift in the automotive industry (from combustion engines to electric and hybrid motors) while expanding its presence in special bearings for non-automotive use, as well as entirely new industry sectors.

Action line 3


Under the Group’s previous Midterm Business Plan it succeeded in establishing a production and sales network in five regions worldwide. However, in order to develop a truly solid global organization and management structure there are still a multitude of challenges to address. It is necessary to conduct a thorough strategic review of all production and sales operations in the Group for optimal global balance, strengthen global research and development activities, and leverage the capabilities of the “Internet of Things” (IoT) to create a new production infrastructure. To this end, the Group will focus all efforts on addressing these issues under the new Midterm Business Plan with flexibility, to deal with dramatic changes in the business environment.

Action line 4


DAIDO METAL is taking steps to promote diversity in its global workforce in order to attract the personnel that can help the Group take business growth to the next level. In addition to providing education and trainings we are working to develop open and effective communications channels and atmosphere to invigorate the organization and promoting an environment in which all employees can actively discuss the issues that affect our future growth, all personnel enjoy a healthy balance between work and their personal life.

Promote CSR activities as a central management issue

As stated in the DAIDO METAL GROUP CSR Policies, the Group, as a responsible corporate citizen, continues to serve the society through its business, and strives to be a trustworthy partner with customers, shareholders, employees, business partners and the communities in which we operate, with our high standard of compliance and the contribution to the community. The Group develops new products and new materials that are energy-efficient and environmentally friendly. Furthermore, DAIDO METAL is constantly working to improve the product quality globally.The Group promotes sales of its environment-friendly products through various trade shows and PR activities. We are steadily reducing CO2 emissions, energy consumption and industrial waste in our global production network, and are engaged in ongoing environmental risk management activities. The Group’s communications with stakeholders include

numerous IR events mainly in Kanto and Tokai area. DAIDO METAL takes an active role in community activities in the towns where production facilities are located. For example, we hold a summer festival for residents of Inuyama and co-sponsor the “Fureai Trio Concert,” and hold many factory tours. We will continue seeking opportunities to build ties with the local community.In the Midterm Business plan that begins in FY2018, the Group placed an importance on ESG (Environment, Society, Governance) management as a key driver to increase corporate value. There is huge potential in the field of Environment. There are many aspects in the field of Society, and we aim to create a working environment and structure where each employee can realize their potentials, promoting diversity in the workplace and better working hour management. In the Governance area, we continue to observe compliance requirements, and review our governance structure in view of new Corporate Governance Code. In this way, we promote and strengthen each element of our CSR activities.

Increasing corporate value over the longer term with the concerted effort of the Group

In September 2018 the company made a public offering which brought in additional capital from many investors. To meet the expectations of shareholders and other Group stakeholders, the entire DAIDO METAL GROUP needs to work in concert to increase corporate value over the mid-long term. Naturally, given the rapidly changing business environment in which we operate, it is necessary to redouble efforts to enhance our profitability. It is also essential that we increase disclosure of our nonfinancial accomplishments and the Group’s efforts in the “ESG” arena to provide our stakeholders with a full and accurate picture of our corporate value. We trust that these efforts will earn the confidence and continued support among our stakeholders.

Interview with Management

The DAIDO METAL GROUP’s as a responsible corporate citizen, continues to serve the society through its business, and strives to be a trustworthy partner with customers, share-holders, employees, business partners and the communities in which we operate, with our high standard of compliance and the contribution to the community. To meet the above objectives, the DAIDO METAL GROUP has introduced a multitude of programs and activities which cultivate the qualities of self-discipline, self-cor-rection, creativity and responsibility in every employee or executive officer, under the slogan: “Self-discipline, Self-correction and Creativity.”

DAIDO METAL GROUP’s Approach to CSR

DAIDO METAL GROUPCSR Policies

Increase awareness of theDAIDO METAL GROUP’s rolein society while increasing

corporate value

Cultivating Self-discipline,Self-correction and

Creativity

Contribute tosociety as a

manufacturer throughcorporate activities

Comply with allpertinent laws andregulations anddemonstrate

responsibility throughactive contributions

to society

Our Corporate Philosophy Our Principles

1.

We hold ourselves responsible for the happiness of everyone in our organization and the contributions we make to global society.

2.

We will create a vigorous and open-minded corporate culture through diligent self-discipline and ethical behavior.

3.

We will learn from our markets, respond to our customers' requirements, and surpass our customers' expectations.

4.We will devote ourselves to creation, innovation,and the realization of dreams.

5.

We will strive to be the world leader in tribology through constant technical improvement, development, and innovation.

1. We will always approach business from a global perspective.

2. We will always attend to the needs and desires of our customers.

3. We will continue to recognize the importance of the environment.

4. We will continue to value individuality and work to achieve synergy between people.

5. We will always remain open to new ideas and proposals.

6. We will always respond with speed and agility.

OurDuty

OurResolve

OurFoundation

OurApproach

OurObjective


SpecialFeature

1

Midterm Business Plan 2018-2023Raise Up “Daido Spirit”＊ Ambitious, Innovative, Challenging

The DAIDO METAL GROUP’s Midterm Business Plan, which commences in FY2018, aims to accelerate business activity and enhance corporate value.

New Midterm Business Plan ‒ Four cornerstones

Our Corporate Philosophy1. Our Duty2. Our Resolve3. Our Foundation4. Our Approach5. Our Objective

We hold ourselves responsible for the happiness of everyone in our organization and the contributions we make to global society.

We will create a vigorous and open-minded corporate culture through diligent self-discipline and ethical behavior.

We will learn from our markets, respond to our customers' requirements, and surpass our customers' expectations.

We will devote ourselves to creation, innovation, and the realization of dreams.

We will strive to be the world leader in tribology through constant technical improvement, development, and innovation.

● The measures adopted under the new Mid-Term Plan will continue to promote this basic philosophy while seeking to enhance corporate value and raise the Group’s global profile.● As noted in the Group’s corporate philosophy, employees are the driving force behind the Group’s development, and they will play an even more vital role in the future as the Group strives to contribute to global society.

● Sales activities to attract new customers, improve functionality and price competitiveness of products and increase and global market share ● Improve capacity utilization rate, and scrap rate, production yield to enhance profitability ● Revamp production process with introduction of IoT (internet of things), leading to a reduction of stock / work-in-progress and improvement profitability ● Other actions to improve efficiencies in production and business operations through BPR (Business Process Re-engineering) activities lead by the BPR Department

● Operations in automotive engine bearings; growth opportunities in China, India etc. ● Target non-Japanese car & truck manufacturers and non-Japanese turbocharger companies

Raise Up“Daido Spirit” Ambitious, Innovative, Challenging

A momentous six-year plan tofurther elevate the spirit of the Group

“Ambitious”, “Innovative” and “Challenging” are three adjectives that describe the elements of the Daido Spirit which carried the Group to its current success, We will re-raise our Spirit even higher to make this six years a period of a great step forward. The first letters of these words have been combined in the acronym “AICH”, which comes from the place where company started its business ‒ Aichi Prefecture. The “AI” is also an acronym for artificial intelligence, as well as a Japanese word that means “love.” By combining artificial intelligence with human compassion and wisdom, the company aims to achieve even greater success.

Ambitious Innovative Challenging＊

Elevating corporate value through ESG efforts

［Perfect］［Prepare］［Expand］［Cultivate］［Challenge］Raise Up “Daido Spirit”＊～ Ambitious, Innovative, Challenging～

＊The action plans adopted to achieve these “four cornerstones” are outlined on the next page.

Action line 1: Action line 2: Action line 3: Action line 4:

Strengthencurrent businesslines further

Creating /fosteringnew business lines

Enhance management /operationalcontrol platforms

Energetic organization withanimated communicationand motivation

- True leader in Tribology

- Define new business areas and foster them.

- Strengthen various platforms including production, IT, HR, financial reporting.

- To develop people and organization which can adapt to rule changes in the business.

Strengthen current business lines further

Action plans for each of the Four cornerstones

- True leader in Tribology

● Investment in R&D (increase investment in “seeds” R&D, on top of “needs”) ● Set up “Future Creation” department in charge of research into new business areas ● Seek possibility of non-organic growth into new business areas through M&A ● Start production of aluminum die cast parts for EVs at our new subsidiary in Thailand (DM Casting Technology (Thailand) Co., Ltd.) (Due to commence in February 2020)● Assess investment opportunity to produce special type of bearings for wind power turbines (both off-shore and on-shore) in Europe (Prototype models completed; local production could begin by 2021)● Further realization of synergy with the Iino Group and the ACJ/ACT Group, sales promotion of “CALME” (sound absorbing material - product of NDC Co., Ltd.)


Actionline 1

● Implement global quality assurance program optimized global production and sales structure ● Set up Technical Center (TC) in China and have global technology service network with TCs in the UK, Germany, Czech Republic, the US, and in China. ● Set up European Technology Division and R&D Center in Germany (expected in 2023) ● Enhance global governance/compliance mechanism encompassing all Group companies ● Introduce Global HR policies, promote diversity to attract a wide variety of talent


● Improve skill and ability of each employee and activate communication to enhance team performance that is more than the sum of each individual’s performance ● Change the corporate culture to support the entre/intrapreneurship ● Promote a work-life balance with reduced working hours, flexible working time and location


Specific objectives

Actionline 2

Actionline 3

Actionline 4


First appearance at Nikkei IR and Investment Fair 2017 (Held at Tokyo Big Sight on August 25-26, 2017)

Financial Results Meeting for the year endied March 2018 (May 16, 2018 at the Asahi Seimei Otemachi Building)

Active material layer

Bonding layer

Current collector layer (aluminum foil)

Structure of the electrode sheet

EPS DC-DC converter installed on HV battery

Steering components Steering components

DC-DC Converter

SAE Certificate of Appreciation Presenter: Kenji Nimura, Research & Development Department, Technology Division

■ Corporate Governance Structure (As of 1 July 2018)

Auditors(3 members including 2 from outside the company)

Auditing

Selects and dismisses Board members

Proposals

Advice

Reporting

Board of Auditors

Auditing Center(internal auditing activities)

Corporate auditors(accounting auditor)

(Reports directly to the President & COO)

Corporate GovernanceCommittee

The Corporate ComplianceCommittee

Risk ManagementCommittee

Advisory Board(4 members)

Auditing

Auditing

CooperationCooperation

Cooperation

Termination

Selection

Decisions on theappointment ortermination ofcorporate auditors

Shareholders Meeting

Suggestionson how tomanageoperations

Instructions

Reporting onoperatingactivities

Reporting

• Director and Senior Managing Executive Officer (2 members)• Managing Executive Officer (5 members)• Senior Executive Officer (3 members)• Executive Officer (7 members)

Individual operating divisions and branches

Board Members(4 members including at least 2 from outside the company)

Board of Directors

• Chairman & Chief Executive Officer (CEO)• President & Chief Operating Officer (COO)

Chief Representative Officers (2 members)

Management Strategy Council

Management of operations

Selection orterminationNonreappointment

Selected from amongBoard members,

executive officers and managers

Composed of two internal membersand two external members

The company is actively involved in IR activities to promote better communication with investors and to achieve sustainable growth in corporate value.

First participation in the Nikkei IR and Investment Fair (at Tokyo Big Sight) in FY2017In FY2016 the company participated in the NSE IR Seminar in Tokyo, and in FY2017 it had a presentation booth at the Nikkei IR and Investment Fair, held at Tokyo Big Sight. The DAIDO METAL GROUP intends to expand its participation in IR events and to communicate direct-ly with investors.

Financial results presentations to institutional investors in Tokyo, with presentation materials andQAs provided on the Company’s Website (as required by fair disclosure rules)

The DAIDO METAL GROUP held financial results explanatory sessions for institutional investors for the second-quarter and the full fiscal year. The Chairman gave an explanation of our business operations, a summary of financial results and the results of the previous Midterm Business Plan,

as well as an overview of the new Midterm Business Plan. Starting this year, as require by Japan’s Fair Disclosure Rules, presentation materials and Question and Answers were posted on the Company Website. This will help our stakeholders to understand better our Group’s business condition and activities.

Investor Relations (IR) Activities

Corporate Governance Structure

ATA Casting Technology Japan Co., Ltd., a new Group subsidiary, produces die-cast aluminum automotive parts at its Thai subsidiary. The company handles all phases of the production process, from aluminum smelting and casting to processing, inspection and shipment. The company’s high technology is recognized by many clients in the automobile and auto parts industries. In the past, the company concentrated mainly on engine and steering column components, but it is now focusing its energies on the emerging market for electric vehicles in the hope of dramatically expanding its product range and market dramatically.

The company’s electrode sheets are marketed under the brand name “DEL ECO.” These are used in the positive electrode (cathode) of lithium ion batteries, and both the anode and cathode of electric double-layer capacitors. A layer of activated carbon is deposited on aluminum foil to give these electrode sheets particularly high density, accuracy, durability and reliability. The products were developed using the molding, rolling and bonding technology which the company uses in the mass production of bearings used by the automotive, marine and general industrial equipment industries. Applications for these products include smart meters, automobile “drive recorders”, hybrid automobiles, electric vehicles and equipment used for renewable energy sources.

Product characteristics● Products are manufactured using the molding, and roll bonding technology DAIDO METAL developed for bearing production. This method gives the sheets 8-20% higher density* than electrodes manufactured using coating technology (*based on in-house company comparisons).

● As the high-density layer can be produced to any thickness the electrode’s capacity can be adjusted to the optimal level for each application.

● Material composition can also be adjusted with considerable freedom, making it possible to increase the content of active materials.

● The manufacturing process is carefully controlled to eliminate impurities, giving these products superior durability.

Electrode sheets for electric double-layer capacitors

Die-cast aluminum automotive parts

The Society of Auto Engineers (SAE) held its annual World Congress in the US on 10 -12 April. At this convention, a DAIDO METAL engineer made a presentation on the results of their research and development activities, entitled “Development of Polymer Overlay Bearing Material for Recent Automotive Engine.”

“I was very nervous about presenting a report on our research results to a large international congress, but it was a truly memorable experience. I look forward to discussing our results again, to people both in Japan and worldwide.”

Presentation of new research activities

Comments from the presenters

New business: Introducing eco-friendlyproducts and technologies

As a world leader in the field of tribology the DAIDO METAL GROUP is using its technological skills to contribute to society as a whole. Product development activities focus on “reducing substances that adversely impact the environment” and “developing products that can contribute to global society.” In this section we will look at some of the products the company has developed to benefit the environment.

2

SpecialFeature Organizational Governance

[Corporate Governance]

The DAIDO METAL GROUP has adopted a Board of Directors structure as part of the continuing effort to earn the trust of shareholders, customers, employees and other stakeholders, by pursuing a future of sustainable growth and endeavoring to improve corporate value over the medium and long term. An executive officer system has been introduced in order to further elevate management efficacy, and the company has appointed board members from outside the company in an effort to ensure transparency, fairness and propriety. These external

directors perform an oversight function to monitor business management, and external auditors have been appointed to strengthen the Group’s auditing functions.The DAIDO METAL GROUP has established a Corporate Governance Committee, which will take responsibility for setting basic governance policies for the entire Group. In addition, it will seek ways to improve and implement the feasibility evaluation system introduced by the Board of Directors.The Group’s basic stance on and approach to governance is described in detail in the Corporate Governance Report, issued in July 2018.

Org

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（%）

(FY)2013 2014 2015

35

30

25

20

(People)

2932 31 30

2.0

1.5

1.0

0

1.8

2.07 2.21 2.02 2.01

2016

Government statutory target levelNumber of employeesPercentage of work force

32

2.24

2017

Presentation of Overseas Short-term Study Abroad System for Language Study experiences

A management training program

Workstyle poster

■ Daido Metal Training Structure

Position-specific Training Daido Metal College CoursesGlobal

DivisionManagers

Top Managementlevel

DepartmentalManagers

ExperiencedEmployees

GeneralEmployees

Newly HiredEmployees

Departmental Manager training

Management program

Self-improvement training

Training for third-yearemployees

Training forsecond -year employees

Selective training

Executive Officer training

Overseas riskmanagement seminars

Global productiontraining

Management training priorto overseas secondment

Overseas Short-term StudyAbroad System forLanguage Study

Follow-up training fornewly hired employees

Training program fornewly hired employees

Technical instruction

Entry-level course

Mid-level course

Training for Supervisorcandidates I

Training for Supervisorcandidates II

International p

ersonn

el develo

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ent system2016 (FY)2013 2014 2015

25

20

15

10

5

0

(People)

1815

1815

8888

77

7777

2211

99 771010

2017

23

1111

11

1111

Employees taking child care leave (Women)Employees taking prenatal/postnatal leave (Women)

Employees taking child care leave (Men)

Work-life balance● Measures to encourage female employees’participationIn response to the Act on the Promotion of Women’s Participation and Advancement in the workplace, DAIDO METAL developed an action plan aimed at increasing the number of women in our workforce, and took steps to increase awareness of programs that address issues such as maternity and nursing care leave. Among the achievements of this plan to date the company developed a web page aimed specifically at attracting female graduates and held events for prospective employees aimed at attracting a larger percentage of women to the workforce. A handbook was prepared describing the programs that the DAIDO METAL GROUP has in place for maternity leave and nursing care leave to make it easier for employees to participate in these programs. The Group aims to expand and strengthen these activities going forward, with the goal of providing a stimulating work environment for not only women, but for all employees.

● Conditions of child care leave programThe company is continuing to seek new ways to improve the working environment to help parents balance work and child-rearing commitments. During FY2017 23 employees took either prenatal/postnatal leave or child care leave, with child care leave for fathers continuing as an ongoing annual program.The company has taken steps to raise awareness of child care and nursing care leave programs not only for female employees, but for men as well. Over 78% of fathers whose partner gave birth took advantage of the two days paternity leave accorded to new fathers.

Employee Training ProgramsA variety of training and learning opportunities - including global study experiences - are provided to employees at

each level of responsibility and each stage of their career, to ensure that they develop the skills they need and are aware of their roles in the company. Daido Metal College is a special training facility which continuously provides training by passing on knowledge, technology and skills accumulated by the company.

● Employing workers with disabilitiesDAIDO METAL is very proactive in employing individuals with disabilities.

● Acceptance of interns from overseasDaido Metal provides a “Technical Internship System for Overseas Personnel” which accepts technical interns from foreign countries every year. Currently, roughly 20 interns are striving to acquire expertise, technical skills, and know-how from Japan, so that they may contribute to the growth of expertise and technical skill in their own countries.

● Work Style Reform“Work Style Reform” refers to the ongoing effort to revise working conditions to allow people to achieve a healthy balance between their jobs and personal life. For example, the company plays music at the end of the day on “no overtime day” so that employees can feel free to leave work on time. Posters are displayed at all offices to ensure that all employees share the same objectives. Year by year, employees have been taking a larger percentage of their permissible paid vacation days.

● Global training introducedIn 2016, in an effort to accelerate the globalization of the DAIDO METAL GROUP, a program was introduced for employ-ees who are selected for their potential to work in international roles, known as the “Overseas Short-term Study Abroad System for Language Study.” Meanwhile, management personnel at overseas affiliated companies continue to receive training aimed at giving them the necessary proficiency in management, financial and person-nel-related issues and safety risk management.

● Management Training ProgramsA 360 degree management training program has been developed on the basis of a comprehensive survey of each employee’s superiors, colleagues and subordinates, with the goal of developing manage-ment skills and stimulating organizational energy. In this way, the company hopes to continue to improve the organizational skills and unlock the poten-tial of managers.

Personnel Training Promoting Diversity

Human Rights/Labor PracticesPersonnel training and working conditions

Company policy on human rightsDaido Metal’s policy on human rights is set out in the “Performance Standards” for the Daido Metal Group.All employees are expected to understand this policy and apply it in all company activities.

Respect for Human Rights・We maintain accepted moral standards and a high standard of ethics. We comply with labor laws and conform to rules. We respect individuals, do not discriminate against others, strive to be considerate to others and improve the working environment and human relations.・We respect one another’s personal privacy and do not infringe on human rights through discrimination for reasons of race, skin color, beliefs, nationality, gender, sex, national origin, religion, physical appearance, disability or language. We will not tolerate any form of sexual harassment or abuse of power.

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Certificate number:JQA-OH0045

Employees of a domestic affiliated company listening to a safety demonstration

1st placed in the Safety photoScene at management and employee patrol

Spot air conditioners introduced at the Gifu Factory

Air conditioning system at plant

Heat-blocking coating (Inuyama site office)

Before conversion After conversion

Diagram of lighting● Mercury vapor lamp ○ LED lamp

50,000

45,000

40,000

35,000

30,000

（ t ）650

600

550

500

450

(g-CO2 /thousand JPY)

Emissions per unit of productionCO2 emissions■ Trends in CO2 emissions

(FY)20152013 2014

* CO2 emissions volume is calculated using the methodology provided by the “Energy Saving Act” which can change from year to year.

633.3618.8618.8

40.91340.91340,35740,35743,01843,018

609.3609.3

2016

591.4591.4

37,98737,987

2017

564.3564.3

38,34038,340

OHSAS18001 CertificationDAIDO METAL has adopted a management philosophy that places great emphasis on people. Accordingly, the company pursues employee safety policies aimed at completely eliminating workplace accidents. The company’s domestic production facilities have been certified as compliant with the global standards set for management systems under OHSAS.The company has continuously complied with these standards since 2003. In June 2017 our domestic affiliates Daido Plain Bearings and Daido Industrial Bearings Japan were organized as one single company site, expanding the scope of certification.

Implementing “Safety Week”at all Domestic PlantsCooperation between management and the workforce to address risk

Over the course of the year, inspections are conducted in areas where there is a danger that equipment can cause cuts or pinch injuries. In addition, a nationwide “Safety Week” is observed in July of each year, in which management and employees confirm that safety procedures are being carried out properly.All employees take part in the events by composing safety slogans, making safety photo and competing for safety commendations, thus raising awareness of

safety issues. In addition, a “Sanitation and Health Week” is observed in October, during which management and employees confirm disaster preparedness, practice the proper use of dangerous materials and strengthen disaster prevention measures.

Affiliated companies conduct experientiallearning to raise safety awarenessDAIDO METAL’s safety training program is provided to all employees upon joining the company, and supervisors receive follow-up training on an ongoing basis. This training not only includes classroom lectures but also hands-on practice in safe operations. From FY2018, all domestic affiliated companies (including NDC Co., Ltd.) have installed demonstration equipment at each site so that employees can receive practical safety instruction on-site, and thus increase awareness of safety at all locations.

Safety-related Activities Promoting environmental management systems

Efforts to the Prevent Global Warming

Human Rights/Labur PracticesPersonnel training and working conditions

Fundamental Policy on Health and SafetyBased on its people-oriented management philosophy,DAIDO METAL does its utmost to protect the health andsafety of its valued employees. Maintaining high levels ofemployee safety is a top company priority, and the companyinvests whatever management resources are required tomaintain the highest possible levels of safety.

Operations covered byOHSAS18001 certification

Scope of certification

• Inuyama Factory• Maehara Factory• TMBS Factory• No.4 Company• Bimetal Division• Environmental & Safety Management Dept.• Gifu Factory• Daido Plain Bearings Co., Ltd.• Daido Industrial Bearings Japan Co., Ltd.

Environment

Reducing Energy ConsumptionThe Group does its utmost to combat the risk of climate change and make the most efficient use of natural resources, promoting activities to cut power

consumption. The company aimed to“ emit less CO2 than in 2016” in 2017 and due to energy saving measures and a reduction in production values was able to limit emissions to 38,340 tons which was down 0.9% from 2016. Also, one key measure of energy efficiency - CO2/1000JPY of sales - showed a decrease of 5.8% in 2016 to 564.33g.This mainly reflected the reduction of energy usage associated with production transfers.

Energy reduction activities at company site offices● Insulation measuresIn the summer the hot sun shining on the rooftop of a factory building raises the temperature and makes air conditioning less efficient. However, heat-blocking coatings on the roof can prevent the temperature inside from rising as much, and reduce the burden on air conditioning systems. In FY2017 the company finished placing insulation coatings on two buildings.

● Switching to LED lightsFactories that have switched to LEDs for interior lighting were inspected to determine the brightness and angle of illumination. The results prompted the company to adjust the layout of light fixtures and reduce the total number of light bulbs. As a result the introduction of LED lighting has greatly reduced electric power consumption.

●“Spot”air conditioning introduced in factoriesOlder air conditioning systems in factories are being replaced with new energy-conserving systems and workers are taking care to conserve energy.

Daido Metal Group Environmental Policy

Fundamental philosophyDaido Metal Group views the global environment as a precious resource for all people to share, and considers protection of the environment to be one of the most important issues facing mankind. The company will focus all of its efforts and technology on preserving the environment.

Fundamental policies1) The Daido Metal Group will fulfil its responsibility to preserve the global environment, while observing all relevant laws and regulations.

2) The entire Group will take steps to address environmental issues and strengthen environmental management.

3) In all work activities, comprehensive efforts will be made to reduce energy consumption and use of materials, recycle materials, and reduce industrial waste to a minimum.

4) Through the development of products and technologies, the Group will employ its overall technical abilities in an effort to preserve and clean up the environment.

5) The Group will take active steps to inform customers, the local community and other related parties of its efforts to preserve the environment, and promote communication regarding the issue.

6) Through environmental education and informative activities, the Group will seek to boost environmental awareness among all employees, and encourage them to take it upon themselves to participate in environment-related activities.

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Management and DQC circle participants Scene at presentation

Display at the 21st annual Mechanical Components and Materials Tech Expo (at Tokyo Big Sight)

Display of products made by Group affiliated companies

The DAIDO METAL display booth

Eye-catching displays included a cutout model of an eight-speed automatic transmission and a simulator demonstrating the effect ofCALME sound absorption material

River cleanup activitiesMayor of Inuyama City (third from left) presents the award to a company employee (second from right)

Group Project award received by the “green curtain”

View of the “green curtain”from inside the site office

■ Trends in generation of industrial waste（ t ）

(FY)20152013 2014

2,381 2,425 2,486

2016

2,200

2017

1,931

3,000

2,000

1,000

0Picture of a night-time disaster drill (22 May 2017)

Reducing industrial waste withcutting lubricant filtration equipment Night-time disaster drill

(simulating a spill caused by an earthquake)

Quality Control (QC) policy for FY2017The company’s QC policy was developed to raise the initiative and self-reliance of company employees, and measures are being implemented based on the FY2017 slogan “Using the philosophy of the “Three Gen’s”(*) to deliver customer satisfaction and security, while applying the PDCA cycle to prevent problems from recurring.” This motto reflects the company’s dedication to improving quality.

The 32nd DQC Circle Convention to promote QC Circle activities/“Quality ImprovementMonth” activitiesOn 11 December 2017 the DQC Circle Convention was held by nine circles selected from domestic production bases, as well as circles invited from overseas affiliated companies. This event is an opportunity to spread quality improvement activities throughout the entire DAIDO METAL GROUP, to energize workplaces, and to promote enhancements to improvement ability. During Quality Improvement Month (November), the Quality Control Division conducts activities whereby employees contribute slogans and posters to raise awareness of product quality issues throughout the company.

Introducing quality control at overseas affiliatesQuality Control personnel from domestic factories are being dispatched to overseas affiliated companies to help them introduce compre-hensive quality control standards. Standardizing production process-es and observing quality standards helps ensure that the entire Group maintains a consistent level of product quality. By sharing quality

concerns and elevating awareness the Group is contributing to a higher level of product quality.

Participation in the 45th annual Tokyo Motor Show 2017 ‒ displaying products made by DAIDO METAL and other Group subsidiaries (NDC, Iino Mfg., ACT)

The 45th annual Tokyo Motor Show 2017 took place at Tokyo Big Sight on 27 October to 5 November 2017. Some 153 domestic and overseas corporations held exhibitions at this event. DAIDO METAL’s display employed eight video monitors to introduce a multitude of Group products, as well as cutout models of new products such as an eight-speed automatic transmission and shock absorbers. There was also a display of NDC’s sound absorption plate material, CALME. The exhibit attracted considerable interest from visitors and helped boost the profile of DAIDO METAL and its Group affiliated companies.

Mechanical Components and Materials Tech Expo (M-Tech) Joint display by company divisions and Daido Metal Sales Co., Ltd.

The DAIDO METAL GROUP took part in Nagoya Mechanical Components and Materials Tech Expo, held on 12 -14 April and Mechanical Components and Materials Tech Expo (M-Tech), on 21- 23 June 2017. A joint display by the DAIDO METAL GROUP’s company divisions and Daido Metal Sales Co., Ltd. included traditional products such as the dry bearing series, metallic bearings, die slides, thermalloys and others, as well as a broad assortment of products from automotive half shell bearings and RP pumps to NDC’s sound absorption plate material, CALME, pipes and knock pins made by Iino Manufacturing and die-cast products made by ACT Casting Technology Japan.

Serving CustomersAmong the production facilities operated by DAIDO METAL, plating and processing plants produce the largest volume of industrial waste. In FY2017 DAIDO METAL was able to reduce the volume of plating wastewater generated and also began reusing lubricant and solvents to cut down on the amount of waste generated. The Group will continue seeking opportunities to reduce waste and make operations more environmentally sensitive, implementing plans that can make even minor reductions to the amount of waste generated.

Efforts to reduce industrial waste

●“Green curtain”installation (Recipient of the Inuyama City“green curtain”contest award)Greenspace has been created at many of the Group’s factories and offices including the Inuyama Site Office, where a structure was built on the south side of the facility and alongside the cafeteria to shade the facility and keep it cooler in the summer. In FY2017 the Site Office entered the Inuyama City “green curtain” contest, and won the award for “Group Projects.”

● Taking part in river cleanup activitiesIn FY2017 the company began taking part in river cleanup activities organized on an annual basis by local residents. The activity involves clearing large stones and algae from the river bed, trimming weeds along the embankment and cleaning up the area along the river in the vicinity of the Inuyama Site Office. In addition to representing the company’s continued dedication to environmental activities, this also gives DAIDO METAL a chance to contribute to the community as a responsible corporate citizen.

Other environmental activities

Environmental risk managementDAIDO METAL and all of its Group subsidiaries conduct emergency drills every year to prepare for sudden emergencies or disasters. One item which relates to environmental impact is the risk of spills or drainage of hazardous materials. Checks are conducted and drills carried out. In both FY2016 and FY2017 the company conducted drills which simulated an earthquake that took place at night, when the number of personnel on site is limited and lighting may be poor. Overseas trainees also took part in the drill, and received practical experience in dealing with such an incident.

Environment Consumer IssuesProduct Quality Control and PR Activities

* Philosophy of the Three Gen’s: A method of resolving or analyzing problems which focuses on three main points ‒ the Genba or “actual place” a problem occurred, the Genbutsu or “actual item or part” involved, and the Genjitsu or “actual situation or circumstances” that caused the problem.

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IT Security Guidelines

https://www.daidometal.com/jp/it-security-guidelines/

The Corporate Compliance Committee

Chairman (Head of the Compliance Unit)

Members (Human Resources Planning Div. Manager and four other members)

Secretariat (Legal Affairs Dept.)

Committee Chairman: President & Chief Operating Officer (COO)

Vice-Chairman: Human Resources Planning Division Manager

Risk Management Committee Secretariat (Legal Affairs Dept.)

Committee members (9 members, primarily consisting ofexecutive officers and managers of related operating divisions）

Type of risk Division responsible

Bimetal Division

BCP Secretariat

Legal Affairs Dept.

Finance Dept.

Productionrelated risk

Fire/disasterrisk

Salesrisk

Financialrisk

Business PromotionDept. of each company

TechnologyDivision

Quality Management &Planning Dept.

Environmental & SafetyManagement Dept.

Business PromotionDept. of each company

Production Promotion Dept. of each companyDaido Logitech Co., Ltd.

Purchasing Dept.,Legal Affairs Dept.

General Affairs Dept.,Corporate Planning Dept.

Human ResourcesPlanning Dept.

Information Management Subcommittee

Technologicalrisk

Productquality risk

Environmentalsafety risk

Purchasingrisk

Managementrisk

Human resources related risk

Information management risk

Production capacity risk

Technological development risk,intellectual property strategy risk

Product failure risk,product liability lawsuit risk

Environmental pollution risk,health and safety risk

Fire/disaster risk (includesearthquake, flood, lightningand other disasters)

Customer-related risk,anti-monopolylaw-related risk

Subcontractor Act-related risk

Distribution risk

Business continuity risk,overseas expansion riskFinancial information reportingrisk, insufficient funds risk andexchange rate risk

Human resources andlabor-related risk

Information disclosure risk

InformationSystems Dept.

IT-relatedrisk IT systems interruption risk

Risk Management Committee Members (As of April 2018)

The Corporate Compliance Committee: Participating members (as of April 2018)

■ Diagram of the reporting and consultation structure

InternalReportingand

ConsultationOffice

ExternalReportingand

ConsultationOffice

The Corporate ComplianceCommittee

InstructionAdvice

Code of Conduct Standards of Conduct

Education

ReportReport

Instruction

②Report, 　Discussion

Report(major items) DiscussionReport

Notification③Report, Discussion

Instruction

Report

Instruction

Report

Board of Directors Audit & Supervisory Board

Rewards and Penalties Com

mittee

Division Manager

①Principles

Employees

Cooperation

Compliance manager -Chief Operations Officer

(COO)

Head ofthe Compliance Unit

EducationExplanation Report, DiscussionInstruction

The DAIDO METAL GROUP’s approach to compliance focuses not only on upholding all laws, regulations and company internal rules, but also insists that all employees abide by the rules and standards of behavior of the communities in which they operate, conducting themselves with proper social norms and common sense. Compliance is viewed as a cornerstone of all company business activities, and all employees are expected to be aware of and adhere to the “DAIDO METAL GROUP Performance Standards.” The Group has a Compliance Unit which is responsible for discussing compliance-related measures. The head of this unit serves as the Chairman of The Corporate Compliance Committee. A “Reporting and Consultation System” has also been created to discuss and report on all compliance-related matters that arise within the Group, ensuring that any potential infringement of compliance standards is identified and reported as swiftly as possible, and the anonymity of the person making the report is carefully preserved. The Corporate Compliance Committee provides the Board of Directors with regular reports on the status of compliance activities within the Group, giving top management a clear picture of compliance for the Group as a whole.

Domestic compliance trainingConducted sessions to promote appropriate transactions

In FY2017 DAIDO METAL implemented measures to address revisions to the Subcontract Act, and changes to the regulations governing appropriate transactions in the automotive industry. The company and all of its Group affiliated companies took steps to ensure strict adherence to rules governing transactions, including a series of “appropriate transaction promotion seminars” involving members of the Purchasing Division and Legal Affairs Division. This not only included ensuring that everyone was aware of the relevant law, but also clarifying the administrative process that should be followed when placing orders, to ensure that all such transactions are appropriate, and training employees to follow the process smoothly.

Overseas compliance trainingConducting compliance checks in Asia(Group affiliated companies in Thailand and India)

In November 2017 the company conducted inspections at Group companies in Thailand and India to verify and explain the compliance structure. At ATA Casting Technology Co., Ltd., in Thailand, the company held discussions with the local compliance officer to ensure that measures were under way to cultivate an awareness of compliance standards and to ensure that all affiliated companies were implementing compliance policies on their own.

Risk management activities include “risk brainstorming” to identify all of the potential risks to Group business activities, “risk evaluation” and “risk response planning” to address each item, and “reporting results to the Risk Management Committee or the Board of Directors.” This cyclical process helps to reduce the risks affecting the Group and provide a structure for the Group to manage risks. Since FY2016, Group affiliates have been improving their quality control activities. Led by risk control officers at each facility they have conducted “risk brainstorming” sessions, evaluated risks and developed measures to reduce risk. These activities are reported to the Group’s Risk Management Committee on a regular basis to help the Committee understand risk conditions within the Group.

Compliance Risk Management

Photo of a training seminar

Compliance documents in Thai

Emergency inspections and preparations to resume production

BCP simulation drill

Managing the supply chainDissemination of Green Procurement Guidelines

Green Procurement Guidelines include a survey which suppliers use to describe their internal environmental policy, investigation of any substances - including the products themselves - which may have an adverse impact on the environment, and steps being taken to appropriately manage and reduce the environmental footprint.

Implementation of disaster response training and BCP exercises held in autumnThe company has prepared Business Continuity Plans (BCP) and is bolstering its response measures at all Group companies to address predictions of a major earthquake, given the possibility of tectonic movement in the major faults of the area. Evacuation drills were conducted in the morning, including all employees, while in the afternoon staff practiced the implementation of the BCP, such as emergency inspections needed to quickly restart plants that supply raw materials, administrative exercises at each plant to identify and report any damage, simulations of functional responsibility, to verify and discuss whether the facility is able to supply products customers in an emergency, and other drills and simulations.

Initiatives to strengthen information managementThe Group is taking steps to improve its IT management structure, including the introduction in April 2017 of guidelines dealing with the management of classified information. This created various levels for information and laid down regulations for each category. In March 2018 IT security Guidelines governing IT security management policy for the entire DAIDO METAL GROUP were compiled and published on the company website.

Green Procurement Guidelines

Fair Operating PracticesCompliance, Risk Management, and Supply Chains

Information management risk

Risk of fire/disaster

EnvironmentalSafety Risk

Fair

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The winning team

View of the festival

The winning trophy and certificate for the fire hydrant usage competition

Tape-cutting ceremony

Children listen to a safety lecture (Inuyama Site Office)

Enthusiastic children asking questions (Inuyama Site Office)

A tour group watches employees at work (Gifu Factory)

Rescue vehicles arriving at Daido Metal Saga

Picture of the presentation

Certificate of Appreciation

Picture of “balloon fishing” activities

Summer festival at the Inuyama Site OfficeEvery five years the Inuyama Site Office holds a summer festival. Although the festival was held during the hot summer season, it was favored by good weather attracting a large number of people. The summer festival allowed the people of Inuyama, who have lent so much support to the company over the years, to visit the plant and enjoy activities that helped relieve the heat. Stalls were set up by company employees to sell a variety of goods. Hopefully we can continue to promote communication with local residents through festivals like this, which give us an opportunity to repay the community in which we operate.

First Prize in the outdoor firefighting competitionEvery year employees of the Inuyama Site Office take part in a firefighting competition organized by the Inuyama Fire Department and the Inuyama Association for the Safety of Hazardous Materials. The Inuyama plant has a large number of hazardous materials stored on its grounds, and therefore employees take part in fire drills to prepare for the event of an accident. The regular practice has naturally allowed employees to develop considerable skills in dealing with such emergencies; so much so that in FY2017, the team from DAIDO METAL won first prize

Social Contribution Activities

Kyushu Block joint training exercises at Daido Metal Saga Co., Ltd.On 11 and 12 November the emergency fire response team for the Kyushu Block held a joint training exercise. From around 7:00AM on the 12th, fire engines and ambulances from areas around the Kyushu region began arriving at the site. A total of 250 vehicles eventually arrived, including those from the Japan Self-Defense Forces, along with 1,500 participants and spectators. The event kicked off with speeches from Saga Vice-Governor Yoshihiko Soejima, Takeo City Mayor Tadashi Komatsu and the fire chief of Saga Prefecture. Participants then took part in drills simulating a bridge collapse and the rescue of people from fallen vehicles. Next came a drill in which people were rescued by helicopter from the roof of a six-story building, a drill that involved rescuing people from a mudslide, and extracting victims from a collapsed tunnel. The entire exercise took an hour and a half.

Regional activities of at Daido Precision Metal (Suzhou) Co., Ltd. Personnel at Daido Precision Metal (Suzhou) Co., Ltd. are actively engaging with citizens of their area. In FY2017

Activities of Group companies

Community Involvement andDevelopmentSocial Contributions to Local Communities

in the competition which involved the use of an outdoor fire hydrant. In the future the company will continue to participate in this competition, aiming to maintain high awareness of and preparation for fire emergencies.

Factory tours for local elementary schools Every year Daido Metal facilities host visits for local elementary school children. On the day of the visit crowds of happy children swarm into the company’s facility. First they are shown a DVD which explains the company’s operations and receive various explanatory materials which they can look at while listening attentively to the descriptions. Thereafter they tour the plant, which many of the children find amazing, and they watch with interest as employees go about their duties. At the end the children have a chance to express their experiences and relay their thanks to the plant personnel. The look of joy on the children’s faces is more than sufficient reason for the company to continue conducting these tours.

employee family members and local elementary school children were invited to the facility. This was recognized as a family-oriented regional activity, and was commended by the management of the industrial park in which the company is located.

Recognition from Bellefontaine Fire Dept. for the firefighting team at Daido Metal U.S.A. Inc. Daido Metal U.S.A. takes part in fire prevention activities in the local area as part of the company’s active social contribution. In FY2017 the company received a certificate of appreciation from the Bellefontaine city fire department for their participation in safety education programs for local children.

Family Day at Daido Metal Czech s.r.o.Daido Metal Czech s.r.o. invited employees’ family members to the facility for a “Family Day” event. The event attracted 252 people including employees and members of their families. The event offered attendees a chance to experience some elements of Japanese culture, helping them to better understand their Japanese-owned company. The events included origami demonstrations, “balloon fishing” and various other entertaining activities.

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