Commitment to Corporate Governance

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Governance and management are the dual components that enhance the value of the corporate group. LIXIL's Board of Directors, which controls governance, is centered on four outside directors and non-executive directors with extensive management experience who objectively supervise management, discuss the future of the Group from a long-term perspective, and exchange views with the president. We are adding two additional directors to establish a 12-member governance structure. At the same time, we are also strengthening the roles of three management committees to better reflect the view from the front lines of the business within the Board of Directors.

The region stretching from Japan to China and India accounts for around 60% of the global population, and is expected to generate considerable demand for infrastructure development and construction. This will be the most important region for growth for LIXIL over the long term. China alone already has an annual GDP 2.5 times that of Japan. This prompts management to pursue business expansion that keeps pace with Asia's development. The ceramics business has followed this direction in India and other countries. We are also developing new aluminum products for ASEAN markets. We are utilizing Singapore as our center for Asian expansion, and opened a modern showroom there in the spring of 2018.

At the same time, protectionist measures in overseas countries and counter-currents against a more open society are issues of concern. Increasing barriers to free trade necessitate the creation of more exacting supply chains tailored to the conditions in each country. In response, LIXIL is employing a diverse workforce irrespective of race, gender, or nationality, in order to reflect different views.

The somewhat spread investment program employed during the acceleration of LIXIL's multinational business development has been refocused under the current management to place greater emphasis on profitability. Revenue growth has slowed, but earnings have increased. At the same time it is extremely important to sow the seeds for the future, and I have held discussions with management to ensure we avoid an excessive contraction.

LIXIL's results have fallen short of plan in certain areas as a result of a slowdown in new housing starts in Japan from the latter half of the previous fiscal year, and higher aluminum prices due to speculation over developments in international politics. At the same time, expanded production at our factories in Thailand, Mexico, and the Dominican Republic have resolved supply shortages overseas, resulting in positive growth.

Toilet conditions in developing countries present major concerns in terms of hygiene and safety. LIXIL's SATO Toilet Systems are a measure to directly address these issues. The usual pattern for brands in advanced nations is to target small markets in developing countries for the most well-off or foreigners, but LIXIL is approaching these markets as a social business and responding to significant demand.

We will make further efforts to meet the expectations of stakeholders. Thank you for your continued support.

November, 2018

Yoichiro Ushioda
Yoichiro Ushioda

Yoichiro Ushioda
Chairman of the Board

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