CSR Report 2007 Murata Group About This Report CSR Report

Murata Group CSR Report 2007 Murata Group About This Report CSR Report

2007 Purpose of This Report and Editorial Policies The Murata Group CSR Report is issued to deepen the understanding of and enhance communications with all stakeholders with regard to the Murata Group’s corporate social responsibility (CSR) and its endeavors in this field. It provides economic, environmental and social perspectives on the activities of Murata Group companies inside and outside Japan. This edition reports on our basic policies, principal efforts and targets for fiscal We aim for Murata’s technologies 2006, progress toward these goals and future plans. Insofar as possible, the information in this report avoids specialized jargon through easily understandable language in an accessible design format. The objective is to present a candid and products to enrich various aspects report that features the Murata employees who bear the Company’s corporate social responsibility.

of life in societies around the globe. Target Period This document covers the Murata Group’s activities and accomplishments for fiscal year 2006, spanning the period from The Company is always considering what April 1, 2006 to March 31, 2007. However, some portions of this document address initiatives outside this defined period.

further contributions it can make for Scope of This Report This report encompasses the activities of the Murata Group, which comprises Murata Manufacturing Co., Ltd., and its 56 subsidiaries people and for the planet. and affiliates inside and outside Japan.

Reference Guidelines • Environmental Reporting Guidelines, 2003 Edition and 2007 Edition, of the Ministry of the Environment, Japan • Sustainability Reporting Guidelines 2002 (2nd Edition) and 3rd Murata’s Philosophy Edition of the Global Reporting Initiative (GRI)

We Pledge… Publication History and Future Issue Plans To Contribute… The Murata Group began publishing its CSR Report in 2005. To the continued worldwide development of The next CSR Report is slated for publication around July 2008. industry and culture through management commitment (Online Disclosure) To Pursue… Scope of Reporting and Disclosure Total quality and customer satisfaction, while This report has been compressed and continuously introducing innovative products in edited to present the Murata Group’s integrated and interrelated technologies which CSR endeavors in an accessible will allow our company, our employees, manner. For more detailed information, customers and other partners, and our case studies, environmental communities performance and other data, please refer to the Murata website. To Grow and Prosper… Environmental data by business site With an appreciative feeling of mutual pride and the initiatives unique to each site are and trust available in the CSR Report by business site, as posted on the Murata website. For more detailed financial data, please refer to Investor Information section.

Click to access data on the Murata website.

Future Forecasts, Plans and Targets In addition to past and current performance, this report includes future forecasts, predictions, plans and other information. Such forecasts, plans and targets are made on assumptions and judgments based on information available at the time of publication. Accordingly, the results of future operating activities and future phenomena may differ from forecasts, predictions and plans in this report. The understanding of readers regarding such disparities is greatly appreciated.

1 Contents

Top Commitment Firmly Grasping the Growing Responsibilities that Accompany Business Expansion and Striving for Further Development 3

Recognizing Murata Creating Functions for Electronic Equipment— Here, There and Everywhere 5 Murata by the Numbers How many? How much? 7 A Group of 56 Companies, with a Staff of 29,000 Worldwide

Feature 1 Murata’s Product Responsibility Small Electronic Components, a Big Sense of Responsibility 9 Feature 2 Murata’s New Businesses A Step Taken for the Future 13 Feature 3 Murata’s Activities for Tree Planting Aiming for Factories Rich with Greenery, in Harmony with Regional Communities 17

CSR Management Corporate Governance 18 Compliance 19 Risk Management 20

Economic Review Economic Relations with Stakeholders 21

Murata and the Environment 23 Murata and People 35 Environmental Management 24 Responsibilities and Conduct toward Customers 36 Environmental Action Plan and Performance 25 Responsibilities and Conduct toward Suppliers 39 Overview of Environmental Impact 27 Accountability and Conduct Environmental Accounting 28 for Shareholders and Investors 41 Eco-Friendly Design 29 Responsibilities and Conduct Green Procurement and toward Employees 43 Purchasing 30 Responsibilities and Conduct Prevention of Global Warming toward Societies and Local 31 Communities 46 Effective Utilization of Resources and Reduction of Waste 32 Managing Chemical Substances Third-Party Comments 48 and Environmental Risk 33 Promoting Eco-Friendly Physical Distribution and Packaging 34 2 Fulfilling Our Corporate Responsibilities attain this ambition, it is vital that we continue to from Economic, Environmental and supply valuable products while realizing a sustainable Social Perspectives society by fulfilling our corporate responsibilities from Murata’s products—electronic components—are economic, environmental and social perspectives. physically small and usually not seen. However, these minute individual components play a major accumulative role. For example, chip monolithic Contributing to Regional Economic capacitors, for which Murata holds the top market Development while Ensuring Returns share worldwide, are mounted with various electronic to Stakeholders components, while one mobile phone contains more First, from an economic perspective we emphasize than 200 and a notebook computer more than 700 an appropriate return to all stakeholders of the profits such parts. Our proprietary technologies have generated by supplying customers with valuable reduced to less than 1mm the size of components products. that store electricity, suppress electrical current noise Based on this approach, we pass on profits to and facilitate AC flow by interrupting DC in electronic shareholders, employees, communities and countries equipment throughout the world. Through such through dividends, salaries and taxes, in addition to technologies, we add functionality to electronic fulfilling our role in local societies by contributing to equipment and support people’s lifestyles and the various funds and supporting cultural activities. foundations of industry. Furthermore, as a global enterprise deriving 75% of Murata’s corporate slogan, “Innovator in sales overseas, we believe that we have an important Electronics,” embodies its commitment to develop responsibility to contribute to regional economic new components and technology that supports the development in the countries where we operate. infrastructure of our electronics-intensive society. To Accordingly, the Company conducts its business in

Top Commitment Firmly Grasping the Growing Responsibilities that Accompany Business Expansion and Striving for Further Development

Yasutaka Murata Chairman Statutory Representative Director Tsuneo Murata President Statutory Representative Director

3 Japan and overseas based on the maxim that To intensify exchange with regional societies, we “Murata Serves to Bring Joy to the Local are swiftly carrying out measures to enhance the Community.” Through investment in research and environmental esthetics of our operational sites, development, we will cultivate new businesses that aiming for factories rich with natural greenery, in contribute to future societies, aiming as a corporation harmony with regional communities. In fiscal 2005, to build a sustainable cycle of universal benefits. we commenced environmental and natural science education programs targeting children local to the areas in which we operate. Promoting Companywide Production Process Improvements to Reduce CO2 Emissions Gaining Societal Endorsement as Global warming prevention, waste reduction and an Innovator on All Fronts chemical substance countermeasures bear the brunt In January 2007, Murata announced its long-term of the environmental aspects of our corporate management plan, targeting net sales of ¥1 trillion by responsibilities. 2015. Strategies as an innovator are indispensable to Global warming prevention is a particularly achieving this objective. During fiscal 2006, we important current issue. We are reinforcing promoted research in the new areas of energy, improvements to production processes and bioelectronics and the environment. Specifically, these implementing other measures to speed up reductions included lithium ion batteries and CO2 absorption in CO2 emissions. Rationalizing production processes materials that contribute to reducing the environmental also helps cut lead times and costs. Accordingly, from impact and devices for biosensors that contribute to fiscal 2007 members of operational divisions the early detection of diseases in the medical field. participate in the Murata Environmental Committee to Furthermore, in fiscal 2007 we established the implement policies that build stronger links between Technology and Business Development Unit to business activities and environmental consideration. support our policies to develop new products over the In addition to promoting processes improvements, medium and long term that reflect market needs and we believe that it is necessary to focus on measures aggressively carve out new business niches. for emissions trading and CDM.*1 Expanding the scale of our business and In fiscal 2003, in line with waste reduction supplying valuable products worldwide in turn brings measures the Murata Group in Japan achieved its greater corporate responsibilities. We believe that only zero emissions targets (defined as a 100% recycling a company that rises to these responsibilities can rate). Currently, we are endeavoring to expand this gain social recognition and survive into the future. record to our overseas factories. Murata aims to be an innovator, displaying We are promoting chemical substance originality on all fronts, from development through countermeasures in preparation for more stringent production, sales, marketing and delivery. Within this regulations, particularly the introduction of REACH*2 framework, we shall fulfill our responsibilities as a in the EU, and striving for swift realization of LCA*3 corporation and strive further to raise our status in data. the eyes of our various stakeholders. We ask for your continued support in the future and welcome any candid opinions on the contents of Focusing on Customer Satisfaction, this report. Employee Satisfaction and Exchange with Regional Societies July 2007 From a social perspective, Murata’s first priority is providing a stable supply of products to fulfill its responsibilities to its customers and maintaining measures for stringent quality control. Employee satisfaction ranks alongside customer Yasutaka Murata satisfaction as a focus for the Company. We aim to Chairman conduct business in such a way that corporate Statutory Representative Director growth is achieved by all employees carrying out their work with inspiration while applying their full potential. Furthermore, as we strive to accelerate the globalization of our operations, we are aware of the Tsuneo Murata urgency in creating environments and systems in President which local employees can excel. Statutory Representative Director

1 CDM: Clean Development Mechanism. An arrangement under the Kyoto Protocol allowing industrialized countries with a greenhouse gas reduction * commitment to invest in projects that reduce emissions in developing countries. 2 REACH: Registration, Evaluation, Authorization and Restriction of Chemicals. A new regulatory system for safety assessments of 30,000 chemicals sold within * the European Union that came into force in June 2007. *3 LCA: Life Cycle Assessment. Evaluation of the environmental impact of products over their entire lifecycles. 4 Actual size Switching power supply for ﬂat panel displays

Eliminates hand shake

Actual size Piezoelectric vibrating gyroscope (GYROSTAR®)

Recognizing Murata Creating Functions for Electronic Equipment— Here, There and Everywhere

Murata’s electronic components are used in an array of electronics equipment in our immediate environs, supporting our lifestyles. These span mobile phones, home appliances, automobiles, personal computers and many more applications. Murata supplies manufacturers worldwide with electronic parts that realize its dream for more convenience, greater speed, enhanced amenity and more consideration for the global environment. “When new features are in demand, we always go back to the very basics of searching for the most appropriate material.” This philosophy has enabled Murata to develop numerous unique products. For example, mobile phones have evolved from telephones to Internet terminals, cameras, car navigation systems, on to multi-communication tools that can receive terrestrial digital broadcasts. Murata has provided the technologies and products that have fueled this advance. Murata, as an “Innovator in Electronics,” continues to evolve day by day to realize an affluent society through leading-edge technologies and products. Actual size Boundary acoustic wave filters, SAW filters, SAW duplexers

Company Profile Trade Name Murata Manufacturing Co., Ltd. Date of Incorporation December 23, 1950 (established October 1944) Paid-in Capital ¥69,376 million (as of March 31, 2007) Stock Exchange Listings In Japan: Tokyo, Osaka Overseas: Singapore Location Head Ofﬁce: 10-1 Higashikotari 1-chome, Nagaokakyo City, Kyoto 617-8555, Japan Branch: Tokyo Branch (Shibuya-ku, Tokyo) Plants and Technical Center: Yokaichi Plant (Higashiomi City, Shiga) / Yasu Plant (Yasu City, Shiga) Yokohama Technical Center (Midori-ku, Yokohama City) / Nagaoka Plant (Nagaokakyo City, Kyoto) Website http://www.murata.com/

5 Protects hard disk data Contributing to from shocks the compactness of ﬂat-panel TVs

Actual size Shock sensors

Actual size Ceramic Discriminators, SAW Resonators, Ceramic Filters (CERAFIL®) for TPMS

Miniaturization of ﬁlters enable smaller mobile phones

Sensitivityfor safety sensors

Major Products by Application

Mobile Communications Chip dielectric antennas, boundary acoustic wave ﬁlters, SAW ﬁlters, SAW duplexers, SWITCHPLEXER®, Bluetooth® modules, GPS modules

Computers Chip ferrite beads, chip common mode choke coils, EMIFIL®, chip coils, chip monolithic ceramic capacitors, low-ESL capacitors, PHS communication cards, shock sensors

Automotive Electronics Ceramic capacitors for medium voltage, ultrasonic sensors, Ceramic discriminators, SAW resonators, ceramic ﬁlters (CERAFIL®) for TPMS, rechargeable lithium ion batteries, ceramic resonators (CERALOCK®) for CAN-BUS

Digital Home Electronics Piezoelectric vibrating gyroscope (GYROSTAR®), terrestrial digital tuners for mobile phones, Switching power supplies for ﬂat panel displays, Wi-Fi modules

6 63 rs since Yea Ratio of R&D establishment investment to net sales

7 %

ribution Overseas cont to consolidated % net sales 75

Employees 29,000

Murata est lead chip monolithicing shareimates of ceramic the its world cap 56 acitor market at Subsidiaries (23 in Japan; 33 overseas) 35 %

Net sales Net income Total assets (FY) (Billions of yen) (FY) (Billions of yen) (FY) (Billions of yen) 2002 394.9 2002 39.4 2002 834.3

2003 414.2 2003 48.5 2003 844.1

2004 424.4 2004 46.5 2004 850.7

2005 490.7 2005 58.4 2005 909.6

2006 566.8 2006 71.3 2006 1,014.9 7 Con productstribution consolidat net sales to of new ed 38 % %

tion of n 80 Propor n Japa production i Total 300,000 products

Murata by the Numbers How many? How much? A Group of 56 Companies, with a Staff of 29,000 Worldwide

Murata is global enterprise with operations spanning more than a dozen countries through 56 subsidiaries. Our total workforce is approximately 29,000, all working to play a part in the development of the electronics industries of their respective countries. Based on the slogan “Murata Serves to Bring Joy to the Local Community,” Murata aims, as a good corporate citizen, to contribute to all these countries and regions.

Europe America

Net sales ¥ 46.1 billion Net sales ¥ 70.4 billion Japan Subsidiaries 6 Subsidiaries 9 Asia Employees 456 Employees 332 Net sales ¥142.6 billion Net sales ¥ 305.6 billion Subsidiaries 23 Subsidiaries 18 Employees 19,289 Employees 9,315

Number of Employees Sales by Application Audio/visual Sales by Area Japan by Geographical Region 74.3(13.2%) 142.6(25.2%) Home and others Japan Asia 81.2(14.4%) 19,289(65.6%) Asia and others 9,315(31.7%) Automotive electronics 305.6(54.1%) 61.4(10.9%) Consolidated Consolidated Europe Total number net sales net sales 564.8 564.8 70.4(12.5%) 29,392of employees Computers and (Billions of yen) (Billions of yen) Europe peripherals 332(1.1%) 117.1(20.7%) Communications 230.6(40.8%) The Americas The Americas 46.1(8.2%) 456(1.6%) * Sales by application and area represent net sales of electronic components and related products. 8 urata’s Product Mission development, design and manufacturing. and Responsibility End users In addition to thoroughness, such built-in M processes ensure inspection of all Our Responsibility as an Electronic manufactured products. Detected faulty Component Manufacturer That components are analyzed, the causes Responsibility Produces Tens of Billions of Parts to finished product identified and countermeasures Each Month manufacturers systematically implemented. Murata’s leading share of the chip As the top manufacturer of chip monolithic capacitor market stands at monolithic capacitors, we are ever aware 35%, with a production output of several of our product responsibility, that is, the billion parts per month. Many perform huge social responsibilities we have for vital roles in such electronic equipment as these miniscule components, and personal computers and mobile phones. endeavor on a daily basis to raise the These include components of a fraction chip monolithic capacitors means level of our activities. of a millimeter—smaller than a grain of problems for the manufacturers of the sand. One flat-screen television includes electronic equipment, who form our more than 1,000 such components, and customer base, for electronic compact modern mobile phones in equipment users, and ultimately for a excess of 200, each fulfilling a role, such vast number of people worldwide. as suppression of malfunctions, poor Accordingly, Murata has formulated reception or radiation noise. processes with built-in quality and A malfunction by one of Murata’s reliability through all stages of the production process, spanning

Inspection process line

Internal electrode External Dielectric electrode ceramics

Cross-section

Monolithic structure

Chip Monolithic Capacitors—Indispensable for Digital Products The role of capacitors is to store electricity and eliminate unnecessary noise. Capacitors with a stratiﬁed structure, called monolithic capacitors, are vital to a diverse range of electronic equipment. Murata’s chip monolithic capacitors are created from raw materials in an integrated manufacturing systems. In addition to our mother plant in Fukui, we conduct production activities in Shimane and Okayama in Japan, and overseas in Beijing and Wuxi in China and in Singapore. These multiple production bases ensure a stable supply system for our products.

9 by market. These processes are product quality maintenance to uality and Safety conducted from a variety of production processes. Q standpoints, including the production Information technology is pivotal We Develop Our Own Production systems of customers and conditions in applying Murata’s long years of Facilities and Maintain High-quality of use by end users. The results are accumulated expertise to its product Products while Envisaging the End then used in daily design work. For and process design. For example, Use from the Development Stage example, we build in quality to the information on past raw materials and The basis for Murata’s manufacturing product design of components used production lots, production facilities, is “absolute safety and quality ﬁrst.” In in mobile phones by simulating such operators, manufacturing conditions emphasizing this approach, we focus actual usage conditions as the intense and other parameters is fed into a on establishing quality assurance heat of being shut in a car during database, and this Murata “PRASS systems for product and process summer and the humidity of being System” is used in the event of any design, that we deem key elements for carried in a breast pocket. malfunction as a reference for safety and quality. Product design Furthermore, in process design it enquiries and swift detection and stresses determining materials and is important to design and utilize resolution for problems. structures, which balances product production and inspection facilities However, regardless of the functionality and safety, while process equipped with functions that can systems that are in place and the IT design focuses on determining realize to the greatest extent possible technologies employed, ﬁnal quality is production methods without disparities the quality targeted in product design. determined by personnel. Therefore, in quality. Accordingly, Murata does not in addition to establishing the In product design, we deploy outsource such production and systems, educating personnel is the quality assurance and other inspection work; its product and crux of Murata’s approach in focusing specialized staff to simulate the manufacturing process expert on educating the operating staff. generation of malfunctions and technicians carry out almost all design Furthermore, we have cultivated a formulate quality evaluation standards on this front to facilitate built-in workforce of several hundred

Feature 1 Murata’s Product Responsibility Small Electronic Components, a Big Sense of Responsibility

Murata’s electronic components are at work in various electronic equipment— mobile phones, personal computers, home appliances, automobiles and industrial robots. Without these components, which range in size from a few tenths of a millimeter to several millimeters, the electronic equipment functions, safety and environmental performance called for by hundreds of millions of people around the world could not be realized. To ensure peace of mind for users of various electronic equipment worldwide, we maintain reliable quality for and strive to reduce the environmental burden of all our products. Small products, but a big sense of responsibility—Murata has every intention of continuing to fulﬁll this responsibility in the future.

10 Feature 1 Murata’s Product Responsibility Small Electronic Components, a Big Sense of Responsibility

end-usage conditions and actively propose methods of use to promote safety and optimize functionality of our products. Moreover, we continually utilize feedback data from customers to Chip dielectric improve and upgrade products. In antenna An internal antenna particular, we have established a with optimal reception Failure Analysis Center, independent of various radio signals of the Automobile Reliability Section that is responsible for long-term reliability assurance technologies, to focus on components supplied to the automobile industry, where product malfunction has life-threatening potential. This body analyzes malfunction data to determine risk of SAW filter Screening to select failure and improve products. required radio signals Indentifying the root causes of failure SWITCHPLEXER® can then be directly linked to quality A multifunctional component, assurance during development and featuring radio signal noise suppression mass production. and transmission/reception switching nvironmental EConsideration specialists to maintain production Proactively Providing Safety Quadruple-Checked to Eliminate facilities, who are deployed on our Information and Utilizing Malfunction Environmentally Detrimental manufacturing lines. Feedback for Quality Improvements Chemical Substances Through such initiatives, Murata Murata’s charge goes beyond Chemical substances are necessary has assembled an army of specialized supplying its customers with products as raw materials for Murata’s technicians to manage all processes that are all inspected to ensure they electronic components. Although the from development through to mass are free from faults. We consider the quantities included in each individual production, from the standpoint of provision of various data to ensure component are minute, end products quality, and is pursing continually the safety during use as a part of its may be mounted with hundreds or introduction of new lines and responsibilities as an electronic even thousands components. improving existing facilities. components manufacturer. To this end, Inappropriately discarding the items we dispatch engineers from our along with the waste end product can Mounting Technologies Center to our signiﬁcantly impact the global customers to conﬁrm intended environment.

Production facilities are also developed in-house

Reliability testing

11 Failure Analysis Center

Data communications in the supply chain

Raw materials manufacturers

Sheets that provide information on materials in chemical substances and preparations, primarily in response to overseas regulations

Parts manufacturers

Sheets to disclose and communicate information on chemical substances contained in Article. Data provided to meet Japanese and overseas legal requirements.

Equipment manufacturers (Customers) Accordingly, Murata aims to reviewed administrative processes Sales of reduce its environmental impact throughout the Group’s divisions to environmentally Providing data considerate throughout the product lifecycle, from ensure compliance by relevant products procurement of raw materials for employees in their daily operations. components through to disposal and For example, production End users recycling of end products, and is departments, as well as the striving to reduce the content of Development Design Department, these new Regulations, every hazardous chemical substances register in a Groupwide database all company must individually manage its contained in its products. restricted substances and all chemical own chemical substances. However, The EU Restriction of Hazardous substances permited for use in the ultimately the best solution is the Substances in Electrical and Company, thus constructing a system construction of a consistent Electronic Equipment Directive (the to prevent the ordering of substances industry-wide management system. “RoHS Directive”) went into effect in prohibited by legislation or in-house Accordingly, in September 2006 July 2006. This restricts six regulations. Furthermore, we implement Murata and other like-minded substances used in electrical and a chemical substance management corporations established the Japan electronic equipment. To ensure swift system for suppliers, with much care Article Management response to this and other global and cooperation to ensure its smooth Promotion-consortium (JAMP*). This regulations, Murata formulated the application. At the production and body aims to establish of a standards “Regulation Program for shipment stages, we keep records of system to facilitate smooth Environmentally Hazardous compliance with rules during conveyance of data on chemical Substances” to establish its own manufacture, allowing conﬁrmation that substances in various parts and regulation in 1996, aiming for the shipped products abide by the laws materials from upstream industries that reduction and abolition of hazardous and regulations of their destinations. produce chemical materials to chemical substances. Moreover, we Through such measures, Murata downstream industries manufacturing is eliminating regulated substances in end products. For electronic Murata chemical substance management the design development, materials components makers, positioned Murata EDP system only permits procurement procurement, production and of parts and chemical substances that between these two extremes, this pass Murata’s standards shipment stages, ensuring represents a policy of providing Design consideration for the global know-how and information. Registration environment throughout its overall Murata production process. In terms of quality and environmental chemical Procurement substance Suppliers consideration, Murata will continue to management Creating a Chemical Substance strive to realize a society with peace of databases Only the materials Management System in Cooperation mind for all people using electronic and that pass Murata’s standards are with Industry Association electrical products. Manufacturing ordered The EU Registration, Evaluation, Declaration of Authorization and Restriction of content chemical JAMP: An active cross-industrial organization Products substance Chemicals (REACH) regulations, to* formulate and spread concrete measures to information necessitating the registration of several facilitate proper management and smooth tens of thousands of chemicals sold disclosure and communications throughout the supply chain of data on chemical substances within the European Union, came into Equipment manufacturers (Customers) contained in articles (parts and molded force in June 2007. To fully respond to components).

12 Feature 2 Murata’s New Businesses A Step Taken for the Future

Murata is exploring the possibilities of new technologies to cultivate the new businesses that will contribute to the society of the future. The themes the Company is pursuing are the environment, energy and biotechnologies. The challenges we face are controlling emissions of greenhouse gases that lead to global warming and early detection of adult diseases.

1 The two other companies are: ENAX, INC., a large-scale* battery production company; and High Power and Daiken Chemical Co., Ltd., an electronic component materials manufacturer. *2 Electrical double-layer capacitor: A type of Safety for Hybrid Vehicles capacitor, which serves as a device that can temporarily store and discharge electrical energy. Compared with conventional batteries, these Development of High-Power Lithium Ion Secondary capacitors last longer and recharge more quickly. Batteries Using Murata Specialist Monolithic Technologies

Hybrid vehicles run on gasoline engines company of chip monolithic capacitors, and electric motors. Key to their merges its unique layering techniques, widespread use is increased electrical double-layer capacitors*2 once functionality of the secondary batteries commercialized and battery material (rechargeable batteries) that serve as a technologies, with the two companies’ power source for their motors. battery and materials technologies, and Nickel-Metal Hydride batteries are aims to bring high-power lithium ion used in currently marketed hybrid secondary batteries to the market by fall vehicles. These batteries, put to 2008. practical use in 1990, provide twice the The car is intended to transport electrical power capacity of previously passengers. Therefore, ensuring of safety Ensuring Safety at Full Power mainstream nickel cadmium secondary is of paramount importance. However, in Hybrid Vehicles batteries, in addition to being free from lithium ion secondary batteries use noxious cadmium and offering other organic solvents, which has led to Masanori Endo Manager, Engineering section, superior characteristics. criticisms of uncertain safety at high Energy Device Business Development Murata is promoting high-power temperatures. In response, Murata has Department lithium ion secondary batteries for employed a monolithic structure with We began partial sample shipments of hybrid vehicles. Double the power of excellent radiation performance. Murata’s high-power lithium ion Nickel-Metal Hydride batteries provides Furthermore, through the use of special secondary batteries in spring 2007. superior acceleration, in addition to materials, we have bolstered safety They are characterized by instantaneous high output and enhanced safety. shorter recharge time, longer life and performance, with experimental results We are working on improving compact design. To realize these ideal showing no ignition, even at several times electrical characteristics and ensuring power sources, we tied up with a overcharge of speciﬁed values. Murata is absolute safety with a view to supplying large-scale battery production company building safe and powerful ideal power these batteries for hybrid vehicles. and an electronic component materials sources to spread hybrid vehicles with Currently, we are going through manufacturer*1. Murata, a leading low environmental load. repetitions of trials and assessments.

13 Contributing to the Field of Healthcare Development of Biosensor Using Microwave Components

Murata wants to contribute to stable measurement with these new healthcare by applying its accumulated parameters. technologies in the field of microwave The conventional detection components. This is the background equipment of this kind are very why Murata started the biosensor expensive and bulky, and, therefore, Biosensor mechanism development. those are not well accepted, at this Proteins that serve as heart Those biosensors are used to moment, in small-scale clinics and disease indicators detect proteins, DNA and other hospitals. However, developing biomaterials in whole blood. compact and high-precision Biofunctional substance Applications are anticipated in the biosensors are believed to contribute clinical diagnostics for the purpose of much to more introduction even to Sensor section discovering the hidden causes of small clinics, and also facilitate swift Murata diseases and quantifying the state of a and accurate diagnosis results even technologies patient’s health. by minute blood samples. Murata has been carrying out this By promoting R&D of such Measurement development jointly with a Danish biosensors, Murata believes that it will device venture enterprise. make major contributions to the field Those biosensors that measure of medical diagnostics by providing protein traces in blood apply the same solutions for the early detection of technologies for the microwave causes of cardiac diseases. components that suppress noise in mobile telephones. Of course, in the development of biosensors, the application and environment for microwave components differ from the mobile telephone applications. Murata is promoting research to find out and secure the best way to realize accurate,

14 Feature 2 Murata’s New Businesses A Step Taken for the Future

CO2 absorption (550–750°C)

BaTiO3 (barium titanate) Ba2TiO4 (barium orthotitanate) + BaCO3 (barium carbonate)

CO2 desorption (800°C+)

CO2 absorbent material (barium orthotitanate) CO2-Capturing Ceramics Development of Ceramics that Absorb Carbon Dioxide

ew Materials with a characterized by stable performance Potential Applications in Potential Role in Global at high temperatures and durability Hydrogen Filling Stations N against sustained usage. It can be Warming Prevention Yoshinori Sato used at temperatures exceeding Materials Development Management Conventional CO2 reduction strategies 900°C, well outside the ranges Division, R&D Center have focused on emissions control allowed by conventional absorbent Fuel cells that can act as power sources through energy reduction. However, in materials (100–200°C), which without generating CO2 are anticipated recent years CO2 absorbent materials eliminates the need for cooling CO2 for next-generation automotive that recover gases after emission have prior to recovery. Accordingly, this applications, although CO2 is emitted as also attracted attention. Murata is also substance has potential applications a byproduct when generating the currently involved in the development with such high-volume, hydrogen these cells uses as fuel. Accordingly, applying barium of such promising CO2 reduction high-temperature CO2 producers as orthotitanate to CO2 absorption technologies, focusing on highly power generation plants and iron and equipment at hydrogen ﬁlling stations functional materials that can absorb steel works. could resolve this issue. This in turn approximately 100 times their own If applied to removing could be a step toward the construction volume of carbon dioxide. high-temperature CO2 generated in of the hydrogen society that is Murata has been researching the hydrogen gas fuel production envisioned for the future. effective uses for the ceramic waste process for fuel cells, it will facilitate materials generated by its existing generation of 98% concentration capacitor production processes. In hydrogen. 2005, we invented efﬁcient CO2 Furthermore, as the CO2 is absorption and desorption functions at recovered at a high temperature, it can high temperatures in barium easily be used as a material to orthotitanate (Ba2TiO4) synthesized synthesize other useful substances. using barium titanate, which is a raw Barium orthotitanate, as a material for one of the Company’s CO2-capturing ceramic, assists the major products, ceramic capacitors. recycling of waste materials from the Since 2006, we have been developing capacitor production process, helping experimental prototypes in to prevent global warming. In addition, collaboration with a CO2 recovery it can supply other production equipment manufacturer and are processes with CO2, rendering it a currently conducting evaluation tests. multipurpose, highly functional Barium orthotitanate is material.

15 MURATA BOY Natural Science Classes and Environmental Learning For the Children of Today, Who Will Inherit the Earth of Tomorrow

mplementation of Environmental Learning to Communicate the Importance Hopes for Children to of Environmental Conservation Have Their Own Eco-Life In addition to conducting its own Keiko Hosomi environmental preservation measures, Environmental Management Section, Murata believes that it has a corporate Environmental Management Department responsibility to communicate the If even one of the children attending “Children’s Science” Murata’s environmental learning importance of global environmental provides easily programs takes environmental problems protection to society as a whole. understandable explanations of MURATA on board, he or she has a starting point Since fiscal 2005, we have BOY’s advanced for environmental conservation activities conducted programs at elementary technologies in a series either at home or at school. and junior high schools in the of books for children. Moreover, this environmental neighborhoods of our factories and learning provides opportunities for hosted presentations and other events sensors and communications modules someone like myself, with almost no for children to actively promote mounted in MURATA BOY, are contact with children, to experience their environmental education. introduced in an easily palatable fashion. flexible creativity and limitless energy Environmental representatives from In the six months following their and to find time, so rarely afforded in daily work, to enjoy being with kids. the Company’s staff introduce current instigation in October 2006, such issues and Murata’s activities on the natural science classes were held 11 themes of the 3Rs (Reduce, Reuse and times in the neighborhoods of Murata’s Recycle) and global warming. factories and subsidiaries. MURATA These highly popular events are BOY has also been recruited to delivered in the form of a quiz, to collaborate in environmental lessons. encourage children to enjoy themselves In the future, we plan to expand our while deepening understanding of the range of electronics educational importance of a recycling-based society materials and programs. and global warming prevention. In fiscal Against the background of claims 2006, the second year of this program, that today’s youngsters are drifting we expanded the agenda four-fold in away from natural sciences, Murata terms of numbers of events and aims to continue to draw the attention participants. of today’s children, who carry the Earth’s future, back to the atural Science Classes Held environment and to science. Nby Murata-Developed Robots Children enjoy our Environmental Quiz, pitting class During fiscal 2006, we commenced groups against each other. After the lessons, we are bombarded with enthusiastic resolutions to natural science lessons with the “start protecting the planet in any way we can!” objective of communicating the fun side of science to children. These events feature the MURATA BOY robot, whose popularity with kids is spurred by appearances in television commercials. Children experience MURATA BOY close up, as he furiously peddles a bicycle, while exploring the mysteries and surprises of natural science. At the same time, the various uses in society of Murata’s leading-edge technologies, such as the

16 Feature 3 Murata’s Activities for Tree Planting Aiming for Factories Rich with Greenery, in Harmony with Regional Communities

Since its foundation, Murata has striven to improve natural beauty, carrying out greening activities based on a clearly deﬁned policy. We currently implement an array of measures at factory premises to harmonize with local communities.

head of its Time—Murata’s AGreen Management Rhododendron appreciation Against a background of heightened ceremony, Yokaichi Plant environmental awareness, in recent years the industrial sector has heralded the importance of greening activities. We have introduced a Green Basic Policy made up of 10 clauses all deriving from the legacy of our founder, Akira Murata, and his expressions of deep love of greenery and nature more than 30 years ago. This policy goes beyond compliance with the legislation speciﬁed under the Factory Location Law and stipulations by municipal authorities to aggressively promote greenery activities that create regional cultural atmosphere, and specify its preservation as our social responsibility as a corporation. Based on this policy, we encourage systematic greenery activities aiming for factories rich with natural greenery, in harmony with regional communities at our facilities across Japan.

armony with Every Region’s Culture and Nature H Relaxation space for employees of Data relating to the trees and greenery Murata Electronics Japanese garden (Thailand) Ltd. we have planted, including plant names, at Company varieties, areas where they are planted headquarters and numbers, for each Murata factory in every country in which we operate, is compiled in a database and used to formulate planting plans. We specifically feature the flora indigenous to each Open house during cherry blossom urban, municipal or rural district, season, Izumo Murata arranged to highlight a shifting array of Manufacturing Co., Ltd. seasonal flowers, blossoms, fruits and berries, fragrances, foliage and hues. In Social and Environmental Green to contribute to regional environments addition, we carefully maintain and Evaluation System (SEGES*). Our Yasu through the creation of verdant and manage our grounds to attract a Plant, Yokaichi Plant and Yokohama luxuriant spaces. In the future, Murata diversity of wild birds and insects. We Technical Center also underwent will continue to prioritize greenery as an also throw our gardens open to the inspection and gained SEGES expression of its regional contributions. public during peak seasons for cherry, certification during fiscal 2007. SEGES: A system facilitated by an urban camellia, rhododendrons and other “We want our presence to be a greenery* fund under which a third party evaluates blossoms and flowers. source of joy and pride in the and certifies favorable green spaces created by In recognition of long years communities in which we operate.” This enterprises or other entities, and the activities conducted in those spaces. Assessment and conducting such activities, during fiscal slogan states Murata’s commitment to inspection criteria span land use sustainability 2006 Murata’s Head Office became the contributing to regional economic and management and functional optimization of green areas, in addition to the approach to and first facility in the electronic components development through its business progressive measures enhance greenery in sector to obtain certification under the activities, but it also embodies a desire corporate premises.

17 CSR Management

Corporate Governance Corporate governance is one of the highest priorities of the management of the Murata Group. Taking into consideration the interests of all stakeholders, we have addressed this priority by building a sound corporate management structure and system. Concrete actions include improving management efficiency, strengthening management-monitoring functions and ensuring thorough compliance with all relevant laws and regulations.

Audit, present the board’s auditing policies Reinforcing the Corporate and plans to the office and receive reports on Governance System internal auditing plans, implementation and other matters concerning the internal auditing system. A close working relationship is Corporate Governance System maintained between all parties in an effort to Murata has adopted the board of statutory ensure audit efficacy. auditors system.The Board of Directors comprised 10 directors (2 from outside the Company) as of June 28, 2007. In addition, About the Internal Control the Company has 5 statutory auditors (3 from Establishment of the Internal System outside the Company). Control System Internal control is a mechanism to determine, manage, supervise To further reinforce supervisory and and guarantee specific standards operational functions, Murata has introduced for each aspect of business to a system of vice presidents. The Board of Internal Control Committee to Evaluate ensure a sound organization that operates in an effective and Directors focuses on making decisions on the Development and Operational Status efficient manner, free from illegal management policies and critical business of the Internal Control System and improper conduct. operations, as well as monitoring the The Internal Control Committee was established as performance of the Statutory Representative an advisory body to the President for the purpose About the Japan SOX Law Directors. The Vice Presidents are responsible of the maintenance and continuous improvement The Financial Instruments and for management of day-to-day business of the system for assuring appropriateness of Exchange Law of 2006 (Japan operations. operations (Internal Control System). SOX Law) was enacted to ensure the adequacy of financial Murata has also established the Executive This committee collaborates with related auditing systems and reinforce Conference, composed of Statutory divisions regarding response to the Japan SOX the internal control of listed companies and their Representative Directors, and other directors Law (Financial Instruments and Exchange Law consolidated subsidiaries. The who occupy Senior Vice President positions or of 2006) to maintain and continuously improve Japan SOX Law is so called above, as a deliberative body to assist the Board the Group’s Internal Control System to assure because it derives from the Sarbanes-Oxley Act of 2002 of Directors and Statutory Representative the reliability of financial reporting. (SOX) in the United States. Directors in their decision-making. Corporate Governance System (as of March 31, 2007) Monitoring System for Performance of Directors General Meeting of Shareholders Auditing policies and plans are set by the Board of Statutory Auditors. Based on these Board of Board of Directors Remuneration Advisory Statutory Directors Outside Directors Committee guidelines, Statutory Auditors attend Board of Auditors Directors’ meetings and other important Standing Audit Supervise Internal Control meetings. Statutory Auditors are further Statutory President Committee Auditors Statutory Representative Director responsible for inspecting the operations and Outside Disclosure finances of the Company and auditing the Statutory Subcommittee Auditors Management performance of Directors from the standpoint Executive Risk Management Subcommittee of legal compliance and adequacy. Independent Committee In addition, an organizationally Audit Compliance Promotion Independent Vice Presidents Committee independent internal auditing department (the Auditor Office of Internal Audit) controls audits by each Key Office of Functional Product Sales and R&D Head office functional department, such as the Marketing Internal Staff Divisions Division General Administration, Personnel and Audit Department Divisions Accounting departments). The statutory auditors and the Board of Statutory Auditors Internal Audit Domestic and Overseas Subsidiaries exchange viewpoints with the Office of Internal

Web Data Education on Internal Control http://www.murata.com/csr/csr/01.html

18 CSR Management

Compliance For our growth and development as a global corporation, it is vital to practice honest and fair business activities. We have formulated and enforce our Corporate Ethics Policy and Code of Conduct to ensure that employees comply with laws and regulations and act in an ethical manner.

From June 2007, the revised They take correspondence courses and version of the Murata Corporate Corporate Ethics Policy participate in dedicated group training Ethics Policy and Code of Conduct is available on our and Code of Conduct sessions and other activities after the website. We have also distributed example of Murata Manufacturing Co., Ltd. to our overseas Group companies English and Chinese translations, which are also Linking Common Sense as Compliance Promotion System available on our website. Corporate Citizens to Voluntary URL: http://www.murata.com/ and Autonomous Activities Board of Directors csr/csr/02-02.html (English) The Corporate Ethics Policy and Code of URL: http://www.murata.com/ President Board of Auditors cn/csr/csr/02-02.html (Chinese) Conduct was established in July 2002 and revised in April 2007 to ensure that both Compliance Promotion corporate ofﬁcers and employees implement Committee Committee Chairman: Murata’s corporate philosophy and act on Corporate Senior Executive Vice President common sense as corporate citizens. The revised edition of 2007 reﬂects Committee Members Director of Corporate Administration newly enacted laws and legislative Group (concurrent post with General Manager of Personnel & Industrial amendments subsequent to the original Relations Dept.), Director of Business Engineering & Information Systems 2002 version. In addition, in the revised Group, General Managers of edition, we have declared that we will act Accounting and Controller Dept., Intellectual Property Dept., Technology proactively with emphasis on “empathy with Management Dept., Purchasing Dept., Quality Assurance Dept., Sales others,” responding to requests from society. Planning Dept of Marketing Group of Sales and Marketing Unit, Environmental Management Dept., and Legal Affairs Dept.

Committee Secretariat About Compliance Secretary General: General Outside Compliance Promotion Consultation Compliance is the abidance by Manager of Legal Affairs Dept. Secretariat Departments: Counter laws and all other types of Personnel & Industrial (established regulations and social rules in a Relations Dept., Legal Affairs April 2006) company’s business and Dept. activities. Appointing Compliance Promotion Compliance Promotion Leaders Leaders in Each Group Company in Japan Employees In 2002, we established the Compliance Promotion Committee as an advisory body directly reporting to the President. This body comprises ﬁve or more corporate ofﬁcers Reporting System and senior employees. It approves basic direction for planning and executing revisions and publicity activities for the Corporate Ethics Policy and Code of Establishment of the External Conduct, deliberates on Companywide Consultation Liaison Division measures toward ethical and legal violations Murata has established a direct reporting and improper conduct and makes remedial system for consultation over concerns or recommendations. problems relating to compliance with the In addition, divisions select compliance Secretariat of the Compliance Promotion promotion leaders, who take correspondence Committee or the External Consultation courses and participate in dedicated group Liaison Division by telephone, email or other training. They share the knowledge they have means. This service is anonymous and open acquired through these training programs to directors and employees, as well as their with other members in their divisions via families, temporary staff, clients and their study meetings and other means. employees and other parties. Compliance promotion leaders are also From April 2007, this reporting system is also appointed at our group companies in Japan. available to our group companies in Japan.

19 CSR Management

Risk Management Business operations carry a variety of risks. Murata has established a system of risk prediction and flexible response to preempt or swiftly resolve these risks.

Export Risks Risk Management —Strict Export Management System Overseas sales account for approximately 75% of Murata’s consolidated net sales. In addition, our products may be used in a Establishing an Organization broad range of electronic equipment. Responsible for Risk Management Accordingly, export management is of Murata has established a Risk Control paramount importance for us. In order to SubCommittee within the Internal Control make contributions to the maintenance of Committee to respond to the various risks the international peace and security, and to of business activity. In addition, we have set supply products to our valued customers up an organization in charge of risk continuously, Murata has established and management, which handle risk implemented a fundamental policy to identiﬁcation, assessment and comply with not only legal requirements but countermeasures. Each corporate staff also the intent of laws, regulations and the department takes responsibility for social requirements behind them. Murata managing risks in its everyday business and has stipulated the “Export Control taking proactive steps for the prevention of Compliance Program” and has strictly escalation of risks to problematic levels. implemented transaction screenings before exporting our products, and furthermore, has conducted training for employees and Major Risks and Responses audits on a periodic basis for the purpose of appropriate operations.

Natural Disaster Risks —Earthquake and Fire Simulation System Information Risks To minimize the effect of production line —Protection of Personal Data stoppages in the event of natural disasters, We believe that the protection of any we have equipped our buildings and Fire drill at Murata’s Himi Murata Manufacturing Co., Ltd. These information by which an individual can be production facilities with anti-seismic and exercises are carried out three identified (personal data) is an important safety equipment and times a year at this facility. corporate responsibility. In March 2005, fire-prevention materials, Murata established its Privacy Policy, and secured backup power has stipulated the handling of personal data sources and taken various in its Privacy Policy Basic Rules. other measures. Furthermore, Specific strategies we have Murata has set up a Disaster constructed to protect electronic data Prevention Committee and include the appointment of data security formed self-protection control officers, implementation of a firewall fire-fighting teams and other against external intrusion and data units. To ensure appropriate encryption for additional security of portable response from employees in data. In addition, Murata has issued a “Data eventuality of disasters, we Security Guidebook” to foster conduct periodic emergency understanding and promote appropriate drills that simulate the onset actions among employees and is carrying of earthquake or the outbreak out self-checks and education programs. of fire.

Intellectual Property Management / Web Data Spillage Risk http://www.murata.com/csr/csr/03.html Response to the Noto Earthquake / Fire Risk Response http://www.murata.com/csr/csr/03.html

20 Economic Review

Economic Relations with Stakeholders Murata believes that the appropriate distribution of profits generated by its business activities, or its economic value, to its various stakeholders is essential to the ongoing development of society.

aware of the scale of inﬂuence that our Pursuing Appropriate activities exert on the world’s electronics Economic Value Distribution industry, and we always endeavor to generate industry-leading new value and to secure a stable supply of products. Striving to Distribute Proﬁts Properly with the Economic Impact on Society Sales by Area in Mind Japan Asia and others A company’s activities are simply the Europe The Americas exchange of money and commodities (Millions of yen) between its various stakeholders, which is to 564,855 say, economic activities. Such activities 489,129 46,112 423,014 41,665 70,444 extend beyond the economic impact on the 393,625 412,852 40,092 38,799 65,944 51,095 related parties of directly giving and receiving 62,294 64,429 55,947 305,675 247,995 merchandise and cash to encompass the 162,438 149,421 186,866 indirect effect on regional, national and

global economic systems. Murata’s business 137,162 148,028 132,920 133,525 142,624 activities are no exception to these rules. We want the influence that our economic ’02 ’03 ’04 ’05 ’06 (FY) activities have on stakeholders and on society to be a positive one. Accordingly, the Company takes stock Suppliers—Honoring Contracts and Net Income of the economic impact of its Appropriate Compensations activities on stakeholders and on Murata procures equipment and materials (Millions of yen) society, and, while maintaining the and parts for its products from a broad range 71,309 58,448 necessary levels of internal reserves, of electronics components, semiconductors 48,540 46,578 strives to distribute appropriately the and equipment manufacturers in Japan and 39,467 generated economic value to its overseas. Through sound procurement stakeholders. However, at this activities, we honor contracts with our point it is very difficult to assess all suppliers and comply with all relevant laws, these influences. This section facilitating the formation of mutually therefore mainly reports on prosperous relationships. ’02 ’03 ’04 ’05 ’06 (FY) identifiable direct influences. Shareholders—Striving for Stable Dividend Increases Murata’s shareholders number 66,000. Of Economic Consideration for the total 225,263,000 shares of stock we Stakeholders have issued, 44.8% are held by financial institutions, 37.7% by overseas corporations, 3.8% by Japanese Customers corporations and 13.7% by private and other As an electronic component manufacturer, minority investors. Murata earns its profits by selling its electronic Our policy on distributing earnings to components and devices to the electronic shareholders is to prioritize equipment manufacturers that form its performance-based allocation via cash customer base. Our operations are dividends. We are committed to increasing characterized by providing quality products the dividend in a stable manner by increasing and services to customers worldwide, earnings per share while giving consideration deriving some 75% of consolidated net sales to raising long-term corporate value and overseas. In particular, we hold the leading strengthening the company’s foundation. On world market share for chip monolithic the basis of this policy we distribute earnings ceramic capacitors. Accordingly, we are to shareholders through cash dividends after

21 R&D Investment Capital Investment

R&D Investment (Millions of yen) (Millions of yen) Ratio of R&D investment to net sales (%) 888 99,651 7 7 31,427 34,163 32,845 34,696 38,670 48,033 51,040 33,088 18,161

’02 ’03 ’04 ’05 ’06 (FY) ’02 ’03 ’04 ’05 ’06 (FY)

comprehensively considering consolidated we are aggressively promoting local About R&D and Capital performance, the payout ratio, and the level recruitment and employment. Our policy on Investment of internal reserves necessary for remuneration is to disregard seniority factors, As previously stated, the economic value that Murata reinvestment in the company’s future. in favor of determining fair and objective generates is distributed to Murata repurchases its own stock as compensation that emphasizes skills and stakeholders and used as appropriate and endeavors to raise capital performance. investment in research and development and capital efficiency while accommodating changes in investment for the Company’s the operating environment. Local Communities—Regional future. The annual dividend for fiscal 2007 Stimulation and Disaster Victim Relief was ¥90 (interim dividend of ¥40 and In addition to science and environmental year-end dividend of ¥50), an increase of education programs for children, Murata ¥20 per share from the previous term. contributes to local societies by providing We plan to raise the full-year dividend support for local sports and cultural for fiscal 2008 by another ¥10, to ¥100 per activities, participating in and sponsoring share (interim dividend of ¥50 and year-end community events, carrying out dividend of ¥50). This dividend is based on environmental improvement programs for the current business environment and welfare facilities and other activities. performance forecasts for fiscal 2008. During fiscal 2006, domestic Murata Group companies donated a total of ¥372 Annual Dividend per Share million in support and financial aid. Recipients included basic research projects (Yen) 90 via the Murata Science Foundation and 70 disaster relief of ¥12 million for victims of the 45 50 50 50 50 July 2006 Java earthquake and the March 35 22 22 2007 Noto earthquake. Governments and Public Administration—Paying Taxes in Each ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 (FY) ’06 Region Where We Operate One of Murata’s policies is to maintain stable Employees—Bolstering Employment in management and continuous tax payments. Japan and Overseas Income taxes for fiscal 2006 totaled About Income Taxes Roughly speaking, Murata’s workforce ¥46,694 million. This is the amount of income numbers approximately 29,000 people taxes as stated in the Consolidated Statement of (19,000 in Japan and 10,000 overseas). Corporate and Other Taxes Income. These employees are spread over 23 (Millions of yen) locations in Japan and 33 abroad. Currently, 46,694

30,145 33,232 Employees by Area 26,327 19,627 Japan Asia and others Europe The Americas (No. of employees)

29,392 ’02 ’03 ’04 ’05 ’06 (FY) 26,435 26,469 25,924 26,956 456 649 510 358 400 332 465 434 337 351 9,315 7,353 7,524 7,512 8,241

17,968 18,001 17,717 17,964 19,289

’02 ’03 ’04 ’05 ’06 (FY)

22 Murata and the Environment

Murata Group Environmental Policy

Concept In the desire to contribute toward the realization of a truly rich human society, we develop superior materials and products, devise and maintain production activities, and supply products worldwide. However, we cannot deny that our production activities as well as our products themselves are unintentionally affecting the global environment. We fully acknowledge this impact on the global environment and are taking actions to reduce our environmental impacts as one of the important initiatives being put into practice as part of our Murata Philosophy and establishment vision. We will unite the efforts of our management organization, repeatedly work toward reducing our environmental impacts, and through management efﬁciency determine the points at which business and environmental interests converge.

We will strive to reduce the environmental impacts Corporate Environmental Policy 3 of our business operations. 1. To help prevent global warming, we will We do not conﬁne ourselves to the mere implement energy conservation and reduce 1 observance of environmental laws and regulations; greenhouse gas emissions. rather, we seek to establish voluntary management 2. Where production processes make use of standards and to improve our management environmentally hazardous substances, we will standards regarding environmental protection. seek ways to reduce the amounts used or incorporate more benign substitutes. 2 We will strive to reduce the environmental impacts 3. We will aggressively seek to reduce, reuse and of our products. recycle wastes, and seek to minimize the amount 1. In our R&D and design activities, we will of waste produced and conserve resources. consider approaches that will minimize the environmental impact of our products. Through aggressive social initiatives, we will adopt 2. In cases where a product contains an 4 environmental preservation activities in close contact environmentally hazardous substance, we will with the local community and promote afforestation of seek ways to reduce the amount used or corporate land according to a systematic long-term incorporate a more benign substitute. plan while working to improve the local environment. 3. In an effort to minimize the amount of packaging materials used with our products, we will adopt 5 While making all employees aware of the a “reduce, reuse and recycle” policy. environmental policy, we will strive to raise 4. We will develop procurement activities through employee awareness of higher environmental ethics. which we will select materials that have minimal Moreover, we will develop timely and appropriate direct or indirect environmental impacts. educational as well as public relations activities. We will strive to become a corporation focused on 6 environmental management and active public disclosure of our achievements in this area. To implement each of the above action guidelines, 7 we will establish and adopt our environmental action plan while continuously striving to improve our environmental performance.

23 Environmental Management Based on its management system to raise the efficiency of its environmental management, Murata is integrating Group ISO certification, conducting environmental audits and carrying out environmental education programs. Through such initiatives, we are united as a Group in promoting environmental management.

Environmental Management Environmental Audits Promotion System

Promoting Environmental Three Internal Audit Channels Management as a Group to Address Problems Murata has appointed an executive in charge of Murata has three types of internal audits at its environmental affairs who is responsible for manufacturing plants and production subsidiaries. environmental activities throughout the Group. The results of our fiscal 2006 internal audit The Environmental Management Department showed four cases of nonconformance and 298 takes the role of promoting Murata’s cases in need of improvement for the Murata Our in-house publication, environmental activities. As a consultative body Group in Japan. Remedial action was completed Journal Murata, includes an annual environmental feature, to the president, the Murata Environmental for 290 cases by the end of fiscal 2006. The facilitating sharing of information Committee examines and deliberates remaining eight cases were resolved by the end by showcasing the progress of and case studies for environ- environmental issues facing each company of of July 2007. mental measures throughout the the Murata Group. Furthermore, as subordinate Company. organizations of the Environmental Committee, Murata’s Three Types of Internal Audits subcommittees address specific themes. Each Audit Name Agenda of these subcommittees identifies pertinent We have established a management standard for day-to-day business, which forms the issues and proposes concrete measures to basis for the monitoring of operations and identification and correction of noncompliance. Plant Internal Self-Audit In addition, an audit is conducted once a year by the Internal Environment Audit Team to address related problems. investigate whether various prescribed rules can be followed correctly.

From ﬁscal 2007, the Environmental Functional Staff Audit by This audit is conducted regularly to complement inspections by the external auditing Committee has been supplemented by the Environmental entity to compensate for specialist areas not covered by plants’ internal self-audits. Management Department divisional staff to bolster investigations into and This annual audit spans inspecting and verifying from an auditor’s standpoint whether to determine measures for reducing the environmental management system construction and operation are being Audit by Auditors appropriately implemented and checking for overall consistency. If necessary, the environmental burden from the planning and auditors provide their comments as feedback. development stages.

Environmental Management Promotion System Environmental Education and President Promotion Executive in Charge of Environmental Affairs

Environmental Management Department

Manufacturing Plants (Japan) Raising the Environmental Awareness of Every Employee Production Subsidiaries (Japan) Murata provides various educational Production Subsidiaries (Overseas) opportunities to enhance understanding by all Non-production Plants and Subsidiaries employees of environmental vision and policies Courses for staff to train as internal environmental auditors Murata Environmental Management System set forth by corporate management and the include intensive drills and Environmental Subcommittee Committee initiatives implemented by the respective divisions. training to foster practical Global Warming Prevention Subcommittee’06 expertise. ’05 Speciﬁcally, we organize dedicated Product Assessment Subcommittee environmental education programs for new, Physical Distribution and Packaging Materials Subcommittee existing and managerial staff members and Regulated Substance Management offer training courses to cultivate internal Subcommittee environmental auditors and individual Resource Conservation and education programs for employees in roles Waste Reduction Subcommittee with potential high environmental impact.

Web Data List of ISO 14001-Certiﬁcatied Factories http://www.murata.com/csr/environment/02.html

24 Murata and the Environment Environmental Action Plan and Performance Murata has established an Environmental Action Plan to promote strategic reductions to its environmental burden. Results during fiscal 2006 against the context of the plan were as follows.

Performance for Fiscal 2006 Third Environmental Action Plan: Targets and Results for Fiscal 2006 and Plans for Fiscal 2007

Item Targets for Fiscal 2006 Obtain ISO 14001 multi-site certification for the Murata Group in Japan Seventeen Targets Achieved Of the 20 targets set for the year under the Environmental Enhancing environmental Establish internal control procedures for management management system environmental costs/results; extend Environmental Action Plan, only three environmental cost management systems to remain to be fulfilled. Specifically, despite overseas subsidiaries strategies to cut volumes of volatile organic Environmentally Compile a database to make LCA data compound (VOC) emissions and conscious designs computation more efficient atmospheric emissions of perfluorocarbons (PFCs), production growth rendered some Complete elimination of all RoHS-designated goals unattainable. Reducing use of substances environmentally hazardous Targets that have not yet been substances in products achieved and ongoing measures carried Reduce use of halogenated flame retardants 20% compared with FY2003 over to fiscal 2007. Managing information Supplying Compile and commence operation of a related to environmentally database for procured materials (MADB) environmentally hazardous chemical substances Establishment of friendly Reduce amount of packaging materials used products the 4th Environmental Action Plan Reducing use of per unit of net production in Japan by more Based on the results for fiscal 2006, we packaging materials than 20% compared with FY2000 and conserving energy Reduce CO2 emissions from physical have reassessed the focus of our measures consumed in distribution distribution per unit of net production in Japan and reset those targets that have already by more than 20% compared with FY2000 been met to formulate the 4th Extend domestic materials greenness survey mechanism to overseas sites; establish green Environmental Action Plan in March 2007. activities at overseas sites Our annual goals are established with a Green procurement Achieve a green procurement ratio for office supplies approaching 100% for offices in Japan view to achieving targets for fiscal 2010, (disclosure of green procurement results) with individual objectives also fixed for each Reduce CO2 emissions per unit of net manufacturing plant. Global warming prevention production in Japan by more than 23% In addition, the Company’s new targets compared with FY1990 have been expanded from a former focus Reduce total waste emissions per unit of net production in Japan by more than 35% on domestic operations to include overseas compared with FY2000 factories. “Reduce, Reuse, Recycle” Each manufacturing plant implements for resources and waste Attain a material recycling rate in Japan of 100% Reduce water consumption per unit of net production its own measures toward achieving the in Japan by more than 35% compared with FY2000 plan’s targets, in addition to a heightened Eco-friendly business Reduce atmospheric emissions of VOCs which emphasis on intra-Group activities. activities contribute to generation of photochemical Managing and reducing oxidants and suspended particulates by more environmentally hazardous than 3% compared with FY2000 chemical substances used in Reduce atmospheric emissions in Japan of production processes PFCs which contribute to greenhouse gases by more than 50% compared with FY2002

About Regenerative Thermal Introduce remediation improvement measures Oxidizers (RTOs) to reduce currently excessive remediation time Risk management at plants and subsidiaries where soil and RTOs combust VOCs at groundwater pollution has been conﬁrmed temperatures of 800°C or above Continue to issue annual CSR report and to achieve 98% decomposition release additional information two or more times or detoxification. Environmental per year via other media communications Issue CSR report Social activities At every plant and subsidiary, participate in Environmental Targets for ﬁscal environmental education programs and events Web Data 2010 Community / social for elementary and junior high school children, contribution activities carry out cleanup activities in local areas, and http://www.murata.com/csr/environment/03.html support NPO/NGO, etc.

25 Results for Fiscal 2006 Achievement Plans for Fiscal 2007 • Inspection completed in January; switch to multi-site certification at the Yes end of March • Complete EMS (Environmental Management System) integration in Japan • Investigated, but were unable to establish, internal control procedures • Hold meetings of officers responsible for environmental management in • During the first half of 2007, Environmental Management Department Japan, China and ASEAN countries (to be held regularly thereafter) will formulate proposals to submit to operational sites • Commence operation of environmental cost management systems • Extension to overseas subsidiaries delayed until after the establishment overseas of internal control procedures • Continue product assessments • Compiled a database of materials by unit CO2 emissions to make LCA Yes • Conduct surveys to construct a mechanism for efficient LCA unit calculations easier compilation from site environmental databases • Eliminated stipulated substances for all RoHS-designated products • Response completed by May 2006 for 99.9% of orders for all products • Revise list of RoHS exemptions clarify reductions and eliminations and on a numerical base; the remaining 0.01% are products eligible for Yes establish target values RoHS special control (Our President determined at the request of • Polyvinyl chloride (PVC) establish special interest group to investigate customers) countermeasures (clarify targets, prioritize alternative assessments) • Bromine flame retardants establish special interest group to investigate • Use of halogenated flame retardants reduced 34% compared with countermeasures (clarify reduction targets, set numerical values) FY2003 Yes • Determined MADB system requirements and completed system construction Yes • Develop product database (for ASC modules) • The system commenced operations in May 2007 • Packaging materials used per unit of net production reduced 23.1% Yes • Reduce amount of taped packaging used at domestic GR/BLM sites by compared with FY2000 42% per unit of net production in Japan compared with FY2000

• CO2 emissions from physical distribution per unit of net production • Reduce CO2 emissions from physical distribution per unit of net production reduced 26% compared with FY2000 Yes in Japan by more than 30% compared with FY2000

• Issued Greenness Survey Procedures (for overseas plants) in Yes December 2006 and commenced surveys • Continue to promote greenness surveys in response to legal stipulation in Japan and overseas and maintain a green procurement ratio for production • Achieve a green procurement ratio for ofﬁce supplies for FY2006 of materials of 100% 99.8% Yes

• Reduce CO2 emissions per unit of net production in Japan by more than • CO2 emissions per unit of net production reduced 38.8% compared Yes 23.5% compared with FY1990 with FY1990 • Assess status of CO2 emissions at overseas manufacturing plants • Convert 56% of the domestic Company fleet to low-pollution vehicles • Reduce total waste emissions per unit of net production in Japan by more • Total waste emissions per unit of net production reduced 39.0% Yes compared with FY2000 than 40% compared with FY2000 • Assess status of waste generation at overseas manufacturing plants • Clarify definition of “zero emissions” at overseas manufacturing plants and • Attained a material recycling rate in Japan of 100% Yes attain a waste recycling ratio calculated using this definition of 70% or more • Water consumption per unit of net production reduced 40.0% • Reduce water consumption per unit of net production in Japan by more compared with FY2000 Yes than 40% compared with FY2000 • VOC atmospheric emissions rose 10.1% compared with FY2000 • Target not yet achieved, despite introduction of RTOs at Yasu Plant and other reduction measures, as a result of overall production • Reduce atmospheric emissions of VOCs to FY2000 levels increases • Reduce atmospheric emissions in Japan of PFCs by more than 38% • Atmospheric emissions of PFCs reduced 33.9% from FY2002 compared with FY2002 • Target not yet achieved, despite promotion of alternative substances • Establish reduction targets by 2010 for PRTR-designated substances at Toyama Murata Manufacturing Co., Ltd., and other reduction measures, as a result of overall production increases • Continue remediation of soil and groundwater pollution building on past • Measures implemented as scheduled at the relevant plants and experiences and maintain a system with minimal environmental risk subsidiaries Yes • Reduce soil pollution and other environmental risks when conducting work that involves landscaping

• CSR Report 2006 published • Posted “What’s New” bulletins four times on the Murata website Yes • Continue to issue annual CSR report and site reports • Hold environmental roundtable discussions with local university students • Posted CSR site reports by plants and subsidiaries on the Murata website Yes • Inaugurate a Murata Forest (tentative name) Preparation Committee, to include former employees, and commence related activities • Environmental education programs: 24 schools, 1,300 participants • Continue environmental education programs and events for elementary and • Environmental events: 5 plants or subsidiaries, 7 events Yes junior high school children and NPO/NGO support • Cleaning activities: All facilities • Continue developments under the Mid-Term Greening Plan • Gain SEGES certiﬁcation (Yasu and Yokaichi plants)

26 Murata and the Environment

Overview of Environmental Impact Murata identifies and analyzes the influence on the environment of its products throughout their lifecycles. We then endeavor to reduce the environmental impact of products and production activities.

Data Calculation Method Chemical Substance Input/ In addition, we recognize the “Total substance input” and Emission Reduction Issues discharge of chemical substances “Chemical substance emissions The raw materials for Murata’s products (pollution) generated by manufacturing into and transfer” represent totals for manufacturing plants and contain numerous chemical substances. the atmosphere and waterways and CO2 subsidiaries in Japan. Other The Company manages these substances emissions as issues of paramount figures represent totals for strictly and properly, while striving to reduce importance. Consequently, we are manufacturing plants and subsidiaries in Japan and the quantities used. continually striving to reduce such waste. overseas.

INPUTSuppliers OUTPUT

Total substance input Products

Chemical substances 8,289 tons Chemical substance emissions and transfer 46.5 tons Packaging Styrene Others 6,636 tons 0.6 tons 1.2 tons 1.2% 2.5% Xylene 3.7 tons Murata Group 7.9% 88% Toluene 41 tons

Total energy input VOC Crude oil equivalent VOC 557 tons 293,037 kl SOx NOx SOx NOx Electricity 6.7 tons 133.8 tons 901,800,000 kWh

Greenhouse gas (CO2) emissions CO2 Fuel 540,806 tons-CO2 64,328 kl Wastes Total emissions 35,419 tons Recycling 33,311 tons Customers End treatment Water 2,108 tons 8,790,000 m3 Wastewater 8,440,000 m3

2723 Murata and the Environment

Environment Accounting Murata attains efficient environmental management by evaluating and analyzing the costs of environmental protection in its environmental activities and the results of these activities.

Environmental Results and Analysis for Cost Management Fiscal 2006

Plans to Extend Our Cost Increase in Investment to Management System Overseas Prevent Pollution Murata established its cost management During fiscal 2006, the cost of Murata’s system in 2003. This initiative enables the environmental activities was ¥4 billion, and Company to evaluate the costs of investment expenses totaled ¥1.7 billion. environmental activities in its domestic Investment in such energy reduction manufacturing plants and subsidiaries and technologies as cogeneration systems as the results of these endeavors. Through the part of our strategy to curb global warming system, this information is subsequently dropped, leading to a decline in global linked to ongoing activities to reduce our environmental conservation investment. environmental impact. However, investment in pollution prevention Since fiscal 2006, we have been increased, spurred by the installation of gas preparing to introduce this system in our emission and wastewater treatment overseas factories. After surmounting facilities accompanying new manufacturing various difficulties, the system is due to plant construction. start operation from fiscal 2008. Results of environmental activities included a reduction of 170,000 tons in greenhouse gas emissions arising from aggressive introduction of double-bundle refrigeration equipment. Environmental Accounting Costs (Millions of yen) Costs (Millions of yen) Investment (Millions of yen) Classification Fiscal 2005 Fiscal’00 2006 ’02 ’03Fiscal 2005’04 ’05Fiscal’06 2006 Pollution prevention 464 470 239 893 Cost Global environmental 364 1,178 manufacturing conservation 319 512 plant premises Recycling 1,326 1,511 190 109 Cost for upstream/downstream 0 environmental conservation 149 120 0 Cost of management activities 429 472 0 97 Cost of social activities 164 200 1 1 Cost of R&D 1,468 930 129 96 Cost of environmental damage 0 0 0 0 Total 4,364 4,022 1,737 1,708 1. The scope of accounting includes Murata Manufacturing’s plants and 17 subsidiaries in Japan. 2. The accounting term is the 12-month period from April 1, 2006, to March 31, 2007. 3. Costs include labor and depreciation. 4. Proportional accounting is applied for compounded costs, in which the cost of environmental conservation is embedded in other costs. 5. Research and development costs are the total expenses for R&D intended primarily for environmental conservation.

Environmental Accounting Web Data (Economic Effects/Physical Effects) http://www.murata.com/csr/environment/05.html

28 Murata and the Environment

Eco-Friendly Design Murata’s products (electronic components) can be found in electronic equipment produced worldwide. We are fully aware of the degree to which products influence the environment, and make the reduction of environmental impact by products a priority issue.

facilities, which are designed in-house, in Manufacturing addition to marketed products. Environmentally Conscious During fiscal 2006, we constructed a Products database of CO2 emissions by materials, which will effectively simplify LCA data calculations. Introduction of Product Assessment at the Mass-Production Stage Product Assessment Items Murata is promoting eco-friendly design, with Classification Item an emphasis on reducing regulated chemical Controlled substances substances contained in products, cutting Downsizing Product electricity consumption and utilizing resources Reduction of main raw materials effectively through downsizing. Power conservation Since November 2004, we have Controlled substances implemented a product assessment system Production Energy consumption reduction process throughout the Group to evaluate the Electricity and waste reduction environmental impact of products. This system Packaging Controlled substances About Lifecycle extends beyond the development stage, and packing Electricity and waste reduction Assessment (LCA) spanning preproduction prototyping and Lifecycle assessment is a method of quantitatively market introduction to confirm that Murata’s assessing all the environmental products are environmentally considerate. influences imparted by a Managing Environmentally product throughout its lifecycle, Hazardous Chemical from resource extraction Introduction of Lifecycle Assessment through manufacturing, sales, (LCA), through Product Use and Substances use and disposal. Disposal In addition to product assessments, Murata is Attaining Targets for focusing on lowering the environmental burden Environmentally Hazardous Handling Products Not Covered by RoHS of its products throughout their lifecycles. In Chemical Substance Reduction For regions and applications not 1995, Murata established its LCA Electrical components necessarily contain covered by the RoHS directive, Subcommittee, and in 1999 introduced LCA substances with the potential to damage the we operate a framework of into its R&D process. Through this evaluation human body and the environment. Murata is autonomous restraint whereby we do not endorse production method, CO2 emissions, consumption of striving to reduce or eliminate environmentally of manufacture and sales of principal raw materials and other data are hazardous chemical substances, including non-RoHS-compliant products without management-level analyzed for representative products. LCA is substances not prohibited by laws and regulations. clearance. being applied to Murata’s own production During fiscal 2006, we promoted conversion to alternative substances and Example of the power savings achieved developed alternative technologies: Standby Power-Saving Circuit Technology ( through the Company’s technical development ( 1. To eliminate substances stipulated under Standby power consumption (W) Brick converter the RoHS directive in Europe 8 Turn-on time control 5W Turn-on time control 2.9W 2. To reduce usage of halogenated flame 6 Turn-on time control + power management 1W retardants by 20% from fiscal 2003 levels 4 Turn-on time control 0.8W As a result of these endeavors, in May 2006 On-off time control 0.2W Power management Murata completed its responses to the 2 1.25W On-off time control + power management 0.1W RoHS directive in Europe for all products 0 other than RoHS-specified exceptions. In addition, we cut usage of halogenated ’93 ’96 ’99 ’02 ’05 (FY) flame retardants by more than 30%.

Standards for Environmentally Hazardous Web Data Chemical Substances http://www.murata.com/csr/environment/06.html Management of Information on Environmentally Hazardous Chemical Substances http://www.murata.com/csr/environment/10.html

2923 Murata and the Environment

Green Procurement and Purchasing In the acquisition of materials, Murata applies a green procurement policy to items used in production and green purchasing to parts and materials used for other applications. We also evaluate the environmental soundness (“greenness”) of suppliers, prioritizing suppliers that have been actively working on environmental conservation activities.

Promotion of Green Procurement Employee Perspective Working with Suppliers to Respond to the RoHS Directive We need to make components and materials Evaluating a Supplier’s Greenness mounted in Murata's products free from Murata has compiled a Green Procurement regulated substances to ensure that this is also Standards sheet that outlines its concept true of the products themselves. This is one of and requirements for suppliers regarding the most important responsibilities for the green procurement. We promote Materials Department. Recently, responses to the RoHS directive have unfolded with procurement on this basis with the tremendous force. Since October 2004, Item understanding and cooperation of suppliers. evaluation methods for management conditions Before dealing with new suppliers, we and confirmation methods for actual status at investigate their environmental management suppliers, which are of increasing importance, Yoshihiro Kirihata systems (such as for ISO 14001 or KES have been standardized, and we have been conducting audits along with the Quality Control Purchasing Qualilty Control certification) and guarantees for delivery of Division. By suppliers recognizing the need for Section, Production Enfgineering Unit, parts and materials not containing chemical and importance of the management of regulated Purchasing Department substances prohibited by laws and substances, we have been able to introduce a regulations. An appropriate chemical system for the prevention of fatal accidents. substance management system is a decisive factor in our approval of a new supplier. For current suppliers, we conduct meeting the criteria of these examinations are About KES “assessments of all suppliers” and registered in a database. We have introduced The Kyoto Environmental “assessments of high-risk suppliers” on and implement measures to ensure that we Management System comprises alternate years. We issue written notification do not procure any chemical substance not specifications for environmental management systems developed of the need for improvement to suppliers registered in this database. by the Miyako Agenda 21 Forum that receive a low evaluation and provide Overseas, we have been conducting that are easily applicable by small guidance through audits. surveys on the greenness of procured and medium-sized enterprises. If there are no improvements, our strict materials. However, in December 2006, we policy is to investigate the termination of our issued “Greenness Survey Procedures” (for relationship with these suppliers. overseas plants) with the aim of establishing consistent groupwide rules. These guidelines Criteria for the Greenness of Suppliers were implemented during fiscal 2006. • Environmental management system • Management system for chemical substances • Submission of certification concerning the six RoHS-designated substances Expanding Green Purchasing

Surveys on the Greenness of Materials As standards for materials (chemical substances, products and packaging) used in Prioritizing Purchasing of About the Law on products, Murata has established its own Compliant Merchandise Promoting Green Purchasing standards for prohibition or reduction of use We deﬁne “green products” as goods that In 2001, the Law on Promoting in accordance with laws and regulations and comply with the Law on Promoting Green Green Purchasing was enacted. It in response to customer requests. Before Purchasing and goods endorsed with promotes the procurement of eco-friendly products (goods and adopting any materials, we conduct “green recognized environmental labels. services that contribute to reducing surveys” at all domestic manufacturing plants As of March 2007, the green purchasing environmental impact) by the state and other entities. This law promotes to conﬁrm that they conform to these ratio in our domestic manufacturing plants the selection of products with low standards. Our expert staff stringently exceeded 99% on an itemized basis. We are environmental impact through such examines chemical substances cited as redoubling our efforts to achieve 100% green eco-labels as Eco Mark, the mark that indicates the use of recycled requiring cautious use and handing. Materials purchasing ratio. paper and the green mark.

30 Murata and the Environment

Prevention of Global Warming

In its business activities, Murata actively implements initiatives to curb greenhouse gases, particularly CO2, which directly cause global warming. Accordingly, we promote energy conservation and other measures for our production facilities.

our unit targets for fiscal 2010. Reduction of CO2 Emissions Murata’s actual emissions were up 5.5% during fiscal 2006 as a result of production expansion. However, we are aggressively advancing with our energy Meeting Drastic Reduction Targets reduction strategies through the for Emissions per Unit of Net introduction of such high-efficiency About Comparisons per Production equipment as double-bundle turbo Unit of Net Production Murata is striving to reduce CO2 emissions refrigerators and other measures. During The JEITA common index, by domestic manufacturing plants and fiscal 2007, we aim to extend our energy which is the value of CO2 emissions against net subsidiaries by 28% per unit of net conservation initiatives from Japan to production (monetary value), production compared with fiscal 1990 overseas operations. adjusted using the corporate levels. By fiscal 2006, we had slashed this goods price index announced by the Bank of Japan. A fall in figure by 38.8%. However, we anticipate a Production Equipment Development this figure indicates that a given rise in energy consumption from the to Realize Energy Savings product quantity (monetary expansion of plant facilities, so we will Murata conducts its development with the value) is produced using less energy. continue our endeavors to ensure we meet ideal of realizing minimal energy consumption from a small production area. CO2 Emissions Comparing energy consumption per unit of About Double-Bundle net production for newly developed Turbo Refrigerators CO2 emissions CO2 emissions per unit (tons-CO2/year) of net production (%) equipment with existing benchmark Equipment that enables 476,086 simultaneous extraction of hot 426,607 445,083 machines shows savings in both energy and cold water through 388,616 and space in equipment developed since 351,372 recovery of surplus waste heat 2004. generated during cold-water 100 By introducing such newly developed manufacture. This equipment 89 facilitates discontinuation of 171,710 83 82 equipment into our manufacturing plants, LPG-powered hot-water 70 generators used in 61 we achieved an annual reduction of conventional systems, thus approximately 17,400 tons-CO2 during reducing CO2 emissions to fiscal 2006. This is equivalent to 3.8% of approximately one-quarter. total CO2 emissions for all domestic ’90 ’02 ’03 ’04 ’05 ’06 (FY) manufacturing plants for the year.

Energy Conservation Performance

Benchmark ratio for consumed energy Taking consumed (comparison of consumed energy of benchmark energy per unit with existing machines as 100% Employee Perspective benchmark machines) Hints on Saving Energy in Our Day-to-Day Business 62 We adopted double-bundle turbo refrigerators in 58 response to plans to boost cooling and heating 53 equipment required for office interior air conditioners. Changing from conventional 35 33 LPG-powered to high-efficiency electrical 26 equipment and recovery of hot-water discharge generated during cold-water production represent cuts of 4,600 tons of CO2 emissions Shuichi Yamamoto 3 per year. Environmental Management

Global warming is a grave environmental Section, Laminators Printers machinery Assembly selectors Characteristic selectors External Processors furnaces Baking issue facing mankind. To continue to develop in Administration Department, coexistence with the earth as a corporation and Fukui Murata Manufacturing a citizen, we will persist in our global warming Co., Ltd. prevention measures in the future.

3123 Murata and the Environment Effective Utilization of Resources and Reduction of Waste In fiscal 2003, Murata achieved its zero emissions target for a recycling ratio of 100% at its 21 plants and subsidiaries in Japan. Our next step is to strive for reduction in emissions of waste.

“Reduce, Reuse, Recycle” Promotion Employee Perspective Murata’s Responsibility to Establish Waste Separation Technologies Reducing Waste by Sharing Information between Plants Murata discharges used polyethylene (PET) and In fiscal 2006, the amount of waste polypropylene (PP) along with other plastics from its manufacturing sites. By separating this waste, generated in our offices, plants and we can facilitate recycling as textile products or subsidiaries in Japan totaled 31,596 tons, a agricultural materials, while reducing waste matter. decrease of approximately 3,674 tons from Using equipment developed by Murata, we fiscal 2000. In terms of waste materials are aggressively promoting separation of extraneous matter from PET. I strongly feel that it Katsumi Oka generated per unit of net production, this is is the social responsibility of a manufacturer in a a decrease of about 38%—in line with our Environmental Management recycling-oriented society to establish waste Section, targets. separation technologies as a complement to Administration Department, Furthermore, when constructing new product manufacturing technologies. Izumo Murata Manufacturing office buildings and plants, we maintain a Co., Ltd. 100% record for recycling of construction waste materials. Collaboration between Group facilities About Murata’s Definition Agenda of Meetings between of “Zero Emissions” is vital to reducing waste and raising Waste Management Officers Murata defines zero emissions recycling levels. Accordingly, we periodically • Inspections of waste management sites at each as zero direct landfilling of hold meetings for the officers responsible plant, office and subsidiary waste as well as zero landfilling for waste management in respective plants, • Presentations and information sharing on of waste matter remaining after waste-reduction case studies intermediate treatment (i.e., a offices and subsidiaries. At these events, • Exchange of views among participants 100% recycling rate). However, participants exchange information and • Lectures presenting the latest waste-management Murata’s zero emission and opinions, such as through the presentation information by external experts recycling rate targets exclude waste matter that the Company of case studies. is unable to process on its own, Achieving 100% Material Recycling such as excess sludge in remediation tanks. Amount of Waste Generation Murata is striving to reduce waste liquids and plastics, which account for approximately 70% Total waste (tons/year) Waste per unit of net production (%) of total waste. In fiscal 2006, we continued our efforts from the previous year to reduce 35,270 effluent and bolster polyethylene (PET) film 30,306 31,596 material recycling. 28,465 28,075 As a result of management of recycling 26,240 and proper separation of wastes, the materials recycling ratio for fiscal 2006 stayed on target 100 101 93 at 100%. 88 67 62 Zero Emissions at Overseas Plants Murata attained zero emissions of waste for its domestic plants during fiscal 2003. In fiscal 2006, we set a new target of zero emissions for our overseas operations by fiscal 2010, ’00 ’02 ’03 ’04 ’05 ’06(FY) and are currently working toward this goal.

Web Data Electronic Manifesto http://www.murata.com/csr/environment/09.html

Effective Use of Water Resources http://www.murata.com/csr/environment/09.html

32 Murata and the Environment Managing Chemical Substances and Environmental Risk The raw materials for Murata’s products contain a vast number of chemical substances. Accordingly, we endeavor to control and reduce emissions of hazardous chemical substances during production. In addition, we consider pollution arising from chemical substances to be a serious risk, which we strive to avoid.

Management and Emissions Avoiding Environmental Risk Reduction for Chemical Substances

Management of 354 Measures to Prevent Environmental PRTR-Designated Substances Accidents and Pollution Among the various chemical substances Murata is aware that among the various used in Murata’s production processes, 354 potential environmental risks involved in its are included in the Pollutant Release and activities that chemical contamination is of Transfer Register (PRTR). Of these, the particular concern. We endeavor to avoid Murata Group in Japan handled 24 such eventualities through preemptive substances, including toluene and xylene, preventive measures, training and other in quantities exceeding one ton. strategies. We also promote risk reduction countermeasures targeting such About VOCs Reducing VOC Atmospheric environmental risks as waste and related VOCs are chemical substances Emissions through the Introduction problems. that cause atmospheric In Japan and overseas, Murata pollution through photochemical of Equipment reactions generating oxidants or In fiscal 2006, Murata operated nine consigns industrial waste disposal to legally suspended particulate matter. exhaust-gas treatment units, including authorized specialist contractors for proper regenerative thermal oxidizers (RTOs) at its treatment. In addition, we conduct regular Yasu and Yokaichi Plants. This enabled us to site visits to confirm the management set a target of 3% or more reduction in VOC status of disposal sites. atmospheric emissions compared with fiscal In fiscal 2006, Murata recorded neither 2000 levels. Although initially the introduction environmental accidents nor violations of of this equipment allowed the Company to environmental standards. attain reductions as planned, increased production has led to an increase of 10% Voluntary Standards for Prevention of Regenerative thermal oxidizers over fiscal 2000 (an 18 percentage point (RTOs) decrease from the previous fiscal year). Environmental Accidents and Pollution In fiscal 2007, we are aiming to bring 1. Prohibition against Underground Storage Tanks In principle, storage tanks for fuels, organic solvents, annual VOC atmospheric emissions back to acids, alkalis and waste liquids and wastewater fiscal 2000 levels. We will achieve this by tanks for treating wastewater will be located above reinforcing process management and ground. If it is unavoidable that a tank be placed underground, it will be a double-walled tank. promoting strategies to restrain usage 2. Permeation Barrier Coating volumes and atmospheric emissions. Locations where such fluids as fuels, organic solvents, acids, and alkalis, as well as waste oil, are handled will be provided with a bed made of a Cutting Back Atmospheric permeation barrier coating or stainless steel. About PFCs Emissions of PFCs 3. Prohibition of Underground Piping PFCs are greenhouse gasses. Murata’s production processes also emit Pipes for transporting such fluids as fuels, organic Murata does not use any PFCs PFCs, which are greenhouse gases. In solvents, acids and alkalis, as well as waste liquids, targeted for reduction under will be located above ground. the Kyoto Protocol, but is fiscal 2006, in pursuit of a goal of a 50% or endeavoring to reduce those 4. Emergency Containment Structure more reduction compared with fiscal 2002 Workplaces where liquids are received or where slated for management as waste liquids are discharged to or from tank trucks chemical substances with levels, we attained a decrease of 30%, or or the like will have a structure for immediately detrimental environmental 96 tons. We will continue our endeavors containing any leakage if an accident occurs. impact. toward this target.

Reduction of Chemical Substances with Web Data Environmental Impact http://www.murata.com/csr/environment/10.html Progress with Soil and Groundwater Contamination Surveys and Remediation http://www.murata.com/csr/environment/10.html

3323 Murata and the Environment Promoting Eco-Friendly Physical Distribution and Packaging To minimize environmental impact during distribution and delivery of Murata products to customers, we are promoting modal shifts and reduced packaging and packing.

Reduction of Environmental Impact Arising from Employee Perspective Distribution Constructing the Optimal Distribution Network to Reduce CO2 Emissions Modal Shifts and Joint Deliveries Collaboration with consigned distributors is Since starting to use Japan Rail (JR) freight in indispensable to curtail CO emissions 2004, we have expanded the scope of goods 2 transported by rail. However, last year we found during distribution. To foster such that it would be difficult to expand further with cooperation, Murata holds presentation JR’s existing timetables, so we reconciled meetings for contractors to encourage the ourselves to the greater convenience of truck routine application of energy-conscious haulage. This year, with the cooperation of its driving. In addition, we are striving to make contractors, Murata is reconstructing its modal shifts from truck transportation to rail distribution network with a configuration freight and shipping, which have relatively optimized to the placement of its manufacturing Yoshihide Toyama lower CO2 emissions and have commenced plants. With many companies consolidating Logistics Control System joint deliveries for some transportation warehouses and transshipment centers, we boosted our number of transshipment sites as a Design Section, Manufacturing System routes. As a result of these endeavors, in measure to increase load efficiency. We aim Design Department fiscal 2006 we exceeded targets by further to reduce CO2 emissions by cutting the reducing CO2 emissions per unit of net number of truck runs. sales by 26% from fiscal 2000 levels. Increasing load efficiency and expanding joint deliveries are important factors further to reduce emissions per products, has helped to reduce packaging About Modal Shifts truck. In fiscal 2006, we investigated materials by approximately 22% over the Modal shift is a switch from reorganizing our domestic distribution past five years. Our target for fiscal 2006 to haulage of goods by truck to network from scratch, culminating in the reduce packaging material use per unit of marine or rail transportation, which facilitates high-volume proposal of a definite concept. We will net sales by 20% compared with fiscal carrying, and thus reduces energy successively implement these measures in 2000 levels was achieved in fiscal 2005. We consumption during distribution. fiscal 2007. nudged this figure up to 23% in fiscal 2006. Murata also focuses on promoting the Reduction of CO2 Emissions during use of returnable cardboard boxes for Changes in Packaging Materials Distribution packaging. In fiscal 2006, we completed the conversion of delivery for taping reels Taped packaging CO2 emissions Unit reduction ratio compared (tons/month) with 2000 (%) between all of the Company’s sites to 388 returnable boxes. With the understanding 361 330 340 325 327 and cooperation of our customers, we will 20 26 extend this initiative to commercial 6 0 -4 deliveries in fiscal 2007. We are also -22 focusing on innovations in packaging technologies for bulk cassettes. Drastic cuts in distribution energy use are being achieved through (FY) ’00 ’02 ’03 ’04 ’05 ’06 changes in package shape. For Reduction in Packaging Material Weight example, we have made major reductions in waste-intensive taped Packaging material Unit reduction ratio compared packaging. Reducing Packaging (tons/month) with 2000 (%) by Downsizing Products 553 Bulk packaging 495 450 In recent years, we have downsized 379 398 401 products through technological innovations, 23 23 0 -4 17 which in turn have reduced the use of 8 Energy packaging materials. For example, the conservation/ miniaturization of chip monolithic ceramic CO2 reduction capacitors, one of Murata’s primary ’00 ’02 ’03 ’04 ’05 ’06 (FY)

34 Murata and People

Responsibilities to Stakeholders

Shareholders and Investors Suppliers Employees

Society and Customers Murata Group Local Communities

Responsibilities and Conduct toward Customers Accountability and Conduct To meet customer needs with unfailing quality for Shareholders and Investors and support product development as an To cultivate appropriate investor relations equipment manufacturer from and establish measures to impart the development stage Page 36 shareholder opinions to our management Page Responsibilities and Conduct toward Suppliers 41 To operate a fair and impartial purchasing Responsibilities and Conduct toward Employees system and build relationships based on trust, To respect every one of our 29,000 while expecting corporate social employees worldwide, providing comfortable responsibility of our suppliers Page 39 working conditions and rewarding employment Page 43 Responsibilities and Conduct toward Society and Local Communities To contribute to communities and society everywhere we operate through involvement in research, culture, the arts, sports and other facets of life Page 46

35 Responsibilities and Conduct toward Customers Murata builds relationships of trust with customers and is continuously improving companywide operations to ensure it supplies products and services that attain customer satisfaction.

Activities to Fulfill Product Quality Management Policy Responsibility We remain committed to the continuous development of unique products and the cultivation of new areas of expertise. Our underlying approach is our belief that “better equipment is made from better parts and better design, and better parts are made from better materials and better processes.“ With this belief, we consistently manage every stage, including design, material Disseminating Our Quality Policy to selection, procurement, production, sales, and servicing in cooperation with all members who comprise the Murata Group—from top management to individual employees—by employing the All Employees Deming circle. In this way, we can economically produce quality products that meet market needs Murata has established a Quality Policy to with full consideration for the natural environment. provide high-quality products that gain the trust and satisfaction of its customers. We display posters bearing this policy in our workplaces to cultivate the Gaining International Standards awareness of employees. The policy is also Certification for Quality Management distributed on a card for employees to carry All Murata Group plants inside and outside with them to ensure they are thoroughly Japan have received quality management cognizant of the policy’s content. system ISO 9001 certification. Our quality management systems have also acquired Adopting a Deming Circle ISO/TS16949 certification, a stricter About the Deming Circle Approach for Continuous Quality international standard specific to the The circle is an approach advocated by the so-called Management automotive industry. father of quality control, Dr. Murata employs the Deming circle Furthermore, the Quality Assurance Edward Deming of the United approach to ensure thorough quality Department at our Yasu Plant has been States. It forms the basis for the Plan-Do-Check-Action management. awarded ISO/IEC17025 certification for concept for continuous quality The Deming circle focuses on the testing and calibration (inspecting the improvement activities. sequence of processes in supplying accuracy of measuring instruments) and products to customers by investigating and gained Japan Calibration Service System analyzing customers’ needs and reflecting (JCSS) accreditation. The department is these results in product manufacture. also bolstering the level of its quality Through this approach, we continuously evaluation technologies. augment the quality of our products by As a globally developing corporation, repeating a cycle of planning and design, the Murata Group is improving its quality manufacture, sales, and surveys and systems on an ongoing basis to ensure services. uniform quality standards worldwide.

Deming Circle

Surveys / Services Planning / Design Investigating customers’ assessments and demands regarding Planning and designing products to product quality conducting research satisfy customers’ demands

Sales Manufacturing Marketing manufactured Manufacturing products products to customers according to design

36 Murata and People Responsibilities and Conduct toward Customers

the products required by markets and the Responding to technologies necessary to spawn these Customer Needs products. Thus by pursuing technology and product development, we are able to respond to customers’ needs by providing A Marketing System to Supply leading-edge products and technologies. Leading-Edge Products Attuned to Market Needs Supporting Problem-Solving Amid the radical changes in the electronics through Technological Exchange Overseas, the Murata Group’s marketing staff participates in sector, it is necessary to grasp market from Our Customers’ Product Global Business Strategy trends swiftly and apply this information to Design and Planning Stages Meetings, which provide a forum product and technology development in Murata anticipates the kinds of features for development themes on next-generation products, taking order to provide products and services that required for its customers’ the into account customers’ needs in perpetually attain customer satisfaction. next-generation models and the electronic each region. Accordingly, Murata has established an components these will necessitate. For an original marketing system to create future early resolution to the issues facing our concepts from the viewpoints of market, clients, we are amenable to customers’ About “Design-In” technologies and products. needs from the early stages of electronic This concept is development based on collaboration from the We reﬂect information on industry equipment development, promoting design and development stages trends and customer demands gleaned by technological exchange and aggressively between technical staff sales staff worldwide to create roadmaps promoting design-in activities. representing the manufacturer and users to incorporate the for midterm market trends. These direct us In these activities, we gain access to necessary functions into products. in formulating development concepts for various data, including conﬁdential

Murata’s Marketing System

Product Out

Market In Technological Roadmap Concepts for the technologies and SMPD development needed to generate Strategic Management Phase Diagram new products New Products Product Development STEP Strategic Technology Program New Technology Development of Product Roadmap Fundamental Technology Concepts for the development and production of new products that are deemed necessary based on the Technological Roadmap market roadmap Roadmap Product Roadmap Market Roadmap Concepts for market conditions Market Roadmap three to five years ahead, reflecting information gleaned by sales staff worldwide on customer demand and industry trends

Market Research

3723 CEATEC, a gathering of electronic equipment and component manufacturers, provides a platform to explain new products and leading-edge technologies to customers. This is an excellent opportunity for Murata to gain understanding for its technological prowess. information. To secure the relationships of trust that this requires, we exercise careful Employee Perspective consideration for the protection and management of all conﬁdential client Exhibitions Helping Customers Assess information. Murata’s Technological Expertise Of course, exhibitions serve as a PR tool for a corporation, as an important opportunity to System of Response in the showcase technological prowess and vision. In terms of planning and production, participants Event of Quality Problems from marketing, staff, product, development and a host of other divisions unite to transcend the boundaries of the organization. Despite differing stances and opinions, which make it difficult to Consolidated Control System of find a unified view, we strive to help customers Complaints for the Development and by facilitating greater understanding of the Improvement of Products Company and its technologies and encouraging Keiichi Shinooka technological exchange. Proposals, requests for improvement and Corporate Communications complaints from customers provide us with Department, precious information that we use to make Technologies & Products Section products more trustworthy and more competitive in the marketplace. We therefore strive to be amenable to customer voices and demands, which we consider Response to Quality Problems from their viewpoint, before swiftly implementing improvements. Customers Murata has built a system for consolidated control of customers’ Report Complaint complaints. After receiving a complaint, the responsible salesperson enters the Sales division information in a database so it can be simultaneously accessed by all Murata Submit a corrective Contact ofﬁces and plants worldwide. Product action report returns are handled primarily by the Production Quality Control Section, which Quality control section of the plant investigates and analyzes the cause of a problem and formulates corrective action to Implement permanent Confirm complaint actions contents prevent reoccurrence. Investigate cause Determine the Information on complaints is also and implement interim responsible division actions circulated to all divisions concerned. A Contact troubleshooting checklist is subsequently Write up a corrective action report compiled and stored by the development and design departments for use in future Division responsible for dealing with product development. We have also the complaint established a system for the Quality Support by the Product Division, Assurance Department to report to top Quality Assurance Department and the Head Office Quality Assurance management on complaints and corrective Department as necessary actions.

Status of Quality Management System Web Data Certiﬁcation http://www.murata.com/csr/social/02.html Three-Stage DR System (design quality inspection) http://www.murata.com/csr/social/02.html

38 Murata and People Responsibilities and Conduct toward Suppliers At Murata, we believe that good electronics begin with good components, and good components begin with good materials. Cooperation with suppliers is vital to this approach, which is underpinned by striving for fair and impartial purchasing activities and reinforcing relationships based on trust.

manners, stress fair, impartial and sincere Basic Approach to responses, abide by laws and regulations, Purchasing keep dealings free from personal interests and act according to societal norms. The Company has prepared a business A Purchasing Policy Based on transaction guidebook that presents and Fairness, Impartiality and Honesty explains to suppliers Murata’s attitudes to Murata believes that it is important to purchasing and dealings with suppliers. To establish relations of trust with suppliers that further strengthen good relations, we have foster mutual prosperity. Accordingly, in our also established a section dedicated to purchasing operations we respect good suppliers on our website.

The business transaction guidebook outlines Murata’s Murata’s Purchasing Policies attitudes to purchasing and 1. Purchasing attitudes dealings with suppliers, in addition • Murata’s buyers will be polite to suppliers, and conduct their dealings with suppliers in a fair, just and sincere to the basic attitudes that Murata manner. requires of suppliers. • Murata’s buyers will responsibly carry out purchasing activities, practicing good manners and following the dictates of common sense. • Murata’s buyers will maintain friendly relationships with suppliers, but have no personal interest with them. • Murata’s buyers accomplish dealings in compliance with relevant laws, rules, in-house regulations and societal norms. 2. Dealings with suppliers • During the selection of suppliers, we will consider quality, price, lead times, continuity of supply, environmental preservation, finances, human rights, occupational health and safety, the introduction of IT and other factors. We will make fair and impartial evaluations and selections based on rational standards. • We will not receive gifts of money or other valuable articles from suppliers, and will make no personal requests of them. About the Subcontract Law • We will not receive treatment or entertainment from suppliers that defies social common sense. The Act against Delay in Payment • We will not force suppliers to purchase Murata products. of Subcontract Proceeds, Etc. to • If suppliers provide us with information that is confidential, we will strictly manage the information and maintain its Subcontractors (Subcontract Law) confidentiality. prohibits the parent business • We will promote green procurement, always taking environmental protection into account. operator (outsourcer) from using • We will not acquire private equity in supplier corporations nor purchase shares based on information not disclosed its advantageous standpoint to to the general public. the detriment of the legitimate • In the eventuality of accidents or complaints, we will always respond swiftly and take thorough measures to interests of the subcontracted prevent recurrence. business operator.

Legal Compliance in Employee Perspective Purchasing Continued Legitimate Materials Procurement to Boost Improvements Thorough Compliance with Laws in All Murata employees involved in materials Education, in Auditing and in Our procurement should aim to continue to conduct business in accordance with laws and Systems ordinances, societal norms, and in-house and Murata carries out education programs and external rules and regulations. Toward this goal, in-house audits and constructs systems to actual cases that occur in the execution of ensure strict abidance by the Act on Prohibition business should be reflected in rules, alongside positive reinforcement to boost improvements Akiko Nakamura of Private Monopolization and Maintenance of on a daily basis through repeated executions of Fair Trade (Anti-Monopoly Law), the Act Against Production Engineering unit, (1) education to keep employees thoroughly Purchasing Department, Delay in Payment of Subcontract Proceeds, etc. informed, (2) formulation of measures for actual Administration Section to Subcontractors (Subcontract Law ) and enforcement and (3) auditing and correction to confirm correct enforcement. other legislation relating to purchasing. We also hold regular brieﬁng sessions for purchasing staff and related departments within the Murata

3923 Group to publicize legal compliance issues. About CSR Procurement In-house audits are in place to confirm that Promoting CSR Emphasis on a supplier’s CSR business is conducted in abidance with Procurement activities, spanning legal compliance, human rights, in-house rules and regulations, which are based environmental conservation and on laws and ordinances. Any requisite other aspects, in addition to price, as criteria in the procurement of improvements are implemented under guidance Requiring CSR Procurement of goods. and subject to monitoring and confirmation. Our Suppliers Basic attitudes that Murata In addition, we have formed a system to As a company with globally developed requires of suppliers (outline) preempt legal violations by preventing delayed operations, we demand corporate social payment and other misdemeanors and are responsibility not only of ourselves, but reinforcing our legal compliance system. throughout the entire supply chain. Accordingly, legal compliance, quality control and environmental conservation activities are also a prerequisite for our Consultation Services for suppliers. Suppliers In the selection of suppliers, we make fair and impartial assessments, with consideration for human rights, occupational Establishment of Two Consultation health and safety and other factors, in Channels for Improper Conduct addition to quality, price and lead times. In the event of any sort of apparent legal or social impropriety in Murata’s dealings, suppliers now have two types of consultation service available. Basic Attitudes that Murata Requires of Suppliers (Outline) The first is an e-mail Company hotline 1. Comply with laws and regulations as well as social norms Suppliers should abide by national and regional laws and social norms. We emphasize legal option, direct to the manager of the Purchasing compliance in its entirety, particularly regarding prohibition of child and forced labor, respect for Department. The second is a Corporate Ethics human rights, maintenance of safe working environments and elimination of corruption. Hotline, which is operated by a third-party 2. Promote sound business management organization, and can accessed via telephone Suppliers should carry out healthy, fair business activities and appropriate disclosure of management policy and financial status. or fax or online. We are bolstering our 3. Emphasize quality, lead times and stable supply compliance stance by continually publicizing Suppliers should observe prescribed quality and delivery standards and maintain stable supply these two services to suppliers. of materials. 4. Emphasize initiatives targeting reduced environmental impact (green procurement) Suppliers should establish an environmental management system and supply eco-friendly Two Consultation Services products. 5. Emphasize Value Engineering activities Suppliers should improve new materials supply and costs through value engineering, to realize Purchasing new product development and prices that meet customer needs through ongoing response. Department Murata Manager 6. Emphasize information disclosure Suppliers should provide information on new technologies and products (materials) relating to technological innovations and global environmental preservation. Contact Contact regarding response / action 7. Emphasize measures to accelerate material procurement: Consultation Response Suppliers should be able to cut materials procurement times through swift and flexible response Third-party organization to market changes. Corporate Ethics Hotline 8. Observe confidentiality Contact regarding Suppliers should strictly observe confidentiality of information necessary for transactions that Consultation response / action relates to Murata’s corporate security. 9. Emphasize IT application Suppliers Suppliers should promote installation and utilization of IT environments that facilitate accelerated business procedures and reinforced relationships.

Web Data Management System for Purchasing http://www.murata.com/csr/social/05.html

40 Murata and People Accountability and Conduct for Shareholders and Investors Murata strives for accurate disclosure of information to investors and shareholders in a timely and fair manner. Furthermore, we respect the rights of our shareholders, creating an environment that facilitates easy exercise of voting rights.

About Disclosure Basic Disclosure Policy Promoting Exercise of Disclosure is the public Voting Rights by presentation by a corporation of information on its business Shareholders operations and other matters. In recent years, such problems as Accurate, Impartial and Timely Making Exercise of Voting Rights fraudulent accounting and concealed information have made Disclosure Easier corporate disclosure of vital The Company’s basic information Murata has devised various means to importance. disclosure policy is to disclose accurate enable shareholders to exercise of voting information to stakeholders, including rights in a speedy and efficient manner and shareholders and investors, in a timely and ensure their opinions are reflected by About Shareholder Voting Rights fair manner. Company management. In accordance with the timely Since 1999, we have issued Shareholders have the right to participate in corporate disclosure regulations of the exchanges on convocation notices well in advance of our management by voting for or which it is listed, the Company discloses General Meeting of Shareholders (more against the motions presented at a company’s General Meeting of information applicable to these regulations than three weeks ahead). This initiative, Shareholders. The voting rights via timely disclosure systems. The which allows shareholders, particularly from that can be exercised are Company posts such publicly disclosed overseas, ample time to investigate the proportional to the number of shares owned. information on its website promptly to exercise of voting rights, has boosted provide fair notice of this information fairly voting turnout 10 percentage points. to general investors. The Company also Convocation notices are prepared in discloses information other than that English, as well as Japanese, and are required by timely disclosure regulations posted on the Company’s website. through news media and the Company’s We have also introduced Internet website, when deemed effective for voting, via PC or mobile telephone, to make understanding the Company. exercising voting rights more convenient. Murata’s Disclosure Policy can also be The Company also participates in a voting found on the website. platform for institutional investors. At the General Meeting of Murata’s 71st General Meeting of Shareholders, we employ various measures Shareholders was held at the to make information more palatable for Head Office in June 2007, with various pertinent questions and shareholders, such as easily significant opinions contributed by comprehensible explanations using charts shareholders. and photographs and demonstrations using our MURATA BOY robot.

Shareholder Breakdown Private and Financial others institutions 30,721 100,969 Domestic 13.7 corporations % 8,566 3.8% Total 225,26444.8 Thousands % ( of shares ) 37.7 Overseas % corporations and others 85,008

41 Company explanatory meeting in Europe

Communications with Shareholders and Investors

Holding Regular Briefing Sessions for Shareholders and Investors Murata holds regular briefing sessions so that analysts and institutional investors understand the Company’s financial status and business strategies. Once a year, the chairman or president conducts presentation meetings in Tokyo, Annual report and the release of quarterly results is Financial report supported by a briefing session by corporate senior executive vice president. The chairman or president also holds briefing sessions in Europe and the United States for overseas investors. Murata’s website offers an Investor Relations section to ensure impartial, timely disclosure of information to shareholders and investors. Flash reports, materials from briefing sessions, annual reports, IR releases and other disclosure information are posted on this website. Investor information http://www.murata.com/cp-data/index.html

Employee Perspective

Working to Enhance Understanding of the Company through the General Meeting of Shareholders The electrical components that Murata manufactures are work, hidden from the eye, inside electrical equipment. This makes the Company’s products and business activities somewhat obscure in general. The General Meeting of Shareholders is an opportunity to enhance understanding of our Company. With this in mind, we have included a glossary of product names and other terminology with reports to shareholders and convocation notices. In addition, we have revised the structure of and narration accompanying the explanatory materials at the General Meeting of Shareholders. Through practical demonstrations of products on-site at the Jun Arai meeting, we are making issues easier to understand from the shareholders’ standpoint. General Affairs Department, First General Affairs Group

Web Data Disclosure Policy http://www.murata.com/csr/social/06.html

42 Murata and People Responsibilities and Conduct toward Employees Murata places great emphasis on employee satisfaction, through comfortable working conditions and rewarding employment. We have established workplace environments where employees can fulfill their potential in their work based on appropriate treatment and deployment of personnel and commitment to safety.

management-level staff at overseas facilities, we Respect for Human Rights conduct management training to ensure solidarity with Murata’s principles from those taking on new responsibilities through to senior management.

Creating a Workplace Environment and Personnel System Free from Discrimination Building an Murata has established a working environment Employee-Friendly and personnel system free from discriminatory Workplace treatment on the basis of race, beliefs, gender, religion, nationality, language, disease, birthplace Establishing a Support System to or other reason, in which the personality and Facilitate Work and Family individuality of each employee is respected. Commitments Moreover, to raise employee awareness of these issues, our graded training programs Murata makes special efforts to support include human rights education content. employees juggling work and family. We Throughout the Murata Group’s offices and have established various support systems plants, both in Japan and overseas, child and for motivated employees with maternity, enforced labor are strictly prohibited. child-raising or nursing commitments at home to fulfill their responsibilities and advance their careers. In response to the Law for Measures to Equal Opportunities and Support the Development of the Next About the Law Diversity in Employment Generation, we formulated an action plan for Measures to Support from April 2005 that includes improving the Development of the maternity leave and short-time employment Next Generation A law formed in July 2003 and Fulfillment of the Potential of systems, introducing special leave for enacted in April 2005 to promote a Diversified Workforce as a Basis infertility treatment and providing support to healthy bearing and rearing of encourage paternity leave. Through such children to support future for Employment societies. It requires action plans Murata’s original approach to business initiatives, Murata is striving to promote a to create environments and development is underpinned by preserving the balance between work and family life. working conditions that enable employees to keep a balance diversity of opinions and backgrounds of its between work and family life. highly capable workforce. Accordingly, Murata Employees who Took Childcare / Family has improved its employment environment to Care Leave ensure that no disparity is generated in FY2005 FY2006 employment, treatment and education due to gender, race, physical disability or other such Family care leave 14 9 factors. We thus provide a working Leave after childbirth 197 183 environment where diverse employees can Childcare leave (Figure in 182 fully demonstrate their capabilities. 176 parentheses indicates the rate (92%) ( ) of leave taken.) 96% At Our Overseas Sites, We are Aggressively Conducting Local Recruitment and Employment We believe that we play a role in the Personnel Systems development of the electronics industries in each of the 16 countries worldwide in which our offices and subsidiaries are located. Based on this principle, a management structure Recruitment Based on Abilities and comprising diversified personnel aggressively Performance; Employment with promotes locally based recruitment. Personal Targets and Self-Assessment With regard to employment of Under a working ethos of valuing the

43 Overseas local manager training held by offshore facility management conﬁrm after returning from Japan.

independence and allowing for expression of the abilities of each employee, since 1991 we Employee Education and have incorporated a business target Human Resource management system for our human resources, Development based on the principles of abilities and performance. Supporting Skills Advancement at Under this system, employees set their Every Career Step own targets and plans, according to Company Murata aims to foster self-directed personnel, policy, in consultation with their line managers. personnel who display individuality with a They then carry out midterm self evaluations of venturous spirit and personnel who value progress and results. customer satisfaction and cooperation. Supervisors evaluate the results and Accordingly, we are constructing education processes involved and reflect the evaluation systems that offer employees specialized training results in staff bonuses. Employee evaluation at each rank, from entry level to management level, A booklet, published separately results, the basis of evaluations, issues arising to provide powerful, effective support to individual from Personnel System in the course of duties, and future directions employees in developing their capabilities. Guidebook, to facilitate easy understanding of the employee are discussed three times a year at meetings The first three years after joining the Company evaluation system is distributed between employees and their supervisors. are designated as a basic training period. This to all Murata staff. Standards for promotion and demotion involves numerous intensive and on-the-job and employee evaluation regulations are training courses, combined with correspondence issued in a Personnel System Guidebook, courses aimed at gaining qualifications, to which is distributed to all staff with supervisory develop the knowledge and skills needed to play responsibilities. an active role as professionals in the business community. Even after this basic training period, various training programs are provided, such as education according to each job step and Appropriate Staff functional training by type of job. By combining Deployment these various training programs, Murata facilitates the development of all its employees’ expertise, skills and management capabilities. Self-Selected Career Paths According to Aptitude Murata, with its emphasis on abilities and Employee Perspective performance, provides employees with opportunities that enable them to maximize Using In-House Staff Recruitment to Step their potential in accordance with their from the Production Technology Department personal aptitude. to Fulfilling Children’s Dreams through MURATA BOY For younger employees, we offer a Prior to my transfer, I was responsible for facilities career path featuring deployment in diverse control software development in the Production roles at various locations. Furthermore, for Technologies Department. The work, which involved those opting out of managerial channels, we realizing product functions, was highly satisfying. have established a system to facilitate My big recruitment chance came with the advent of MURATA BOY. This was something for progression as a highly specialized which I was responsible inspiring and fulfilling the professional, in addition to an in-house staff dreams of children and becoming a tool to stimulate recruitment system whereby employees their interest in science. I felt the challenge to do select their own career track. something with different results to what I was used to, something useful to society, so I applied. Kouichi Yoshikawa I would like to see greater value placed on the in-house staff recruitment system, which enables Corporate Communications Department, career advancement through your own will, with Corporate Section stronger links to invigoration of our corporate organization.

44 Murata and People

Responsibilities and Conduct toward Employees

Surveys on the Challenges Improving Occupational and Rewards of Work Health and Safety

Carrying Out Employee Satisfaction Realizing a Workplace Free from Improvement Strategies and Injury Managerial Reform Based on Murata established its Occupational Health Survey Results and Safety Rules in 1987 with the aim of Murata considers employee satisfaction realizing a workplace free from injury and About ES (ES) to be of equal importance to illness, as well as to create a pleasant ES refers to employee customer satisfaction (CS) as a vital factor working environment for all. satisfaction, which is a underpinning corporate growth. During fiscal 2006, the rate of time lost complementary benefit to CS, or customer satisfaction. If Accordingly, since fiscal 2005 we have for work-related injuries in the domestic employees are satisfied, they feel conducted a survey every two years on Murata Group was 0.50, or 0.35 on a challenged and rewarded by their Organizational Vitality and Individual Vitality. nonconsolidated basis. This was a work, which is linked to providing customers with satisfying The 2005 survey targeted 14,385 considerable rise from the 0.33 of the products and services. employees, with an exceptionally high previous fiscal year (although the Accordingly, ES is an issue of paramount importance for return rate of more than 95%. From the nonconsolidated figure declined from 0.39). Murata. results, various revelations emerged, such This trend has led us to review our as that employees feel differently toward the safety policy, and to commence preparation Company depending on their post and that of our health and safety management feeling exhausted and busy are sources of system based on OHSAS18001-1999. stress. In the future, we will invigorate communications as an ES improvement Working on Mental Healthcare and strategy, and along with accepting and Prevention of Overwork First aid training in respecting each and every employee, carry Promoting the health management and cardiopulmonary resuscitation at Komatsu Murata Manufacturing out managerial awareness reform. fitness of employees equates to a creating Co., Ltd. a healthy Company. Our mental health strategies include educational activities and publicity through in-house bulletins and publications. In addition, we are improving our consultationFY2006 system using occupational physicians and employee support via an external organization (Employee Assistant Program). To prevent overwork, we keep thorough records of work hours and refer employees clocking up more than a specified number of hours to an occupational physician for consultation and a physical health assessment.

Maintaining Equal Opportunities and Diversity of Employment (Employment of the elderly and physically Web Data challenged, expansion of opportunities for women) Consideration for Working Hours and Conditions http://www.murata.com/csr/social/07.html Intellectual Property Rights of Employees Appropriate Staff Deployment (Job rotation, highly specialized professional and in-house staff recruitment systems) Human Resource Cultivation/Education http://www.murata.com/csr/social/08.html and Training (Managerial education, engineer development, global human resource education) Industrial Relations Reducing Risk of Occupational Accidents http://www.murata.com/csr/social/09.html

45 Murata and People Responsibilities and Conduct toward Society and Local Communities We are promoting an array of activities that contribute to society and local communities at our sites worldwide, under the maxim that we want our presence to be a source of joy and pride in the communities in which we operate.

Local Community Activities Contributions and Donations

Cooperating with Local Cultural and Contributing to Various Causes Sports Promotions in Japan and Overseas Murata supports the promotion of culture and Murata’s policy toward its various sports, particularly in the Kyoto area, where the contributions is underpinned by the desire for Head Office is located. “our presence to be a source of joy and pride During fiscal 2006, as part of our cultural in the communities in which we operate.” promotion support activities we held the During fiscal 2006, we contributed Murata Innovator Cup Elementary School 9 disaster relief for victims of the Java x 9 Go Championship for pupils in Kyoto and earthquake in Indonesia through the Shiga prefectures. Approximately 60 Japanese Red Cross Society. In Japan, participants gathered to battle over Go, a through Ishikawa Prefecture authorities we strategic board game. A second event is contributed relief support for Noto Peninsula planned for fiscal 2007. Earthquake victims, who also sought refuge As part of its sports promotion in Murata’s facilities in the region. support, Murata has sponsored the Wakaba The Company cooperates every year in Cup (National Elementary School Student HIV/AIDS prevention activities in Thailand, Badminton Championship) every year since donating funds through People’s Hope 1992 in Nagaokakyo City, Kyoto, and the Lake Japan, an authorized NPO that provides Biwa University Ekiden relay race on the shores international medical support. of the lake. We also support sports for the As part of our drive to foster economic disabled, including the All Japan Wheelchair growth in the Asia-Pacific Region, we Ekiden relay in Kyoto City. contributed to the 40th Asian Development Bank Annual Meeting of the Board of Governors in Kyoto in May 2007. Academic Support Activities

Promoting Natural Sciences, Humanities and Social Sciences through the Murata Science Foundation Employees of Azumi Murata The Murata Science Foundation was Manufacturing Co., Ltd. Murata and family members participated in established in February 1985, with the the All Japan Water Quality Survey objective of contributing to society through in cooperation with an NPO. science promotion. Basing its activities around the electronics industry, the Foundation strives for the improvement, development and globalization of science and technology and aids research that contributes to the resolution of problems in the fields of humanities and the social sciences. In fiscal 2006, the Murata Science Foundation provided financial aid totaling ¥70 million for 66 research projects, 12 study groups and 7 Tree planting activities by employees of Murata Electronics overseas dispatch programs. Trading (Shenzhen) Co., Ltd. (China)

46 Murata and People

Responsibilities and Conduct toward Society and Local Communities

Enhancing Tree Planting Environmental Communication

Promoting Greening Programs for Environmental Education in China Each Factory Murata communicates with residents around Murata has established a groupwide its various facilities as a means to contributing greening policy and has set greening to regional societies. In fiscal 2006, we Environmental education for programs for each factory, so as to actively targeted residents of the Nanxingyu housing residents in the neighborhood of promote measures to enhance the natural estate in the neighborhood of Wuxi Murata Wuxi Murata Electronics Co., Ltd. (China) greenery of factory grounds. (For further Electronics Co., Ltd. (China), in an details, see “Feature 3: Murata’ s Activities environmental education initiative. for Nature” on page 17.) With the primary goal of enhancing Izumo Murata Manufacturing Co., Ltd., understanding of policies promoted by the opens its grounds to the public while the Chinese government, the agenda spanned cherry and camellia are in blossom. separation of waste and energy conservation Furthermore, our Yokaichi and Yasu plants and other environmental themes, and included organize group viewings for their explanations of environmental problems, resplendent rhododendrons. In addition to corporate responsibilities and Wuxi Murata these annual events, Komatsu Murata Electronics’ environmental policies. In the Manufacturing Co., Ltd., Iwami Murata future, we will continue to conduct such Manufacturing Co., Ltd., and the Miyazaki environmental education programs as part of Plant of Fukui Murata Manufacturing Co., our contribution to society. Ltd., and other factories carry out activities to enhance greenery inside and outside Communications with Local their grounds, such as establishing flower Communities beds around local stations and alongside In fiscal 2006, we conducted factory tours for train lines. local elementary school students and residents at eight of our manufacturing facilities. Moreover, Fukui Murata Manufacturing Co., Ltd., Komatsu Murata Manufacturing Co., Employee Perspective Ltd., Sabae Murata Manufacturing Co., Ltd., Okayama Murata Manufacturing Co., Ltd., and Resolved to Continue Raising Environmental Awareness other sites made presentations at local among Local Residents in China environmental events to introduce Murata’s environmental initiatives and to impress the I still sense the difficulties in raising awareness of importance of environmental preservation on environmental consideration in China through visitors. environmental education for local residents. Standards of living in Chinese society are rising, We aim to continue and expand such but at the cost of a deteriorating environment. types of activities. Very few people at a grass-roots level view the environment as a problem that they themselves have to tackle. Monitoring of corporations by governmental departments has become increasingly strict, but the gist of this scrutiny is pollution control, with Chu Guei Li very little said about reducing environmental Administration Department, burden or CO2 emissions. Issues of this scale Environmental Management cannot be addressed by Murata’s measures alone, Section, but only through educating local society, too. Wuxi Murata Electronics Co., Ltd. (China)

Children on a guided factory tour at Himi Murata Manufacturing Co., Ltd. 47 Third-Party Comments

After Reading the CSR Report 2007 of the Murata Group

1. Editorial policy that emphasizes ease of reading and employee participation This year’s report emphasizes readability, aiding readers with many photographs and headlines. This displays Murata’s motivation to communicate with a diversity of stakeholders using the CSR report, an aim I expect to see achieved. The inclusion of many “Employee Perspective” sections is a further characteristic of this year’s publication. It is most important for a CSR report to display the faces of the employees who actually carry out activities—with additional benefits in terms of in-house motivation. In the future, including similar perspectives from customers, clients and local society members would enhance the report’s functionality as communications tool. Professor Katsuhiko Kokubu 2. Environmental Action Plan addressing changes in Graduate School of Business production capacity Administration, Murata’s fiscal 2006 environmental performance largely achieves the Kobe University targets of its Third Environmental Action Plan. Coverage regarding production facilities development to realize energy savings is worthy of note (see page 31). However, targets for total VOC emissions, which relate to production capacity increases, were not attained. In this regard, Murata should investigate its combination of targets for total emissions and for unit emissions to devise an achievable scenario when setting of targets for corporate activities and reduction figures on a total basis. Furthermore, development of such environmental management indices embracing overall environmental protection activities could be investigated.

3. Setting CSR targets With regard to the environment, Murata sets clear targets, as evidenced above, and follows through with PDCA activities. However, I suggest setting similar targets for social endeavors, albeit qualitative goals. If this is done, the CSR Report could present results of assessment and promotion of CSR activities when reviewing the year. In this case, it becomes necessary to investigate thoroughly what are important issues for society and important issues for Murata, and this process itself will boost Murata’s CSR capacity.

4. Environmental and Social Problems A single corporation cannot resolve environmental and social problems; this requires the combined understanding and support of society as a whole. It is important to communicate that this is the reason why Murata puts such emphasis on environmental study and communications. Explaining Murata’s advanced environmental awareness and activities broadly to society forms the social infrastructure that in turn supports Murata. I expect the CSR Report to be fully utilized as an important medium to this end.

48 Corporate Communications Department Murata Manufacturing Co., Ltd. 10-1 Higashikotari 1-chome, Nagaokakyo City, Kyoto 617-8555, Japan Telephone: +81-75-955-6786 E-mail: [email protected]

Printed using 100% recycled paper. To reduce its impact on the global environment, this report is printed using soy ink on 100% recycled paper.