Table of Contents

• I General Provisions
• II Corporate Governance Systems
• III Relationship with Stakeholders

I General Provisions

1. Purpose

The purpose of this policy sets forth the basic items and guidelines of our corporate governance and is to establish effective governance through the steady implementation of the said policy, the timely review and improvement of that policy, and to contribute to the sustainable growth and medium to long term enhancement of corporate value based on a transparent, fair, prompt, and decisive decision-making process.

2. Corporate Philosophy and Corporate Strategy

Nisshinbo makes it its mission to contribute to society through business activities and also hold it as its business policy to realize a super-smart society as an environment and energy company group under its corporate philosophy: Change and Challenge! For the creation of the future of Earth and People.

In order for us to embody the above mission and business policy, Nisshinbo sets it its aim to connect everything and create value. Considering medium- to long-term anticipated changes of external environment and business opportunities such as growing demand for action to counter climate change, demographic changes and development of digital society, Nisshinbo will provide society with a variety of solutions to those social issues with its unique technologies of sensing, wireless communication, and information processing.

So as to realize the above aim, Nisshinbo will take following priority measures:

• Pursue a transformation of the business portfolio.
• Build a business model that looks to future growth and invest management resources in a focused manner.
• Reduce management risk by further strengthening the management base.

For the purpose of accelerating growth with leveraging its core businesses domains, i.e., wireless communication and microdevice, growth investing including merger and acquisition will be considered strategically and flexibly.

Furthermore, with a view of continuously strengthening its management base, Nisshinbo will strive to respect human rights, develop business with consideration for environmental impact, securing diverse human resources to have them bring their best, build a responsible supply chain and enhance the effectiveness of corporate governance.[2-1, 2-3, 3-1(i)]

3. Basic Philosophy of Corporate Governance

As an Environment and Energy Company group, Nisshinbo will strive to enhance corporate value over the medium to long term based on global management and cash flow management while simultaneously achieving qualitative improvements in organizational culture, such as the penetration of our corporate philosophy and corporate governance, and quantitative growth in terms of numerical and business performance by improving profitability and focusing on ROE indicators and stock price-oriented management. Nisshinbo believes it is necessary to enhance corporate value over the medium to long term.

We will work to establish corporate governance based on our corporate philosophy by both improving management efficiency and ensuring transparency, strengthening accountability, and thoroughly adhering to corporate ethics through a prompt, decisive decision-making process based on risk-taking in accordance with the principles of management decision-making. [3-1(ii)]

II Corporate Governance Systems

1. Directors and Board of Directors

(1) Roles and Responsibilities of Directors and the Board of Directors

Directors and the Board of Directors shall recognize their fiduciary responsibility to shareholders and strive to ensure that the Board of Directors appropriately reflects the wishes of shareholders. They will oversee the development and operation of internal control and risk management systems, monitor the status of execution by management, provide support for management decision-making, and work to strengthen accountability to stakeholders, improve profitability, and increase returns by realizing governance that emphasizes prompt, decisive decision-making and by confronting risks without fear. [Basic Principle 4, 4-5]

In light of the above, the Board of Directors shall, in accordance with the Companies Act and other laws and regulations, as well as the internal Rules of the Board of Directors and the Regulations on the Authority to Make Decisions, formulate management strategies and plans, change the business portfolio and group structure, and implement M&A and investment projects. The Board of Directors deliberates, decides, and appropriately supervises important management matters to be resolved by the Board of Directors. In deliberating, deciding, and supervising, the Board of Directors shall pay attention to the following:

• Consistency with corporate philosophy and management policies
• Compliance with laws, regulations, and corporate ethics
• Enhancement of corporate value over the medium to long term
• Pursuit of SDGs and emphasis on ESG
• Securing the trust of stakeholders, including shareholders, customers, employees, business partners, and local communities [4-1, 4-1-1, 4-2-2]

The Board of Directors is authorized by the Articles of Incorporation to adopt resolutions on certain matters system at the General Shareholders’ Meeting. [1-1-2]

(2) Delegation and Support to Senior Managers

The Board of Directors delegates to the management team judgments and decisions on important matters concerning the execution of business operations, excluding matters for discussion at meetings of the Board of Directors. The president makes decisions on the execution of delegated matters and the determination of the content of matters to be placed on the agenda of the Board of Directors after deliberation by the Board of Management, which is composed of managing officers. From the perspective of promoting aggressive governance, the Board of Directors will review and revise, as appropriate, the criteria for submission of matters to the Board of Directors and the scope of delegation to the management team. [4-1-1]

The Board of Directors will work to create the necessary environment and support so that management can promptly and decisively implement the decisions and matters delegated to the Board of Directors based on risk-taking in accordance with the principles of management decision-making. In addition, the Board of Directors shall receive reports from management on the status of the execution of decisions and matters delegated to management by the Board of Directors and shall monitor such execution. [4-2]

(3) Composition of the Board of Directors

In order to develop each of the Group's businesses globally along the environmental and energy axis, the Board of Directors shall nominate as candidates for the Board of Directors management personnel who have outstanding management records of accomplishments and the strong will and ability to commit to realizing the corporate philosophy and increasing corporate value, as well as diversity including gender, internationality, work experience, and age. In addition, the Nomination Committee, which includes outside directors, will deliberate on the combination of skills that the Board of Directors should possess, including experience, knowledge, and expertise, as well as the skills that each director possesses. The Company's Articles of Incorporation stipulate that the number of directors shall not exceed 14. [4-10-1, 4-11, 4-11-1]

(4) Operation of the Board of Directors

The Board of Directors aims to invigorate and deepen deliberations by having all directors actively express their opinions and listen to the opinions of others based on their respective management record of accomplishments and expertise. The Board of Directors will operate in such a way that objective and rational conclusions can be reached in accordance with the corporate philosophy, management strategy, and management plan with the aim of achieving balanced governance that is not biased toward risk aversion but rather offensive and defensive. [4-1, 4-12]

The Board of Directors shall carry out the following items in its operation. [4-12-1]

• Distribute materials for meetings of the Board of Directors at least several days prior to the meeting date and provide explanations of agenda items when necessary or requested by directors.
• The schedule of monthly meetings of the Board of Directors, quarterly meetings of the Board of Directors, and biannual Management Policy Meetings will be fixed at least three months prior to the start of the new fiscal year and at which directors are requested to attend.
• The Board of Directors will ensure that agenda items are brought before the Board in a planned manner and that there is not excessive or insufficient time for deliberation by the Board at its meetings.

(5) Evaluating the Effectiveness of the Board of Directors

The Board of Directors shall conduct a questionnaire survey of all officers regarding the effectiveness of the Board, evaluate the effectiveness of the Board through analysis of the results and comparison with the results of the previous year, and deliberate on measures and initiatives to improve the effectiveness of the Board of Directors. The results of the effectiveness evaluation will be made public. [4-11-3]

2. Monitoring of Directors and Senior Managers

(1) Remuneration of Directors and Senior Managers

The Company's policy and procedures for determining the remuneration of directors are as follows.

• The Company shall establish a Remuneration Committee as an advisory body to the Board of Directors in order to enhance the transparency and objectivity of the process to determine the remuneration of directors.
• The Board of Directors shall pass resolutions to revise or abolish the operating rules and regulations governing the composition and duties of the Remuneration Committee. The Board of Directors also resolves the policy on remuneration decisions formulated by the Remuneration Committee.
• To ensure independence, the Remuneration Committee shall consist of the chairperson of the Board of Directors、president and representative director, and several outside directors appointed by the Board of Directors with the majority of the members being outside directors. In addition, the committee members shall elect a chairperson from among themselves.
• In order to secure excellent management personnel and treat them appropriately, the Remuneration Committee shall establish a remuneration table for directors (to determine the composition, amount, and ratio of remuneration) and bonus calculation standards (to determine sales, income before income taxes, operating cash flow, and other company-wide performance targets, as well as divisional performance targets), taking into consideration the remuneration levels and ratios of other companies and the position of the Company.
• Remuneration for directors shall consist of the base remuneration (monthly remuneration), bonuses, and stock remuneration (restricted stock). However, outside directors shall receive only base remuneration (monthly remuneration).
• Each director shall be paid the base remuneration (monthly remuneration) for each position as set forth in the remuneration table determined by the Remuneration Committee.
• Each director (excluding outside directors) shall receive a bonus once a year as a performance-based incentive. The actual amount of the bonus is determined by applying the bonus calculation standards based on the standard bonus for each position specified in the remuneration table determined by the Remuneration Committee.
• Restricted stock will be allocated to each director (excluding outside directors) as stock-based remuneration in order to further share the benefits and risks of stock price fluctuations with shareholders and to motivate the directors to contribute to increases in the stock price and the enhancement of corporate value.
• Remuneration for directors will be determined within the scope of the total remuneration determined by a resolution adopted at the General Shareholders’ Meeting. The amount of monetary remuneration claims for restricted stock and the timing of payment shall be determined by the Board of Directors after deliberation by the Remuneration Committee within the total amount and total number of shares separately determined by a resolution adopted at the General Shareholders’ Meeting.
• No retirement benefits will be paid to directors.

The determination of remuneration for managing officers shall also be in accordance with this policy and procedure. [3-1(iii), 4-2, 4-2-1, 4-10-1]

(2) Selection and Dismissal of Directors and Senior Managers

The policies and procedures for the nomination and dismissal of directors are as follows.

<Establishment of Nomination Committee>

• The Company shall establish the Nomination Committee as an advisory body to the Board of Directors in order to enhance the transparency and objectivity of the process of nomination, selection, and dismissal of directors.
• The Board of Directors resolves to revise or abolish the operating rules that stipulate the composition and duties of the Nomination Committee. The Board of Directors also resolves the policy on the nomination, election, and dismissal of directors formulated by the Nomination Committee.
• In order to ensure independence, the Nomination Committee shall consist of the chairperson of the Board of Directors、president and representative director, and several outside directors appointed by the Board of Directors with a majority of the members being outside directors. The committee members elect a chairperson by mutual vote.

<Election of Directors>

• The Nomination Committee reports to the Board of Directors on candidates for the Board of Directors who, through its deliberations, have an outstanding management record of accomplishments and a strong will and ability to commit themselves to the realization of the corporate philosophy and the enhancement of corporate value. The Nomination Committee also reports to the Board of Directors on candidates for top management who have particularly outstanding qualities, aptitudes, and performance as management personnel.
• Based on the deliberations of the Nomination Committee, the Board of Directors nominates candidates for directors and selects representative directors and directors with management positions.

<Dismissal of Directors>

• If the Nomination Committee determines through its deliberations that a director, including top management, lacks the qualifications and aptitude for management, the Committee reports to the Board of Directors on such matters as the dismissal of the director with the reasons for its decision.
• Based on the deliberations of the Nomination Committee, the Board of Directors shall decide on the dismissal of the representative director or director with management positions or on the submission of a proposal for the dismissal of a director to the General Shareholders’ Meeting.

The policies and procedures for the selection and dismissal of managing officers are as follows.

<Election of Managing Officers>

• The Nomination Committee reports to the Board of Directors, based on its deliberations, on candidates for managing officers from among representatives of subsidiaries and managers of the Company who are highly ambitious and bold and who excel particularly in management and professional skills.
• Based on the deliberations of the Nomination Committee, the Board of Directors selects managing officers and managing officers with specific responsibilities.

<Dismissal of Managing Officers>

• If the Nomination Committee determines, based on its deliberations, that an executive officer lacks the qualifications and aptitude to serve as an executive officer, the Committee shall report to the Board of Directors on the dismissal or removal of the executive officer concerned with the reasons for its decision.
• The Board of Directors shall decide on the dismissal or removal of the managing officers based on the deliberations of the Nomination Committee. [3-1(iv), 4-3-1, 4-3-2, 4-3-3, 4-10-1]

The reasons for the election or dismissal of individual directors shall be stated in the notice of convocation of the General Shareholders’ Meeting. [3-1(v)]

(3) Succession planning

The president shall formulate a succession plan for directors (excluding outside directors) and managing officers, including top management, and work to develop potential successors, while sharing and discussing the details and progress of the plan with the Nomination Committee, which includes outside directors, and reviewing and improving the plan as appropriate. The Board of Directors shall receive necessary reports from the Nomination Committee and confirm the operational status. [4-1-3, 4-10-1]

(4) Review and formulation of management plan

As part of its management plan, the Company formulates and announces medium and long term performance targets and plans for single fiscal years and works to achieve them. In formulating a new management plan, the Board of Directors will identify the cost of capital and summarize the previous management plan to reflect it in the new management plan. An overview of the plan, the basic policy and status of review regarding the business portfolio, allocation of management resources (capital investment, R&D investment, investment in human capital and intellectual property, etc.), and sustainability initiatives will be incorporated into the new management plan as appropriate, along with the profit plan and basic policy regarding the capital policy, and the plan will be made public. The Company will disclose them publicly. [3-1-3, 4-1-2, 5-2, 5-2-1]

<Basic Policy on Business Portfolio>

Under the corporate philosophy of "Change and Challenge! For the creation of the future of Earth and People," as an Environment and Energy Company group, Nisshinbo will define the strategic business areas and allocate management resources in a focused manner, while assessing the growth potential and future prospects of each business in order to continue to be a company that meets the needs of the times and society, a company that has value, and is a company needed by society. We will also assess the growth potential and future prospects of each business and strive to reconfigure and optimize the business portfolio.

(5) Preparation and Management of Risk Management System

The Board of Directors shall establish an appropriate internal control system, including the establishment of compliance, risk management, and internal control over financial reporting, and shall supervise its operation by using the Internal Audit Department. [4-3-4]

(6) Related Party Transactions

When conducting transactions between directors and the Company, the Company shall obtain the approval of the Board of Directors and report the results of such transactions in accordance with the regulations on conflicts of interest stipulated in the Companies Act. [1-7, 4-3]

3. Audit and Supervisory Board Members and the Audit and Supervisory Board

(1) Roles and Responsibilities of Audit and Supervisory Board Members and the Audit and Supervisory Board

Recognizing their fiduciary responsibility to shareholders, Audit and Supervisory Board members and the Audit and Supervisory Board shall actively exercise their authority, ensure the independence of outside Audit and Supervisory Board members, and execute the information-gathering capabilities of full-time Audit and Supervisory Board members, as well as cooperate with outside directors and make their best efforts to effectively fulfill their roles and responsibilities. [4-4, 4-4-1, 4-5]

(2) Composition of the Audit and Supervisory Board

The Audit and Supervisory Board shall consist of Audit and Supervisory Board members with the appropriate knowledge of finance, accounting, and legal affairs, as well as experience in management. The Company’s Articles of Incorporation stipulate that the number of Audit and Supervisory Board members shall not exceed five. [4-11]

(3) Appointment of Audit and Supervisory Board members

Based on the deliberations of the Nomination Committee, the Board of Directors shall nominate candidates for Audit and Supervisory Board members who have a broad management perspective; knowledge of finance, accounting, and legal affairs; and management experience with the consent of the Audit and Supervisory Board. [3-1(iv), 4-11]
The reasons for the appointment of each corporate auditor (including substitute Audit and Supervisory Board members) shall be stated in the notice of convocation of the General Shareholders’ Meeting. [3-1(v)]

4. Independent Outside Directors

(1) Use of Independent Outside Directors

The Company believes that the use of independent outside directors who are not affiliated with the business operations of the company allows the Board of Directors to effectively fulfill its roles and responsibilities and, therefore, appoints at least one-third of its directors as independent outside directors. [4-6, 4-7, 4-8]
Outside directors shall take advantage of the opportunities to attend meetings of the Board of Directors and other meetings to communicate closely with each other in both the meeting room and in the waiting room for outside directors in order to share the necessary information and exchange opinions. In addition, each of the outside directors will ensure smooth communication with the president and other members of the management team, as well as have regular opportunities to exchange opinions with full-time Audit and Supervisory Board members. [4-8-1, 4-8-2]

(2) Criteria for Independence

The Board of Directors carefully assesses the eligibility of each director as an independent outside director in light of the specific requirements stipulated in the Companies Act and the independence standards specified by financial instrument exchanges and then appoints the director with his/her consent. [4-9]

(3) Concurrent Appointment of Officers from Other Companies

In order to ensure that outside directors and outside Audit and Supervisory Board members can appropriately fulfill their roles and responsibilities, when appointing them, the Company shall ascertain the status of their concurrent positions at other listed companies or equivalent companies or organizations and confirm that the candidates are within the scope that does not impede their attendance at meetings of the Board of Directors and Board of Audit and Supervisory Board members or the performance of their duties. The status of concurrent positions of directors and Audit and Supervisory Board members, including outside directors and outside Audit and Supervisory Board members, shall be stated in the notice of convocation of the General Shareholders’ Meeting. [4-11-2]

5. Support for Directors and Audit and Supervisory Board Members

(1) Efforts and Systems to Support Directors and Audit and Supervisory Board Members

The Company will promote collaboration between directors and Audit and Supervisory Board members and the Internal Audit Division by regularly providing the Board of Directors a summary of the results of internal audits and evaluations of internal control over financial reporting conducted by the Internal Audit Division and by holding regular liaison meetings between the Internal Audit Division and Audit and Supervisory Board members. [4-13-3]

Directors and Audit and Supervisory Board members shall, as necessary, request that the Company provide additional information and seek appropriate advice from outside experts. [4-13-1, 4-13-2]
The Board of Directors and the Audit and Supervisory Board shall confirm that the information and support required by the directors and Audit and Supervisory Board members are provided by the Company in a timely and appropriate manner. [4-13]

(2) Training of Directors and Audit and Supervisory Board Members

The Company provides training for directors and Audit and Supervisory Board members on the selected themes of CSR, compliance, business strategy, and research and development as appropriate and provides opportunities for newly appointed directors and Audit and Supervisory Board members to participate in external training.

For outside directors and outside Audit and Supervisory Board members, the Company will provide training by the top management of the business divisions and inspection tours of major business sites and laboratories to promote a better understanding of the business activities of the Company. [4-14, 4-14-1, 4-14-2]

6. Accounting Auditors

(1) Responsibilities of Accounting Auditors

The Board of Directors and the Audit and Supervisory Board recognize that accounting auditors are responsible for auditing the internal control over financial reporting and shall perform each of the following to ensure proper audits. [3-2, 3-2-2]

• Ensure sufficient audit time
• Ensure access to the president and directors in charge of finance and accounting
• Ensure cooperation with Audit and Supervisory Board members and the Internal Audit Division
• Establishment of a system to respond to suggestions and requests from accounting auditors

(2) Appointment and Evaluation of Accounting Auditors

The Audit and Supervisory Board shall confirm the appropriateness and adequacy of audit activities by the accounting auditors and the independence and expertise of the accounting auditors in accordance with the Policy for Determining Reappointment or Non-reappointment of Accounting Auditors and the Evaluation and Selection Criteria for Accounting Auditors. The Board shall make decisions regarding reappointment every year and, if necessary, shall decide not to reappoint or to dismiss accounting auditors. [3-2-1]

7. Independent Committees

In order to enhance transparency and the objectivity of the process of determining compensation for directors and executive officers and the process of nominating and dismissing directors, Audit and Supervisory Board members, and executive officers, the Company shall establish an independent Nomination Committee and Remuneration Committee with the participation of outside directors as advisors to the Board of Directors. The Board of Directors shall pass resolutions to revise or abolish the operating rules governing the composition and duties of the Nomination Committee and the Remuneration Committee.
In order to ensure independence, the Nomination Committee and the Remuneration Committee shall consist of the chairperson of the Board of Directors、president and representative director, and several outside directors appointed by the Board of Directors with the majority of members being outside directors. In addition, a chairperson of the Committee shall be elected by the Committee members from among the members of the Committee. [4-10, 4-10-1]

III Relationship with Stakeholders

1. Basic Policy

(1) Basic Policy on Communication with Stakeholders

Nisshinbo believes that only by listening to stakeholders and gaining their understanding and trust will the Company be able to achieve sustainable growth and enhance its corporate value over the medium to long term; therefore, we will take various opportunities to deepen communication with all stakeholders. [Basic Principle 2, Basic Principle 5, 5-1]

(2) Basic Policy on Information Disclosure

The Company will proactively provide different types of information, including high value-added nonfinancial information, in a user-friendly and easy-to-understand manner by appropriately combining the disclosure of information in the Notice of Convocation of the General Shareholders’ Meeting, Business Report, Annual Securities Report, Quarterly Report, and other documents required by laws and regulations with the provision of information through voluntary integrated reports and the Nisshinbo website. [Basic Principle 3, 3-1-1]
We will also work to disseminate information in English, for example, by preparing English summaries of financial statements and English integrated reports. [3-1-2]

2. Relations with Shareholders and Investors

(1) Measures Concerning Communication with Shareholders and Investors

• The director in charge of IR oversees all measures related to communications with shareholders and investors. The director in charge of IR is responsible for the IR team, which consists of personnel from IR Public Relations, Finance & Accounting, Legal, and other departments, and exercise the centralized collection of internal information and the accurate and fair dissemination of information by outside directors.
• We will strive to enhance the General Shareholders' Meeting, where top management can directly communicate with shareholders, and the financial results and overseas investors' meetings, where top management personally explains management strategies and plans. We will also plan and hold individual meetings with investors in Japan and overseas throughout the year.
• The person in charge of IR and Public Relations will serve as the contact person for shareholders and investors when they request a meeting, but the director in charge of IR and other directors, Audit & Supervisory Board members, and managing officers will join the meeting when deemed necessary.
• The status of IR activities, including the various measures for communication with shareholders and investors, shall be regularly reported to the Board of Directors for review.
• In communicating with shareholders and investors, the IR team will ensure that no insider information is communicated, but in order to prevent leaks of financial information and ensure fairness, a quiet period will be set from the day following the end of the financial period to the day of the announcement of financial results. [5-1, 5-1-1, 5-1-2]

(2) Ensuring Shareholder Rights

The Company shall implement appropriate measures to ensure that minority shareholders are not effectively prevented from exercising voting rights and that the rights of shareholders are substantially secured. [Basic Principle 1, 1-1, 1-1-3]

From the perspective of improving the environment for the exercise of shareholder rights, the Company shall implement the following initiatives in the operation of the General Shareholders’ Meeting and shall provide accurate information. [1-2, 1-2-1]

• Early dispatch of the convocation notice of the General Shareholders’ Meeting to shareholders and disclosure on the website prior to dispatch. [1-2-2]
• Establish appropriate dates related to General Shareholders’ Meeting, including the date of the meeting. [1-2-3]
• Adoption of an electronic voting system and participation in an electronic voting platform. [1-2-4]
• English translation of reference documents for the General Shareholders’ Meeting, notices of resolutions, and extraordinary reports on the results of the exercise of voting rights. [1-2-4]
• Discussion and consideration with trust banks concerning measures to be implemented when institutional investors wish to exercise voting rights on behalf of trust banks at the General Shareholders’ Meeting. [1-2-5]

(3) Analysis of Voting Behavior at General Shareholders' Meetings

The Board of Directors shall share the results of voting rights exercised at the General Shareholders’ Meeting and analyze the causes and consider the necessity of and measures to be implemented with respect to proposals for which the requirement for passage is generally 20% in favor if the majority of votes are in favor or generally 15% or more if two-thirds or more of the votes are in favor. [1-1-1]

The Company will conduct a survey to understand the shareholder structure in order to analyze the voting behavior at the General Shareholders’ Meeting and to utilize the results in communication with shareholders and investors. [5-1-3]

(4) Policy for Cross-Shareholdings

The Company shall establish a Policy for Cross-Shareholdings and periodically review the significance and economic rationality of each issue in light of the cost of capital and other indicators. The Board of Directors receives reports on the results of the verification and deliberates on the policy for continuing to hold or for selling shares. The Board of Directors will not prevent business partners from holding shares or from selling shares, although they may inform the Board of Directors of their intention to do so. In addition, the Company will periodically confirm the scale and details of transactions with policy-holding counterparties and verify the economic rationality of such transactions. [1-4, 1-4-1, 1-4-2]

<Policy for Cross-Shareholdings>

Of the stocks of business partners acquired for the purpose of maintaining and strengthening business and alliances, the Company will engage in the phased and systematic sales of stocks whose strategic usefulness has diminished. [1-4]

<Criteria for the Exercise of Voting Rights>

Voting rights for shares held by the Company shall be exercised from the perspective of improving the corporate value of the Company and the relevant counterparty and shall be determined on an individual basis in light of the purpose of holding the shares. In such cases, the rationality and necessity of proposals that have a significant impact on corporate value, such as the election or dismissal of directors or the introduction or extension of anti-takeover measures, will be carefully checked. [1-4]

(5) Basic Capital Policy

Nisshinbo will make it its basic strategy for capital policy to aim for balancing both optimal capital efficiency and financial soundness to allow for strategic financing. To this end, on one hand, Nisshinbo will principally make new investments or return profit to shareholders within the range of operating cash flow, above all, prioritizing new investments into strategic business domains to allow realization of its business portfolio. On the other hand, from the viewpoint of improving capital efficiency, Nisshinbo will systematically reduce total assets and utilize gain on their sales for making new investments or returning profit to shareholders together with capital sourced from operating cash flow.

Regarding return of profit to shareholders, Nisshinbo will strive to maintain or increase its dividend payout ratio and aim for a ratio of 40% on consolidated basis through its profit increase. In addition to that, considering adequate capital structures and medium- to long-term outlook for free cash flow, Nisshinbo will be flexible to implement share buybacks, while securing necessary funds for growth investing. [1-3]

The Company has not introduced any takeover defense measures. In the event that the Company intends to implement a capital policy that may harm the interests of shareholders in the future, the Company will consider the necessity and rationality of such a policy and will ensure that explanations are provided to shareholders and that appropriate procedures are followed. [1-5, 1-5-1, 1-6]

3. Relations with Stakeholders Other Than Shareholders and Investors

(1) Measures to Address Social, Environmental, and Other Sustainability Issues

The Board of Directors recognizes that sustainability issues, including global environmental problems, natural disasters, human rights, safety, and health, are deeply related to the management and business operations of the Group and represent risks that must be managed and addressed, as well as opportunities for profit and growth. The Company has established a basic policy for addressing sustainability issues, while paying attention to a wide range of environmental and social issues.

<Basic Policy on Sustainability>

Under the corporate philosophy of "Change and Challenge! For the creation of the future of Earth and People," we, as an Environment and Energy Company group, will develop businesses globally along the environment and energy axis toward the realization of a sustainable society. In addition, by establishing the ESG-related materiality as an issue over sustainability, the Company will provide solutions to meet the needs of society, including solutions to the social issues of global environmental problem and safe and secure lifestyles for people. [2-3, 2-3-1, 4-2-2]

(2) Ensure diversity within the Company

Nisshinbo values the diversity of our business and the diversity of the human resources that support its business, and the personnel of the Company are committed to the growth and enhancement of corporate value through unity in diversity. To ensure diversity, we will also promote D&I (Diversity & Inclusion) activities by establishing priority issues to be addressed at each level and in each area of the Company, including policies related to the recruitment and training of human resources and the development of the internal environment, and the appointment of core human resources. [2-4, 2-4-1]

(3) Establishment of Corporate Ethics Reporting System

The Company strives to instill and establish corporate ethics in all employees in all business activities and has established a corporate ethics reporting system for the purpose of early detection and recurrence prevention of any suspected violations of laws and regulations or corporate ethics. This system accepts reports not only from employees of the Group but also from a wide range of internal and external stakeholders and allows direct reporting to internal Corporate Ethics Committee members, as well as to external legal counsel. The Board of Directors will take sufficient care to ensure that whistleblowers will not be disadvantaged because of their use of this system. The Board of Directors shall receive regular reports and reviews on important matters concerning corporate ethics, including whistle-blowing cases. [2-5, 2-5-1]

(4) Compliance with the Business Conduct Guidelines

The Company has established the Nisshinbo Group Business Conduct Guidelines , which consists of nine items related to compliance, environment, human rights, safety, fair trade, diversity, bold challenges, innovation, and communication, as specific action guidelines to be observed by all officers and employees. Directors and managing officers shall take the initiative in setting the Business Conduct Guidelines and shall repeatedly educate employees on the importance of compliance with the Business Conduct Guidelines to ensure that all employees are fully aware of it. [2-2]

The Board of Directors shall deliberate and make decisions on the revision of the Business Conduct Guidelines and shall regularly receive and review reports on the status of implementation of each item stipulated in the Business Conduct Guidelines. [2-2-1]

(5) Corporate Pension Plan

In order to ensure the safe and appropriate management and administration of the pension plan and the safe and efficient investment of pension assets, the Company shall establish an Asset Management Committee, which shall engage in necessary deliberations and adjustments while taking care to avoid any conflicts of interest with the beneficiaries. In addition, the committee will assign and train the managers and staff in charge of finance, accounting, and human resources departments as members of the Asset Management Committee. [2-6]

*The numbers in [ ] indicate the principle number of the corresponding Corporate Governance Code.

Established February 2016
Revised July 2017
Revised January 2019
Revised March 2020
Revised December 2021
Revised February 2024