Corporate Governance Report
Nippon Denko Co., Ltd.

Last Update: March 28, 2024

Nippon Denko Co., Ltd.
Yasushi Aoki, President & CEO
Contact: +81-3-6860-6800
Securities code: 5563
https://www.nippondenko.co.jp/en/

The corporate governance of Nippon Denko Co., Ltd. (the “Company,” “Nippon Denko” or“We”) is described below.

I.

Basic Views on Corporate Governance, Capital Structure, Corporate
Attributes, and Other Key Information

1.

Basic Views
The Company is enhancing its corporate governance by seeking sustainable growth and striving to
improve its corporate value over the medium/long-term through the establishment of systems thatfacilitate transparent, fair, rapid, and resolute decisions and the demonstration of entrepreneurial spirit
based on the following Management Philosophy, all without losing sight of its fiduciary responsibility as
an entity entrusted by its shareholders with business management in addition to its responsibilities tothem as well as its employees, customers, business partners, creditors, local communities, and otherstakeholders.
[Management Philosophy]
Helping create an affluent future through sustainable growth by developing and providing distinctive
products, technologies, and services.
Additionally, we chose to be “a company with the Audit and Supervisory Committee” in order tostreamline decision making and business execution processes by transferring part of decision-making
authority for the execution of important operations from the Board of Directors to Directors, deepen
discussions on medium/long-term management strategies, and strengthen the supervisory functions of theBoard of Directors, thus tightening corporate governance and improving corporate value further.
The definition of a term used in the following sections is as follows.
Senior management: The President & CEO and other executive officers appointed in accordance with theRegulations for Executive Officers.

[Reasons for Non-compliance with the Principles of the Corporate Governance
Code][Principle 4-11]
Nippon Denko has not appointed non-Japanese Directors, but the Board of Directors of the Company iscomposed of personnel who possess knowledge, experience, and capabilities for fulfilling their roles andduties effectively in a well-balanced manner, while achieving diversity and realizing an appropriate size.
1[Disclosure Based on each Principle of the Corporate Governance Code][Principle 1-4]
(1) Policy on cross-shareholdings
Nippon Denko holds cross-shareholdings (all shares other than the Company’s shares) for the
purpose of improving corporate value of the Company over the medium/long-term by maintaining
and strengthening business relationships, maintaining and developing partnerships, and ensuringsmooth execution of business activities. Regarding the cross-shareholdings, the Board of Directors
evaluates the performance and financial strength of the investee company as well as theirsignificance of shareholding regularly on an annual basis and examines the appropriateness ofshareholding including its reduction.
(2) Details of the examination of the appropriateness of cross-shareholdings
Nippon Denko examines the appropriateness of cross-shareholdings in the Board of Directors, inaccordance with the policy mentioned in Section (1), by researching the past trends of major
financial indicators of respective investee companies, checking whether the ROE of each investee
company exceeds the cost of capital of Nippon Denko, and assessing the risk of degrading thecorporate value of Nippon Denko.
(3) Standards for appropriately exercising voting rights accompanying cross-shareholdings
Nippon Denko exercises the voting rights accompanying cross-shareholdings appropriately, after
responsible sections of the Company carefully check the proposals at the General Meeting of
Shareholders of each investee company and comprehensively judge whether or not the proposals
would contribute to the improvement in corporate value of Nippon Denko and the investee
company.
[Principle 1-7]
If any transaction between Nippon Denko and a Director (including an indirect transaction) falls underconflict-of-interest transactions, it is necessary to obtain an approval from the Board of Directors andsubmit reports in accordance with laws, regulations, and the “Regulations for the Board of Directors,”
which are in-company rules. In addition, the Company checks whether or not there is any conflict-ofinterest transaction by having directors report it by themselves every year, and the Board of Directors
confirms that there are no transactions that would damage the Company.
The above-mentioned transactions are disclosed appropriately according to the importance andcharacteristics of each transaction pursuant to laws and regulations.
The transactions with “major shareholders and others” are conducted under fair conditions, and will notcause any damage to the Company.
[Supplementary Principle 2-4 (i)](1) Mindset for securing diversity
Nippon Denko recognizes that in order to improve medium/long-term corporate value through thediversification of ideas, etc., it is necessary to promote core personnel while ensuring diversity. The
Company recruits personnel regardless of nationality, so non-Japanese employees are deployed andtrained in the same way as Japanese employees, and flourish in each workplace. Mid-career workers
are employed when necessary according to the needs in workplaces and the workforce composition.
(2) Voluntary measurable goals for securing diversity
Regarding the active participation by women, Nippon Denko has no female managers as of now, butaims to promote female employees to managerial posts as soon as possible.
(3) Policies for developing personnel and an in-company environment for securing diversity, and theirstatuses
As the policy for developing personnel for securing diversity, Nippon Denko strives to enrich human2capital by securing diversity in recruitment and educating employees evenly and effectively throughOJT and Off-JT, and the “Personnel Development Committee” chaired by the President & CEO
formulates a personnel development policy and manages its progress.
[Principle 2-6]
The Personnel Department of Nippon Denko manages the operating institutions for pension assets basedon the contract-type defined-benefit corporate pension plan for the purpose of stably developing assets
in the long term to secure the payment of pension to beneficiaries. The staff in charge of managementof pension assets check whether the operating institutions have handled pension assets in accordancewith the Basic Policy for Managing Pension Assets as stipulated by the Company, and strive to exert
expected functions as an asset owner while honing their expertise by attending external training, etc.
In addition, the staff in charge of management of pension assets check the records, policies, systems,
processes, etc. of management of pension assets conducted by said institutions, and comprehensively
evaluate financial instruments for investment and said institutions. In addition, the Company holds a
regular meeting of the “Pension Asset Management Committee,” which is composed of officers in chargeof accounting, personnel, and internal control departments, the representative of the labor union, andothers, to check the records of management of pension assets, deliberate and approve related policies,and confirm the soundness of pension financing and the appropriateness of in-house management
systems.
The Company entrusts several Japanese institutions that have adopted the Japanese Stewardship Codefor handling accumulated funds with the management of pension assets, while leaving the exercise of
voting rights to them, so as to avoid a conflict of interest between beneficiaries and the Company.
[Principle 3-1]
(1) Management Philosophy
Nippon Denko has formulated the following management philosophy.
(Management Philosophy)
Helping create an affluent future through sustainable growth by developing and providing distinctive
products, technologies, and services.
This is described in our website, too. Please refer to it.
URL: https://www.nippondenko.co.jp/en/company/governance/(2) Basic approach and policy for corporate governance
Please refer to Section I-1 “Basic Approach” of this report.
(3) Policy and procedures used by the Board of Directors for determining the remuneration of the senior
management and Directors
a. Policy for determining remuneration(a) As a basic policy, remuneration for senior management and Directors (excluding Directors
who belong to the Audit and Supervisory Committee and Outside Directors, same as in thepolicies mentioned below) shall be an appropriate level based on the position in charge andperformance of the Company.
In detail, the remuneration for the senior management and Directors shall be composed of
fixed monetary remuneration, performance-linked monetary remuneration and stock
remuneration. For Outside Directors, who have the supervising function, the Company pays
only fixed monetary remuneration, while considering their duties.
(b) Fixed monetary remuneration shall be paid on a monthly basis, and its amount shall be
determined in accordance with the Company’s standards, which stipulate that remuneration
shall be paid while considering the positions and managerial tasks of the senior management
and Directors, corporate business performance, and so on.

3(c) Performance-linked monetary remuneration shall be bonuses, which are paid whileconsidering the business performance in the previous fiscal year, etc. The total amount shallbe determined with reference to consolidated ordinary profit of the Company, which is anindicator of results of business activities, allocated according to the positions of the senior
management and Directors, and paid in a specified period every year.
Non-monetary remuneration shall be the shares of the Company (with restrictions on transfer)for giving an incentive to improve the corporate value of the Company sustainably and sharing
value with shareholders further, and its amount shall be determined in accordance with theCompany’s standards, which stipulate that the number of shares of the Company to be given
shall be determined while considering the positions and managerial tasks of the senior
management and Directors, corporate performance, and so on, and provided in a specified
period every year.
(d) Regarding the composition of remuneration for the senior management and Directors, fixedmonetary remuneration is mainly paid, while performance-linked monetary remuneration andnon-monetary remuneration are added with appropriate ratios while considering their businesstypes and categories.
(e) For Directors who belong to the Audit and Supervisory Committee, the Company shall pay
only fixed monetary remuneration while considering their duties.
(f) Regarding monetary remuneration and stock remuneration, the total amount was determinedat the 124th Annual General Meeting of Shareholders held on March 28, 2024.
As of March 2008, Nippon Denko abolished a retirement benefit plan for Directors.
b. Procedure for determining remuneration
Monetary remuneration of senior management and Directors shall be determined based on the
aforementioned policies by the President & CEO under the supervision of the Board of Directors
including independent Outside Directors and with the authority of the Board of Directors. Nonmonetary remuneration of senior management and executive directors shall be determined by the
Board of Directors including independent Directors based on the aforementioned policies.
c. Review body for matters related to remuneration
Nippon Denko established the “Executive Personnel and Remuneration Meeting,” in which Outside
Directors constitute the majority, and said meeting discusses the appropriateness of the amountof remuneration for each position and each person, with reference to external data, and considers
revising the remuneration levels, calculation methods, etc. according to changes in the businessenvironment as appropriate.
The Board of Directors and the President & CEO shall revise the executive remuneration standards
appropriately based on the results of the review by the Executive Personnel and Remuneration
Meeting.
(4) The Board of Directors’ policy and procedures for nominating candidate directors, appointing anddismissing senior managementa. Policy for appointing and dismissing senior management and nominating candidate directors
When appointing senior management and nominating candidate directors of the Company, theBoard of Directors conducts deliberations and makes decisions while taking into account thedetails of the Nippon Denko Group’s businesses, issues to be addressed, and the experience,
knowledge, etc. of each person, to realize optimal scale and composition for the consolidated
management of the Company from the viewpoint of improvement in medium/long-term corporate
value.
The Board of Directors of the Company is composed of Directors who had worked for theCompany and possess specialized capabilities and knowledge for each business of the Company
and Outside Directors who possess the experience and knowledge of diverse businesses,
expertise, insight, and a neutral, objective perspective, so as to realize diversity and a good4

balance. We think that the current scale is appropriate for making decisions swiftly in response tochanges in the business environment and developing an effective corporate governance system.
b. Nomination of candidate directors and appointment of directors at executive posts
The nomination of candidate directors and appointment of directors at executive posts shall be
determined by the Board of Directors, while comprehensively considering abilities, qualities,
leadership, past business performance, etc.
c. Nomination of candidate directors who belong to the Audit and Supervisory Committee
The nomination of candidate directors who belong to the Audit and Supervisory Committee shallbe determined by the Board of Directors while comprehensively considering fairness, universality,
independence, the composition of the Audit and Supervisory Committee after appointment, etc. inaddition to the above-mentioned items after obtaining the consent of the Audit and Supervisory
Committee.
d. Appointment of executive officers (excluding directors at executive posts)
The appointment of executive officers (excluding directors at executive posts) shall be determinedby the President & CEO who was authorized by the Board of Directors in accordance with theRegulations for Executive Officers, while comprehensively considering abilities, qualities,
leadership, past business performance, etc., and the results shall be reported to the Board of
Directors.
e. Dismissal of senior management
Internal regulations stipulate the requirements for dismissing senior management. When a senior
management member satisfies said requirements, he/she will be dismissed through a resolutionof the Board of Directors.
f. Organization for discussing items regarding personnel affairs of the senior management andDirectors
As an organization for broadly discussing items regarding personnel affairs of the senior
management and Directors, the Company established the Executive Personnel and Remuneration
Meeting, which is composed of independent Outside Directors and the President & CEO. Said
meeting shall be chaired by the President & CEO, who collects appropriate opinions fromindependent Outside Directors when necessary.
(5) Explanations on the appointment, dismissal, and nomination when the Board of Directors appoints or
dismisses senior management or nominates candidate directors
When determining candidate directors, the Board of Directors shall make sure that the diversity andappropriate size of the Board of Directors will be secured and at least one of Directors who belong to
the Audit and Supervisory Committee possesses sufficient knowledge of finance and accounting.
The dismissal of any director at an executive post shall be determined by the Board of Directors, inaccordance with the Regulations for Punishment on Executives.
The dismissal of executive officers (excluding directors at executive posts) shall be determined by
the President & CEO authorized by the Board of Directors and the results shall be reported to theBoard of Directors, in accordance with the Regulations for Punishment on Executives.
Regarding the appointment of senior management and the nomination of candidate directors, thebiography of each person shall be mentioned in the reference material for “securities reports” and“convocation notice of general meeting of shareholders.” Every time posts, duties or responsibilities
of Directors and senior management are changed or they are dismissed, the Company will issue apress release to explain the nomination, appointment, or dismissal of each person.
[Supplementary Principle 3-1 (iii)]
Our management philosophy is to help create an affluent future through sustainable growth bydeveloping and providing distinctive products, technologies, and services.
Under this philosophy, we consider sustainability to be a key management strategy for achieving both of5the aims of “contributing to solving social issues through our business activities” and “increasing ourcorporate value through sustainable growth.” Specifically, we are committed to promoting sustainability
in the context of the following material issues.
•Take on challenges to achieve carbon-neutrality in 2050, aiming for the conservation of a sustainableglobal environment and realization of a decarbonized society.
•Provide products, technologies, and services that contribute to decarbonization and circular economy
while creating new business opportunities to contribute to the realization of a sustainable society.
•Create values through management focusing on human capital, such as D&I, and human resource
development.
•Implement fair and equitable purchasing, ensuring the business partners’ commitment for humanrights, environmental protection, etc.
•Increase corporate value over the medium/long-term through constructive communication with thestakeholders.
In our efforts thus far, the Company has been striving to grow sustainably and resolve societal issues.
Going forward, we face major changes in societal circumstances, and it is becoming even more
important to strike a balance between sustained improvement of corporate value and achieving asustainable society by solving societal issues. Therefore, to promote efforts toward sustainability andfurther improve corporate value over the medium/long-term, we established a Sustainability Committee
on January 1, 2022.
Regarding the disclosure of information related to climate change following the TCFD Recommendations,
Nippon Denko has disclosed the outline of related initiatives in our integrated report issued in March2023 and our website.
(Integrated Report: https://www.nippondenko.co.jp/en/ir/library/annual/)(Website: https://nippondenko.co.jp/en/sustainability/environment/)[Supplementary Principle 4-1 (i)]Regarding items other than those to be resolved by the Board of Directors specified by laws, regulations,
the Articles of Incorporation, and the Regulations for the Board of Directors, the Board of Directors of
the Company leaves decisions to the senior management, including the President & CEO, while
specifying the detailed requirements, etc. in the Regulations for Decision-making Authority, and receives
reports regularly to oversee them.
The Company has adopted the executive officer system, for the purposes of streamlining businessadministration by making decision making swifter and clarifying responsibilities.
[Principle 4-9]
Nippon Denko formulated the standards and policy for judging independence when appointing
independent Outside Directors, with reference to Tokyo Stock Exchange’s standards for judging
independence. In addition, we think that one of the standards for appointing them is that there is no riskof a conflict of interest with general shareholders.
[Supplementary Principle 4-10 (i)]Nippon Denko established the “Executive Personnel and Remuneration Meeting,” in which independent
Outside Directors constitute the majority, as mentioned in Section “II Business Management
Organization and Other Corporate Governance Systems regarding Decision-making, Execution ofBusiness, and Oversight.”
In addition, we strive to tighten governance by establishing an organization where independent officers
account for one third or more of Directors.

6

[Supplementary Principle 4-11 (i)]The Board of Directors of Nippon Denko is composed of Directors who had worked for the Company andpossess specialized capabilities and knowledge for each business of the Company and Outside Directors
who possess the experience and knowledge of diverse businesses, expertise, insight, and a neutral,
objective perspective, so as to achieve composition to focus on diversity and strike a good balance.
For your information, the skill matrix, which summarizes the expertise and experience of each Director,
is included in the last page of said report.
[Supplementary Principle 4-11 (ii)]
When determining candidate directors, Nippon Denko checks whether each candidate can fulfill his/herroles and duties appropriately, while considering their concurrent posts as officers of other listedcompanies or the like. The concurrent posts of Directors as officers of other listed companies aredisclosed with reference material for “convocation notice of Annual General Meeting of Shareholders”
and so on every year.
URL: https://www.nippondenko.co.jp/en/ir/meeting/[Supplementary Principle 4-11 (iii)]
Based on a questionnaire survey targeted at all Directors and Audit & Supervisory Board Members, theanalysis of the results and the exchange of opinions, Nippon Denko evaluated the effectiveness of theBoard of Directors in FY 2023 at the meeting of the Board of Directors held in February 2024.
As a result, it was confirmed that all of the operation of the Board of Directors, resolutions, reports, anddeliberation time were appropriate. In addition, it was concluded that the effectiveness of the Board of
Directors of the Company has been secured from a comprehensive viewpoint, because discussions were
held openly and vigorously from the diverse perspectives of Directors and Audit & Supervisory Board
Members from inside and outside the Company.
On the other hand, we will discuss measures for dealing with the issues extracted through theevaluation of the effectiveness of the Board of Directors, such as “strengthening of the supervision of thebusiness portfolio and the deepening of discussions thereof” and “strengthening of the supervision ofsustainability and the deepening of discussions thereof.”
An outside organization creates, collects, and analyzes part of the evaluation questionnaire on theeffectiveness of the Board of Directors to ensure transparency and effectiveness. We use the results of
our annual evaluations to continue to improve governance on an ongoing basis.
[Supplementary Principle 4-14 (ii)]
Nippon Denko has formulated the following policies.
(1) The Company holds training about necessary items for fulfilling the roles, responsibilities, and duties
of inside and outside Directors.
(2) For Outside Directors, the Company explains the management philosophy, businesses, etc. of theCompany when they are appointed, and makes efforts to deepen their understanding of thebusinesses of the Company even after the appointment.
(3) The Board of Directors checks whether or not the above two policies are followed appropriately,
through Directors’ evaluation of the effectiveness of the Board of Directors.
[Principle 5-1]
Nippon Denko has formulated the following policies.
(1) We make efforts to further promote constructive dialogue with our shareholders from theperspectives of achieving sustainable growth and improving corporate value over the medium/longterm.

7(2) The Director in charge of the General Affairs Department oversees dialogues with shareholders andinvestors, and the various internal departments including the General Affairs Department collectively
share information and work to improve measures.
(3) We work to enhance dialogue by proactively providing information and meticulous Q&As toshareholders in General Meeting of Shareholders as well as IR information meetings and individual
small meetings to investors.
(4) We have a system to provide feedback from shareholders and investors to the Board of Directors ina timely and appropriate manner as needed.
(5) We have a system to prevent leaks of insider information in dialogues with shareholders.
The dialogue based on the above policies held in 2023 is as follows.
a. The person who mainly engaged in dialogue with shareholders: Executive officer in charge of IRb. Outline of shareholders who attended the dialogue:
Interview for IR (mainly institutional investors): 12 Japanese companies (24 times), 2 foreigncompanies (5 times)
c. Major dialogue themes and shareholders’ concerns: Business performance, share price,
shareholder return policy, etc.
d. Feedback on opinions and concerns of shareholders grasped through the dialogue to the
management and the Board of Directors
As mentioned in the above policy (4), the details of the dialogue are regularly reported to theBoard of Directors.
[Principle 5-2]
[Measures for realizing business administration focused on the cost of capital and share price]
In “Medium/Long-Term Business Plan – Toward ‘Our Ideal State’ in 2030,” Nippon Denko set the goal ofachieving an ROE of 10% or higher, exceeding cost of shareholder’s equity, and announced that we aim
to improve corporate value through continuous efforts.
Reference: Medium/Long-Term Business Plan - Toward “Our Ideal State” in 2030-Page 9
URL: https://www.nippondenko.co.jp/en/shared/pdf/2024plan.pdf

82.

Capital Structure
Foreign Shareholding Ratio

Less than 10%[Status of Major Shareholders]Number of Shares

Name or Company Name

Owned

Percentage (%)

NIPPON STEEL CORPORATION

30,314,480

22.09

The Master Trust Bank of Japan, Ltd. (Trust Account)

11,816,000

8.61

Mizuho Bank, Ltd.

4,000,000

2.92

Custody Bank of Japan, Ltd. (Trust Account)

2,703,500

1.97

Nippon Denko Business Partner Stock Ownership Association

2,248,800

1.64

Nittetsu Mining Co., Ltd.

2,100,000

1.53

1,728,000

1.26

JP MORGAN CHASE BANK 385781

1,267,807

0.92Mizuho Trust & Banking Co., Ltd.

1,250,000

0.91

Nippon Denko Employees’ Shareholding Association

1,239,490

0.90

Custody Bank of Japan, Ltd., Retirement Allowance Trust,
Mizuho Trust & Banking Co., Ltd.

Name of Controlling Shareholder, if
applicable (excluding Parent Companies)
Name of Parent Company, if applicable―――Not applicable

Supplementary Explanation
Shareholding ratio has been calculated after deducting 2,497 treasury shares.

3.

Corporate Attributes
Listed Stock Exchange and Market
Segment
Fiscal Year-End

DecemberBusiness Sector

Iron & Steel

Number of Employees (Consolidated) as of
the End of the Previous Fiscal YearNet Sales (Consolidated) for the Previous
Fiscal Year
Number of Consolidated Subsidiaries as of
the End of the Previous Fiscal Year

4.

Prime Market

500 or more but fewer than 1,000\10 billion or more but less than \100 billion
Fewer than 10

Policy on Measures to Protect Minority Shareholders in Conducting
Transactions with Controlling Shareholder
―――

9

5.

Other Special Circumstances which may have a Material Impact on
Corporate Governance―――

II. Business Management Organization and Other Corporate
Governance Systems regarding Decision-making, Execution ofBusiness, and Oversight1.

Organizational Composition and Operation
Corporate Governance System

Company with an Audit and Supervisory Committee[Directors]
Number of Directors Stipulated in Articles
of Incorporation
Directors' Term of Office Stipulated in
Articles of Incorporation

15
1

Chairperson of the Board

President & CEO

Number of Directors

11Election of Outside Directors

ElectedNumber of Outside Directors

6

Number of Independent Directors

5Outside Directors’ Relationship with the Company (1)Name

Relationship with the Company*

Attributes

a

b

c

d

e

Kazutoshi Ohmi

From another company

Kazunari Itami

From another company△

Hokuto Nakano

From another company△

Masahiro Tani

From another company

Hiroaki Kimura

From another company

Aogi Suemura

From another company

f

○

g

h

△

△

i

j

k

○

*Categories for “Relationship with the Company”.
(Use “○” when the director presently falls or has recently fallen under the category; “△” when the
director fell under the category in the past; “●” when a close relative of the director presently falls or
has recently fallen under the category; and “▲” when a close relative of the director fell under the
category in the past.)
a. Person who executes business for the Company or its subsidiary
b. Person who executes business for a non-executive director of the Company's parent company
c. Person who executes business for a fellow subsidiaryd. Person/entity for which the Company is a major client or a person who executes business for said
person/entity
e. Major client of the Company or a person who executes business for said clientf. Consultant, accounting expert, or legal expert who receives large amounts of cash or other assets
from the Company in addition to remuneration as a director/company auditor
10

g. Major shareholder of the Company (in cases where the shareholder is a corporation, a person who
executes business for the corporation)h. Person who executes business for a client of the Company (excluding persons categorized as any ofd, e, or f above) (applies to director him/herself only)
i. Person who executes business for another company that holds cross-directorships/cross-editorships
with the Company (applies to director him/herself only)
j. Person who executes business for an entity receiving donations from the Company (applies todirector him/herself only)
k. OtherOutside Directors’ Relationship with the Company (2)NameMembership

DesignationofasSupervisory

Independent

Committee

Director

Supplementary
Explanation of theReasons for Appointment

Relationship[Reason for appointing him as an
Outside Director]
We considered that Mr. Kazutoshi
Ohmi would utilize his expertise,plenty of experience and broad
insight accumulated through the
management of multiple
enterprises for the businessadministration of the Company.
[Reason for designating him as an

Kazutoshi
Ohmi

independent officer]○―――

He has never become an executiveof a major business partner orshareholder of the Company, so hesatisfies the standards forindependence set by Tokyo Stock
Exchange, and does not have a
direct stake in the Company or an
employer thereof. Accordingly, he
is not under the control of theCompany or an employer thereof,
so he is independent, and there will
be no conflict of interest withgeneral shareholders.

11Mr. Kazunari Itami is[Reason for appointing him as anfrom Nippon Steel

Outside Director]

Corporation (a major

We considered that Mr. Kazunaribusiness partner andItami would utilize his knowledge

shareholder of theon the management department

Company) and Nippon

and plenty of experience andSteel Technology Co.,

insight accumulated so far forLtd. (a businessaudits of the Company.

partner of the

Kazunari
Itami

○

○

Company). Nippon[Reason for designating him as an

Steel Corporation

independent officer]

buys our products,

He is not an executive of a major

and the amount ofbusiness partner or shareholder oftransactions in FY

the Company, so he satisfies the

12/2023 was 49,148

standards for independence set by

million yen/year.

Tokyo Stock Exchange, and does
not have a direct stake in the
Company or an employer thereof.
Accordingly, he is not under thecontrol of the Company or an
employer thereof, so he isindependent, and there will be no
conflict of interest with generalshareholders.

Mr. Hokuto Nakano is[Reason for appointing him as anfrom Mizuho Bank,

Outside Director]

Ltd., which is a major

We considered that Mr. Hokuto

financing bank of the

Nakano would utilize plenty ofCompany. The amountexperience and insight aboutof borrowings frominternational finance, financial

this bank accounts for

affairs, and accounting, which

nearly 40% of thehave been accumulated for many

total debt of theyears, for the businessNippon Denko Groupadministration of the Company.

(as of the end of FY
12/2023).
HokutoNakano○[Reason for designating him as
an independent officer]○

He is not an executive of a major
business partner or shareholder of
the Company, so he satisfies thestandards for independence set byTokyo Stock Exchange, and does
not have a direct stake in the
Company or an employer thereof.
Accordingly, he is not under thecontrol of the Company or an
employer thereof, so he isindependent, and there will be no
conflict of interest with generalshareholders.

12[Reason for appointing him as an
Outside Director]
We considered that Mr. Masahiro
Tani would utilize his experienceand insight of organizational
management and DX in
manufacturing sites inside andoutside Japan, which have been
accumulated for many years, forthe business administration of theCompany.

Masahiro
Tani[Reason for designating him as an
○

○

―――

independent officer]
He is not an executive of a major
business partner or shareholder of
the Company, so he satisfies thestandards for independence set byTokyo Stock Exchange, and does
not have a direct stake in the
Company or an employer thereof.
Accordingly, he is not under thecontrol of the Company or an
employer thereof, so he isindependent, and there will be no
conflict of interest with generalshareholders.

Hiroaki
Kimura○Mr. Hiroaki Kimura is[Reason for appointing him as anan executive of

Outside Director]

Nippon SteelWe considered that Mr. Hiroaki

Corporation (a major

Kimura would utilize plenty ofbusiness partner andexperience and insight accumulatedshareholder of thein other companies for audits of theCompany). Nippon

Company.

Steel Corporation buys
our products, and theamount of transactions
in FY 12/2023 was49,148 million
yen/year.

13

[Reason for appointing her as an
Outside Director]
We considered that Ms. Aogi
Suemura would contribute to theaudit and supervision of thebusiness administration of theCompany with plenty of knowledge
and insight on corporate
accounting and management as acertified public accountant, whichhave been accumulated for many
years, and her viewpoint as awoman.
Aogi
Suemura○○―――[Reason for designating her as anindependent officer]
She has never become an executiveof a major business partner orshareholder of the Company, so shesatisfies the standards forindependence set by Tokyo Stock
Exchange, and does not have a
direct stake in the Company or an
employer thereof. Accordingly, she
is not under the control of theCompany or an employer thereof,
so she is independent, and there
will be no conflict of interest withgeneral shareholders.

[Supervisory Committee]
Composition of Supervisory Committee and Attributes of the Chairperson

Supervisory
Committee

All Committee

Full-time

InsideOutsideMembers

Members

Directors

Directors

5

Appointment of Directors and/or Staff to
Support the Supervisory Committee

10Committee Chair
5

OutsideDirector

Appointed

Matters Concerning Independence of Said Directors and/or Staff from Executive
Officers/Reasons for Adopting Current System
We established the secretariat of the Audit and Supervisory Committee and employed staff(secretariat members), to assist said committee in smooth operations. We do not have any
Directors who support the duties of the Audit and Supervisory Committee.
Secretariat members engage in operations under the instruction of the Audit and Supervisory
Committee. For the replacement, evaluation, etc. of secretariat members, General Manager of the
Personnel Department shall consult with the Audit and Supervisory Committee in advance. With this14

system, we secure the independence of secretariat members from Executive Directors and the chainof command and the effectiveness of instructions from the Audit and Supervisory Committee.

Cooperation among the Supervisory Committee, Accounting Auditors and Internal Audit
Department
The Audit and Supervisory Committee makes efforts to share information and cooperate with theInternal Control Department and accounting auditors, and regularly holds meetings, including
sessions for exchanging opinions with the President & CEO and sessions for receiving reports on
audit plans and results from accounting auditors, to realize fair audits.
In addition, the Internal Control Department mutually reports audit plans and results to the Audit andSupervisory Committee and accounting auditors and regularly exchanges opinions with them in orderto cement the mutual cooperation among the Audit and Supervisory Committee and accounting
auditors for proper audits.

[Voluntary Established Committee(s)]Voluntary Establishment of Committee(s)equivalent to Nomination Committee or

Established

Remuneration Committee

Status of Voluntarily Established Committee, Attributes of Members Constituting theCommittee and the Committee Chairperson
Committee’s

All

Full-time

InsideOutsideOutsideName

Members

Members

Directors

Directors

Experts

4

0

1

3

0

0

4

0

1

3

0

0

Other

Chairperson

Voluntarily
Established

Executive

Committee

Personnel andEquivalent toRemuneration

Nomination

Meeting

InsideDirector

Committee
Voluntarily
Established

Executive

Committee

Personnel andEquivalent toRemuneration

Remuneration

Meeting

InsideDirector

Committee

Supplementary Explanation
The “Executive Personnel and Remuneration Meeting,” in which the President & CEO serves aschairperson and Outside Directors constitute the majority, holds a meeting when necessary, todiscuss the personnel affairs about the senior management and Directors, assess the appropriatenessof the amount of remuneration, and revise remuneration levels, calculation methods, etc. timely andappropriately according to changes in the business environment.
In addition, we are reviewing the composition of said meeting. As soon as the new composition isdetermined, we will update information.

15

[Matters Concerning Independent Directors]
Number of Independent Directors

5

Other Matters Concerning Independent Directors
We referred to Tokyo Stock Exchange’s standards for judging independence, when formulating ourstandards or policies for judging the independence of Outside Directors. Another requirement is that
there is no risk of causing a conflict of interest with general shareholders.

[Incentives]
Implementation Status of Measures related

Other

to Incentives Granted to Directors

Supplementary Explanation for Applicable Items
Through the resolution at the 119th Annual General Meeting of Shareholders held on March 28, 2019,
we adopted a system for treasury share-based remuneration (with restrictions on transfer) for giving
our Directors, excluding Outside Directors, an incentive to improve our corporate value in a sustainable
manner and sharing value with shareholders.
Persons Eligible for Stock Options

Supplementary Explanation for Applicable Items―――[Director Remuneration]
Status of Disclosure of Individual Director’s
Remuneration

No Disclosure for any Directors

Supplementary Explanation for Applicable Items
Annual remuneration for 4 Directors (excluding Outside Directors): 155 million yen
Annual remuneration for Audit and Supervisory Committee members (excluding outside Audit andSupervisory Committee members): None
Annual remuneration for 7 outside officers (excluding an unpaid outside Audit and Supervisory
Committee member): 56 million yen
Policy on Determining Remuneration
Amounts and Calculation Methods

Established

Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods
Please refer to “(3) Policy and procedures used by the Board of Directors for determining the
remuneration of the senior management and Directors” of Principle 3-1 of Section I-1 “Disclosure
16Based on each Principle of the Corporate Governance Code” of this report.

[Support System for Outside Directors](1) At the monthly meetings of the Board of Directors, we report the situation of business execution to each
Outside Director, and distribute reference material and give explanations regarding the items to bedeliberated and reported at each meeting of the Board of Directors to each Outside Director in advance.
(2) The General Affairs Department serves as the secretariat of the Board of Directors, fulfilling functions tocommunicate with Outside Directors and conduct coordination, including the distribution of notifications
and reference materials to Outside Directors and scheduling, so that necessary information is conveyed
without fail.

2.

Matters Concerning Functions of Business Execution, Auditing andSupervision, Nomination, and Remuneration Decisions (Overview of Current
Corporate Governance System)

The outline and approach of the current corporate governance system are mentioned in Section I-1 “BasicApproach” of this report. Please refer to them as well as the following supplementary explanations aboutbusiness execution, audits, supervision, nomination, determination of remuneration, etc. and the schematic
diagram at the end of this report.
(1) Business execution
In Nippon Denko, the Board of Directors makes important decisions about business execution, including
items to be resolved by the Board of Directors specified by laws, regulations, the Articles ofIncorporation, and the Regulations for the Board of Directors. Some important decisions about businessexecution are left to Directors.
(2) Audits and supervisiona. Supervision by the Board of Directors
In Nippon Denko, the Board of Directors, which is composed of 11 Directors (including 6 Outside
Directors), makes important decisions about overall business administration and supervises overallbusiness execution.
For details, please refer to Section II-3 “Reasons for Adoption of Current Corporate Governance
System” of this report.
We have signed contracts for specifying that the limit of liability described in Article 423, Paragraph 1of the Companies Act shall be the minimum liability amount set forth in Article 425, Paragraph 1 of
the Companies Act with Directors (excluding Executive Directors, managers, and other employees),
so that Directors can fulfill their expected roles to a sufficient degree when executing their duties.
b. Audits by the Audit and Supervisory Committee
The Audit and Supervisory Committee monitors the business operation of Directors and the status ofgovernance from neutral and fair perspectives, to secure the sound growth of the Nippon Denko
Group based on an appropriate corporate governance system.
The Audit and Supervisory Committee is composed of 5 Directors, who are all Outside Directors. Fouramong them were registered as independent officers at Tokyo Stock Exchange.
Mr. Kazunari Itami, who is a standing member of the Audit and Supervisory Committee, chairs the
Audit and Supervisory Committee and other members are Mr. Hokuto Nakano, Mr. Masahiro Tani, Mr.
Hiroaki Kimura, and Ms. Aogi Suemura, who are Directors who belong to the Audit and Supervisory
Committee.
We have signed contracts for specifying that the limit of liability described in Article 423, Paragraph 1

17

of the Companies Act shall be the minimum liability amount set forth in Article 425, Paragraph 1 of
the Companies Act with Audit and Supervisory Committee members, so that they can fulfill their
expected roles to a sufficient degree when executing their duties.
For information on the system of the Audit and Supervisory Committee, please refer to Section II-3
“Reasons for Adoption of Current Corporate Governance System” of this report.
c. Accounting audits
Nippon Denko has signed an audit contract with Ernst & Young ShinNihon LLC, to undergo audits inaccordance with the Companies Act, the Financial Instruments and Exchange Act, etc. Certified public
accountants in charge of accounting audits for Nippon Denko can conduct said audits for up to 7 years.
The assistants in audits are 5 certified public accountants and 11 people in charge of audits. We haveno special stake in said auditing corporation nor executive employees of said auditing corporation
engaging in audits for Nippon Denko.
d. Internal audits
Regarding internal audits, the Internal Control Department continuously audits each department andeach group company in cooperation with the members of the Audit and Supervisory Committee andaccounting auditors. The basic policy for internal audits is to review and evaluate the systems for
managing and conducting business activities of Nippon Denko and the status of business execution
from the viewpoints of legality, rationality, and risk control, provide information on audit results, andgive proposals for improvement and rationalization, in order to preserve the assets of the Company,
streamline business administration and then contribute to the continuous corporate growth.
(3) Nomination and determination of remuneration
Please refer to “(3) Policy and procedures used by the Board of Directors for determining the
remuneration of the senior management and Directors” and “(4) The Board of Directors’ policy andprocedures for nominating candidate directors, appointing and dismissing senior management” of“Principle 3-1” of Section I-1 “Disclosure Based on each Principle of the Corporate Governance Code” ofthis report.

3.

Reasons for Adoption of Current Corporate Governance System

Nippon Denko makes continuous efforts to tighten corporate governance with the aim of achieving
sustainable growth and improving corporate value. We chose to be “a company with the Audit andSupervisory Committee” in order to streamline decision making and business execution processes bytransferring part of decision-making authority for the execution of important operations from the Board of
Directors to Directors, deepen discussions on medium/long-term management policies, and strengthen the
supervisory functions of the Board of Directors, thus tightening corporate governance and improving
corporate value further.
(1) Board of Directors
In Nippon Denko, the Board of Directors, which is composed of 11 Directors (including 6 Outside
Directors), makes important decisions about overall business administration and supervises overallbusiness execution.
So that the Board of Directors could make decisions appropriately from diverse viewpoints andstrengthen the supervising function, 6 Outside Directors were appointed at the 124th Annual General
Meeting of Shareholders held on March 28, 2024, and 5 Directors among them were registered as
independent officers at Tokyo Stock Exchange. We believe that corporate governance can be tightenedby enhancing the supervising and overseeing functions of independent Outside Directors.
The Board of Directors of the Company is chaired by the President & CEO Yasushi Aoki, and othermembers are Yoshimi Yamadera, Jiro Kobayashi, Masakazu Tsumoda, Yasuhide Miyake, Kazutoshi Ohmi,

18

Kazunari Itami, Hokuto Nakano, Masahiro Tani, Hiroaki Kimura, and Aogi Suemura, who are Directors.
(2) Audit and Supervisory Committee
The Audit and Supervisory Committee monitors the economic activities of Directors and the status ofgovernance from neutral and fair perspectives, to secure the sound growth of the Nippon Denko Group
based on an appropriate corporate governance system. The Audit and Supervisory Committee iscomposed of 5 Directors, who are all Outside Directors. Four among them were registered as
independent officers at Tokyo Stock Exchange.
Mr. Kazunari Itami, a Director who is a standing member of the Audit and Supervisory Committee,
chairs the Audit and Supervisory Committee and other members are Mr. Hokuto Nakano, Mr. MasahiroTani, Mr. Hiroaki Kimura, and Ms. Aogi Suemura, who are Directors who belong to the Audit andSupervisory Committee.
Furthermore, our system for the Audit and Supervisory Committee sufficiently maintains neutrality andobjectivity in the function of supervising business administration based on the following points, and wehave established a system for appropriate corporate governance entrusted by shareholders, so theCompany has established an appropriate governance system and is operating it effectively as acompany with an Audit and Supervisory Committee, securing the effectiveness of supervision ofbusiness administration.
a. The Audit and Supervisory Committee makes appropriate judgments from the independent andobjective viewpoint, while considering the fiduciary responsibility toward shareholders, to fulfill its
roles and duties.
b. In engaging in supervision, Directors who belong to the Audit and Supervisory Committee makeefforts to secure transparent, fair decision making of the Company and establish an environment inwhich the Company can make decisions swiftly and boldly, exercise their authority proactively andactively without becoming conservative too much, and appropriately express their opinions to theBoard of Directors and the management.
c. While keeping the purposes of the Companies Act in mind, the Audit and Supervisory Committee will
improve its effectiveness by organically combining the firm independence of Outside Directors who
belong to the Audit and Supervisory Committee and the advanced information gathering skill of a
Director who is a standing member of the Audit and Supervisory Committee.
d. So that Outside Directors who belong to the Audit and Supervisory Committee can polish theirinformation gathering skills with no effect on their independence, the Audit and Supervisory
Committee shall allow them to attend regular meetings of the Audit and Supervisory Committee,
meetings with the President and CEO, etc. when necessary, while a Director who is a standing
member of the Audit and Supervisory Committee makes efforts to share necessary information hehas obtained, to ensure the cooperation with Outside Directors.
e. The nomination of candidate directors who belong to the Audit and Supervisory Committee shall be
determined by the Board of Directors while considering their abilities, qualities, past businessperformance, etc. and comprehensively taking into account fairness, universality, independence, thecomposition of the Audit and Supervisory Committee after appointment, etc. after obtaining theconsent of the Audit and Supervisory Committee.
f. The Board of Directors shall make sure that at least one of Directors who belong to the Audit andSupervisory Committee possesses sufficient knowledge of finance and accounting, at the time ofmaking a decision in the above item.

19

III. Implementation of Measures for Shareholders and Other
Stakeholders
1.

Measures to Vitalize General Meeting of Shareholders and Facilitate Exerciseof Voting Rights
Supplementary Explanation
Early Posting of Notice of the General
Meeting of Shareholders
Electronic Exercise of Voting Rights

We dispatch a “convocation notice of General Meeting of Shareholders”
by the deadline specified by laws and regulations (at least two weeks
prior to General Meeting of Shareholders).
We have established an environment in which voting rights can be
exercised via the Internet by using a PC or smartphone.

Participation in a Platform for the Electronic
Exercise of Voting Rights and Other
Initiatives to Enhance Environment for
Institutional Investors to Exercise Voting

The Company has been registered in the platform for exercising voting
rights for “institutional investors,” which is operated by ICJ, Inc.

RightsProvision of Notice (or Summary of Notice)of the General Meeting of Shareholders in
English“Convocation notices” and “Reference material regarding General
Meeting of Shareholders” have been translated into English, and they
are available in the websites of Nippon Denko and Tokyo Stock
Exchange.
We have adopted a system for electronically providing referencematerial regarding General Meeting of Shareholders. “Reference

Othermaterial regarding General Meeting of Shareholders” is uploaded to thewebsites of Nippon Denko and Tokyo Stock Exchange by the deadline
specified by laws and regulations (at least three weeks prior to General
Meeting of Shareholders).

2.

Status of IR-related Activities
Explanation by arepresentative
Supplementary Explanation

director or arepresentative
executive officer

Regular Investor Briefings held for
Analysts and Institutional Investors

We hold a financial results briefing session
for IR twice a year (reporting interim andannual results).
We disclose convocation notices of General
Meeting of Shareholders, securities
reports, brief reports on financial results,

Online Disclosure of IR Informationreference material for financial results
briefing sessions for IR, correspondence toshareholders, and other items to bedisclosed.
The Director in charge of the General
Affairs Department manages all dialogues

Establishment of Department and/orwith shareholders and investors, and thePlacement of a Manager in Charge of IR

Publicity and IR Section has been
established in the General Affairs
Department.

Other

We hold meetings for security analysts andfor institutional investors.

20

Held

3.

Status of Measures to Ensure Due Respect for Stakeholders
Supplementary Explanation“Management Philosophy,” “Corporate Conduct Charter of the Nippon
Denko Group,” and “Employee Conduct Guidelines of the Nippon Denko
Group” stipulate provisions regarding the respect for stakeholders’Establishment of Internal Rules

standpoints, such as a provision that the Company shall make efforts to

Stipulating Respect for the Position ofproperly cooperate with stakeholders while recognizing that the

Stakeholders

sustainable growth of the Company and the creation of medium/longterm corporate value are attributable to the provision of resources andcontribution by various stakeholders, including employees, customers,
business partners, creditors, and local communities.
Considering the pursuit of sustainability as an important management
strategy, the Nippon Denko Group has established the “Sustainability
Committee” to implement concrete measures and regularly report thesituation to the Board of Directors. In addition, our initiatives, the status of
implementation of them, etc. are disclosed in our integrated report.
(https://nippondenko.co.jp/en/ir/library/annual/)
Considering the following five items as material issues, this committee
aims to “contribute to the resolution of societal issues through ourbusiness activities” and “increase our corporate value through sustainablegrowth” through group-wide initiatives.

Implementation of Environmental
Preservation Activities and CSR Activities,

Material issuesetc.

Take on challenges to achieve carbon-neutrality in 2050, aiming for theconservation of a sustainable global environment and realization of adecarbonized society.
Provide products, technologies, and services that contribute todecarbonization and circular economy while creating new business
opportunities to contribute to the realization of a sustainable society.
Create values through management focusing on human capital, such as
D&I, and human resource development.
Implement fair and equitable purchasing, ensuring the business partners’commitment for human rights, environmental protection, etc.
Increase corporate value over the medium/long-term throughconstructive communication with the stakeholders.

Formulation of Policies, etc. on Provision

We disclose accurate information in a timely manner by utilizing websites,of Information to Stakeholders

etc.

21

IV. Matters Concerning the Internal Control System
1. Basic Views on Internal Control System and Status of Development
The Nippon Denko Group has formulated the Corporate Conduct Charter of the Nippon Denko Groupand the Employee Conduct Guidelines of the Nippon Denko Group in order to establish corporate ethics,
observe the laws in Japan and overseas and the spirit thereof, and earn trust as a good corporate
citizen. We have set up a permanent Internal Control Committee with the aim of promoting companywide compliance activities and established a help desk for receiving inquiries and reports so that we
can identify and correct wrongdoings as swiftly as possible, if any.
As part of our risk management system, the permanent Internal Control Committee is responsible formanaging and mitigating management risks, and for various risks that may arise in overall businessactivities, we share information with the Audit and Supervisory Committee and submit risk analysis
and countermeasures as well as reports and written opinions to the Board of Directors regularly or asneeded. In the unlikely event that a business crisis which may lead to a significant loss occurs, we will
immediately set up a Crisis Management Headquarters and implement procedures to promptly take thenecessary actions in order to minimize the damage and impact.
(Progress of development of an internal control system)
The Board of Directors of the Company has passed a resolution on the “Basic Policy on Internal Control”
as follows as a system for ensuring proper business activities.
The Company strives to become a corporation that gains the trust of society while enhancing ourcorporate value and ethics pursuant to our management philosophy and the Corporate Conduct
Charter of the Nippon Denko Group.
In addition, so as to comply with related laws and regulations and ensure the reliability of our financial
reports and the effectiveness and efficiency of our business activities, we developed and properly
operate the following internal control systems (including systems for ensuring proper businessactivities) and endeavor to continuously improve them from the perspective of further enhancement ofour corporate governance.
(1) Matters required for the execution of the duties of the Audit and Supervisory Committee(i) Matters regarding the Directors and the employees who are appointed to assist the Audit andSupervisory Committee in its duties
We established the secretariat of the Audit and Supervisory Committee and employedsecretariat members, to assist said committee in smooth operations. We do not have any
Directors who support the duties of the Audit and Supervisory Committee.
(ii) Matters regarding the independence of the secretariat members from other Directors (excluding
the Directors who belong to the Audit and Supervisory Committee), and matters in regard toensuring the effectiveness of instructions given by the Audit and Supervisory Committee to thesecretariat members
Secretariat members engage in operations under the instruction of the Audit and Supervisory
Committee. For the replacement, evaluation, etc. of secretariat members, General Manager of
the Personnel Department shall consult with the Audit and Supervisory Committee in advance.
With this system, we secure the independence of secretariat members from Directors
responsible for the duties (Executive Directors) and the chain of command and the effectivenessof instructions from the Audit and Supervisory Committee.
(iii) System allowing the Directors and the employees of the Company and the subsidiaries todeliver reports to the Audit and Supervisory Committee

22

The Directors (excluding the Directors who belong to the Audit and Supervisory Committee),the executive officers, the department heads, and other employees of the Company shall share
information with the Audit and Supervisory Committee by delivering reports directly or throughthe Company’s relevant organizations, such as the Internal Control Department, to the Audit
and Supervisory Committee about how the duties are executed, how the internal control
systems are developed and operated (including the operation of the internal whistleblower
system; hereinafter the same), major accidents and incidents, and other matters concerning
risk management in a timely and appropriate manner pursuant to relevant laws and regulationsor the Company’s internal regulations, and by giving reports on other important matters related
to business operations in meetings of the Board of Directors, executive committee, the Internal
Control Committee, etc.
Furthermore, the Directors, the Audit and Supervisory Committee members, and the employeesof the subsidiaries shall present reports directly or through the Company’s relevantorganizations, such as the Internal Control Department, to the Audit and Supervisory
Committee about how the duties are executed, how the internal control systems are developed
and operated, major accidents and incidents, and other matters concerning risk management ina timely and appropriate manner pursuant to relevant laws and regulations or the Company’s
internal regulations.
(iv) System for ensuring that persons who deliver a report as specified in the preceding item are
not treated disadvantageously because of the report
The Company and the subsidiaries do not treat anyone who has delivered a report as specified
in the preceding item disadvantageously because of the report.
(v) Matters regarding policies on how to process expenses that arise out of the execution of theduties of the Audit and Supervisory Committee
The Company records expenses that we regard necessary for the Audit and Supervisory
Committee to execute the duties in budget. In regard to an urgent or temporary payment madeby the committee, we accept a request from the committee for reimbursement of the expense
after the payment.
(vi) Other systems for ensuring that audits by the Audit and Supervisory Committee are performed
effectively
The General Manager of the Internal Control Department cooperates closely with the Audit andSupervisory Committee on a regular basis or as needed by, for example, exchanging opinions
about how the internal control systems are operated. In addition, the Company strives todevelop an environment that allows the committee to carry out audits organizationally andefficiently.
(2) System for ensuring that the execution of the duties of the Directors complies with relevant laws
and regulations, and the Articles of Incorporation, and system for ensuring proper businessactivities of the corporate group consisting of the Company and the subsidiaries(i) System for ensuring that the execution of the duties of the Company’s Directors complies with
relevant laws and regulations, and the Articles of Incorporation <System for ensuring the
Directors’ compliance with relevant laws and regulations>
The Board of Directors makes important business decisions and receives reports on businessadministration in accordance with the Regulations for the Board of Directors. The Directors
execute the duties assigned to each of them according to the decisions made by the Board of
Directors and deliver reports to the Board of Directors.
(ii) System regarding retention and management of information on the execution of the duties of
the Company’s Directors <Information management system>
All kinds of information on the execution of the duties of the Directors shall be properly
recorded and retained as printed documents or via electronic media by thoroughly managing

23

information and formulating regulations for document management in accordance with theRegulations for Information Management. In addition, we ensure that such information anddocuments are available to the Directors and the Audit & Supervisory Committee members at
all times.
(iii) Rules and other systems regarding management of the risk of loss at the Company <Risk
management system>
In the unlikely event that a business crisis which may lead to a significant loss occurs, we will
immediately set up a Crisis Management Headquarters s and swiftly take necessary action.
The head of each department identifies and assesses business risks in their departments andexecutes their respective duties according to the authorities and responsibilities set forth in theinternal regulations. Concerning such risks as safety and health, environment and disasterprevention, information management, intellectual property management, quality control,
purchasing management, and reliability of financial reports, the relevant organizations at our
Head Office develop rules and regulations from the company-wide perspective and ensure that
all the departments have been well-versed in the rules and regulations.
(iv) System for ensuring that the Company’s Directors execute the duties efficiently <System forensuring the efficiency of the duties>
The Directors strive for efficient execution of duties through efforts to set company-wide basic
policies and numerical targets, which will be shared with the Directors and the employees, as
medium-term business plans and thoroughly disseminate them in the Nippon Denko Groupand to add agile measures by not only summarizing and reviewing performance targets ofeach department biannually but also repeatedly reviewing progress with performance targets
during each fiscal year.
A resolution on execution of such matters as budget compilation, and investment and loan
including capital investment, will be passed by the Board of Directors through deliberations byrelevant committees and executive committee. Pursuant to the internal regulations, theexecutive officers, the general managers, or other related employees execute the duties thatare based on decisions made by such organizations as the Board of Directors.
(v) System for ensuring that the execution of the duties of the Company’s employees complies
with relevant laws and regulations, and the Articles of Incorporation <System for ensuring theemployees’ compliance with relevant laws and regulations>
The Company has formulated the Corporate Conduct Charter of the Nippon Denko Group andthe Employee Conduct Guidelines of the Nippon Denko Group with the aim of enhancing the
Nippon Denko Group’s corporate ethics and making all employees comply with relevant laws
and regulations, the Articles of Incorporation, and related internal regulations more thoroughly.
In addition, we set up and operate an internal whistleblower system for dealing with inquiries
and reports regarding compliance. The general managers of each department ensure that theemployees in their departments thoroughly understand and comply with relevant laws,
regulations, and rules concerning their own duties and endeavor to prevent violations of suchlaws and regulations. The employees of the Company are obliged to comply with relevant laws,
regulations, and rules and appropriately execute their duties. We check the efficiency of ourbusiness activities and risks of misconduct through monitoring activities by the Internal Control
Department. The Internal Control Department delivers reports about audit results to the Boardof Directors and the Internal Control Committee as required. The employees of the Company
are obliged to comply with relevant laws, regulations, and rules and appropriately execute theirduties. Any employees who violated relevant laws or regulations will be punished severely inaccordance with the rules of employment.
(vi) System for ensuring proper business activities of the corporate group consisting of theCompany and the subsidiaries <System concerning management of the corporate group>

24The Company and each of the subsidiaries share business strategies with each other, operatebusiness as a corporate group consisting of the Company and the subsidiaries, and thoroughly
educate employees in such matters as business operation policies in accordance with theCompany’s management philosophy while taking into account the business characteristics ofeach company.
The Company draws up fundamental rules regarding management of the subsidiaries in such
regulations as the Regulations for Management of Affiliated Companies and strives to enforce
them appropriately. The Company supervises and audits each of the subsidiaries by sending
the Directors and the Audit and Supervisory Committee members and carries out internal
audits of each subsidiary regularly via the Internal Control Department.
Each subsidiary endeavors to enrich their policies on internal control by establishing anddeveloping internal control systems centered on autonomous internal control and sharing
information with the Company. The department in charge at the Company checks how eachsubsidiary implements internal control and, as necessary, provides support for improvement.
The Internal Control Department grasps and assesses the status of internal control in thecorporate group consisting of the Company and the subsidiaries, and gives instructions andadvice to the department in charge and the subsidiaries. Specific systems based thereon are
as follows:a. System for delivering reports to the Company about matters regarding the execution of theduties of the Directors and other relevant employees of the subsidiaries
The department in charge at the Company provides advice while requesting each subsidiary
to deliver reports regarding matters important for the Company’s consolidated business
operations or for business operations of the relevant subsidiary, including business plans,
important business policies, and settlement of accounts at each subsidiary.
b. Regulations and other systems concerning management of the risk of loss at thesubsidiaries
The department in charge at the Company requests each subsidiary to deliver reports about
how they manage risks and provides advice.
c. System for ensuring that the Directors of subsidiaries execute the duties efficiently
The department in charge at the Company assesses business performance of eachsubsidiary and offers support relating to management.
d. System for ensuring that the execution of the duties of the Directors and employees ofsubsidiaries complies with relevant laws and regulations, and the Articles of Incorporation
The department in charge at the Company requests each subsidiary to deliver reports aboutcompliance with relevant laws and regulations, and development and operation of internal
control and provides necessary support and advice. In addition, it requests each subsidiary
to present reports regarding any acts that may be against relevant laws and regulations
and facts of violations of relevant laws and regulations at their companies, and swiftly
reports in this regard to the Internal Control Department.

2. Basic Views on Measures for Eliminating Anti-Social Forces and Status ofDevelopment
The Nippon Denko Group has clearly specified in the Corporate Conduct Charter of the Nippon Denko
Group, the Employee Conduct Guidelines of the Nippon Denko Group, and other related internal
regulations that we decisively confront anti-social forces and organizations that threaten social orderand safety, and complies with the regulations.

25

V. Other1.

Adoption of Anti-Takeover Measures
Adoption of Anti-Takeover Measures

AdoptedSupplementary Explanation for Applicable Items
The summary of the “basic policies related to the way a person is to control the decisions on thefinancial and business policies of the Company” as stipulated in Item 3, Article 118 of the Ordinance for
Enforcement of the Companies Act is as follows:(1) Basic policy concerning the Company’s control
Considering stable and sustainable improvement of the corporate value as the top priority for ourbusiness operations, the Company makes daily efforts toward it. The Company, therefore, believes
that a person who is to control the decisions on financial and business policies of the Company
must be a person who fully understands the Company’s management philosophy, a wide variety ofsources for the corporate value, and the relationship of trust with the stakeholders supporting theCompany and is capable of ensuring and enhancing the common interests of shareholders as wellas the Company’s corporate value in the medium/long-term.
The shares in the Company as a listing company are traded freely by a number of shareholders andinvestors through a stock exchange. Therefore, an ideal form for controlling the decisions on
financial and business policies of the Company is, in principle, determined based on the will of theshareholders, and we believe that whether or not to accept a proposal for purchase of theCompany’s shares that is accompanied by the transfer of the right to control the Company should
be decided according to the will of all the shareholders eventually.
Not a few purchases or proposals for purchase of the Company’ shares on a large scale areinappropriate, including purchases intended obviously to abuse the Company’s shares, ones that
may in fact force our shareholders to sell the shares they hold, ones that may damage the common
interests of shareholders as well as our corporate value considering the purpose, and ones that do
not allow the Board of Directors and the shareholders of the Company to have an adequate amountof information or time for considering the conditions of the purchase or the Board of Directors of
the Company to have information or time for offering alternative plans. We believe that parties that
conduct such large-scale purchase or offer a proposal for such large-scale purchase are notappropriate as a person who is to control the decisions on financial and business policies of theCompany, and it is essential to build a framework for preventing large-scale purchase and othersimilar acts that are against the Company’s corporate value and the common interests ofshareholders.
(2) Initiatives that contribute to the realization of the basic policy concerning the Company’s control
The officers and the employees of the Company all together are taking the following measures inorder to enhance our corporate value and the common interests of shareholders so that a multitudeof investors can continue to invest in the Company over the long term. We believe that these
initiatives will contribute to realizing the basic policy concerning the Company’s control as specified
in (i) above.
Initiatives toward enhancement of the corporate value through formation of a stronger
management foundation
The Company has formulated the 9th Medium-Term Business Plan that ends in 2027 and framed
specific policies to pursue for the coming four years.
26

We will establish a sounder earnings and financial structure by striving to boost the productivity andreduce inventories in the Ferroalloys Business. At the same time, we will propel forward researchand development for manufacturing carbon-free ferroalloys with the aim of curbing CO2 emissions
by 45% or more by 2030. Regarding the Overseas Business, we will continue stable production andopen up markets by taking advantage of our competitive edge with green electricity provided byhydroelectric power generation.
In the Functional Materials Business, we will expand our zirconium oxide production capacity by
40% in order to fulfill the demand for electronic components that is expected to grow in the future.
Furthermore, we will boost earnings by expanding sales of our one-of-a-kind products that
contribute to eliminating geopolitical risks and by materializing the results of our research anddevelopment in the field of next-generation battery materials.
In the Incineration Ash Recycling Business, we will strive to increase the number of incineration ash
melting furnaces from four to seven by 2030 by steadily conducting price pass-through of the risein electricity and other costs in the treatment prices, securing greater cooperation withmunicipalities and local communities, and collecting larger quantities of incineration ash.
In the Aqua Solutions Business, we will enhance our capabilities in order to meet the demand forremoving boron contained in the water released from industrial waste treatment plants. We will
also contribute to development of a hydrogen society by expanding sales of our pure waterproduction systems.
The Electric Power Business will make contribution to realizing carbon neutrality at the Company byensuring long-term and stable earnings through the Feed-in Tariff (FIT) program and receiving nonfossil certificates while taking advantage of the environmental value of hydroelectric power
generation.
The immediate steps that we will take are to build a stronger foundation towards the future bymoving forward with development of infrastructure and enhancement of the structure of theoperation and manufacturing departments and ironing out issues on a steady basis regarding
sustainability policies, such as green transformation (GX) and digital transformation (DX), in
research and development and the functionality department, and the Nippon Denko Group will workin unity and make every effort for reaching our “ideal state.”(3) Summary of the system for preventing control over decisions on the Company’s financial andbusiness policies by a person who is deemed inappropriate in light of the basic policy concerning
the Company’s control
The Company resolved to continue the “Countermeasures Regarding a Large-scale Purchase of theCompany’s Shares” (hereinafter “the Plan”) at the meeting of the Board of Directors held on
February 24, 2023 as an initiative for preventing control over decisions on the Company’s financial
and business policies by a person considered inappropriate in light of the basic policy concerning
the Company’s control and ensuring and improving our corporate value and the common interestsof shareholders, and obtained approval for continuing the Plan at the 123rd Annual General Meetingof Shareholders held on March 30, 2023.
Large-scale purchase of the Company’s shares covered by the Plan is a purchase of the Company’s
share certificates, which is aimed at acquiring 20% or more of the voting rights to a specified
shareholder group, or a purchase of the Company’s share certificates, which consequently allows
the purchaser to acquire 20% or more of the voting rights to a specified shareholder group, andparties that perform such purchase are referred to as “large-scale purchasers.”
In the Plan, the basic rules for ensuring that information is provided and time is secured forconsideration at the time of a large-scale purchase (hereinafter the “Large-scale Purchase Rules”)
stipulate that (1) a large-scale purchaser provides a necessary and adequate amount of information
to the Board of Directors of the Company in advance and (2) after completion of the provision of27

necessary information, a maximum of 60 days for a purchase of all the shares in the Company
through a takeover bid in which the cost can be paid only by cash, or a maximum of 90 days forother large-scale purchases is set as a Board of Directors evaluation period during which the Boardof Directors of the Company carries out assessment and consideration, and that large-scalepurchase shall be begun after the Board of Directors evaluation period, or the shareholder
consideration period if they are set.
In the Plan, in principle, no countermeasures will be implemented against large-scale purchase aslong as a large-scale purchaser complies with the Large-scale Purchase Rules; provided, however,that we may take any possible countermeasures permitted by the Companies Act, other relevantlaws and regulations, and the Company’s Articles of Incorporation, within a necessary andreasonable range, such as allotment of stock acquisition rights without contribution, when a largescale purchaser does not comply with the Large-scale Purchase Rules, or when the Company has
determined that a large-scale purchase of the Company’s shares significantly damages our
corporate value and the common interests of shareholders, such as irreparable damage inflicted on
the Company due to the purchase, even if a large-scale purchaser has complied with the rules.
In regard to implementation of countermeasures, the Board of Directors consults an independent
committee consisting of members elected from the Outside Directors or outside experts who are
independent of the management that carries out the business of the Company about whether or
not countermeasures should be imposed before implementation, and the independent committee
provides advice within the Board of Directors evaluation period regarding whether or notcountermeasures should be taken. The Board of Directors of the Company respects advice given by
the independent committee as much as possible when making a decision on whether or not to
impose countermeasures.
The Plan expires at the end of the 126th Annual General Meeting of Shareholders scheduled forMarch of 2026. Even while the Plan is effective,(i) A resolution is made at General Meeting of Shareholders of the Company to discontinue the Plan(ii) A resolution is made by the Board of Directors of the Company to discontinue the Plan, then thePlan shall be discontinued at that point.
(4) Reasons to prove why the Plan is in line with the basic policy concerning the Company’s control, isconsistent with the corporate value of the Company and the common interests of shareholders,and is not intended to maintain positions of corporate officers of the Company
We believe that,(i)

On the fact that the Plan meets the requirements of the guidelines regarding takeover
defenses(ii) On the fact that the Plan has been introduced in order to secure and improve the common
interests of shareholders(iii) On the fact that the Plan reflects the will of shareholders(iv) On the fact that the Plan prioritizes the judgment of highly independent outside persons andinformation disclosure(v) On the fact that the Plan is not a dead-hand type or slow-hand type countermeasure,the Plan is in line with the basic policy concerning the Company’s control, is consistent with thecorporate value of the Company and the common interests of shareholders, and is not intended
to maintain the positions of management of the Company.

2. Other Matters Concerning the Corporate Governance System(1) Department in charge of timely disclosure
The Company, in principle, discloses information in a timely and appropriate manner in order toenhance the transparency of the business operations and provide information on the Company

28

swiftly, accurately, and fairly. Departments that deal with information that should be disclosed in atimely manner are as follows.
(i) The General Affairs Department is in charge of gathering and managing information.
(ii) The General Affairs Department considers and determines whether or not information should
be disclosed in a timely manner in accordance with such regulations as the Securities Listing
Regulations through discussion with the Accounting Department, the Personnel Department,
and the departments in charge of a relevant matter.
(iii) The General Affairs Department is in charge of disclosing information on the Company in atimely manner under the officer who is in charge of general affairs and serves as the person
responsible for handling information.
(2) Internal systems regarding timely disclosure of information on the Company(i) Decisions
The General Affairs Department discloses matters that are subject to timely disclosure and fallunder the decisions specified by the Securities Listing Regulations and other relevant rules in aswift and timely manner through resolutions by the Board of Directors.
(ii) Events
The General Affairs Department centrally manages information, strives to gather information incooperation with responsible departments, offices, and affiliated companies, and discloses
relevant information in a swift and timely manner pursuant to such rules as the Securities
Listing Regulations through resolutions by the Board of Directors when timely disclosure isdeemed necessary because of possible impact on profit and loss or any other reasons.
(iii) Information on financial results
The Accounting Department plays a leading role in preparing values of financial results andforecasts and the General Affairs Department discloses information in a swift and timely manner
pursuant to such rules as the Securities Listing Regulations through resolutions by the Board of
Directors.

29

General Meeting of Shareholders
Appointment/Dismissal

Appointment/Dismissal

Appointment/Dismissal

Nippon Denko Group【Decision making and supervision】【Auditing】

Board of Directors
6 Directors(excluding members of the Audit & Supervisory Committee)(including an outside Director)

Auditing
Supervision

Audit&
Supervisory
Committee

Collaboration

5 Directors who belong to the Audit & Supervisory Committee(including 5 outside Directors)

Internal Control
Committee

Executive Personnel
and Remuneration
Meeting

ProposalandreportSupervisionanddelegation

Instruction
Advice, etc.

Collaboration

Accounting
AuditorAccounting
auditing

Collaboration【Business execution】

President and CEO

Executive Committee
Budget Council

Internal Control Department

Internal control promotion
Internal auditing

Corporate Report Meeting

Internal
whistleblower
systemPlant Report Meeting
Head office (Business development)
Research Report Meeting

Head office(Business development
Sales office

Crisis Management
Headquarters

PlantsSustainability Committee
Subsidiary companies

Standing Committee

30

Employees

Business Report Meeting[In-company system for timely disclosure]

Information on decisions, events, and financial results(including information on subsidiaries)
Accounting Dept.

Each section

General Affairs Dept.

Executive committee
Budget council

Consultation
about thenecessity of
President & CEO

disclosure andcontents to bedisclosed

Board of Directors

General Affairs Department (section in charge of disclosure)

Timely disclosure

Disclosure via TDnet

Financial instruments exchange

31

Skills matrix

Field

Name

Title

Yasushi Aoki

President & CEO

Yoshimi Yamadera

Director and Senior
Managing Executive
Officer

Jiro Kobayashi

Director and Senior
Managing Executive
Officer

Masakazu Tsumoda

Director and Managing
Executive Officer

Yasuhide Miyake

Director and Executive
Officer●

Kazutoshi Ohmi

Outside Independent
Director●

Kazunari Itami

Outside Independent
Director as Audit &Supervisory Committee
Member●Hokuto Nakano

Outside Independent
Director as Audit &Supervisory Committee
MemberMasahiro Tani

Outside Independent
Director as Audit &Supervisory Committee
MemberHiroaki Kimura

Outside Director as Audit& Supervisory Committee
MemberAogi Suemura

Outside Independent
Director as Audit &Supervisory Committee
MemberCorporate planning
Business strategy

Finance and accounting
Financial andeconomics●

Personnel and labor
Human resources
development

Governance and risk
management
Legal and compliance

Production andtechnology
Research anddevelopment●

Sales and purchasing
MarketingGlobalEnvironment
Sustainability

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

The above list does not show all of knowledge and experience of each Director.

32

●

●

●

●

●

●