Corporate Governance Report
Nippon Sanso Holdings Corporation

Last updated: December 16, 2021

Nippon Sanso Holdings Corporation
Toshihiko Hamada, Representative Director, President CEO
Contact: +81-3-5788-8500
TSE Code: 4091
https://www.nipponsanso-hd.co.jp
The corporate governance of Nippon Sanso Holdings Corporation (the “Company”) is
described below:

I. Basic thinking on corporate governance, capital structure, corporate
attributes and other basic information
1. Basic Thinking on Corporate Governance
From the perspective of ensuring sustainable growth of the Company and long-term increaseof corporate value, taking into account the positions of shareholders and other stakeholders,customers, employees, and local communities, the Company believes that the essence ofcorporate governance involves ensuring transparency and fairness of decision-making,making effective use of the management resources available, and maximizing the efficiency
and strength of management through prompt and decisive decision-making. The Company
will work toward a full implementation of correct corporate governance based on the basic
approach below.
(1) The Company will respect shareholders’ rights and ensure their equality.
(2) The Company will consider the benefits of shareholders and other stakeholders and work
appropriately in partnership with those stakeholders.
(3) The Company will ensure transparency by releasing appropriate corporate information at
appropriate times.
(4) By separating supervisory and executive functions, the Company will improve
effectiveness of the Board of Directors’ supervisory function over the Company’s businessexecutions.
(5) The Company will engage in constructive dialogue with shareholders in order to contributeto the sustainable growth of the Group and the medium- to long-term improvement ofcorporate value.
[Reasons for Not Implementing the Principles of the Corporate Governance Code][Updated][The Code Applied]
The following is presented in accordance with Japan’s Corporate Governance Code revisedin June 2021:
1

[Supplementary Principle 2.4.1 Ensuring Diversity in the Promotion of Core Human
Resources and Other Elements]
The information required to be disclosed under this principle is being considered in thecurrent process of preparing the Company’s Medium-Term Management Plan, and will be
disclosed in conjunction with the Plan.
[Supplementary Principle 4.11.1 Appointment of Outside Director(s) with Management
Experience]
None of the Company’s independent outside directors have the experience of managing
listed companies or Japanese subsidiaries of global enterprises. However, Director Eduardo
Gil Elejoste has the experience of managing non-Group companies, an example being that
he was responsible for the European business of Praxair, Inc. when the business was
acquired by the Company. In addition to him, President CEO Toshihiko Hamada, Chairmanof the Board Yujiro Ichihara, and Directors Kenji Nagata and Thomas Scott Kallman have allample management experience in that they currently manage or previously managed Group
companies respectively as their president. As a result, the Company’s Board of Directors is
engaged in discussions drawing on the members’ experience of managing various Groupand non-Group companies, albeit having no independent outside directors with management
experience appointed.
[Disclosure Based on the Principles of the Corporate Governance Code] [Updated][Principle 1.4 Cross-Shareholdings]
The Company has established its policy on strategic holdings of listed stock and basic rules
on exercising voting rights in relation to strategic stock holdings in Article 4 of Principles ofCorporate Governance available on its corporate website. The Board of Directors annually
carries out a comprehensive assessment of each of strategic stock holdings bothquantitatively, by using the Return on Invested Capital (ROIC) indicator, and qualitatively, by
analyzing its business needs and other matters, and thereby verify whether there aresufficient reasons for each individual stock holding.
(https://www.nipponsanso-hd.co.jp/Portals/0/images/company/governance/nippon-sansoholdings-corporate-governance-principles_en.pdf)[Principle 1.7 Related Party Transactions]
The Company has established the framework of procedures for related party transactions in
Article 5 of Principles of Corporate Governance available on the Company’s website.
(https://www.nipponsanso-hd.co.jp/Portals/0/images/company/governance/nippon-sansoholdings-corporate-governance-principles_en.pdf)

2

[Principle 2.6 Roles of Corporate Pension Funds as Asset Owners]
Taiyo Nippon Sanso (TNSC) which is the core business company of the Company grouphas established the Corporate Pension Managing Committee that has been engaged indeliberation of the management of corporate pension. TNSC has managed the corporate
pension fund in accordance with the basic policy of managing pension reserves and basedon the strategic asset contribution ratio necessary for achieving the target of the pension
asset management in order to ensure stable management of the employee’s assets, whileproperly controlling conflict of interests. Furthermore, TNSC has appointed the best trustees
based on the strategic asset contribution ratio, evaluated the quantitative and qualitative
aspects of the trustees designated by TNSC, and disclosed to employees the summary of
performance by trustee, including the investment results of corporate pension fund.
[Principle 3.1 (1) Full Disclosure]
The Company has formulated its corporate philosophy and published it on its corporatewebsite.
(https://www.nipponsanso-hd.co.jp/en/company/mission.html)
The Company had promoted its Four-Year Medium-Term Management Plan “Ortus Stage 2”(FYE2018-FYE2021).
Originally, we had planned to formulate and announce its new Medium-Term Management
Plan starting from FYE2022, but due to the global spread of COVID-19 and the uncertaintyof the global economy and our business environment, we decided to postpone theformulation of Medium-Term Management Plan for one year and announce it as a plan
starting from FYE2023.
Previous Medium-Term Management Plan is available on the Company’s website.
(https://www.nipponsanso-hd.co.jp/en/ir/management/plan.html)[Principle 3.1 (2) Full Disclosure]
The Company has formulated Principles of Corporate Governance as its basic thinking andpolicy on corporate governance and published it on its corporate website.
(https://www.nipponsanso-hd.co.jp/Portals/0/images/company/governance/nippon-sansoholdings-corporate-governance-principles_en.pdf)[Principle 3.1 (3) Full Disclosure]
As regards the policy and procedures for the Board of Directors’ determining of the
remuneration of management personnel and directors, please refer to “Disclosure of Policy
on Determining Remuneration Amounts and Calculation Methods” in the subsection “Director
Remuneration” under the section “1. Matters on Organizational Composition and Operation”
under the part “Ⅱ. Business Management Organization and Other Corporate Governance
Systems regarding Decision-making, Execution of Business, and Oversight in Management”
of this report.

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[Principle 3-1(4) Full Disclosure]
The Company has defined its policy and procedures for the Board of Directors’ appointmentof executive officers and nominating candidates of directors and Audit & Supervisory Board
members in Articles 13 through 15 of Principles of Corporate Governance available on its
corporate website.
(https://www.nipponsanso-hd.co.jp/Portals/0/images/company/governance/nippon-sansoholdings-corporate-governance-principles_en.pdf)[Principle 3-1(5) Explanations with respect to the individual appointments/dismissals andnominations of executive officers, candidates of directors and Audit & Supervisory Board
members]
Explanation of the reason for nominating as candidate for directors and Audit & Supervisory
Board members is made in the proposal for the election of directors and election of Audit &Supervisory Board members stipulated in the reference documentation for the General
Meeting of Shareholders. In the case the candidates are scheduled to be appointed as
executive officers at the board meeting to be held after the General Meeting of Shareholders,the explanation is made taking such appointment into consideration. The Company has
published the notice of convocation for the 17th Ordinary General Meeting of Shareholders
that includes reference documentation on its corporate website.
(https://www.nipponsanso-hd.co.jp/en/ir/stock/meeting.html)[Supplementary Principle 3.1.3 Disclosure of Company Initiatives on Sustainability]
The Company details its sustainability initiatives and human capital investment on pages 5685 and 140-175 of the Integrated Report available on the link below.
(https://www.nipponsanso-hd.co.jp/Portals/0/images/ir/library/integrated_report/nipponsanso-holdings-integrated-report_en-full_2021.pdf)
Also, Taiyo Nippon Sanso Corporation, a principal operating company of the Group, explains
investment in intellectual property on its website.
(https://www.tn-sanso.co.jp/jp/rd/intellectual [in Japanese])
The Company collects and analyzes the necessary data on the impact of climate changerelated risks and earning opportunities on its business activities, profits, and other factors inaccordance with the Task Force on Climate-related Financial Disclosures (TCFD)
recommendations. The results are presented on pages 66-67 of the Integrated Reportavailable on the link below. Note that TCFD-based disclosure complies with the principle thatapplies to the companies listed on the Prime Market.
(https://www.nipponsanso-hd.co.jp/Portals/0/images/ir/library/integrated_report/nipponsanso-holdings-integrated-report_en-full_2021.pdf)
4

[Principle 4.1.1 Roles and Responsibilities of the Board]
The Company has defined the scope and content of the matters for which the authority isdelegated to the management in Article 7.3 of Principles of Corporate Governance available
on its corporate website.
(https://www.nipponsanso-hd.co.jp/Portals/0/images/company/governance/nippon-sansoholdings-corporate-governance-principles_en.pdf)[Principle 4.9 Independence Standards and Qualification for Independent Directors]
The Company has defined the independence standards for independent outside directors in
Article 9.2 of Principles of Corporate Governance available on the Company’s website.
(https://www.nipponsanso-hd.co.jp/Portals/0/images/company/governance/nippon-sansoholdings-corporate-governance-principles_en.pdf)[Supplementary Principle 4.10.1 Nomination and Remuneration Committees]
The Company outlines the mandates, roles, policy regarding the independence, and such,of its Advisory Committee on Appointments and Remuneration later in this Report: see theSupplementary Explanation to Voluntary Establishment of Committee(s), Members andAttributes of Chairperson in the Directors section of “1. Matters on Organizational
Composition and Operation” under “II. Business Management Organization regarding
Decision-making, Execution of Business, and Oversight in Management/ Other Corporate
Governance Systems.” Note that this disclosure complies with the principle that applies tothe companies listed on the Prime Market.
[Supplementary Principle 4.11.1 Preconditions for Board and Kansayaku Board
Effectiveness]
The Company has determined its view on the appropriate balance between knowledge,
experience, and skills, as well as diversity and appropriate size, of the Board of Directors asa whole, which is set out in Article 9 of the Principles of Corporate Governance available on
its website.
(https://www.nipponsanso-hd.co.jp/Portals/0/images/company/governance/nippon-sansoholdings-corporate-governance-principles_en.pdf)
In addition, the Company creates a skills matrix that shows the knowledge, experience, skills,
and other expertise possessed by individual directors, as presented on pages 130-131 of theIntegrated Report available on the link below.
(https://www.nipponsanso-hd.co.jp/Portals/0/images/ir/library/integrated_report/nipponsanso-holdings-integrated-report_en-full_2021.pdf)[Supplementary Principle 4.11.2 Preconditions for Board and Audit & Supervisory Board
Effectiveness]
Outside director, Mitsuhiro Katsumaru is also serving as outside director of Shimano Inc.
5

Director, Hidefumi Date is serving as Director, Managing Corporate Executive Officer andChief Financial Officer of Mitsubishi Chemical Holdings Corporation, and Representative
Director and President of Mitsubishi Chemical Holdings Corporate Staff, Inc. None of outside
Audit & Supervisory Board members has a concurrent position of any other listed company.
[Supplementary Principle 4.11.3 Preconditions for Board and Audit & Supervisory Board
Effectiveness]
We evaluate the Board of Directors using a questionnaire for the directors. To explain theprocess more specifically, a questionnaire was distributed to the directors after explaining its
content at February’s board meeting. Each director answered the questionnaire andsubmitted it to the chairperson. In the board meeting in April, the directors evaluated theeffectiveness of the board based on the answers submitted while discussing problems andproposals for improvement.
The questionnaire included questions about the board’s responsibilities as provided in thecompany’s principles of corporate governance, which are: (1) the supervision of overall
operation; (2) the establishment of an internal control structure; (3) the selection, appointment,
dismissal, and evaluation of the President and CEO as well as other senior executives, andthe determination of their compensation; (4) the formulation of management strategy anddecisions on the execution of important operations; and questions about area which was
handled successfully or unsuccessfully in transition to a holding company structure executedon 1st October 2020. The questionnaire also asked opinions about what kind of theme theBoard of Directors should intensively discuss or monitor as a board of directors of a holding
company from now on.
As a result, it was confirmed that the board had been performing its functions as required.
For the board to perform its functions more properly, the directors decided, at thechairperson’s proposal, to continue discussions on the themes each director has presented
as the themes board of directors of a holding company should discuss or monitor in the
preparation for the Medium-Term Management Plan scheduled in this fiscal year. Especiallyas to the response to the matter of carbon neutral the Company has already launched aworking team consisting of members from group companies around the world and started
discussion on that matter because many directors pointed out the matter as an urgent task
[Supplementary Principle 4.14.2 Director and Audit & Supervisory Board Members Training]
The Company has defined its training policy for directors and Audit & Supervisory Board
members in Article 17 of Principles of Corporate Governance available on the Company’s
corporate website.
(https://www.nipponsanso-hd.co.jp/Portals/0/images/company/governance/nippon-sansoholdings-corporate-governance-principles_en.pdf)[Supplementary Principle 5.1 Dialogue with Shareholders]
The Company has formulated Nippon Sanso Holdings Group Investor Relations (IR) Policy(Basic Principles for Dialogue and Disclosures Concerning IR Activities) as a policy on the
structure and initiatives to facilitate constructive dialogue with shareholders and published it
6

on the Company’s website.
(https://www.nipponsanso-hd.co.jp/en/ir/management/irpolicy.html)
2. Capital Structure
Foreign Shareholding Ratio

10% or more and less than 20%[Status of Major Shareholders] [Updated]
Name / Company Name

Mitsubishi Chemical Holdings Corporation
The Master Trust Bank of Japan, Ltd. (trust account)
Taiyo Nippon Sanso Corporation stock holding association
for clients and suppliers
Custody Bank of Japan, Ltd. (trust account)
Meiji Yasuda Life Insurance Company
Mizuho Bank, Ltd.
The Norinchukin Bank
Nippon Sanso Holdings Corporation stock holding
association for employees
IBIDEN CO., LTD
Custody Bank of Japan, Ltd. (trust account9)

Number of
SharesOwned
218,996,766
23,445,800
17,429,521

Percentage(%)

13,087,100
10,007,471
8,182,847
3,500,440
3,176,023

3.02
2.31
1.89
0.81
0.73

3,004,844
2,889,600

0.69
0.67

50.59
5.42
4.03

Controlling Shareholder (except for
Parent Company)

N/A

Parent Company

Mitsubishi Chemical Holdings Corporation (TSE
Code: 4188)

Supplementary Explanation
N/A

3. Corporate Attributes
Listed Stock Market and Market
SectionFiscal Year-End
Type of Business
Number of Employees (consolidated)
as of the End of the Previous Fiscal
Year
Sales (consolidated) as of the End of
the Previous Fiscal YearTokyo Stock ExchangeFirst Section
March
Chemical
1000 or more

¥100 billion or more and less than ¥1 trillion
7

Number of Consolidated Subsidiaries
as of the End of the Previous Fiscal
Year

100 or more and less than 300

4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions
with Controlling Shareholder [Updated]
When entering into a transaction with its controlling shareholder, the Company has a policy
to define reasonable contractual conditions and prices in reference to other transactions andmarket prices. Furthermore, the Company will obtain approval of the Board of Directors forany material transaction with its controlling shareholder that is not included in the ordinary
course of business. The Company seeks to secure the objectivity and transparency of theBoard of Directors in deliberations on transactions with the controlling shareholder, byappointing three independent outside directors who are independent of the controllingshareholder so that they make up a third of the nine-member Board of Directors.
5. Other Special Circumstances which may have Material Impact on Corporate
Governance
The Company has entered into the basic agreement with its parent company, Mitsubishi
Chemical Holdings Corporation, dated on May 13, 2014, whereby Mitsubishi Chemical
Holdings Corporation shall, under its Group Management Regulations, respect theCompany’s independence and provide it with full support and cooperation.
If a conflict of interest occurs between the parent company and other shareholders, Nippon
Sanso Holding’s directors take action so as not to harm the interests of the othershareholders. We appoint three independent outside directors and two full-time independent
outside members of the Audit & Supervisory Board. They supervise that any conflict ofinterest between the parent company and other shareholders should not happen. In addition,
we have an Advisory Committee on Appointment and Remuneration that is establishedvoluntary for the Board of Directors to consult with regarding the nomination of candidates
for directors and members of the Audit & Supervisory Board, as well as the appointment anddismissal of CEO and other executive officers. The committee consists of five members, thepresident, chairman of the board and three independent outside directors, one of themserving as the chairperson. With such structure, we ensure independence from the parent
company of the appointment of senior executives.

Ⅱ. Business Management Organization regarding Decision-making,Execution of Business, and Oversight in Management/ Other Corporate
Governance Systems
1. Matters on Organizational Composition and Operation
Organization Form
Company with an Audit & Supervisory Board

8

[Directors]
Maximum Number of Directors Stipulated in Articles ofIncorporation
Term of Office Stipulated in Articles of Incorporation
Chairperson of the Board
Number of Directors
Appointment of Outside Directors
Number of Outside Directors
Number of Independent Outside Directors

15
One year
Other than CEO
9Appointed
33Outside Directors’ Relationship with the Company (1)NameAttribute
Relationship with the Company*a b c d e
f g h i jkAkio Yamada
Other〇
Mitsuhiro Katsumaru Lawyer〇
Miri Hara
CertifiedTax〇
Accountant*Categories for “Relationship with the Company”* “○” 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;“▲” when a close relative of the director fell under the category in the pasta. Executive of the Company or its subsidiaries
b. Non-executive director or executive of a parent company of the Company
c. Executive of a fellow subsidiary company of the Company
d. A party whose major client or supplier is the Company or an executive thereof
e. Major client or supplier of the Company or an executive thereof
f. Consultant, accountant or legal professional who receives a large amount of monetaryconsideration or other property from the Company besides compensation as a director/
audit & supervisory board member
g. Major shareholder of the Company (or an executive of the said major shareholder if theshareholder is a legal entity)
h. Executive of a client or supplier company of the Company (which does not correspond toany of d, e, or f) (the director himself/herself only)
i. Executive of a company, between which and the Company outside directors/ audit &supervisory board member are mutually appointed (the director himself/herself only)
j. Executive of a company or organization that receives a donation from the Company (thedirector himself/herself only)
k. Others

9Outside Directors’ Relationship with the Company (2)Name
Designation Supplementary
Reasons of Appointment
asExplanation of
Independent
theDirector
Relationship
Akio Yamada
Mr. Yamada, currently assuming Chairman ofFair Trade Institute, has held important
positions at Japan Fair Trade Commission
and has experience serving as an outside
director of another listed companies, and thus○―――
the Company considers him qualified to be an
outside director. On top of that, the Company
has selected him as an independent director
who is unlikely to have conflicts of interest withgeneral shareholders based on suchbackground.
Mitsuhiro
Mr. Katsumaru, who is a registered attorney,
Katsumaru
has held important positions at the Ministry ofJustice and Public Prosecutors Offices andthus the Company considers him qualified to○―――
be an outside director. On top of that, theCompany has selected him as anindependent director who is unlikely to haveconflicts of interest with general shareholders
based on such background.
Miri Hara
Miri Hara has served as a director of realestate management company over many
years, and also has wide-ranging experienceof serving as Representative Certified Public
Tax Accountant of Tax Corporation, and an
outside director at a publicly listed company○
and thus the Company considers her qualified
to be an outside director. On top of that, theCompany has selected him as anindependent director who is unlikely to haveconflicts of interest with general shareholders
based on such background.
Voluntary Establishment of Committee(s)Corresponding
toNomination
Committee
Remuneration Committee

10

EstablishedorVoluntary Establishment of Committee(s), Members and Attributes of Chairperson
Committee’s

All

Full-time

Internal

OutsideExternal

Other

Chair

Name

Committee

Members

Directors

Directors

experts

members

person

0

2

3

0

0

Members
Voluntary

Advisory

Committee

Committee on

Corresponding

Appointments

to Nomination

andCommittee

Remuneration

Voluntary

Advisory

Committee

Committee on

Corresponding

Appointments

to Remuneration

andCommittee

Remuneration

5

Outsidedirector

5

0

2

3

0

0

Outsidedirector

Supplementary Explanation [Updated]
The Company’s Advisory Committee on Appointments and Remuneration is an organ thatadvises the Board of Directors. The five-member Committee consists of the representative
director and president CEO, the chairman of the board, and the three independent outside
directors, and is chaired by Independent Outside Director Akio Yamada. This composition—
namely, independent outside directors making up the majority with the chairperson being oneof them—ensures the Committee’s independence as well as its objectivity and transparency
in decision-making. The Committee operates in compliance with the Regulations of theAdvisory Committee on Appointments and Remuneration of Nippon Sanso Holdings
Corporation approved by the Board of Directors. It is consulted by the Board of Directors onsuch matters as the selection of candidates for the office of director or member of the Audit& Supervisory Board, appointment and dismissal of executive officers, selection of a
successor to the representative director and president CEO, and revision of the internal
regulations on director remuneration. After deliberations on the matters consulted upon, theCommittee decides by a majority vote and reports the results to the Board of Directors.
[Audit & Supervisory Board Members]
Establishment of Audit & Supervisory Board
Maximum Number of Audit & Supervisory
Board Members Stipulated in Articles ofIncorporation
Number of Audit & Supervisory Board
Members

Established5

4

Coordination among Audit & Supervisory Board Members, Independent Auditors andInternal Audit Departments
The Audit & Supervisory Board comprises four full-time members, three of whom are outside11

members. Audit & Supervisory Board members attend meetings of the Board of Directors
and the Management Committee to oversee directors’ business execution objectively andform and express opinions impartially. The Audit & Supervisory Board conducts its audit incoordination with Independent Auditors and Corporate Audit Office. The Audit & Supervisory
Board receives reports from the Independent Auditors about their auditing plans and thestatus of their audit, and also receives reports from Corporate Audit Office about the resultsof internal audit.
Furthermore, the secretariat of the Audit & Supervisory Board staffed by full-time personnel
has been in place to help Audit & Supervisory Board members with their duties and thereby
ensure the effectiveness of audit conducted by the Audit & Supervisory Board.
Appointment of Outside Audit & Supervisory
Board Members
Number of Outside Audit & Supervisory
Board Members
Number of Independent Audit & Supervisory
Board Members

Appointed
3212Outside Audit & Supervisory Board Member’s Relationship with the Company (1)NameAttribute
Relationship with the Company*a b c d e
f g h i jkAkihiro Hashimoto
From another△company
Masahiro Osada
From another△△company
Kazuya Kobayashi
From another△company* Categories for “Relationship with the Company”* ”○” when the audit & supervisory board member presently falls or has recently fallen under
the category;“△” when the audit & supervisory board member fell under the category in the past
* “●” when a close relative of the audit & supervisory board member presently falls or has
recently fallen under the category;“▲”when a close relative of the audit & supervisory board member fell under the category
in the pasta. Executive of the Company or its subsidiaryb. Non-executive director or accounting advisor of the Company or its subsidiaries
c. Non-executive director or executive of a parent company of the Company
d. Audit & supervisory board member of a parent company of the Company
e. Executive of a fellow subsidiary company of the Company
f. A party whose major client or supplier is the Company or an executive thereof
g. Major client or supplier of the Company or an executive thereofh. Consultant, accountant or legal professional who receives a large amount of monetaryconsideration or other property from the Company besides compensation as an audit &supervisory board member
i. Major shareholder of the Company (or an executive of the said major shareholder if theshareholder is a legal entity)
j. Executive of a client or supplier company of the Company (which does not correspond toany of f, g, or h) (the audit & supervisory board member himself/herself only)
k. Executive of a company, between which and the Company outside directors/ audit &supervisory board member are mutually appointed (the audit & supervisory board member
himself/herself only)
l. Executive of a company or organization that receives a donation from the Company (theaudit & supervisory board member himself/herself only)
m. Others

13Outside Audit & Supervisory Board Member’s Relationship with the Company (2)Name
Designation
Supplementary
Reasons of Appointment
asExplanation of the
Independent
Relationship
Audit &
Supervisory
Board
memberAkihiroMr. Hashimoto is invited Mr. Hashimoto is appointed as an
Hashimotofrom Mizuho Bank, Ltd. Outside Audit & Supervisory Board
which is the Company’s memberforhislong-term
lender.
The
group experience at financial institutions
companies’ outstanding and his substantial level ofborrowings to the bank accounting
andfinancial○was 286,685 million yen knowledge. On top of that, theat the end of March Company has selected him as an
2021.
independent Audit & Supervisory
Board member who is unlikely tohave conflicts of interest withgeneral shareholders based onsuch background.
Masahiro
Mr. Osada is invited from Mr. Osada is appointed as an
Osada
Mitsubishi
Chemical Outside Audit & Supervisory Board
Corporation, which is the member for his experience at
Company’s
fellow accounting
departments
andcompany and client. The corporate management department
annualamountof of a chemical company and histransactions between the substantial level of financial andgroup companies and accounting knowledge.
Mitsubishi
Chemicalstood at 5,330 million
yen for the year ended in
March 2021.
KazuyaMr. Kobayashi is invited Mr. Kobayashi is appointed as an
Kobayashifrom Mizuho Bank, Ltd. Outside Audit & Supervisory Board
which is the Company’s memberforhislong-term
lender.
The
group experience at financial institutions
companies’ outstanding and his substantial level ofborrowings to the bank accounting
andfinancial○was 286,685 million yen knowledge. On top of that, theat the end of March Company has selected him as an
2021.
independent Audit & Supervisory
Board member who is unlikely tohave conflicts of interest withgeneral shareholders based onsuch background.
[Independent Directors/ Audit & Supervisory Board member]
Number of Independent Directors/ Audit & 5
Supervisory Board member
14Other Matters relating to Independent Directors
N/A[Incentives]
Implementation of incentive measures for Performance-linked bonuses
Directors
Supplementary Explanation on Relevant Matter
Remunerations for directors consist of the fixed “Basic Monthly Remuneration,” which isbase salary specific to each rank, and “Performance-linked Bonuses” which vary according
to business results. The proportion of the two portions is approximately six to four, which isreflected in the amount of remuneration for each director. Outside directors and directors
whose main jobs are directors of subsidiaries receive the fixed “Basic Monthly Remuneration”
only. The Performance-linked Bonuses are determined on the basis of the following formula.
Performance-linked Bonuses (variable) = Rank-specific standard amount x Coefficient
based on evaluation related to Performance-linked Bonuses
The following figures are applied to the coefficient based on evaluation related to
Performance-linked Bonuses in order to judge the status of achievements of medium-term
management plan targets while strengthening the extent of their interlocking with theCompany’s business results as well as improving their objectivity and transparency.
➢ Degree of achievements of each fiscal year’s budget based on medium-term
management plan targets (consolidated revenue and consolidated core operating
profit margin)➢ Year-on-year improvements in business results (consolidated revenue,
consolidated core operating profit and profit attributable to owners of the parent
company)Targets & results of indicators tied to Performance-linked Bonuses for directors in
FY2020 ending March 2021

Degree of achievement in each FY’s budget based on medium-term management plantargets
Indicator forevaluation
Consolidated
revenue
Consolidated core
operating profit
marginTarget for FYE2021

Results for FYE
2021

830,000 mil. yen

818,238 mil. yen

9.9%

10.7 %

15

Year-on-year performance improvements
Indicator for evaluation
Consolidated revenue
Consolidated core
operating profit
Profit attributable toowners of parent
company

Results of FYE
2020

Results of FYE
2021

850,239 mil. yen

818,238 mil. yen

90,337 mil. yen

87,251 mil. yen

53,340 mil. yen

55,214 mil. yen

Recipients of Stock Options
Supplementary Explanation on Relevant Matter
N/A[Director Remuneration]
DisclosureofIndividual
Remuneration

Directors’ No Individual Disclosure

Supplementary Explanation on Relevant Matter
The Company discloses the total amount of remuneration for directors.
The total amount of remuneration for 10 directors was 287 million yen, including 24 million
yen for two outside directors.
Total amount of remunerations by type:・Basic Remuneration: 193 million yen, including 24 million yen for two outside directors
・Performance-tied Remuneration: 94 million yen※ For the period from 1st April 2020 to 31 March 2021.
These amount includes remuneration for 1 director who retired during the year.
Policy on Determining Remuneration
Amounts and Calculation Methods

Established

Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods
The amount of remuneration, etc. for directors and auditors is determined by a resolution
adopted at the General Meeting of Shareholders in the form of a cap on the total amount for
all directors and another cap on the total amount for all auditors. The amount of remunerationfor each director is determined on the basis of the policy described in [Incentives] andsupplementary explanation of “Implementation of incentive measures for Directors” Theboard of directors has approved internal regulation that reflected the policy. Outside directors
and directors whose main jobs are directors of subsidiaries are paid the fixed “Basic Monthly
Remuneration” only. Remuneration for directors is based in principle on an annual salarysystem, with the amount paid monthly equivalent to one-12th of the annual salary.
Representative Director who is authorized to decide the amount of each director’s
remuneration calculates it according to the internal regulations. The amount of
16

remuneration for directors is to be unambiguously calculated from their rank andperformance based on the internal regulations, and it is possible to verify the results ofcalculations by the Representative Director. The Company has established the advisorycommittee on appointments and remuneration that consisted of five members that are
President, Chairman of the Board and three independent outside directors and chaired byan independent outside director. The Committee continuously discusses directors’
remuneration at the consultation of the board of directors.
[Supporting System for Outside Directors and/or Audit & Supervisory Board Members]
For outside Audit & Supervisory Board members, full-time personnel are in place in thesecretariat of the Audit & Supervisory Board to help them perform their duties. For outside
directors, relevant materials are provided along with agenda items prior to a meeting of theBoard of Directors, and a person in charge of an agenda item gives explanation where
necessary. Further, outside directors and the Audit & Supervisory Board regularly meet to
exchange information and share the same recognition concerning the Company’s business,internal control, corporate governance and other matters.
2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination, andRemuneration Decisions (Overview of Current Corporate Governance System)
The Board of Directors consists of nine members, two of whom are independent, andoperates to ensure correct business judgement. The Articles of Incorporation stipulates thatthe maximum number of directors on the Board of Directors is 15. The Board of Directors
holds a regular monthly meeting to discuss important matters and hear reports aboutbusiness activities. The Company has established the Advisory Committee on Appointments
and Remuneration as a discretionary advisory committee under the Board of Directors. The
committee is chaired by outside director, Akio Yamada, and attended by President (CEO),Toshihiko Hamada, Chairman of the Board, Yujiro Ichihara, and outside director, Mitsuhiro
Katsumaru and Miri Hara. The Board of Directors consults this committee regarding theselection of candidates for the position of director and Audit & Supervisory Board member,the appointment and dismissal of President (CEO) and executive ofﬁcers, the choosing of
successors to President (CEO) and revisions of the internal regulations on director’scompensation, and seeks advice from the independent outside directors to ensure thetransparency and objectivity of decision making.
In accordance with the Articles of Incorporation of the Company and Article 427(1) of theCompanies Act, the Company has entered into agreements with each outside director to limit
their liability for damages stipulated in Article 423(1) of the Companies Act, and has set theirmaximum liability for damages in accordance with Article 425(1) of the Companies Act.
In addition to the Board of Directors, the Company has established the Management
Committee consisting of directors and concerned executive officers for prompt decision
making. The term of a director has been limited to one year in order to facilitate responsible
management in each fiscal year. The Audit & Supervisory Board comprises four full-timemembers and three of them are outside members. Audit & Supervisory Board members
attend meetings of the Board of Directors and the Management Committee to oversee
directors’ business execution objectively and form and express opinions impartially. The Audit& Supervisory Board conducts its audit in coordination with Independent Auditors and17

Corporate Audit Office as well. The Audit & Supervisory Board receives reports from the
Independent Auditors about their auditing plans and the status of their audit, and also
receives reports from Corporate Audit Office about the results of internal audit. Furthermore,
the secretariat of the Audit & Supervisory Board staffed by full-time personnel has been inplace to help Audit & Supervisory Board members with their duties and thereby ensure theeffectiveness of audit conducted by the Audit & Supervisory Board.
Three outside directors and two outside Audit & Supervisory Board members are
independent. The Company appoints Ernst & Young ShinNihon LLC as an accounting auditor.
In addition to that the Company has established Code of Conduct of Nippon Sanso HoldingsGroup and strives to ensure compliance and business ethics of the group companies.
3. Reasons for Adoption of Current Corporate Governance System
The Company considers that the system described above in “2. Matters on Functions ofBusiness Execution, Auditing, Oversight, Nomination, and Remuneration Decisions” is themost appropriate corporate governance system for the Company in light of characteristics
and size of the Group’s business.
The Company has three outside directors. The Audit & Supervisory Board comprises four
full-time members, three of whom are outside. Having the three outside directors and two outof the three outside members of the Audit & Supervisory Board satisfies the independence
standard for outside directors/Audit & Supervisory Board members required by the Tokyo
Stock Exchange. The Company ensures the objectivity and fairness of management
oversight functions.

Ⅲ. Measures Implemented for Shareholders and Other Stakeholders
1. Measures to Ensure Active General Meetings of Shareholders and Smooth Exerciseof Voting Rights [Updated]

Early Notification of General
Shareholder Meeting
Scheduling GMs Avoiding
Overlapping with Other
AGMs
Allowing Electronic Exerciseof Voting Rights
Participation in an Electronic
Voting Platform and Other
Measures for Enhancing theExercise of Voting Rights ofInstitutional Investors

Supplementary Explanation
Notices of convocation for General Meetings ofShareholders are mailed to shareholders at the earliest
possible date prior to the date designated by law.
The Company sets the date for annual General Meetings ofShareholders early to avoid dates on which many othershareholders’ meetings are held.
To enhance the convenience for exercising shareholders’voting rights, the Company has allowed shareholders to
exercise their voting rights electronically.
The Company has used the platform provided by ICJ, Inc.
to enable institutional investors to exercise their voting
rights electronically.

18

Supplementary Explanation
Provision of Convocation
Notice (Summary)in English

Other

The Company has notices of convocation (in the narrow
sense) of, and reference documentation for, General
Meetings of Shareholders and business reports translated
into English, and posts them on its website and the Tokyo
Stock Exchange’s Company Announcements Service,along with Japanese version of the notices ofconvocation.
Notices of convocation of General Meetings ofShareholders are posted on the Company’s website andthe Tokyo Stock Exchange’s Company Announcements
Service, prior to being sent out to shareholders.

2. IR Activities
Supplementary Explanation

Regular Investor Briefings
for Analysts and Institutional
Investors

Posting of IR Materials on
Corporate website

EstablishmentofDepartment
and/orManager in Charge of IR

Twice a year, following announcement of
the full year and the first half consolidated
business performance respectively, theCompany holds investor briefings withpresentations by President (CEO) foranalysts from securities firms andinstitutional investors.
1. Financial Results
2. Notices of Convocation and Resolutionof General Meeting of Shareholders
3. Integrated Report
4. Annual Securities Report
5. Electronic Public Notice
OthersInvestor Relations of Group Finance andAccounting

Provision of
Explanations
by theCompany
Representative
Provided

3. Measures to Ensure Due Respect for Stakeholders [Updated]
Supplementary Explanation
Stipulation of Internal Rules for Respecting The Group stipulates respect for thethe Position of Stakeholders
position of stakeholders in its Code of

Conduct and the related policies, all ofwhich are available on the Company’s
website.
19

Implementation of Environmental Activities,
CSR Activities etc.

Supplementary Explanation
The Company prepares an Integrated
Reportfortheperformanceofenvironmental activities, CSR activities andother matters each year and publishes it on
its corporate website.

20

IV. Matters Related to the Internal Control System
1. Basic Thinking on Internal Control System and the Progress of System
Development
Basic Policy on Internal Control System
The Board of Directors of the Company has approved a resolution as follows regarding aframework for ensuring the appropriateness of business (internal control system) pursuant
to provisions in the Ordinance for Enforcement of the Companies Act.
1. A system to ensure that the execution of duties by directors and employees of theGroup comply with laws and regulations and the Articles of Incorporation.
・The directors of the Company shall determine the basic policy of compliance in the Groupand establish the organization and rules to ensure its effectiveness.
・We have a Chief Compliance Officer (hereinafter referred to as "CCO") and a Regional
Chief Compliance Officer (hereinafter referred to as "RCCO") in each overseas region toprovide education according to compliance risks in each region in Japan and overseas,
and to provide compliance. Clarify the rules for dealing with violations and make themknown to each group company.
・We have a Chief Compliance Officer (hereinafter referred to as "CCO") and a Regional
Chief Compliance Officer (hereinafter referred to as "RCCO") in each overseas region toprovide education according to compliance risks in each region in Japan and overseas,
and to provide compliance. Clarify the rules for dealing with violations and make themknown to each Group company.
・CCO and RCCO have control over compliance promotion activities and have supervisory
authority, and strive to enhance and permeate the Group's compliance promotion activities.
・We will establish a whistleblowing system in Japan and overseas to ensure a system thatallows us to report compliance violations within the Group and the possibility of such
violations without suffering any disadvantages.
・In order to ensure the reliability of financial reporting, an internal control reporting systemshall be established and its effective and efficient operation and evaluation shall be carriedout.
・Internal audit department of the Company shall carry out an internal audit of the operational
status of the above organizations, institutions and systems.
2. Matters concerning the storage and management of information related to the
execution of duties by directors･ Information related to the execution of duties by directors will be appropriately stored and21managed based on the Information Security Management Regulations and other related
regulations based on the Information Management Basic Policy of the Group･ The above storage and management shall maintain the information available to directors
and Audit & Supervisory Board Members.
3. Regulations and other systems for managing the risk of loss for the Group・The directors of the Company shall determine the basic policy of risk management in theGroup and establish the organization and rules to ensure its effectiveness.
・Risk management shall be carried out by the department in charge of the relevant field,
and Global Risk Management Committee shall be established to select important risks forthe entire Group and formulate countermeasure.
・Internal audit department of the Company shall carry out an internal audit of the operational
status of the above organizations, institutions.
4. A system to ensure the efficient execution of duties by the directors of the Group・In order to ensure the efficiency of the duties of the directors, the board of directors shallmake reasonable division of duties and appoint appropriate executive officers.
・The Global Strategy Review Committee shall formulate the Group's management strategy
and manage its progress.
・A long-term management vision and a group medium-term management plan shall be
formulated, quantitative and qualitative targets shall be set in order to achieve the plan,and performance management shall be carried out through quarterly monitoring.
5. A System to ensure the appropriateness of operations in the Group・Based on the above policy, group management rules and other related rules,

we manage

its business, and compliance promotion, risk management and other systems that makeup the internal control system shall cover the entire group, and as a holding company, thecompany shall maintain and operate the internal control system while respecting theindependence of each group company. We shall support and manage it according to thesituation.
・Internal audit department of the company shall cooperate with the internal audit departmentof each company of the Group, and shall grasp and evaluate the maintenance status of
the internal control system of the Group through the audit of each company of the Group.

22

6. A system for employees when Audit & Supervisory Board Members request theappointment of employees to assist them・As an organization that assists the duties of Audit & Supervisory Board Members, thesecretariat of the Audit & Supervisory Board Members, which is independent of thecommand and order of directors, shall be established and dedicated employees shall beassigned.
7. Matters concerning the independence of employees in the previous item fromdirectors and ensuring the effectiveness of instructions given to such employees
・The employee of the secretariat of Audit & Supervisory Board Members in the preceding
item shall not receive the command and order of the directors when receiving an ordernecessary for audit work from Audit & Supervisory Board Members.
・The evaluation of the employee shall be carried out by the Audit & Supervisory Board
Members, and the prior consent of the Audit & Supervisory Board Members shall beobtained for the transfer and disciplinary action.
8. A system for reporting to the Audit & Supervisory Board Members of the Company,
system for ensuring that the person who reported to the Audit & Supervisory
Board Members of the Company will not be treated unfavorably because of thereport・Audit & Supervisory Board Members and Directors shall hold regular meetings to share
information, and Directors and Employees shall report the following matters ①to ⑤ to
Audit & Supervisory Board Members without delay in addition to the legal matters.
・The directors and employees of the company and the directors, corporate auditors andemployees of each group company report to the department in charge of the company
regarding matters corresponding to ④ or ⑤ below, and also report directly to the Audit& Supervisory Board Members or the Board of Corporate Auditors. It shall be possible.
・It is prohibited for a person who has made a report to the Audit & Supervisory Board
Members specified in this item to be treated unfavorably because of the report① Contents decided by the Directors regarding important matters that affect the
management of the Company or each Group company②Results of internal audits conducted by the department in charge of the Company or eachGroup company③Of the whistleblowing, the content that has a significant impact on the management of
the Company or each Group company④Matters that violate compliance and have a significant impact on the management of the23Company or Group companies⑤Among matters related to quality defects and product defects, matters that have asignificant impact on the management of the Company or each Group company
9. Policy related to the processing of expenses or debts incurred in the execution ofduties by Audit & Supervisory Board Members
When an Audit & Supervisory Board Member make a request for prepayment or
reimbursement of expenses for the execution of their duties, they promptly apply unless it
is deemed that the expenses or obligations related to the request are not necessary forthe execution of his / her duties. Expenses or debts shall be dealt with.
10. Other systems to ensure that audits by Audit & Supervisory Board Members are
conducted effectively
The Board of Auditors receives prior reports on the audit plans of Accounting Auditor andregularly receives reports on the Auditing Plan of Accounting Auditor in order to cooperatewith the internal audit department, supervise Accounting Auditor, and ensure theindependence of the Accounting Auditor from the directors. We shall maintain close
contact with each other by receiving reports of audit results.
2. Basic Thinking on Eliminating Anti-Social Forces and the Progress of System
Development
Basic Policy on Eliminating Anti-Social Forces
The Group’s Code of Conduct has the section titled “Rejection of Relationship with AntiSocial Forces” that specifies “the Group reacts resolutely towards anti-social forces andwill never have any relationship with anti-social forces. Moreover, the Group will resolutely
reject any unreasonable request made by anti-social forces or their equivalent and will not
try to solve the request with money.” The Company ensures that this principle is madeknown thoroughly to its officers and employees.

Ⅴ. Other
1. Adoption of Anti-Takeover Measures
Adoption of Anti-Takeover Measures

Not Adopted

Supplementary Explanation on Relevant Matter
N/A
2. Other Matters Concerning to Corporate Governance Organization
1. Our Approach to Timely Disclosure
The Company has established the Nippon Sanso Group Code of Conduct to guide the24conduct of all Group officers and employees, which stipulates that: we are aware of theimportance of accountability in corporate activities, where we reserve transparency; wealways maintain an open stance to internal and external stakeholders and endeavor todisclose information in an appropriate manner; we are truly open to views and criticism
concerning information disclosure and have good faith communication, which we optimize incorporate activities.
The Company has also maintained Nippon Sanso Holdings Group Investor Relations (IR)Policy (Basic Principles for Dialogue and Disclosures Concerning IR Activities) and published
it on its corporate website.
(https://www.nipponsanso-hd.co.jp/en/ir/management/irpolicy.html)
2. Overview of Timely Disclosure
The specifics of the Company’s system for timely disclosures are as follows:
Executive Officer of the Group Finance and Accounting is responsible for handlinginformation for timely disclosure, and Investor Relations of Group Finance and Accounting
and Accounting of Group Finance and Accounting are responsible for announcement thereof.
(1) Disclosure of Information on Decision
Decisions made by the Board of Directors that, in the opinion of Chief Compliance Officer(“CCO”), fall under the information subject to timely disclosure shall be disclosed in a timely
manner by Investor Relations of Group Finance and Accounting or Accounting of Group
Finance and Accounting.
(2) Disclosure of Information on Occurrence of Material Fact
When any fact that might constitute a material fact has occurred, a business division that
becomes aware of the occurrence must report on it to CCO and then, where necessary, to
President (CEO), the Board of Directors, and the Management Committee. If CCO
determines that the occurrence of the material fact falls under the information subject totimely disclosure, the information shall be disclosed in a timely manner by Investor Relationsof Group Finance and Accounting or Accounting of Group Finance and Accounting.
(3) Financial Information
Information on financial results shall be disclosed in a timely manner by Investor Relationsof Group Finance and Accounting and Accounting of Group Finance and Accounting under
the instructions of CCO subject to prior approval of the Board of Directors.

25

General Meeting of Shareholders
Appointment/dismissal

Appointment/dismissal

Appointment/dismissal

Consultation

Advisory CommitteeonAppointments
and Remunerationlath
Response

ReportingBoard of Directors
Nine members
two of whom are outside
Supervision

Appointment/dismissal

Management
Committee
Global Strategy Review Meeting
Audit ofAudit ofoperations
Audit ofaccounts

accounts

Corporate Audit
Coordination

Global Risk Management Meeting

OfﬁceInternal audit

Holding Company
companies

Divisions

Coordination

26

and

AffiliatedBusiness

Independent auditors

Audit & Supervisory Board

Four members, three of whom are outside

Representative Director, President CEO

Organizational Structure for Timely Disclosure
1. Information on Decision:
2. Information on Occurrence of Material Fact:
3. Financial information:

Accounting data

Business divisions and subsidiaries

Chief Compliance Officer (CCO)(Individual responsible for Groupwide information management)

Management
Committee

President and CEO

Board of Directors

Chief Compliance Officer (CCO)(Individual responsible for groupwide information management)

Department responsible for timely disclosure(Investor Relations of Group Finance andAccounting)

Department responsible for timely disclosure(Accounting of Group Finance andAccounting )TDnet, corporate website,

EDINET

media, etc.

Investors

27