Mitsubishi Chemical : Corporate Governance Report 2021/07/08

Corporate Governance Report

Last Update: July 8, 2021

Mitsubishi Chemical Holdings Corporation

Chief Executive Officer Jean-Marc Gilson

Contact: Osamu Shimizu

General Manager, Corporate Communications Office

Securities Code: 4188

https://www.mitsubishichem-hd.co.jp/english/

The corporate governance of Mitsubishi Chemical Holdings Corporation (the "Company") is described below.

1. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and

Other Basic Information

1. Basic Views

The Mitsubishi Chemical Holdings Corporation (MCHC) Group defines KAITEKI as "the sustainable well- being of people, society and our planet Earth", and has "realizing KAITEKI" as its vison. The MCHC Group will not stop at providing solutions to environmental and social problems, but also aim to contribute to a sustainability in both through our corporate activities.

For Realizing KAITEKI, in accordance with these guidelines, MCHC shall establish a system to enhance both the soundness and efficiency of business administration, improve the transparency of its business administration through suitable disclosure of information and dialogue with stakeholders, and endeavor to establish a better suitable corporate governance system.

Please refer to our "Mitsubishi Chemical Holdings Corporate Governance Guidelines" on the Company's website for basic policies concerning corporate governance such as the roles, constitution and appointment criteria of the Board of Directors.

(https://www.mitsubishichem-hd.co.jp/english/group/governance/policy.html )

[Reasons for Non-compliance with the Principles of the Corporate Governance Code]

The company complies with the all principles of the Corporate Governance Code.

[Disclosure Based on the Principles of the Corporate Governance Code] (Updated)

As used in this report, the following terms shall have the following meanings: "senior management" means corporate executive officers.

"officers" means directors and corporate executive officers.

Cross-Shareholdings>

(Mitsubishi Chemical Holdings Corporate Governance Guidelines [Development of a framework that improves the soundness and efficiency of management])

The Company and major subsidiaries shall acquire and hold shares of clients, etc. if the shareholding contributes to medium- to long-term improvement in corporate value. The Board of Directors shall review the

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adequacy of such cross-shareholdings on a regular basis. Considering the effect on the market, we make effort to sell such cross-shareholdings as assessed insufficient in adequacy.

On September 25, 2020, the Board of Directors reviewed the adequacy of all cross-shareholdings of Group as of the end of March, 2020, in light of economic rationale as measured by ROIC and necessity for business, etc. As a result of the review, we have found insufficiency in adequacy of a part of cross-shareholdings. Considering the effect on the market, we will proceed to sell such cross-shareholdings as assessed insufficient.

The Company investigates the existence of related party transactions such as transactions involving members of the board or corporate executive officers and their close relatives through methods including seeking direct confirmation from members of the board. The Company sets competitive and conflict-of-interest transactions as a matter to be resolved by the Board of Directors, who confirm the adequacy of the transactions. The Company has no shareholder who holds 10% or more of the voting rights of all shareholders.

In order for corporate pension funds to perform their roles as asset owner, Mitsubishi Chemical Corporation which is the core business company of the Company group has taken measures based upon the guidelines as published by Ministry of Health, Labor and Welfare.

Specifically, Mitsubishi Chemical Corporation has set guidelines for management of pension assets, established committee for management of pension assets, determined proportion of composition of political assets and implemented the total assessment of asset management companies.

In addition to the foregoing, in cooperation with consultants, Mitsubishi Chemical Corporation has performed measures for proper management of corporate pension funds.

(What the company aims for)

The Company Group aims to realize KAITEKI through our corporate activities. KAITEKI is the Company's original concept that means "the sustainable well-being of people, society and our planet Earth." To realize KAITEKI, the Company Group promotes KAITEKI Management with the objective of increasing corporate value based on our three core management policies of improving capital efficiency, creating innovative technologies, and enhancing sustainability for people, society and the Earth with an emphasis on time. Please refer to KAITEKI Management on the Company's website for details. (https://www.mitsubishichem- hd.co.jp/english/kaiteki_management/kaiteki/)

(Management plan)

In February 2021, the Company has formulated its new medium-term management plan APTSIS 25, Step 1, which will commence from fiscal 2021. With regard to the impact of the COVID-19 pandemic, the situation will likely remain uncertain. Based on this awareness, the five-year period of APTSIS 25 from fiscal 2021 has been divided into two phases: Step 1 (With COVID-19) and Step 2 (After COVID-19). The principal measures in Step 1 (fiscal 2021 to fiscal 2022) have been formulated. The plan for Step 2 (fiscal 2023 to fiscal 2025) will be formulated in fiscal 2022.

Please refer to the Medium-Term Management Plan on the Company's website for details. (https://www.mitsubishichem-hd.co.jp/english/ir/pdf/01033/01180.pdf)

(The Company's view on overall corporate governance)

Please refer to our "Mitsubishi Chemical Holdings Corporate Governance Guidelines" on the Company's website for our view on overall corporate governance. (https://www.mitsubishichem- hd.co.jp/english/group/governance/policy.html)

(Policy and procedures for deciding compensations of senior management and directors)

(Mitsubishi Chemical Holdings Corporate Governance Guidelines [Development of a framework that improves the soundness and efficiency of management]3(3), [Enhancement of management transparency]5) The Compensation Committee determines the individual amount of compensation for each director, corporate executive officer and major subsidiaries president (excluding listed subsidiaries).

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Policy on Determining Remuneration of senior management and directors is [Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods]

(Policy and procedures in the appointment/dismissal of the senior management and the nomination of directors)

(Mitsubishi Chemical Holdings Corporate Governance Guidelines [Development of a framework that improves the soundness and efficiency of management]3(1), [Enhancement of management transparency]4) The Nominating Committee nominates candidates for directors, corporate executive officers and the presidents of major subsidiaries that are non-listed companies (Mitsubishi Chemical Corporation. and Life Science Institute, Inc.). In consideration of transparency and fairness in the process of nominating candidates, an outside director serves as the head of the committee.

Policy on appointment/dismissal of senior management and nomination of directors is described at [Policy on appointment/dismissal of senior management and nomination of directors].

(Reason for the Appointment of Officers)

The reason for appointment of officers are described at the end of this report [Reason for appointment of the Director] and [Reason for appointment of the corporate executive officers].

The Company delegates authority to corporate executive officers to make all business execution decisions, with the exception of matters that must be legally resolved by the Board of Directors and important matters in terms of portfolio management.

(Mitsubishi Chemical Holdings Corporate Governance Guidelines Attachment 2)

Independence Standards for Independent Directors are described at [Matters relating to Independent Directors].

(Mitsubishi Chemical Holdings Corporate Governance Guidelines [Development of a framework that improves the soundness and efficiency of management]2(2))

In order to establish the Group's basic management policies and oversee management appropriately, Directors who possess an advanced level of knowledge and deep insight in management experience, finance and accounting, science technology, IT and production, risk management, business strategy and marketing, laws and regulations, etc., and globalism and diversity are appointed.

Furthermore, in a bid to enhance oversight functions, a majority of Directors of the Board will not concurrently take on the role of Corporate Executive Officer.

Regarding the skills matrix described above, please refer to the Notice of the General Meeting of Shareholders.

(https://www.mitsubishichem-hd.co.jp/english/ir/pdf/01079/01234.pdf)

Regarding the Directors of the Board's concurrent positions, please refer to the Notice of the General Meeting of Shareholders.

(https://www.mitsubishichem-hd.co.jp/english/ir/pdf/01079/01234.pdf)

- Implementation of the Board of Directors Effectiveness Evaluation

In accordance with the Mitsubishi Chemical Holdings Corporate Governance Guidelines, the Board of Directors is evaluated for their effectiveness annually and a summary of the results are disclosed.

- Evaluation methods and processes

In FY 2020, the evaluation was conducted by an independent external review organization by inspection of the minutes of meetings of the Board of Directors, the Corporate Executive Officers Committee, the Nominating Committee, the Audit Committee, and the Compensation Committee, collecting responses from all directors including the chairperson through a questionnaire (answers using a 5-point scale and written comments), interviewing each director for about one hour, and providing an evaluation based on the reviewer's professional knowledge. Based on such results, the Board of Directors discussed the issues that

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should be addressed and future challenges. Based on these discussions, the Chairperson reported the issues that should be addressed and future challenges to the Board of Directors.

- Outline of evaluation results

The findings from the evaluation of the Board of Directors' effectiveness conducted by the independent review organization are briefly described as follows.

1. The effectiveness of the Board of Directors is secured in terms of a structural framework, as is shown in such fact that the scheme of a "company with a nominating committee, etc." defined in Japan's Companies Act is adopted. However, some critical issues are found in terms of the substance.
2. • Many directors have pointed out that the effectiveness as a holding company's board of directors is not sufficiently secured, and they have advocated the necessity of clarifying the roles of the Board and redefining the agenda.
3. Efforts to address the issues identified in the previous year's effectiveness evaluation brought improvements in some issues. However, some other issues have not been sufficiently addressed, as is clear from harsh comments given by some outside directors. Their comments pertain to discussions on roles as a holding company, prior distribution of board meeting materials, and other problems.
4. Since the mission of increasing corporate value of the Mitsubishi Chemical Holdings Corporation is to be entrusted to a new CEO recruited from outside, enhancing the effectiveness of the Board of Directors, as the supervisory body of the CEO, is an urgent critical issue. Therefore, the Company is expected to address the following four issues, among others.
5. • Redefining the roles of the Board of Directors and redesigning the agenda
   • Encouraging directors' leadership
   • Revisiting the composition of the Board of Directors
   • Reinforcing the function of director nomination

Based on the evaluation findings described above and ensuing discussions by the Board of Directors, The Company is going to take action toward redefining the roles of the Board of Directors and the agenda, revisiting the composition of the Board of Directors and further reinforcing the function of director nomination.

[Outline of results of the Evaluation on the Effectiveness of the Board of Directors in fiscal 2020] is described at the end of this report.

(Mitsubishi Chemical Holdings Corporate Governance Guidelines [Development of a framework that improves the soundness and efficiency of management]4(1))

MCHC shall explain to outside directors the Group's business contents and organization on a continuing basis, and provide opportunities to visit domestic and overseas business sites as well as opportunities for dialogue with the management on a regular basis.

For internal directors, opportunities to develop qualities suitable for directors shall be provided through external seminars held by various organizations, in addition to trainings on compliance and internal control.

(Mitsubishi Chemical Holdings Corporate Governance Guidelines Attachment 1)

MCHC will ensure appropriate disclosure so as to gain the trust of our shareholders and encourage long-term holding of MCHC's shares. MCHC also intends to engage in active dialogue with shareholders and reflect it in our corporate activities.

(Policy on Dialogue with Shareholders)

Disclosure to and dialogue with shareholders shall be implemented by each relevant department, in cooperation with each other, under the supervision of the President, officer in charge of IR and officer in charge of legal. Opinions obtained through the dialogue will be reported to the Board of Directors, etc., and shared by the management.

Please refer to our "Mitsubishi Chemical Holdings Corporate Governance Guidelines" on the Company's website for our Policy on Dialogue with Shareholders. (http://www.mitsubishichem- hd.co.jp/english/pdf/governance_guidelines.pdf)

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2. Capital Structure

		Percentage of Foreign Shareholders		more than 20%
[Status of Major Shareholders] (Updated)
		Name / Company Name			Number of Shares Owned	Percentage (%)
	The Master Trust Bank of Japan, Ltd. (Trust account)		126,730,500	8.90
	Custody Bank of Japan, Ltd. (Trust account)			82,100,900	5.77
	Meiji Yasuda Life Insurance Company			64,388,743	4.52
	Nippon Life Insurance Company			42,509,094	2.99
	Custody Bank of Japan, Ltd. (Trust account 7)			26,245,900	1.84
	Custody Bank of Japan, Ltd. (Trust account 4)			23,652,000	1.66
	MUFG Bank, Ltd.			20,552,904	1.44
	STATE STREET BANK WEST CLIENT - TREATY 505234		20,297,909	1.43
	Custody Bank of Japan, Ltd. (Trust account 5)			20,074,700	1.41
	Taiyo Life Insurance Company			18,838,372	1.32
		Controlling Shareholder (except for Parent		None
		Company)
		Parent Company		None

Supplementary Explanation

Although the Company has made the Statements of Large-Volume Holdings (including the Change Report) available for public inspection, since the actual number of shares as of March 31, 2021 cannot be confirmed, such figures have not been listed in the above list of major shareholders (top 10).

Name

Date of public inspection

Number of shares owned (ratio of shares owned to total number of issued shares)

Mitsubishi UFJ Financial Group, Inc. June 15, 2020

104,036,458 shares (6.91%)

Nomura Securities Co., Ltd. October 22, 2020 101,814,722 shares (6.42%)

Sumitomo Mitsui Trust Bank, Limited. November 6, 2020

96,836,403 shares (6.43%)

3. Corporate Attributes

	Listed Stock Market and Market Section		Tokyo Stock Exchange
		First Section
	Fiscal Year-End		March
	Type of Business		Chemicals
	Number of Employees (consolidated) as of the		More than 1000
	End of the Previous Fiscal Year
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