Nisso : Corporate Governance Report 2021/05/18

Corporate Governance Report

Last Update: May 18, 2021

NISSO CORPORATION

Ryuichi Shimizu,

Representative Director, President & CEO

Contact: Norihiro Sekido,

Senior Executive Officer

TEL: [phone]

Securities Code: 6569

http:// www.nisso.co.jp/

The corporate governance of NISSO CORPORATION (the "Company") is described below.

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

Other Basic Information

1. Basic Views

The Nisso Group (the "Group") is promoting respect for human rights and the creation of compassionate human relationships based on (our founding philosophy) "Nurturing and Bringing Out the Best in People". With the aim of creating new corporate value that can contribute to society by striving to create and establish its own unique, proprietary technologies, the Company shall ensure the transparency of management by complying with laws and ordinances and disclosing accurate information. The Company recognizes the importance of corporate governance in order to achieve continuous improvement of corporate value, and conducts management focused on compliance. Furthermore, the Company respects the rights of shareholders, and aims to be a company that is trusted by society.

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

The Company implements all the principles of the Corporate Governance Code.

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

[Principle 1.4 Cross-Shareholdings]

In principle, the Company shall not hold cross-shareholdings, except in cases where the significance and rationality of strategic holdings are recognized for the purpose of improving corporate value over the medium to long term. In addition, the Company shall sell shares that it holds, taking into consideration their impact on the market, if the significance and rationality of the holdings have decreased.

Under this policy, no listed shares were held as of the end of March 2021.

Regarding the exercise of voting rights pertaining to cross-shareholdings, the Company shall determine to vote for or against each proposal from the viewpoint of whether or not it will contribute to the enhancement of the corporate value of the Group and issuing companies. The proposals considered to be particularly important are as follows:

• Appropriation of Surplus ② Election of Managing Directors/Audit & Supervisory Board

Members ③ Organizational Restructuring ④ Takeover Defense Measure Proposal etc.

[Principle 1.7 Related Party Transactions]

The Company does not conduct related party transactions in principle, but in cases where they are carried out, in order to ensure that related party transactions do not harm the interests of the Company and the common

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interests of its shareholders, in accordance with laws and ordinances, the "Regulations of the Board of Directors", and the "Related Party Transaction Management Regulations", and with the consent of the Audit

• Supervisory Board Members, the Company shall obtain approval from the Board of Directors. Furthermore, the Company periodically investigates the status of the transactions on a yearly basis, in addition to reporting and receiving approval for such transactions at the first Board of Directors' Meeting held at the beginning of each fiscal year.

[Principle 2.6 Roles of Corporate Pension Funds as Asset Owners]

With regard to the management of reserved funds of the defined benefit corporate pension to which the Group belongs, the Company has established pension regulations/basic management policies, etc., receives periodic operational status reports from life insurance companies and trust banks, which are entrusted management institutions, and administers the appropriate operation/management of corporate pensions.

With regards to making important decisions such as the reexamination of policy asset proportions, the qualitative evaluation of management institutions, and the changes to each policy, the Personnel Division, which is the division in charge of management, after consulting with the Accounting Division, shall formulate the necessary drafts, and after receiving advisories from the Asset Management Committee, which consists of the person in charge of the Company's relevant administration/finance departments and the officer in charge of the relevant administration department, such decisions shall be made at the Board of Directors' Meetings. The Company discloses the management results of reserved funds to its employees.

Furthermore, the division in charge of management strives to enhance its expertise through the participation of various seminars.

[Principle 3.1 Full Disclosure]

1. Management philosophy, management strategy and management plan

Under the founding philosophy of "Nurturing and Bringing Out the Best in People", the Company has formulated its management philosophy and has provided it on its website. In addition, the Medium-term Management Plan has been explained at briefing sessions for investors, and is provided on the Company's website.

1. Basic views and policies on corporate governance

The Company's basic views and policies on corporate governance are as stated in I. 1. Basic Views of this report.

1. Policies and procedures for the determination of senior management executives/Managing Directors

remuneration by the Board of Directors

Please refer to "II. 1. Organizational Composition and Operation Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods" in this report. In addition, in order to ensure fairness, transparency, and objectivity of procedures and to further enhance corporate governance, the remuneration of Managing Directors is determined by resolution of the Board of Directors, after consulting with the Nomination and Remuneration Committee, which is made up in majority by Independent External Managing Directors and an Independent External Audit & Supervisory Board Member.

1. Policies and procedures for the appointment/dismissal of senior management executives and the nomination of Managing Director/Audit & Supervisory Board Member candidates by the Board of Directors

The nomination of Managing Director candidates is based on the Company's management philosophy and management strategy, with consideration to business contents/scale/business environment, etc., and personnel with knowledge/experience and qualifications that can contribute to the fulfillment of the functions of the Board of Directors are selected as candidates at the Board of Directors' Meetings after consulting with the Nomination and Remuneration Committee. In addition, the nomination of Audit & Supervisory Board Member candidates is based on the selection criteria prescribed in the Auditing Standards of Audit & Supervisory Board Members, and personnel to which the Audit and Supervisory Board gives consent to are appointed as candidates.

Regarding the dismissal of senior management executives, in cases such as where it is deemed that he/she has not been able to sufficiently contribute to the fulfillment of the functions of the Board of Directors, in the same manner as in their appointment, upon consulting with the Nomination and Remuneration Committee, deliberations shall be held at the Board of Directors' Meetings, and such resolutions shall be made at the General Meetings of Shareholders.

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1. Explanations with respect to individual appointments/nominations for the appointment/dismissal of

senior management executives and the nomination of Managing Director/Audit & Supervisory Board Member candidates by the Board of Directors

Regarding the individual appointments/nominations of Managing Director and Audit & Supervisory Board Member candidates, their brief career summaries and reasons for their selection are provided in the "Notice of the General Meeting of Shareholders".

[Supplementary Principle 4.1.1 Roles/Responsibilities of the Board of Directors (1)]

The Board of Directors makes important decisions on management strategies, management plans and other matters concerning the management of the Company, as well as supervising the execution of business in accordance with laws, the Articles of Incorporation, and other regulations of the Company. With respect to other matters, in order to promptly make decisions concerning the execution of business, the authority related to the execution of business is entrusted to the President, the Managing Executive Officer, Senior Executive Officers, and Division Directors.

[Principle 4.8 Effective Use of Independent External Managing Directors]

At present, the Company has appointed 2 External Managing Directors, and both persons have been reported to the Tokyo Stock Exchange as Independent External Managing Directors.

[Principle 4.9 Independence Standards and Qualifications for Independent External Managing Directors]

In selecting Independent External Managing Directors, the Company has formulated its own independence standards, as well as meeting the requirements of External Managing Directors as stipulated in the Companies Act and the independence criteria set by the Tokyo Stock Exchange.

[Principle 4.11 Preconditions for Board of Directors/Audit and Supervisory Board Effectiveness]

The Company's Board of Directors shall be constituted of personnel with knowledge/experience and qualifications in order to effectively fulfill its role and responsibilities. In addition, with regards to Audit & Supervisory Board Members, the Company has appointed personnel who have sufficient knowledge of finance/accounting.

Currently, the Board of Directors is comprised of 3 Internal Managing Directors and 2 External Managing Directors (including 1 female Managing Director), who are Independent Officers.

[Supplementary Principle 4.11.1 Preconditions for Board of Directors/Audit and Supervisory Board Effectiveness]

The Board of Directors shall maintain the diversity and appropriate number of its members in order to make appropriate decisions in accordance with the Company's business domain/scale. The appointment of Managing Directors is based on the Company's management philosophy and management strategy, with consideration to business contents/scale/business environment, etc., and personnel with knowledge/experience and qualifications that can contribute to the fulfillment of the functions of the Board of Directors are selected.

[Supplementary Principle 4.11.2 Preconditions for Board of Directors/Audit and Supervisory Board Effectiveness]

The Company's Managing Directors/Audit & Supervisory Board Members select candidates who can secure the time and effort required to appropriately fulfill their roles and responsibilities. In cases where Managing Directors/Audit & Supervisory Board Members concurrently serve as officers of other listed companies, the number of such positions shall be kept within a reasonable range, and the status of significant concurrent positions of the Company's Managing Directors/Audit & Supervisory Board Members are provided in the "Annual Securities Report" and the "Notice of the General Meeting of Shareholders".

[Supplementary Principle 4.11.3 Preconditions for Board of Directors/Audit and Supervisory Board Effectiveness]

For the evaluation of the effectiveness of the Board of Directors for the Fiscal Year Ended March 31, 2021, from the viewpoints of 1. Evaluation of effectiveness regarding overall management (ensuring the rights and equality of shareholders, appropriate collaboration with non-shareholder stakeholders, ensuring appropriate information disclosure and transparency, responsibilities of the Board of Directors, etc., dialogue with shareholders), 2. Substantial evaluation of the effectiveness of the Board of Directors (the size of the Board

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of Directors {number of personnel} and the appropriateness of the constituent members, the quality of the Board's decision-making process, the quality of information provided to the Board of Directors), and 3. Comprehensive evaluations, the Company conducted a nominal questionnaire for all Managing Directors (including 2 External Managing Directors), and all Audit & Supervisory Board Members (including 3 External Audit & Supervisory Board Members) in April 2021. The results of the questionnaire were tabulated/analyzed by the Secretariat of the Board of Directors, with the inclusion of the 2 External Managing Directors, and its contents were examined/summarized at the Board of Directors' Meetings.

[Supplementary Principle 4.14.2 Managing Director/Audit & Supervisory Board Member Training]

The Company's Managing Directors/Audit & Supervisory Board Members shall endeavor to acquire and appropriately update the knowledge deemed necessary to fulfill their roles and responsibilities, for matters such as corporate governance and compliance, and the Company shall provide opportunities for training and support of costs for such purposes. In addition, when an External Managing Director or External Audit & Supervisory Board Member assumes office, the Company shall provide opportunities for them to acquire information about its businesses, business environment, financial condition, organization, etc.

[Principle 5.1 Policy for Constructive Dialogue with Shareholders]

The Company actively engages in IR and SR activities based on the following basic policy in order to contribute to the sustainable growth and the enhancement of corporate value over the medium term by promoting constructive dialogue with shareholders and investors.

(1) Designation of management personnel, etc., regarding dialogue with shareholders

The President & Representative Director plays a central role in dialogue with shareholder and investors, and the Senior Executive Officer in charge of IR, along with the division in charge of IR assist and promote such dialogue.

(2) Initiatives for seamless collaboration within the Company

At the Company, the Accounting, Finance, Legal Affairs, Internal Auditing, and other business divisions/offices, centering on the office in charge of IR, will work together for constructive dialogue with shareholders through the discussion, sharing and preparation of disclosure information, in addition to cooperating with the Corporate Value Enhancement Committee to ensure timely and appropriate disclosures.

(3) Initiatives to enhance means of dialogue other than individual interviews

By recognizing that the General Meeting of Shareholders is a forum for dialogue with shareholders, the Company strives to set the date and time of the General Meeting by avoiding days when such meetings are concentrated, as well as sending out and disclosing convocation notices and reports as soon as possible.

In addition, in order to help deepen the understanding of the Company, it holds Financial Results Briefings and Medium-term Management Plan Briefings for institutional investors and analysts, and conducts Company Briefings for individual investors.

(4) Initiatives for feedback of shareholder opinions and concerns

The Company has established a system for the timely reporting of IR activity reports, including opinions and concerns of shareholders and investors obtained through dialogue, to the Board of Directors, etc.

(5) Initiatives related to management of insider information

Regarding dialogue with shareholders and investors, in addition to establishing "Information Disclosure Regulations" and "Insider Trading Prevention Regulations" in order to prevent material information from being disclosed to some specified persons and to thoroughly manage material information, the Company has selected a Chief Information Officer, and strives to prevent the leakage of material information and insider trading by internal personnel.

Furthermore, the Company will refrain from dialogue with shareholders and investors for a certain period of time prior to the announcement of financial results, setting it as a "silent period".

(6) Other initiatives

In addition to regularly ascertaining the shareholder composition on the register of shareholders, the Company conducts shareholder identification surveys of those who hold substantial shares of the Company, which is utilized in constructive dialogue with shareholders and investors.

Furthermore, the Company will focus further on providing non-financial information such as business strategies and information related to ESG, etc.

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2. Capital Structure

		Foreign Shareholding Ratio		From 10% to less than 20%
[Status of Major Shareholders]	(UPDATED)
		Name / Company Name			Number of Shares			Percentage (%)
				Held
	NS Holdings Co., Ltd.	13,917,400				40.99
	Custody Bank of Japan, Ltd. (Trust Account)	2,652,600				7.81
	The Master Trust Bank of Japan, Ltd.	2,315,400				6.82
		(Trust Account)
	Tadao Shimizu	1,022,600				3.01
	Chikako Shimizu	974,000				2.87
	The Nomura Trust and Banking Co., Ltd.	826,300				2.43
	(Investment Trust Account)
	Custody Bank of Japan, Ltd.	671,500				1.98
	(Trust Account 9)
	BNY GCM CLIENT ACCOUNT JPRD AC	532,560				1.57
	ISG (FE-AC)
	J BNYM SA/NV FOR BNYM	440,659				1.30
	FOR BNY GCM CLIENT
	ACCOUNTS M LSCB RD
	Shoichi Iwashige	433,800				1.28
		Controlling Shareholder (except for Parent			―
		Company)
		Parent Company			None

Supplementary Explanation (UPDATED)

• The above-mentioned [Status of Major Shareholders] is based on the register of shareholders as of the end of March 2021.
• The percentages listed above are calculated based on the total number of outstanding (issued) shares excluding the number of treasury shares. In addition, the figures are rounded off to the second decimal point.
• In the Changes Report of the Large Shareholding Report which was made available for public inspection on December 17, 2020, although it was stated that SPARX Asset Management Co., Ltd. and its joint holders held the following shares as of December 15, 2020, since the Company was unable to confirm the number of real held shares by these companies as of the end of March 2021, the status of the major shareholders stated above has been based on the number of shares held on the register of shareholders. The contents of the Changes Report of the Large Shareholding Report are as follows:
  [Shareholder Name (Number of shares held, Shareholding ratio to the total number of issued shares)] SPARX Asset Management Co., Ltd.（2,107,900 shares, 6.16％)
  ＜Total: 2,107,900 shares, 6.16％＞
• In the Changes Report of the Large Shareholding Report which was made available for public inspection on January 8, 2021, although it was stated that Nomura Asset Management Co., Ltd. held the following shares as of December 31, 2020, since the Company was unable to confirm the number of real held shares as of the end of March 2021, the status of the major shareholder stated above has been based on the number of shares held on the register of shareholders. The contents of the Changes Report of the Large Shareholding Report are as follows:
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