Nitto Denko : Corporate Governance Report

[Notes of caution]

This document is an English translation of the Japanese original. In the event of any differences or inconsistencies between the Japanese and English versions, the Japanese language version shall take precedence.

CORPORATE GOVERNANCE

NITTO DENKO CORPORATION.

Last update: Aug 3, 2022

NITTO DENKO CORPORATION

Hideo Takasaki, President Inquiries: Corporate Legal Dept. Legal and Compliance Div.

Phone: [phone] Stock code: 6988 https://www.nitto.com/jp/ja/

The corporate governance of NITTO DENKO CORPORATION. is described below.

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

1. Basic Views

At the Nitto Group, we make clear our fundamental values and sense of purpose with respect to business performance in the form of our Corporate Philosophy.

In order to maximize our corporate value and achieve continuous growth under the Corporate Philosophy, we believe that prompt and transparent decision-making, as well as bold managerial decisions, are necessary. Being fully aware of the importance of establishing corporate governance to achieve such decision-making, we will further improve our corporate governance system by establishing these Corporate Governance Guidelines [Reference 1] in accordance with the following basic principles.

1.We ensure the rights and equality of our shareholders. 2.We collaborate with our stakeholders appropriately.

3.We disclose information appropriately to ensure transparency.

4.We aim to realize the management functions expected of us by our stakeholders. 5.We engage in constructive dialogue with our shareholders.

[Reason not to Enforce Each Principle of the Corporate Governance Code]

【Supplementary Principle 4.10.1 Composition, Independence, Etc. of Advisory Committees】

Nitto established the Management, Nomination, and Remuneration Advisory Committee as an advisory body to the representative director. For details, please see "Voluntary Establishment of Committee(s) Equivalent to

Nomination Committee or Remuneration Committee" of the Corporate Governance Report.

Please note that Nitto does not necessarily believe that only independent directors can provide useful advice on management, nomination, and remuneration but rather believes that inviting opinions from a broad range of independent third parties contributes to the enhancement of corporate governance. As such, said Committee consists of independent individuals who are deemed to be appropriate at the time, such as outside corporate auditors and external experts. This being the case, independent directors may not always compose a majority of said Committee, though we believe that its independence is secured as full-time executives other than the representative director are not eligible to be a member of said Committee.

【Supplementary Principle 5.1.1 Dialogue between Senior Management and Shareholders】

Please refer to Principle 5.1 Policy for Constructive Dialogue with Shareholders for Nitto's policy for dialogue with shareholders.

Nitto is aware of the requests from shareholders to provide information and arrange management meetings with outside directors and corporate auditors. Accordingly, we make it a rule that the contents of dialogue with shareholders be shared with outside directors, corporate auditors, and other senior management members at the Board of Directors meetings and other opportunities and have outside directors provide information in Integrated Report and elsewhere. We will continue discussing how we can realize management meetings with outside directors and corporate auditors, as there remain issues with the current systems' structure to ensure fairness of opportunities, prevent information leaks, etc.

[Disclosure Based on the Principles of the Corporate Governance Code]

【Principle 1.4 Cross-Shareholdings】

The Nitto Group may hold shares of other listed companies as cross-shareholdings only when such holdings are deemed to lead to the enhancement of the Group's corporate value over the long-term. However, the ratio of such shares to total assets is minimal, and with regard to each cross-shareholding, we will continue to examine every year such factors as the status of transactions with such companies and whether the return on such holdings is commensurate with the capital costs deemed appropriate by the Company, and determine whether or not such shares need to be sold.

When exercising voting rights with respect to such cross-shareholdings, we decide the manner in which we vote in a comprehensive manner after taking into consideration such factors as whether each item to be resolved leads to the stable enhancement of the Group's corporate value.

【Principle 1.7 Related Party Transactions】

At Nitto, related party transactions conducted by our Directors or major shareholders and other parties are resolved at Board of Directors meetings or entrusted to Outside Directors as appropriate in order to verify the rationality (business necessity) of such transactions and the validity of their terms and conditions.

resolve such transactions or entrust such business to Outside Directors as appropriate

Whether or not any items to be presented at Board of Directors meetings and other important meetings fall

under the definition of related party transactions is examined by the Secretariat beforehand in conjunction with the legal department.

The soundness and appropriateness of such transactions are ensured through ex-post-facto checking of their nature, etc. by the internal audit department and through audits by the Board of Corporate Auditors (mem- bers).

【Supplementary Principle 2.4.1 Ensuring Diversity】

Nitto strives to empower women by appointing more female employees to managerial positions by including "corporate culture that satisfies diverse employees" in its material issues (materiality) for sustainability. Meanwhile, at this point, we do not set or disclose performance targets for the appointment of foreign and/or mid-career employees to managerial positions as we do not perceive a significant difference in appointing our employees to managerial positions on account of their nationality or timing of hiring. Please refer to the Company's website and Integrated Report regarding our performance targets and progress for the appointment of women to managerial positions.

Remaining committed to developing a "Nitto Person" who comprehends and carries out the Nitto Way, Nitto is developing a group-wide foundation for human resource management to empower human resources across the globe. Please refer to the Company's website and Integrated Report for the latest on our concrete evaluation systems and human resource development programs.

The Company's website: https://www.nitto.com/jp/en/sustainability/social/human_resources/ - Integrated Report

The Company's website: https://www.nitto.com/jp/en/sustainability/report/

【Principle 2.6 Roles of Corporate Pension Funds as Asset Owners】

In order for Nitto to perform a function as an asset owner with its enhanced investment expertise, it appoints a CFO, a manager in charge of finance, and a manager in charge of human resources as the pension management director, and in addition, appoints human resources with experience in fund management as an executive director, and supplements professional capacity and knowledge by employing an external advisor, thereby properly operating and managing Nitto's corporate pension.

【Principle 3.1 Full Disclosure】

(i) Corporate Philosophy and Management Plan

Please refer to the Company's website at https://www.nitto.com/jp/en/ir/

1. Basic Views on Corporate Governance Please refer to "1. Basic Views" of this Report.
   Please refer to [Reference 1] for the "Corporate Governance Guidelines."

1. Policy related to remuneration of Directors and Corporate Auditors Please refer to the Company's website at https://www.nitto.com/jp/en/ir/
2. (v) Nomination Policy and Procedures, and Reasons for Individual Nomination of Candidates for Directors and Corporate Auditors
   (Appropriate Structure of the Board of Directors and Board of Corporate Auditors)
   Given the current scale of business, the need to facilitate substantial discussions at Board of Directors meet- ings and Board of Corporate Auditors meetings and to ensure an appropriate number of Outside Directors, etc., we believe that the appropriate size of the Board of Directors is not more than ten Directors (one third or more of whom are independent directors). Likewise, the Articles of Incorporation set an upper limit of ten. We also believe that the appropriate size of the Board of Corporate Auditors is not more than five members (half or more of whom are independent auditors), who are individuals having appropriate experience and ability as well as necessary knowledge in finance, accounting, and legal affairs, with at least one (1) Corporate Auditor who has sufficient expertise in finance and accounting. Furthermore, in order to make important policy deci- sions in an ever-changing business environment and to exercise a sustained supervisory function, we have identified five qualities, knowledge, experience, etc. (hereinafter collectively referred to as "skills") in "leader- ship," "technology," "finance," "governance," and "sustainability" for the Board of Directors and Board of Corporate Auditors and believe that a composition that ensures a good balance of such skills will contribute to management.

(Appointment and Dismissal of Directors and Corporate Auditors)

The Officer Appointment Standards and the Officer Dismissal Standards have been established as described below and are applied when appointing or dismissing a Director or Corporate Auditor. In addition, in order to further enhance fairness and transparency in appointment and dismissal of Directors, the Management, Nomination and Remuneration Advisory Committee meets and reports the results of its deliberations to the Board of Directors, and the Board of Directors makes the final decision by taking such report into account.

1. A person who practices the Nitto Way*
2. A person who can contribute to the Company with the five skills identified by the Company.

*Our values, attitudes and mindset, and code of conduct are based on placing safety before everything else, amazing and inspiring our customers, anticipating and leveraging change, taking on challenges for new value creation, acting promptly and following through on decisions with determination, transforming ourselves con- stantly, and having an attitude of integrity, and understanding and respecting diversity.

1. An act was committed that was contrary to public order and morality;

1. A violation of the laws and ordinances, the Articles of Incorporation, or any other regulations of the Group was committed, and Nitto suffered a substantial loss or hindrance to Group business operations due to such violation;
2. A material inconvenience was caused to the execution of the duties of an Officer; or
3. Any of the quality requirements set forth in the Officer Appointment Standards is no longer satisfied.

(Nomination of Outside Directors and Outside Corporate Auditors)

When nominating Outside Director and Outside Corporate Auditor candidates, individuals who are considered appropriate for such positions must meet the Independent Officer Appointment Standards and the Officer Appointment Standards. Furthermore, in order for Outside Directors and Corporate Auditors to set aside the time and labor necessary to properly fulfill their roles and responsibilities at Nitto, due attention is paid to the statuses of concurrent positions (officers, etc.) that they might hold at other companies to ensure that such statuses are appropriate.

The Company, in an effort to ensure the objectivity and transparency of governance, has set forth the criteria for the independence of Outside Directors and Outside Corporate Auditors (hereinafter collectively referred to as "Outside Officer(s)"), as follows.

The Company considers an Outside Officer or a candidate for Outside Officer to have independence, if, after conducting an investigation to the utmost reasonable extent, it is determined that none of the following items are applicable to the Outside Officer or candidate for Outside Officer.

1. A person who is or has been in the past ten years an executing person (Director, Corporate Auditor, Vice President, or any other employee) of the Company or the Group (hereinafter collectively referred to as the "Group");
2. A person who is an important executing person (Director, Corporate Auditor, Accounting Advisor, Executive Officer, Executive Director, or any other important employee; hereinafter the same shall apply) of a major shareholder of the Company (a shareholder holding 10% or more of the voting rights of the Company);
3. A person who is an important executing person of a company of which the Company is a major shareholder;
4. A person who is an important executing person of a major counterparty of the Company (a counterparty for which the amount of payment or receipt for transactions with the Company for the latest fiscal year exceeds 2% of consolidated gross sales);
5. A person who is an important executing person of a major lender of the Company (a lender to which the Group's aggregate amount of loans payable at the latest fiscal year-end exceeds 2% of consolidated total assets);
6. A person who is a legal professional, accounting and tax professional, consultant, or research and educa-