Toyo Tanso : Corporate Governance Report was updated

Corporate Governance Report

CORPORATE GOVERNANCE

Toyo Tanso Co, Ltd.

Last Update: March 31, 2023

Toyo Tanso Co, Ltd

Naotaka Kondo,

Representative Director, Chairman & President, CEO Contact: Planning Department, Corporate Planning Division

Securities code: 5310https://www.toyotanso.com/

The corporate governance of Toyo Tanso Co., Ltd. (the "Company") is described below.

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

Information

1. Basic Views

In order to respond to the trust placed in us by our stakeholders including shareholders, customers, employees and society, and to achieve sustainable growth and medium- to long-term corporate value, while following the fundamental philosophy and management policies below as our basic principle, the Company and the TOYO TANSO GROUP have built a structure of corporate governance aiming to make transparent, fair, quick and decisive decisions while keep maintaining a balance between management supervision and the execution of duties.

[Fundamental philosophy]

The Company and the TOYO TANSO GROUP aim to contribute to society through our business activities, based on the fundamental philosophy that "The TOYO TANSO GROUP contributes to the world through the pursuit of the possibilities inherent in carbon(C)."

[Management policies]

• 1. With raising the level of customer satisfaction constituting the predominant theme of management, we shall aim to provide optimal levels of quality, delivery times, costs, and services and engage in corporate activities accordingly.

• 2. Through carbon technologies, it is our goal to be a constantly growing, future-oriented corporate group highly trusted by shareholders and the general public.

• 3. We are committed to building a rewarding workplace that respects the independence and creativity of employees, encourages employees to have goals, and permits fair evaluations.

• 4. Based on compliance with laws and social norms, we shall observe public order as well as contribute to society through conscientious and fair corporate activities.

5.

We shall aim to coexist in a state of consonance with people, carbon technologies, and the natural environment and engage in corporate activities that will contribute to the conservation of the global environment.

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

[Supplementary Principle 3-1 (3): Disclosure of Initiatives on Sustainability]

The Company established the Sustainability Committee as an important management body and the Sustainability Promotion

Department as a dedicated department, through which it pursues sustainability management to implement strategic initiatives aimed at solving environmental and social issues, including formulation of measures and plans, identification of materiality in relation to

ESG (Environment, Society, and Governance), and establishment of indicators for setting targets. Please refer to the Company's website for information about our sustainability initiatives.

https://www.toyotanso.com/sustainability/

In addition, in July 2021, we indicated our support for the TCFD recommendations, and we are gradually preparing to disclose information based on the disclosure framework recommended by the TCFD, including analyzing and collecting information related to the impact of climate change-related risks and earning opportunities on our business activities and profits.

[Supplementary Principle 4-1(3): Succession Planning for the CEO and Other Top Executives]

At present, the Board of Directors of the Company determines successors for the CEO and other top executives, after receiving suggestions for appointment approved by the Nomination / Remuneration Committee based on sufficient deliberation in light of the appointment criteria of the Company. Furthermore, the Company is currently in the process of developing systems for succession planning and its supervision.

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

[Updated]

[Principle 1-4: Cross-Shareholdings]

Taking into consideration changes in the environment surrounding the Corporate Governance Code and the fact that the risk of fluctuations in share prices may significantly impact the Company's financial position, the TOYO TANSO GROUP holds, as cross-shareholdings, shares that are deemed to contribute to enhancing the corporate value of the TOYO TANSO GROUP through the maintenance and strengthening of business relationships with issuers and trouble-free transactions, from a medium- to long-term perspective. When the Company assesses that there is little meaning in holding shares, it will take actions to reduce its holdings, such as selling all or part of the shares, after considering the impact on the market and other factors.

In accordance with this policy, every year, the Board of Directors comprehensively verifies the purpose of holding, the benefits of holding (dividends received and gains from business transactions), the risks, the cost of capital, etc., for individual cross-shareholdings. As a result of this verification, all shares held as of December 31, 2022, fulfill the holding criteria. If, however, any holdings do not satisfy these criteria, the Board of Directors will examine the future impact of continuing to hold the cross-shareholdings on its financial targets, customer base, etc., through dialogue with the issuer, and it will thereby verify the appropriateness of the cross-shareholdings, and will reconfirm and consider whether to continue holding them. Based on the results of verification conducted during fiscal 2022, the Company sold one stock held as cross-shareholding during the fiscal year.

When exercising voting rights for individual cross-shareholdings, the Company makes an assessment for each proposal, after comprehensively considering factors such as whether it can be expected to enhance the corporate value of the investee over the medium to long term, and whether there is any possibility that it will harm shareholder value.

[Principle 1-7: Related Party Transactions]

The Board of Directors must approve any competing transactions or transactions with conflicts of interest, as set forth in laws and regulations, between the Company and officers, and when such transactions are conducted, the content thereof must be reported within a certain time period. In addition, the Company makes reasonable choices concerning transactions with major shareholders, etc., after considering factors such as the necessity and cost-effectiveness of the transaction, and approval of the Board of Directors is also obtained for transactions that meet certain criteria set forth in the Board of Directors Regulations and very important transactions.

[Supplementary Principle 2-3 (1): Response to Sustainability Issues]

The Board of Directors recognizes factors such as consideration for climate change and other global environmental issues, respect for human rights, fair and appropriate treatment of the workforce including caring for their health and working environment, fair and reasonable transactions with suppliers, and crisis management for natural disasters as management issues related to sustainability, and the Sustainability Promotion Department, Risk & Compliance Committee, and responsible departments promote initiatives under the control of the Sustainability Committee.

[Supplementary Principle 2-4 (1): Policy on ensuring diversity in recruitment of core personnel, etc.]

The prohibition of discrimination is a basic principle of the Company, including discrimination on the basis of gender and nationality, as well as religion, age, disability, and other differences between people, and the Company aims to foster a corporate culture where employees with differing values and ideas respect each other, and where there is an abundance of trust and co-creation, enabling employees to feel fulfilled in their work.

As our plan for April 2021 to March 2024, we have set forth targets of achieving a ratio of women among managerial positions of 7% or more, and an average ratio of women among new hires of 20% or more.

[Updated]

[Principle 2-6: Function as a Corporate Pension Asset Owner]

The Company entrusts its corporate pension fund to an asset management institution that has expressed its acceptance of the

Stewardship Code, and has appointed an employee within the Human Resources Department, which is the department responsible for corporate pension, as the person in charge of corporate pension. This person receives regular reports from the asset management institution concerning management systems, the level of achievement of management targets, composition of assets, and other information, the details of which are also reported to the Board of Directors. Based on the content of those reports, he or she works with an appropriately qualified employee from the Finance and Accounting Department to discuss the appropriateness of the management of the corporate pension by the managing institution, including stewardship activities, makes revisions to the composition of assets, etc., as necessary, and performs monitoring to ensure that any potential conflicts of interest between beneficiaries and the Company are appropriately managed, etc.

[Updated]

[Principle 3-1-i: Full Disclosure: Company Objectives (Fundamental Philosophy, etc.), Business Strategies, and Business Plans]

・Fundamental philosophy: This information is provided in "I. Basic Views on Corporate Governance, Capital Structure,

Corporate Profile, and Other Basic Information 1. Basic Views" in this report as well as the Company's website.

https://www.toyotanso.com/sustainability/governance/corporate-governance.html

・Business strategies and business plans: This information is provided in disclosure materials, financial results presentation materials, and other documents. Each type of document is provided on the Company's website.

Medium-term management plan:https://www.toyotanso.com/IR/plan.html

Financial results presentation materials:https://www.toyotanso.com/IR/presentation.html

[Principle 3-1-ii: Full Disclosure: Basic Views and Guidelines on Corporate Governance]

This information is provided in "I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic

Information 1. Basic Views" in this report.

[Principle 3-1-iii: Full Disclosure: Policies and Procedures for Determining the Remuneration of Senior Management and Directors]

This information is provided in "II. Business Management Organization and Other Corporate Governance Systems regarding

Decision-making, Execution of Business, and Oversight in Management 1. Organizational Composition and Operation [Director

Remuneration] Disclosure of Policy on Determining Remuneration Amounts and the Calculation Methods Thereof" in this report.

[Principle 3-1-iv: Full Disclosure: Policies and Procedures for the Appointment/Dismissal of Senior Management and the Nomination of Director and Audit & Supervisory Board Member Candidates]

When nominating Director and Audit & Supervisory Board Member candidates and appointing/dismissing Executive Officers, the

Board of Directors nominates persons that possess the abundant experience, excellent skills and insight, and advanced expertise suitable for Directors, Audit & Supervisory Board Members, and Executive Officers of the Company, in order to uphold the corporate philosophy of the Company, achieve sustainable growth, and enhance medium- to long-term value, with the prerequisite that these persons satisfy the Company's criteria for appointment.

In addition, when selecting Director and Executive Officer candidates, the Company's basic policy is to make appointments regardless of age, gender, nationality, and whether they are from inside or outside the Company. Furthermore, with regard to Outside

Directors, the Company also enhances the transparency and fairness of management and ensures the transparency of processes related to the personnel serving as Directors, Audit & Supervisory Board Members, and Executive Officers by ensuring that the Nomination / Remuneration Committee provides recommendations to the Board of Directors concerning persons with these qualities, together with the reasons thereof, with the prerequisite that they satisfy the conditions stipulated in the Companies Act and the conditions for

Independent Directors and Independent Audit & Supervisory Board Members set forth by the Tokyo Stock Exchange, as well as the

Company's independence standards.

Furthermore, the consent of the Audit and Supervisory Board is obtained for the nomination of Audit & Supervisory Board Member candidates.

The Board of Directors makes decisions concerning the dismissal of Directors or Executive Officers, after receiving suggestions for dismissal approved by the Nomination / Remuneration Committee based on sufficient deliberation in light of the dismissal criteria of the Company, pursuant to a consultation by the Board of Directors.

[Principle 3-1-v: Explanations with Respect to Individual Appointments and Nominations when Nominating Director and Audit &

Supervisory Board Member Candidates]

This information is provided in the reference documents attached to convocation notices for the General Shareholders Meeting.

Convocation notices for the General Shareholders Meeting are posted on the Company's website.

https://www.toyotanso.com/IR/meeting.html

[Supplementary Principle 4-1 (1): Overview of Scope of Delegation to Management]

The Board of Directors makes decisions concerning important matters set forth in laws and regulations, the Articles of Incorporation, and the Board of Directors Regulations. In addition, to ensure prompt decision-making and clarify responsibilities, the Company has introduced an Executive Officer system. The day-to-day execution of business operations is delegated to Executive Officers, and important management matters are deliberated and matters to be reported to the Board of Directors are discussed by the Management

Meeting, which consists of Directors and Executive Officers. In this way, the Company ensures the validity of judgments when making decisions concerning important matters. Each Executive Officer is appointed by the Board of Directors to lead the internal organizations they oversee, execute business operations, and take responsibility for the development and promotion of business operations in accordance with management policies, management plans, etc.

[Supplementary Principle 4-2 (2): Basic Policy on Sustainability Initiatives]

The Company's basic policy on sustainability is as follows.

At the TOYO TANSO GROUP, all employees shall carry out their duties with independence and a sense of responsibility based on the governance policy established by the Board of Directors. They shall strive to provide the value that is expected by all stakeholders

(customers, suppliers, local communities, shareholders and investors, and employees). So that we can be a company that continually contributes to improving sustainability (sustainable societal growth and preservation of the global environment), our policy is to achieve continual advancements through our business activities while increasing the sustainability of corporate growth.

Based on this policy, we will conduct all business activities throughout our value chain with a basic approach that is strongly focused on contributing to society while achieving continued growth. This includes technological innovations and creation of value for society and customers through our products, as well as consideration for the global environment, ensuring safety and health, compliance and risk management, fair business practices, respect for human rights and diversity, and harmony with society through social contribution activities.

[Principle 4-8: Effective Use of Independent Directors]

The Company has appointed three Independent Directors, meaning that Independent Directors make up 50% of the total number of

Directors (six). As a result, a structure has been created for the Board of Directors of the Company that ensures objectivity and independence.

[Principle 4-9: Independence Standards and Qualification for Independent Directors]

When appointing Independent Directors, the Company selects candidates in accordance with our own criteria, in addition to the criteria set forth by the Companies Act and the Tokyo Stock Exchange.

[Supplementary Principle 4-10 (1): Policy, Mandates, Roles, etc., Related to the Independence of the Composition of the Nomination / Remuneration Committee]