Corporate governance

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

The Company has implemented all of the principles of the Corporate Governance Code (revised on June 11, 2021).

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

[Principle 1.4 Cross-Shareholdings]

In principle, the Company shall not hold cross-shareholdings, and does not currently hold any listed shares.
However, for the purpose of increasing corporate value over the medium- to long-term, it is the Company's policy to hold shares when strategic significance and rationality of holding such shares are recognized.
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:
① Appropriation of Surplus ② Election of Corporate Officers ③ Organizational Restructuring ④ Takeover Defense Measure Proposal etc.
In addition, if the significance and rationality of holding such shares decreases, the Company shall sell those shares after taking into consideration their impact on the market.

[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 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 and Supervisory Committee, 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.

[Supplementary Principle 2.4.1 Ensuring Diversity in Appointment of Core Human Resources]

(1) Ensuring Diversity
In order to respond to the rapid changes in society and industrial structures, the Group aims to increase overall added value as a company by creating a work environment where diverse employees, including women, the elderly, foreign nationals, and people with disabilities can flourish.

(2) Human Resources Development Policy and Internal Environment Improvement Policy for Ensuring Diversity Among Core Human Resources, and Implementation Status
The Group recognizes that this is an important issue for ensuring diversity, and has set a target of 11.5% by April 2025 to increase the ratio of female managers. As of March 31, 2023, the ratio of female managers in the Group was 11.3%.
Please refer to the Company's corporate website for information on the Human Resources Development Policy and Internal Environment Development Policy aimed at ensuring diversity within the Group.
Human Resources Development Policy
Japanese:https://www.nisso-hd.com/sustainability/social/human-resource/
English:https://www.nisso-hd.com/en/sustainability/social/human-resource/
Internal Environment Development Policy
Japanese:https://www.nisso-hd.com/sustainability/social/divercity/
English:https://www.nisso-hd.com/en/sustainability/social/divercity/

[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 NISSO CORPORATION, a consolidated subsidiary of the Company 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 regard 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 operations, after consulting with the Finance & 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 relevant personnel and finance departments and the officer in charge of the relevant finance 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]

(i) Management philosophy, management strategy and management plan
Under the founding philosophy of "Nurturing and Bringing Out the Best in People", the Group 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 its website.

(ii) Basic views and policies on corporate governance
The Company's basic views and policies on corporate governance are as stated in Basic Views.

(iii) Policies and procedures for the determination of senior management executives/Directors remuneration by the Board of Directors
Please refer to "Overview of Corporate Governance Structures".
In addition, in order to ensure fairness, transparency, and objectivity of procedures and to further enhance corporate governance, the remuneration of Directors (excluding Directors who are Audit & Supervisory Committee Members) is determined by resolution of the Board of Directors, after consulting with the Nomination and Remuneration Committee, which is comprised of a majority of Independent External Directors.

(iv) Policies and procedures for the appointment/dismissal of senior management executives and the nomination of Director candidates by the Board of Directors
The nomination of Director candidates (excluding Directors who are Audit & Supervisory Committee Members) is based on the Company's management philosophy and management strategy, taking into account the business content, scale, business environment, etc., and candidates who possess the 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 candidates for Directors who are Audit & Supervisory Committee Members is based on the selection criteria prescribed in the Auditing Standards of the Audit and Supervisory Committee, and personnel to which the Audit and Supervisory Committee gives consent to are selected 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.

(v) Explanations with respect to individual appointments/nominations for the appointment/dismissal of senior management executives and the nomination of Director candidates by the Board of Directors
Regarding the individual appointments/nominations of Director candidates, their brief career summaries and reasons for their selection are provided in the "Notice of the General Meeting of Shareholders".

[Supplementary Principle 3.1.3 Initiatives for Sustainability, etc.]

In order to achieve its mission of "Creating opportunities and hopes for people to work", the Group recognizes the importance of contributing to society and the environment through investment in "people", which is the driving force behind the Group.
In promoting activities related to sustainability, based on the "Sustainability Policy", the Group aims for sustainable business growth and promotes initiatives to realize a sustainable society by establishing policies on human rights, labor, the environment, health and safety, and ethics.
(1) Basic Views
The Group defines “human resources development” and “diversity” as the most important factors in aiming for sustainable growth of its business. From the perspective of enhancing value, the Group will improve the ratio of highly skilled human resources by developing human resources who can take on the challenge of all possibilities in all fields. In addition, the Group aims to create a workplace where all employees can have dreams and a sense of fulfillment, and build a workplace where diverse human resources can flourish. From the perspective of risk management, the Group recognizes the importance of activities such as respect for human rights, the environment, safety and health, compliance, and local environmental conservation, and is promoting initiatives aimed at reducing various risks and contributing to society.
(2) Implementation Status
(Human resources development)
The basic view of human resources development is "To improve the ratio of highly skilled human resources by developing human resources who can challenge all possibilities in all fields", and the Group's goal is to increase the ratio of engineering employees to 15.0% by April 2025. As of March 31, 2023, the ratio of engineers in the Nisso Group was 9.5%.
(Diversity)
The basic view of diversity is "Aiming to create a workplace where all employees can have dreams and a sense of fulfillment, and building a place where diverse human resources can flourish", and the Group's goal is to increase the ratio of female managers to 11.5% by April 2025. As of March 31, 2023, the ratio of female managers in the Group was 11.3%.
(Climate Change Initiatives)
The Group strives to contribute to society by investing in people, who are its driving force, and at the same time, recognizes that addressing climate change, which is essential to the survival of its business, is an important management issue.
In order to achieve the goal of "achieving carbon neutrality (net-zero emissions) by 2050" the Group has set an interim reduction target based on 2030 of "reducing GHG emissions of 2,951 (t-CO2) by 30% in FY 3/2021". As of March 31, 2023, GHG emissions amounted to 3,116 (t-CO2), rising due to the recovery of economic activity following the end of the COVID-19 pandemic. The Company will continue to address climate change through its business in order to achieve its goals.
For other sustainability-related activities, please refer to the Company's corporate website.
Japanese:https://www.nisso-hd.com/sustainability/
English:https://www.nisso-hd.com/en/sustainability/

[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 & CEO, the Senior Managing Executive Officer, the Managing Executive Officer, Executive Officers, and Division Heads.

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

In selecting Independent External Directors, the Company has formulated its own independence standards, as well as meeting the requirements of External Directors as stipulated in the Companies Act and the independence criteria set by the Tokyo Stock Exchange.
Please refer to the Corporate Governance Report for the "Criteria for Appointment of Independent Officers" established by the Company.

[Supplementary Principle 4.10.1 Appropriate Involvement/Advice of Independent External Directors Through the Establishment of Independent Nomination and Remuneration Committees]

Please refer to the Corporate Governance Report.

[Supplementary Principle 4.11.1 Preconditions for Board of Directors 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 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 Effectiveness]

The Company's Directors select candidates who can secure the time and effort required to appropriately fulfill their roles and responsibilities. In cases where Directors 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 Directors is scheduled to be provided annually in the "Annual Securities Report" (in Japanese only), the "Notice of the General Meeting of Shareholders" and other documents.

[Supplementary Principle 4.11.3 Preconditions for Board of Directors Effectiveness]

The Company conducts a questionnaire survey of all Directors regarding the effectiveness of the Board of Directors, and the results are analyzed and evaluated the by the Board of Directors.
At NISSO CORPORATION prior to the transition to a holding company structure, 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 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), 3. Other (Effectiveness of the Nomination and Remuneration Committee), and 4. From the perspective of comprehensive evaluation, it conducted a questionnaire in April 2023 and reported the analysis and evaluation of the effectiveness of the Board of Directors at the Board of Directors' Meeting in June 2023. As a result, all of the items have been generally positively evaluated by all Corporate Officers, and the Company recognizes that the effectiveness of the Board of Directors of NISSO CORPORATION has been ensured. However, opinions were expressed regarding the promotion of the succession planning and the enhancement of prior explanations to External Corporate Officers regarding proposals.
Based on these opinions, the Company's Board of Directors will also evaluate the effectiveness of the implementation and strive to ensure its effectiveness.

[Supplementary Principle 4.14.2 Director Training]

The Company's Directors 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 Director assumes office, the Group 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]

Please refer to the "Policy for Constructive Dialogue with Shareholders"here.

[Measures to Realize Management that is Conscious of Capital Costs and Share Prices]
[English Disclosure Available]

The Company closely monitors its cost of capital (cost of shareholders' equity and weighted average cost of capital (WACC)) and strives to pursue earning power and improving capital efficiency by setting return on equity (ROE) and return on invested capital (ROIC) as key management indicators. In addition, the Company will strive to enhance its corporate value by achieving a structure in which ROIC consistently exceeds the cost of capital (weighted average cost of capital (WACC)).

Organization Form

Company with Audit and Supervisory Committee

[Directors]

Maximum Number of Directors Stipulated in Articles of Incorporation	14
Term of Office Stipulated in Articles of Incorporation	1 year
Chairperson of the Board of Directors	President
Number of Directors	8
Status of Appointment of External Directors	Appointed
Number of External Directors	5
Number of External Directors Designated as Independent Officers	5

[Audit and Supervisory Committee]

All Committee Members	4
Full-time Members	1
Internal Directors	0
External Directors	4
Chairperson	External Director

Appointment of Directors and Employees to Assist in Fulfillment of Duties of Audit and Supervisory Committee
Not Appointed

Reasons for Adopting Current System
In the event that the Audit and Supervisory Committee requests that an employee be appointed to assist in its duties, the Company will immediately appoint an employee. Employees who assist in the duties of the Audit and Supervisory Committee shall perform their duties under the direction and orders of the Audit & Supervisory Committee Members, and decisions on personnel matters shall be discussed in advance with the Audit and Supervisory Committee.

Cooperation between Audit and Supervisory Committee, Accounting Auditor, and Internal Auditing Department
In accordance with the audit policy and audit plan established by the Audit and Supervisory Committee, the Audit and Supervisory Committee monitors the implementation status of governance, inspects important approval documents, and conducts on-site inspections of business offices, exchanges opinions and cooperates with the Accounting Auditor and the Internal Auditing Office led by the Full-time Audit & Supervisory Committee Member, and strives to audit the execution of duties by Directors through effective audits.

2.Director Remuneration

(Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods)
The upper limit of the total amount of Corporate Officer remuneration was determined by resolution of the 43rd Ordinary General Meeting of Shareholders of NISSO CORPORATION held on June 28, 2023 (Approval of Share Transfer Plan), and shall include basic remuneration for Directors (excluding those who are Audit & Supervisory Committee Members) within the limit of 300 million yen per year (of which the amount for External Directors is within the limit of 30 million yen per year), and performance-linked remuneration (monetary remuneration) linked to the achievement level of company-wide consolidated performance (consolidated operating profit) targets in a single fiscal year as short-term incentive remuneration within the limit of 300 million yen per year. In addition, the Company has introduced a restricted share remuneration plan as a medium- to long-term incentive remuneration, which provides monetary remuneration claims within the limit of 50 million yen per year.
The amount of remuneration for Directors who are Audit & Supervisory Committee Members shall be within the limit of 60 million yen per year.

(Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration Decisions)

a. Board of Directors

The Company's Board of Directors is comprised of 8 Directors (including 5 External Directors). In addition to holding regular Board of Directors' Meetings once a month, in principle, a system has been established where extraordinary meetings can be flexibly held when important matters arise. As a supervisory body for decision-making and business execution of important matters concerning the management of the Company, the Board of Directors examines the validity, efficiency and fairness of management, and resolves matters that are stipulated by laws and ordinances as well as other matters related to important business tasks.

b. Audit and Supervisory Committee

In order to further strengthen the supervisory function of the Board of Directors and corporate governance, the Company has established the Audit and Supervisory Committee to strengthen the supervisory function of the Board of Directors and further enhance corporate governance.
The Audit and Supervisory Committee is comprised of 4 Directors who are Audit & Supervisory Committee Members (including 4 External Directors). Audit policies and audit plans are discussed and decided by the Audit and Supervisory Committee.
In addition to striving to communicate with Directors and employees who are not Audit & Supervisory Committee Members to gather information, Directors who are Audit & Supervisory Committee Members attend Board of Directors' meetings, receive reports on the status of the execution of duties from Directors and employees, request explanations as deemed necessary, inspect important decision-making documents etc., and investigate the status of the Company's business operations and assets.
The Audit and Supervisory Committee convenes on a regular basis once a month, and extraordinary meetings are held occasionally as deemed necessary.
Furthermore, the Audit and Supervisory Committee works closely with the Internal Auditing Office and the Accounting Auditor, and strives to enhance the effectiveness and efficiency of audits.

c. Nomination and Remuneration Committee

The Nomination and Remuneration Committee is comprised of 2 Independent External Directors and the Representative Director, President & CEO, and is chaired by an Independent External Director.
For the purpose of enhancing the transparency of personnel affairs and remuneration, etc., of Directors (excluding Directors who are Audit & Supervisory Committee Members) and Executive Officers, it will report to the Board of Directors matters concerning (i) the personnel affairs of Representative Directors, Directors, Executive Officers and Directors of subsidiaries, as well as successor planning, and (ii) the remuneration structure and remuneration levels of Directors and Executive Officers based on the evaluation of the company's business performance, etc.
The Nomination and Remuneration Committee will be convened at any time as deemed necessary.

d. Group Meetings

Group Meetings are comprised of the Company's Directors, representatives of affiliated companies, part-time directors of affiliated companies and the Corporate Planning Division Director, and convenes once a month. Reports regarding the status of business operations as well as business performance results are received at Group Meetings, and business plans and significant factors that contribute to their differences are confirmed. In addition, progress reports and policy guidance regarding important matters such as management issues are conducted.

e. Corporate Value Enhancement Committee

The Corporate Value Enhancement Committee is comprised of the Company's Directors, representatives of subsidiaries, the Company's Internal Auditing Office Director and the Council Chairperson. It conducts reports・deliberations of issues for the prevention of corporate scandals for the entire Group, the strengthening of our multifaceted corporate structure, and the realization of sustainable businesses, as well as constructing a management system to enhance corporate value over the medium- to long-term.
The Sustainability Council, which belongs to the Corporate Value Enhancement Committee, clarifies the roles that the Company should fulfill through its businesses to shareholders, society, and other stakeholders, establishes the structures to put them into practice, and promotes their appropriate operations・checks. The Internal Control・Compliance Council establishes, operates, and checks the internal control structure of the Group, reviews its compliance observance status, and promotes risk assessment・countermeasures. In order to make effective use of the Group's resources, assets, and capital, the Investment and Loan Review Council promotes the establishment of standards and management methods that include not only financial aspects but also non-financial aspects such as environmental・social impacts.
The Committee convenes 3 times a year, but extraordinary meetings are held as deemed necessary.

f. Internal Audits and Audit and Supervisory Committee Audits

The Internal Auditing Office, which is under the direct control of the Representative Director & President, is in charge of internal audits, and has staff members in addition to the Office Head. Based on the fiscal year plan, the Internal Auditing Office conducts audits for all departments and divisions of Headquarters, Sales Offices and affiliated companies, prepares audit reports, and reports the results to the Board of Directors and the Representative Director & President. In addition, instructions for improvements based on the results of the audits are issued to the department/division that has received the audits, and the status of improvements are reported by them and confirmed by the Internal Auditing Office without delay. Moreover, follow-up audits and special audits are conducted as deemed necessary.
Audit and Supervisory Committee audits, which are based on its auditing plans created for each fiscal year, are implemented with a focus on the legality and validity of the Directors' execution of duties, as well as the maintenance・operational status of internal control systems as priority items.
Furthermore, the Audit and Supervisory Committee exchanges information with the Internal Auditing Office and the Accounting Auditor as deemed necessary in order to enhance mutual cooperation.

g. Status of Accounting Audits

The Company has concluded an auditing contract with Ernst & Young ShinNihon LLC. In addition to receiving audits on periodic financial statements, etc., from Ernst & Young ShinNihon LLC, the Company has been examined for the maintenance・operational status of systems and procedures related to internal control, accounting systems and accounting records that are within the scope deemed necessary for auditing purposes, and moreover, have received reports on the results.

1.System to ensure that the execution of duties by the Group's Directors is in accordance with laws, ordinances and the Articles of Incorporation

(1) In order to carry out sound and sincere business activities with compliance as well as high moral values, the Company has established the "Nisso Group Charter of Corporate Behavior", and concrete guidelines for personal conduct, the "Nisso Group Employee Code of Conduct". In addition, the Directors have taken the initiative to implement these measures, and the Company shall continue to strive to ensure the thorough awareness of the measures by employees by posting them on the in-house intra-system.

(2) In order to ensure the thorough compliance of laws and ordinances, corporate ethics and internal regulations, the Company has established "Compliance Regulations", and has set up a "Corporate Value Enhancement Committee" chaired by the President to promote sound and sincere business activities.

(3) Directors who discover any material violation of laws or ordinances or any other material facts concerning compliance, shall report such matters to the Board of Directors.

(4) The Group has taken a resolute stance against unreasonable demands from anti-social forces, and has established concrete action guidelines which demonstrate that it has no relationships whatsoever with them. The Group shall continue to ensure the thorough awareness of such matters to Directors and employees in order to eliminate any relationships with these forces.

(5) In order to preserve corporate assets and improve management efficiency, the Company has established "Internal Audit Regulations", and has set up an independent Internal Auditing Office. The Group shall continue the auditing of its entire operations in regards to its compliance with laws and ordinances and the status of the execution of its business operations.

2.System concerning storage and control of information related to the execution of duties of Directors

(1) The Company has established "Document Control Regulations" for documents such as the minutes of the Board of Directors' Meetings and documents pertaining to other significant decisions as prescribed by laws and ordinances, in addition to properly storing and managing such documents after clarifying management responsibilities. Also, the Company shall continue to maintain a system which allows for the viewing of such documents as deemed necessary.

(2) The Company has established "Information Management Regulations" for confidential information, and shall continue to ensure security.

3.Regulations and other systems concerning the management of risk of loss

(1) The Company has established "Risk Management Regulations" for risks affecting business objectives (hereinafter referred to as "risks"), and in order to maintain a system that can adequately respond to such risks, it has set up a "Corporate Value Enhancement Committee" (hereinafter referred to as the "Committee") which each company in the Group takes part in. The Committee shall convene in accordance with the regulations of the meeting body and shall be convened as deemed necessary.

(2) Based on the "Risk Management Regulations", the Committee identifies, analyzes and evaluates concrete risks, and has established a policy to correspond to such matters. In addition, in the event where an emergency response is needed as the Committee monitors the status of risk management, it shall convene an emergency committee to take the necessary measures.

(3) The Committee shall report any matters concerning risks to the Board of Directors on a regular basis.

(4) Each Division Head of the Group shall be responsible for risk management within their respective divisions, and must promptly report to the Committee Secretariat in the event that an emergency situation requiring reporting on risks arises. In addition, they are required to administer appropriate procedures, such as incorporating countermeasures in their business plans to respond to significant risks identified within their division of responsibility, as well as other individual risk-related matters.

(5) Each Division Head of the Group, after sharing information with relevant divisions, shall clarify response systems, and must take appropriate measures regarding risks that may affect multiple divisions, as well as other significant risks that may be actualized.

(6) In order to respond promptly and accurately to the actualization of risks that may affect its business objectives, the Group has established response systems, procedures, and regulations in advance, and shall maintain and strive to improve the structure of reporting systems in the event of a crisis, as well as processes capable of responding quickly and appropriately.

(7) The Group shall formulate a business continuity plan and strive to develop a system that can promptly carry out business continuity after the occurrence of a disaster.

4.System to ensure the efficient execution of duties by Directors

(1) The Group has established "Regulations of the Board of Directors", and shall clarify the governance of the Board of Directors and matters to be discussed.

(2) To ensure the smooth and efficient operation of duties of Directors and employees, the Board of Directors has established "Organization・Division of Duties Regulations" and "Regulations of Administrative Authority", and shall determine matters regarding the segregation of duties of each division, as well as the fundamental roles, duties and authorities of each position.

5.System to ensure that the execution of duties by employees is in accordance with laws, ordinances and the Articles of Incorporation

(1) In order to carry out sound and sincere business activities with compliance as well as high moral values, the Company has established the "Nisso Group Charter of Corporate Behavior", and concrete guidelines for personal conduct, the "Nisso Group Employee Code of Conduct". In addition, the Directors have taken the initiative to implement these measures, and the Company shall continue to strive to ensure the thorough awareness of the measures by employees by posting them on the in-house intra-system.

(2) In order to ensure the thorough compliance of laws and ordinances, corporate ethics and internal regulations, the Company has established "Compliance Regulations", and has set up a "Corporate Value Enhancement Committee" chaired by the President to promote sound and sincere business activities.

(3) The Group has established "Whistleblower Protection Regulations", and shall institute a system for the early detection of violations of laws and regulations with regard to the Group, as well as ensuring that the informant is not subjected to any disadvantages.

(4) The Group has taken a resolute stance against unreasonable demands from anti-social forces, and has established concrete action guidelines which demonstrate that it has no relationships whatsoever with them. The Group shall continue to ensure the thorough awareness of such matters to Directors and employees in order to eliminate any relationships with these forces.

(5) In order to preserve corporate assets and improve management efficiency, the Company has established "Internal Audit Regulations", and has set up an independent Internal Auditing Office. The Group shall continue the auditing of its entire operations in regards to its compliance with laws and ordinances and the status of the execution of its business operations.

6.System to ensure appropriate business operations in the Corporate Group consisting of the Company and its subsidiaries

(1) In order to promote the fair business activities of the Group, the Company has established the Group-wide "Nisso Group Charter of Corporate Behavior", and concrete guidelines for personal conduct, the "Nisso Group Employee Code of Conduct". Furthermore, each company in the Group shall continue to strive to ensure the thorough awareness of these matters by Directors and employees.

(2) In order to strengthen the management of the Group, the Company has established "Affiliated Companies Management Regulations". In addition to requiring the reporting of significant matters concerning the business operations of subsidiaries, the Company shall refer matters of particular importance to the Board of Directors.

(3) The Company's Internal Auditing Office shall conduct audits of each company in the Group on a regular basis and when deemed necessary. Furthermore, the Internal Auditing Office shall cooperate with the Audit and Supervisory Committee and the Accounting Auditor to strive to ensure the proper business operations of the Group through audits.

7.Matters concerning employees and their appointment to assist in the fulfillment of duties of the Audit and Supervisory Committee when requested

(1) The Company shall immediately appoint employees to assist in the fulfillment of the duties of the Audit and Supervisory Committee when requested to do so.

8.Matters concerning the independency of employees in the preceding item from Directors (excluding Directors who are Audit & Supervisory Committee Members)

(1) The Company shall have employees assisting in the fulfillment of the duties of the Audit and Supervisory Committee execute their duties under the direction of the Audit & Supervisory Committee Members whom they are assisting.

(2) The Company shall consult with the Audit and Supervisory Committee in advance about the decision of matters concerning personnel affairs of employees assisting in the fulfillment of the duties of the Audit and Supervisory Committee.

9.System for Directors (excluding Directors who are Audit & Supervisory Committee Members) and employees to submit reports to the Audit and Supervisory Committee and other systems related to submitting reports to the Audit and Supervisory Committee

(1) The Company shall request the attendance of Audit & Supervisory Committee Members for the "Board of Directors' Meetings", the "Corporate Value Enhancement Committee Meetings", and other meetings of importance.

(2) The Company's Representative Director and the Internal Auditing Office shall maintain cooperation with the Audit and Supervisory Committee and exchange information on a regular basis.

(3) Directors (excluding Directors who are Audit & Supervisory Committee Members) and employees of the Group shall respond to requests in the event they are asked by the Audit and Supervisory Committee to submit reports on important information.

(4) The Company shall ensure that persons who submit reports to the Audit and Supervisory Committee do not receive disadvantageous treatment due to reasons for submitting the report.

10.Other systems to ensure the effective implementation of audits by the Audit and Supervisory Committee

(1) Audit & Supervisory Committee members shall attend the "Board of Directors' Meetings", the "Corporate Value Enhancement Committee Meetings", and other meetings of importance.

(2) In response to the request of the Audit and Supervisory Committee, the Company shall establish a system that allows for the viewing of important documents such as minutes of meetings.

(3) The Company shall formulate a budget after confirming with the Audit and Supervisory Committee about the expenses required to perform its duties, in addition to establishing a system for the prepayment or reimbursement of expenses incurred when executing its duties.

1.Control Environment

In order to appropriately conduct financial reporting, the Group shall establish and operate an environment necessary for control, such as the development of internal rules and regulations, the establishment of appropriate organizations, in addition to the securement and placement of appropriate human resources.

2.Risk Assessment and Response

1. The Group shall identify risks that impede the appropriateness of financial reporting, and implement the assessment and response of significant risks.
2. With regards to risk assessment, the Group shall analyze the degree of influence and the probability of occurrence, etc., of risks depending on their nature, and evaluate them appropriately.
3. The Group shall take necessary measures such as reduction, possession, avoidance, removal, etc., of risks that have been assessed.
4. The Group shall conduct risk assessment and response on a continuous basis every period.

3.Control Activities

1. In order to ensure the appropriateness of financial reporting, the Group shall establish regulations and operational manuals, etc., for organization and duties, and clarify the division of duties, authority and responsibilities.
2. Based on the implementation status of internal control, the Group shall establish and operate a system that is able to make necessary enhancements of problematic matters.

4.Information and Communication

In order to ensure the appropriateness of financial reporting, the Group shall establish and operate a system in which information pertaining to internal control is communicated in a timely and accurate manner to those in need of such information.

5.Monitoring

In order to continuously evaluate that internal controls are functioning effectively (or “In order to continuously evaluate the effectiveness of internal control functions”), the Group shall establish a system for routine monitoring and independent evaluations.
In addition, the Group shall establish and operate a system to rectify problems or deficiencies related to control in a timely and appropriate manner.

6.Response to IT

1. The Group shall effectively and efficiently utilize IT to ensure the effectiveness of the control environment, risk assessment and response, control activities, information and communication and monitoring.
2. In order to effectively and efficiently utilize IT, the Group shall have an appropriate understanding of the IT environment and the scope of control using IT, in addition to establishing and implementing appropriate policies and plans related to such matters.