Aica Kogyo : Corporate Governance Report

(URL: https://www.aica.co.jp/english/company/sustainability/)

AICA's human capital-related targets set forth in the current Medium-Term Business Plan are disclosed on our website (available in Japanese only).

(URL: https://www.aica.co.jp/company/philosophy/vision/#headline-1682925148)

2. Voluntary and measurable goals for ensuring diversity

(1) Promotion of women to managerial positions

Since 2014, twelve female employees have been promoted to managers, covering broader business segments, including sales, administration, and production divisions. AICA will continue to increase the ratio of female managers and expand the scope of participation by providing equal opportunities through promotion and hiring, helping them network and be independent, aiming to optimize the management. (Target) Ratio of female management positions (fiscal year 2025): 5.8 % (fiscal year 2022 results : 3.9%)

(2) Promotion foreign nationals to managerial positions

Three foreign nationals were appointed executive officers at the Board of Directors meeting held on April 1, 2023. AICA will continue to maintain the current number of foreign national officers. Overseas Group companies focus on actively utilizing local human resources and is promoting the appointment of talented locally employed staff to key positions. In fiscal year 2022, 81% of Group companies overseas appointed foreign nationals to the presidential position.

AICA alone continuously practices equal opportunity hiring regardless of nationality and currently has six foreign nationals joined as new graduates or mid-career hires. They play active roles in a wide range of fields, including overseas locations, sales, R&D, and administrative divisions. AICA is actively recruiting foreign nationals as it expands our business globally and will hire more foreign nationals than the present. In the mid to long term, AICA aims to grow into a corporation with culturally diverse teams ready to meet various needs in the organization.

(3) Promotion mid-career hires to managerial positions

AICA recruits a certain number of mid-career professionals every year to have experienced personnel with minimum training. AICA hired 32 people in fiscal year 2022 as mid-career hires, for a wider range of positions, including sales, R&D, administrative divisions and production technology. AICA currently has 318 mid-career hires, and 61 of them are serving as director, executive officer, or holding other managerial positions. The ratio of mid-career hires in the executive positions (director and executive officer) is 45% to the total number of executive officers. The ratio is 22% for managerial positions. AICA will continue to encourage mid-career hiring and their recruitment to managerial positions as part of our management strategy.

3. Human resource development policy and internal environment development policy to ensure diversity and their implementation status

Under the Corporate Policy saying, "viewing human resources as the most vital resource of our company, we nurture motivated human resources and organizations through mutual understanding and development," AICA is working to cultivate diverse human resources who have a strong awareness of personal growth and their futures, and who strive forcefully toward the Corporate Principle of "Challenge and Creation," while establishing human resource development policy and internal environment development policy. To this end, AICA has established generation-based,grade-based, and occupation-based training programs, the overseas trainee system, the correspondence education system, the support system for obtaining official qualifications, and the environment for e-learning. Responsible departments, committees, and project teams (the Diversity Promotion Project, the Sustainability Development Committee, and the Work Improvement Committee) work with an aim of creating a work environment where diverse individuals respect and encourage each other. Our work environment is undergoing a transition, such as a workforce shortage, facing diversified needs and changes in work styles, but AICA will continue to work to cultivate diverse human resources and develop an internal environment that are capable of adapting to such changes flexibly and promptly following our Corporate Principle "Challenge and Creation."

The details of human resource development policy and internal environment development policy are as follows.

◆Human resources development policy

We aim to achieve the Corporate Policy saying, "viewing human resources as the most vital resource of our company, we nurture motivated human resources and organizations through mutual understanding and

- 3 -

development." We cultivate people who have a strong awareness of personal growth and their futures, and who strive forcefully toward the Corporate Principle of "Challenge & Creation."

◆Internal environment development policy

By building a workplace where diverse human resources can recognize each other and everyone can play active roles, we aim to achieve mutual growth for both the company and our employees. Based on the recognition that while our employees comprise assets, they are also important stakeholders, we focus on activities aimed at deepening mutual understanding as we strive to provide opportunities and an environment in which each and every employee can fully apply his or her abilities.

Principle 2.6 Roles of Corporate Pension Funds as Asset Owners

AICA has adopted both a contract-type defined benefit pension plan and a corporate-type defined contribution pension plan. The Human Resources Department, which is the division in charge of managing the contract- type defined benefit pension fund, appropriately manages it such as by obtaining information on the status of management from asset managers including life insurance companies and trust banks through a report or in writing. In addition, AICA appropriately invests and manages pension assets by establishing the "Basic Policy for Pension Asset Management" while checking an assurance report on the effectiveness of internal controls and their operation status of each asset manager when necessary.

For the corporate-type defined contribution pension plan, AICA has introduced a matching contribution scheme in 2019 to provide support for self-help efforts of employees. AICA has also been striving to create an environment by opening a dedicated website for employees to provide them with monthly performance reports for each product and allow them to access to educational materials on the plan in the forms of video and text as needed.

Principle 3.1 Full Disclosure

As a company that is widely trusted by society, AICA has a basic policy of disclosing information about AICA to all stakeholders at the right time and in the most fair and appropriate manner. AICA strives to engage in constructive dialogue with shareholders by actively disseminating information through various means, including holding Financial Results Briefings, disclosing information through AICA's website, issuing press releases and Integrated Reports. Please refer to the following URL for details of AICA's "Disclosure Policy" (available in Japanese only).

(URL: https://www.aica.co.jp/company/ir/management/disclosure/)

(1) AICA objectives (e.g., corporate philosophy), management strategies, and business plans

AICA's Corporate Principle, Corporate Philosophy, Corporate Policy, Sustainability Policy, Code of Conduct, long-term and medium-term business plans are disclosed on the following URL on AICA's website.

Challenge and Creation

The AICA Group creates new value and contributes to society through continuous innovation in the spirit of our philosophy of Kyosei*.

• Japanese word Kyosei stands for active engagement with the AICA Group's stakeholders (customers, employees, shareholders, suppliers, business partners, and local communities, etc.) and the global environment. Kyosei represents our approach to minimize the adverse effects of the AICA Group's business activities and products, and to contribute to society through the value we create and build better relationships with surroundings , with aiming for a sustainable existence together with the stakeholders mentioned above.

1. Chemistry and Design
   We create uniquely original products through the power of chemistry and design, to contribute to the achievement of a prosperous society.
2. Group Synergies
   We create group synergy through collaboration in technologies and market network.
3. Leading Products
   Throughout the specific domains and regions of our business, we enhance and expand our market-leading products.
4. Global Presence

- 4 -

We strive to achieve sustainable growth in global markets by enhancing the capabilities of our overseas operations and participating in the higher growth sectors.

1. Human Resources and Organizations
   Viewing human resources as the most vital resource of our company, we nurture motivated human resources and organizations through mutual understanding and development.
2. Compliance Management
   We practice fair and transparent management in accordance with all relevant laws, regulations, and social order.
3. Commitment to Safety and Security
   We ensure trusted quality and engage in environmentally considerate business activities by focusing on our communication with stakeholders.

< Sustainability Policy >

1.We address social issues through our business activities to contribute to the creation of a better society. 2.We have established "Compliance with laws and regulations," "Respect for human rights," "Harmony with

society," "Fair business practice," "Customer's security and trust," "Proper information disclosure," "Protection of company information and property," and "Environment and safety" as the basic principles of the Code of Conduct, and we base our actions on these principles as shared values for all employees.

3.We emphasize dialog with stakeholders, including customers, employees, shareholders, suppliers, business partners, local communities, and local governments, and respond promptly to social needs and changes.

4.We identify material issues from the perspectives of both corporate management and stakeholders, address those issues alongside our business activities, and disclose our progress in addressing them.

Please refer to AICA's website for details.

(URL: https://www.aica.co.jp/english/company/philosophy/vision/)<> Business Plan "Value Creation 3000 & 300"> (FY2023-FY2026)

Please refer to AICA's website for details (available in Japanese only).

(URL: https://www.aica.co.jp/company/ir/news/files/pdf/value_creation_3000_300_ver2.pdf)

(2) Basic views and guidelines on corporate governance

Basic views on corporate governance are disclosed on AICA's website and I-1 in this report. (URL: https://www.aica.co.jp/english/company/ir/library/corporate_library/index.html)

1. Board policies and procedures in determining the remuneration of the senior management and directors  The details of decision-making policies regarding the contents of individual remuneration for directors are
   as follows.
   1. Composition of remuneration
   Remuneration of directors (excluding directors who are members of the Audit and Supervisory Committee and external directors) consists of fixed monthly basic remuneration, variable performance-based remuneration, and stock remuneration. The stock remuneration was approved and passed at the 121st Ordinary General Meeting of Shareholders held on June 24, 2021, under Proposal 4: Determination of Remuneration for Granting Restricted Shares to Directors (Excluding Directors Who Are Members of the Audit and Supervisory Committee and External Directors). Meanwhile, remuneration of directors who are members of

- 5 -