Nabtesco : Corporate Governance Report 2021/12/14

CORPORATE GOVERNANCE REPORT

Nabtesco Corporation

Last Update：December 14, 2021

Nabtesco Corporation

Representative Director, President & CEO: Katsuhiro Teramoto

Contact：03-5213-1133 Securities Code：6268 https://www.nabtesco.com

The corporate governance status of the Nabtesco Group is as indicated below.

1. Basic views on corporate governance, capital structure, corporate attributes and other basic information

1. Basic views

Based on its corporate philosophy, which states, "The Nabtesco Group, with our unique motion control technology, will provide safety, comfort and a sense of security in daily lives as well as any form of transportation," and through the implementation of "The Nabtesco Way," the Nabtesco Group endeavors to enhance its corporate governance with the aim of realizing the Group's sustainable growth, enhancing its medium- to long-term corporate value and earning the greater trust of its stakeholders.

Nabtesco has also established the Corporate Governance Basic Policy (hereafter, "Basic Policy"), which is posted on our corporate website.

Corporate Governance Basic Policy:https://www.nabtesco.com/en/ir/policy/governance.html

【Reasonsfornon-compliancewiththeprinciplesoftheCorporateGovernanceCode】 UpdatedNabtesco executes allprinciplesoftherevised CorporateGovernanceCode published onJune11, 2021, including those to be applied to companies listed on the prime market after the Tokyo Stock Exchange restructures its market into new segments.

【Disclosure based on the principles of the Corporate Governance Code】 Updated

【Principle 1-4】Cross-Shareholdings

Please refer to Article 4 (Basic Policy on Cross-Shareholdings and Exercising of Voting Rights Concerning Cross-Shareholdings) of the Basic Policy.

In line with a basic policy under which it should as soon as possible dispose of and reduce cross- shareholdings thatitfindsoflittlesignificance inlightofcircumstancesasoftheendofan immediate fiscal year, the Board of Directors annually assesses, based on certain standards, whether a purpose of holding each individual stock is appropriate and whether the benefits and risks from each holding cover its cost of capital and reviews whether or not to continue to hold the stock and the number of shares held.

At the Board of Directors meeting held on February 26, 2021, Nabtesco assessed each of 11 stocks held as of the end of fiscal 2020 based on its standards on whether or not to continue to hold a stock and consequently confirmed for each stock a certain degree of both significance and economic rationality. On the other hand, it was also decided to reduce the balance of the cross-shareholdings as much as possible in the future reflecting the changes in the environment concerning cross- shareholdings as per the revised Corporate Governance Code of June 2018.

【Principle 1-7】Related party transactions

Please refer to Article5 (Related Party Transactions) of the Basic Policy.

【Supplementary Principle 2-4-1】Diversity in the promotion to core human resources

In order to have a pool of diverse human resources, Nabtesco encourages employees to think, learn and practice what they have learned on their own, and improves the in-house environment in a manner that increases diversity.

For the Company's policies on human capital development and the improvement of the in-house environment as well as for its ideas, numerical targets and past records concerning the employment

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and promotion to managerial positions of non-Japanese people, women and mid-career workers, please refer to the following sections on our corporate website:

Human Capital Development:https://nabtesco.disclosure.site/en/themes/123

Fostering Workplace Diversity:https://nabtesco.disclosure.site/en/themes/122

【Principle 2-6】 Roles of Corporate Pension Funds as Asset Owners

Nabtesco deems that Principle 2-6 is not applicable to it because it adopts a defined contribution corporate pension plan as its retirement pension plan.

【Principle 3-1(i)】Business principles, business strategies and business plans

Nabtesco has set out its Action Guidelines as a common set of principles applying to all employees in the performance of their duties and decision-making. The Action Guidelines, along with our Corporate Philosophy and Our Promises, are collectively referred to as The Nabtesco Way, which is disclosed on our website and via other tools.

Nabtesco has also formulated and disclosed a Long-term Vision that integrates the ideal image of our goals for FY2030, as well as a Medium-term Management Plan.

Please refer to our webpages below for details.

The Nabtesco Way:https://www.nabtesco.com/en/company/greeting.html

Long-termVision:https://www.nabtesco.com/en/company/vision.html

Medium-termManagement Plan:https://www.nabtesco.com/en/ir/policy/mid_term_plan.html

【Principle 3-1(ii)】Basic views and guidelines on corporate governance Please refer to "I. 1. Basic views" of this report.

• Principle 3-1(iii)】 Board policies and procedures in determining the remuneration of senior management and Directors
  Please refer to Article 24 (Remuneration of Management Personnel) of the Basic Policy.

【Principle 3-1(iv)】Board policies and procedures in the appointment/dismissal of senior management and the nomination of Directors and Audit & Supervisory Board Member candidates

Please refer to Article 23 (Nomination of Directors, Audit & Supervisory Board Members and CEO) of the Basic Policy.

【Principle 3-1(v)】Explanations with respect to the individual appointments/dismissals and nominations at the time of the appointment/dismissal of senior management and the nomination of Directors and Audit & Supervisory Board Member candidates by the Board of Directors

The reasons for appointing particular candidates to the position of Outside Director, and the career summaries, positions and assignments of other Directors and Audit & Supervisory Board Members, are disclosed in the notice of convocation of annual general meeting of shareholders and other materials. Please refer to our webpage below for details. https://www.nabtesco.com/en/ir/stock/shareholders_meeting.html

【Supplementary Principle 3-1-3】Initiatives on Sustainability

For Nabtesco's sustainability-related measures, investments in human capital and intellectual property and issues related to climate change, please access the following sections on our corporate website:

Sustainability:

https://nabtesco.disclosure.site/en/themes/111Human capital:https://nabtesco.disclosure.site/en/themes/122https://nabtesco.disclosure.site/en/themes/123Intellectual properties:

https://nabtesco.disclosure.site/en/themes/80

Climate change: https://nabtesco.disclosure.site/en/themes/126

【Supplementary Principle 4-1-1】Delegation to management

Please refer to Article 15 (Delegation to Management Personnel) of the Basic Policy.

【Principle 4-9】Independence Standards and Qualification for Independent Outside Directors Please refer to Article 18 (Independent Outside Directors) of the Basic Policy.

【Supplementary Principle 4-10-1】Independent Nomination Committee and Remuneration Committee Please refer to Article 21 (Nomination Committee) and Article 22 (Remuneration Committee) of the

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Basic Policy, and to II.1. (Status of voluntary establishment of committees, their member composition and attributes of their chairpersons) and the supplementary explanation of this report.

【Supplementary Principle 4-11-1】Composition of the Board of Directors

Please refer to Article 16 (Composition of the Board of Directors) of the Basic Policy.

Also, please refer to the Skill Matrix of Directors and Audit & Supervisory Board Members posted in the following section on our corporate website:

https://nabtesco.disclosure.site/en/themes/133#skill_matrix

【SupplementaryPrinciple4-11-2】SignificantpositionsconcurrentlyheldbyOutsideDirectorsandAudit & Supervisory Board Members (Independent)

They are disclosed every year in the notice of convocation of annual general meeting of shareholders and other materials. Please refer to our webpage below for details. https://www.nabtesco.com/en/ir/stock/shareholders_meeting.html

【Supplementary Principle 4-11-3】Assessment of effectiveness of the Board of Directors

In line with Article 25 of the Basic Policy, Nabtesco conducts analysis and assessment of the effectivenessoftheBoardofDirectorseveryyearbasedontheself-assessment,etc.ofeachDirector with the aim of enhancing the functionality of the Board. In FY2020, self-assessment was conducted by all Directors and Audit & Supervisory Board Members by way of anonymous questionnaires, and the effectiveness of the Board was evaluated through discussions at the Board of Directors meeting based on the results including the summary and analysis by outside attorneys-at-law. An outline of the results is shown below.

As in FY2019, respondents self-assessed in thequestionnaire as follows: the number of members and the composition of the Board of Directors are appropriate, and unrestricted and constructive discussions and exchanges of opinions take place at its meetings. In FY2020, the number of Independent Outside Directors was increased by one, thus accounting for at least one-third of the total number of directors. Moreover, discussions are conducted from even more diverse viewpoints at the meetings due to an increase in the number of female Directors in FY2020. Taking these points into consideration, the effectiveness of the Board is considered to be well-secured.

On the other hand, various challenges have been recognized, such as further improving the operational effectiveness of the Board to secure enough time for deliberations on important business issues including growth strategy, and further promoting diversity.

Nabtesco aims to further enhance its corporate governance by meeting the aforementioned challenges and further enhancing the functionality of the Board on a continual basis.

【Supplementary Principle 4-14-2】Self-improvement and training for Directors and Audit & Supervisory Board Members

Please refer to Article 27 (Self-improvement and Training for Directors and Audit & Supervisory Board Members) of the Basic Policy.

【Principle 5-1】Constructive dialogue

Please refer to Article 29 (Constructive Dialogue) of the Basic Policy.

2. Capital structure

Foreign shareholding ratioNo less than 30%

【Major shareholders】 Updated

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Supplementary explanation Updated

As for 【Major shareholders】, the information listed above is as of June 30, 2021, and Nabtesco also owns 4,815,117 shares as its treasury shares. The Company cancelled 4,069, 700 treasury shares on July 15, 2021.

3. Corporate attributes

4. Guidelinesformeasurestoprotectminorityshareholdersinconductingtransactions,etc. with controlling shareholders

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5. Other special circumstances that may have a material impact on corporate governance

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1. Businessmanagementorganizationandothercorporategovernancesystemswith regard to decision-making, execution of business and oversight in management

1. Organizational composition and operations, etc.

【Directors】

Outside Directors' relationship with the Company (1)

• Categories of relationship with the Company
• "○" when the Director presently falls, or has recently fallen, within the category; "△" when the director fell within the category in the past
• "●" whenacloserelativeoftheDirectorpresentlyfalls,orhasrecentlyfallen,withinthecategory; "▲" when a close relative of the Director fell within the category in the past
• 1. A person who executes business of the Company or its subsidiary
  2. A person who executes business or a non-executive director of a parent company of the Company
  3. A person who executes business of a brother company of the Company
  4. A person whose main business partner is the Company or a person who executes business of the same
  5. A main business partner of the Company or a person who executes business of the same
  6. A consultant, accountantorlegal expertwho receivesa large amountofcashorother properties from the Company, in addition to executive remuneration
  7. A major shareholder of the Company (if the said major shareholder is a corporation, a person who executes business of the said corporation)
  8. A person who executes business of a business partner of the Company (that does not correspond to d, e, or f; applies only to the person in question)
  9. A person who executes business of an entity with which the Company has a cross-directorship arrangement (applies only to the person in question)
  10. A person who executes business of an entity that receives a donation from the Company (applies only to the person in question)
  11. Others

Outside Directors' relationship with the Company (2)

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