Nagase : Corporate Governance Report

Supplementary Principle 2.4(1)

We believe that in order to achieve sustained growth for the NAGASE Group, including our overseas and manufacturing companies, it is essential to appoint and support the activities of human resources with diversity in gender, nationality, professional background, and specialty who will be core drivers of reform. With this, we are actively promoting the creation of a foundation empowering diverse human resources, including the development of overseas Group employees and their promotion to managerial roles, and mid-career hiring of highly specialized human resources. In particular, our policy in the executive officer system is to promote the appointment of women, non-Japanese, and mid-career hires, making them core drivers within the NAGASE Group. In FY2022, we appointed five new executive officers.

We will continue to empower diverse human resources and appoint them as core drivers of our businesses by expanding options for work styles and workplaces, and providing training programs and challenging opportunities to support voluntary career development. These come as part of our basic policy to actively support skills and career development and provide a comfortable and safe workplace that fosters creativity.

Principle 2.6

The Company has adopted a contract-type defined benefit pension plan, establishing and managing an Asset Management Committee which serves as a body to provide basic policies for plan management, establish policies for plan asset composition, and review said policies. The Asset Management Committee is also responsible for evaluating and reviewing the contracted investment institution.

This contracted investment institution includes the Company's labor union and uses outside consultants in plan management, ensuring transparency and objectivity. The committee manages the plan appropriately to ensure no conflicts of interest occur between plan beneficiaries and the Company.

Further, the Company has established Operating Regulations for Corporate Pension Asset Management Committee to prevent any conflicts of interest. The Company appoints a plan manager who is well-experienced in finance and investing. This individual develops greater expertise through the guidance of outside consultants and performs regular monitoring of the investment institution.

Principle 3.1

（i）,（ii）

We recognize our responsibility to society and offer beneficial products and services while maintaining the highest standards of integrity. Through our growth, we will contribute to society and enrich the lives of our employees.

Under this philosophy, we pursue the NAGASE Vision as a promise to our stakeholders that we will realize a sustainable world where people live with peace of mind, each of us embodies our value proposition, Identify, Develop and Expand through daily activities, and strives to improve our medium- and long-term corporate value.

We continue to strengthen corporate governance, as the Company believes that speed in decision-making and action and ensuring transparency are essential for executing the initiatives described above.

（iii）

See 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] in this report and 4 [Corporate Governance] (1) Corporate Governance 4. Director Remuneration in our annual securities report for more information related to policies and decision-making procedures regarding director compensation.

（iv）,（v）

Candidates for executive officer are those individuals who demonstrate an honest character and who possess great insight and skills. Candidates must also possess operational experience, knowledge, and expertise. Candidates are selected by the representative director. After deliberations by the independent Nominating Committee, the board of directors then conducts deliberations and comes to a decision.

As a rule, internal directors interim directors are selected from candidates who have experience as an executive officer. Candidates for outside director are individuals who demonstrate honest character and possess great insight and skill, providing insight from stakeholders in society from which they can raise issues to be addressed by the Company. Candidates are selected by the represent rector. After deliberations by the independent Nominating Committee, the board of directors then conducts deliberations and comes to a decision. Finally, candidates are proposed before the general shareholders' meeting.

Candidates for member of the Audit & Supervisory Board are selected by the represent director from among individuals who meet conditions as provided in the Audit & Supervisory Board Audit Standards. After deliberations by the independent Nominating Committee, the board of directors conducts deliberations and comes to a decision Finally, candidates are proposed before the

general shareholders' meeting. The Company discloses the reasons for nominating each candidate for director in each candidate for member of the Audit & Supervisory Board within the reference materials included in the shareholders' meeting convocation notice.

The Company has established standards for the dismissal of directors and executive officers*. After deliberations by the independent Nominating Committee as to the dismissal of individuals subject to any of the aforementioned standards, the board of directors conducts celebrations and comes to a decision. The Company performs dismissal procedures as necessary, disclosing the reasons for dismissal as applicable.

*Dismissal Standards:

1. Individual has committed an act of suspected illegality, unfairness, or bad faith, individual becomes subject to discipline under the provisions of Employment Regulations, individual has engaged in acts or speech damaging to the Company's reputation for profits, or individual has become otherwise ineligible, deemed unsuitable to serve in the capacity of corporate officer.
2. Individual demonstrates insufficient performance of duties or results, and the board of directors determines that leaving said individual in the capacity of corporate officer is inappropriate.

Supplementary Principle 3.1 (3)

We recognize that sustainability initiatives are an important management issue. When we formulated our ACE 2.0 medium-term management plan, announced in May 2021, we analyzed the external environment and identified the most important issues for NAGASE and our shareholders: technological innovation, climate change and resource shortages, demographic changes, and industrial reorganization. We identified materialities based on the value we offer to stakeholders. With respect to climate change and resource shortages in particular, we established the Carbon Neutral Project under the Sustainability Committee. With respect to climate change and resource shortages in particular, we established the Carbon Neutral Project under the Sustainability Committee. We plan to conduct scenario analyses incorporating climate-related risks and opportunities, identifying and disclosing these in line with the TCFD (Task Force on Climate-related Financial Disclosures), which we have endorsed. With respect to human capital, we established the Employee Engagement Project under the Sustainability Promotion Committee, and we strive to strengthen human capital by improving employee engagement.

Our sustainability initiatives, including initiatives related to climate change, are disclosed on our corporate sustainability website.

https://www.nagase.co.jp/english/sustainability/

Supplementary Principle 4.1(1)

The board of directors functions to oversee business operations and make decisions regarding important business matters. The board also make decisions about important management issues, as well as important operational issues as provided by laws, relations, and the Company's articles of incorporation. The Company has established standards for those matters to be decided by the president, the director in charge, division general managers, or supervisory departments. We have established systems that clarify the division of responsibilities, allowing for speed in business management. We clearly define these standards in Board of Director Regulations and Regulations Governing Approvals.

Principle 4.9

The Company selects candidates according to independent standards provided by the financial instruments exchange, as well as the ability to raise issues to be addressed by the Company from the standpoint of our stakeholders and society.

Supplementary Principle 4.10(1)

As advisory bodies to the board of directors, the Company has established the Compensation Committee and the Nomination Committee, the majority of which consists of outside directors. Outside directors and outside members of the Audit & Supervisory Board meet the criteria for independence. We believe these individuals are fully capable of fulfilling the role to ensure the

independence, objectivity, and, and transparency with respect to the nomination and compensation of the Company's management

team at present. The Compensation Committee deliberates the design of compensation packages for directors and executive officers. The Nomination Committee deliberates the knowledge, experience, and abilities required of directors, as well as the diversity of the composition of the board of directors, specific proposals regarding appointments, and succession plans. Each committee provides reports and advice to the board of directors as necessary. In this way, these committees enhance the objectivity and transparency of the management nomination process within the Company.

Supplementary Principle 4.11(1)

The board of directors is composed of internal directors with business experience, knowledge, and expertise, and outside directors who have management experience, mainly at other companies, and who can raise issues based on the perspectives of stakeholders and society. This composition ensures that the board understands the status of business execution, can make decisions in a flexible and prompt manner, and can supervise business execution.

Under this basic policy, the board of directors consists of nine members, including three outside directors who are independent directors. More than one-third of the board of directors is composed of independent outside directors. Further, the Company pursues diversity in management, regardless of gender, nationality, or race. We believe we have secured a certain level of diversity in terms of gender and internationality, including the appointment of one female director. As well, many of our directors have worked overseas for several years (an average of six years of overseas service among our internal directors). The skills matrix for

the board of directors, which indicates the roles and expertise required by NAGASE of its directors, is disclosed in notices of annual shareholders' meetings and is also posted on the Company's website.

Supplementary Principle 4.11(2)

The Company discloses the significant concurrent duties (including service as directors of other publicly traded corporations) performed by directors, members of the Audit & Supervisory Board, and candidates thereof on an annual basis in disclosure documents including shareholders' meeting convocation notice reference materials, business reports, and annual securities reports. The Company believes that the number of companies in which directors perform concurrent services is within a reasonable scope.

Supplementary Principle 4.11(3)

The Company analyzes and evaluates the effectiveness of the board of directors, believing in the importance of improving board effectiveness on an annual basis. In order to more proactively elicit frank opinions, we conduct anonymous surveys with all directors and Audit & Supervisory Board members. In addition, survey results are collected, aggregated, and analyzed by a third- party organization to eliminate arbitrary elements, ensuring transparency in the evaluation methodology.

As a result, the Company confirmed that our Board of Directors conducts appropriate and timely deliberations and decision- making, functioning effectively.

The status of issues recognized in the previous fiscal year is as follows.

For the optimization of providing agenda information for consideration prior to meetings, the operational secretariat has worked to make improvements in prior distribution awareness and material quality. On the other hand, new issues have been identified, such as reviews of material structure, and we will continue to work toward improvement.

For providing better feedback and follow-up, we took actions and worked to make improvements, such as including reports to the board of directors when follow-up was deemed necessary, depending on the content of the agenda item or other matter in question.

For further discussions to secure diversity in the composition in the board of directors over the medium to long term, we worked to make improvements by appointing of one new director with expertise in manufacturing/research and development and by the formulating and publishing a skills matrix.

On the other hand, from the perspective of making the board of directors meeting a forum for more robust deliberation and discussion, we had ample discussions regarding the Group's strategy and future vision when the ACE 2.0 medium-term management plan was formulated. Here, we confirmed that we need to secure further discussion opportunities on the Group's overall direction even after this plan was formulated.

The Company intends to continue with initiatives for improving board of director effectiveness.

Supplementary Principle 4.14(2)

The Company provides information related to the NAGASE Group Management Philosophy, corporate management, business activities, and organization to outside directors and outside members of the Audit & Supervisor Board. In this way, we help these individuals gain a deeper understanding of these topics.

The Company also provides opportunities at the Company's expense to help directors and members of the Audit & Supervisory Board (including outside directors and outside members) obtain the necessary knowledge to accomplish their roles and responsibilities.

Principle 5.1

Our basic policy is to conduct constructive dialogue with shareholders that contributes to sustainable growth and corporate value improvement over the medium and long term. As much as reasonable, we respond to meeting requests from shareholders the purpose of holding constructive dialogues.

The Company's director in charge of the Corporate Management Department in charge of Company investor relations. Our investor relations department works in cooperation with other internal departments to provide appropriate responses in creating opportunities for constructive dialogue with our shareholders.

The Company strives to provide information through various briefings, in-person meetings with domestic and foreign investors, facilities tours, and publication on our corporate website.

Information and requests received from shareholders through these and other dialogues are forwarded to the board of directors regularly. We manage information carefully in accordance with our Regulations for Preventing Insider Trading to prevent inside information from being disclosed during these dialogues.

2. Capital Structure

Foreign Shareholding RatioMore than 20% less than 30%

1. On August 20, 2010, BlackRock Japan Co., Ltd. submitted the following information to the Director-General of the Kanto Finance Bureau in connection with a substantial shareholding report (change report) concerning holdings of Company stock. However, we have not been able to confirm beneficial ownership status as of March 31,2022. Accordingly, BlackRock Japan Co., Ltd. is not included in the Status of Major Shareholders above.

2. On December 4, 2020, Sumitomo Mitsui Trust Bank, Limited submitted the following information to the Director-General of the Kanto Finance Bureau in connection with a substantial shareholding report (change report) concerning holdings of Company stock. However, we have not been able to confirm beneficial ownership status as of March 31,2022. Accordingly, Sumitomo Mitsui Trust Bank, Limited is not included in the Status of Major Shareholders above.