Nippon Sanso : Other Electronic Matters related to the 19th Ordinary General Meeting of Shareholders

System to Ensure the Appropriateness of Business Operations and Implementation Status of Such Systems

1) Overview of internal control system

The framework for ensuring the appropriateness of business ("internal control system") specified by the Companies Act and the Regulations for Enforcement of the Companies Act, is determined by a resolution adopted at the Board of Directors, as follows.

1. Framework for confirming the execution of duties by Company Group directors & employees complies with laws/regulations & Articles of Incorporation
   ・The directors of the Company shall determine the basic policy of compliance in the Group and establish an organization and rules to ensure its effectiveness.
   ・The Group Chief Compliance Officer (hereinafter referred to as "Group CCO") is assigned to the Company, and a Regional Chief Compliance Officer (hereinafter referred to as "Regional CCO") is assigned to each region. The Group CCO is in charge of supervision of compliance promotion activities in the Group, and the Regional CCO is in charge of supervision of compliance promotion activities in its region.
   ・The Group CCO and Regional CCO shall strive to enhance and establish the Group's compliance promotion activities.
   ・The "Global Compliance Committee" is held by the Group CCO on a regular basis, to share the compliance promotion policy and contents of compliance promotion activities in each region, and to discuss on the respective issue as necessary.
   ・The Company shall establish a whistle-blowing mechanism in Japan and overseas to ensure a system that allows us to report compliance violations within the Group and the possibility of such violations without suffering any disadvantage.
   ・In order to ensure the reliability of financial reporting, an internal control reporting system shall be established and its effective and efficient operation and evaluation shall be carried out.
   ・The Company's audit department shall carry out an internal audit of the operational status of the above organizations, institutions and systems.
2. Matters concerning storage & management of information related to execution of duties by directors
   ・Information related to the execution of duties by directors shall be appropriately stored and managed based on the Information Security Management Regulations and other related regulations based on the Information Management Basic Policy of the Group.
   ・The above storage and management system shall allow relevant information to be kept available to directors and members of the Audit & Supervisory Board.
3. • The Company's internal audit department shall carry out an internal audit of the above operational status.
4. Regulations & other systems for managing Group risk of loss

・The directors of the Company shall determine the basic policy of risk management in the Group and establish an organization and rules to ensure its effectiveness.

・Risk management shall be carried out by the department in charge of the relevant field, and the Global Risk Management Committee shall be established to select important risks for the entire Group and formulate countermeasures.

・The Company's internal audit department shall carry out an internal audit of the operational status of the above organization and institutions.

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4. System to ensure efficient execution of duties by Group directors

・In order to ensure the efficient execution of duties by directors, the Board of Directors shall practice reasonable division of duties and appoint appropriate executive officers.

・The Representative Director and President shall execute his duties based on the basic policy specified by the Board of Directors, and discuss and decide on the necessary issues at the management meeting.

・The Global Strategy Review Committee shall formulate the Group's management strategy and manage its progress.

・A medium-term Group management plan shall be formulated, quantitative and qualitative targets shall be set to achieve the plan, and performance management shall be carried out through quarterly monitoring.

5. System to ensure appropriateness of Group operations

・The Group shall manage its business based on the above policy, group management rules and other related regulations, and compliance promotion, risk management and other systems that make up the internal control system shall cover the entire Group. As a holding company, the Company shall maintain and operate the internal control system while respecting the independence of each Group company. The Company shall support and manage it according to the prevailing situation.

・The Company's internal audit department shall cooperate with the internal audit department of each Group company, and shall grasp and evaluate the status of setting up and operating the internal control system in the Group through the audit of each Group company.

1. System for appointment of employees sought by Audit & Supervisory Board (hereinafter, sometimes referred to as "A&S Board") members to assist them
   The Audit & Supervisory Board shall have a secretariat established as an organization for assisting the duties of A&S Board members and as an entity independent of the command and order of directors. Dedicated employees shall be assigned to the secretariat.
2. Matters for securing independence of above employees from directors & ensuring effectiveness of instructions given to such employees
   ・Employees of the Audit & Supervisory Board's secretariat mentioned in the preceding item shall not receive the command and order of directors when receiving an order necessary for audit work from A&S Board members.
   ・The evaluation of the above employees shall be carried out by A&S Board members, and the prior consent of A&S Board members shall be obtained for their transfer, disciplinary action, etc.

8. System for reporting to A&S Board members, system for ensuring no unfavorable treatment of anyone reporting to A&S Board members

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1. Policy related to processing of expenses or debts incurred in A&S Board members' execution of duties
   When an A&S Board member requests prepayment or reimbursement of expenses for the execution of his/her duties, the request shall be met promptly unless it is deemed that the expenses or debts related to the request are not necessary for the execution of the relevant A&S Board member's duties.
2. Other systems to ensure effective audits by A&S Board members

The Audit & Supervisory Board shall receive a prior report on the audit plan of an accounting auditor, regularly receive reports on audit results, and make other efforts in cooperation with the internal audit department to maintain close relations with the accounting auditor in order to supervise the accounting auditor and ensure the independence of the accounting auditor from directors.

2) Operational status of internal control system

1. Operational status of compliance

The Company strives to improve and gain support for compliance across the Group, and under the initiative of Group Chief Compliance Officer (Group CCO), a Regional Chief Compliance Officer (Regional CCO) is assigned to the eight zones where our business is conducted, and develops compliance promotion activities in response to risks in each zone.

As for the compliance promotion in overseas regions, under the initiative and supervision of Group CCO, Regional CCOs in North America, Europe, East Asia, Taiwan, Southeast Asia, India, and Australia, promoted compliance activities, such as training in response to compliance risks in the regions.

In order to promote our compliance in Japan, the persons in charge of compliance promotion who were appointed for domestic Group companies, including the Company, Taiyo Nippon Sanso Corporation, and Thermos K.K., by the Taiyo Nippon Sanso Group CCO implemented compliance training.

In the "Global Compliance Committee" held by the Group CCO, we discussed the issues to be solved to implement compliance training, and the operational issues in the whistle-blowing mechanism, while sharing the compliance promotion policy, the status of compliance promotion activities in each region, and the progress status of lawsuit.

The contents of Global Compliance Committee are reported to the Board of Directors.

We also have a whistle-blowing channel in place in each domestic and overseas Group company for early discovery and correction of compliance violations. For each whistle-blowing case, we respond with remedy action, recommendations, etc. based on thorough investigations, thus leading to formulation of countermeasures to prevent any recurrence. In the specific operation of the whistle- blowing mechanism, we thoroughly protect whistle-blowers and prohibit their detrimental treatment.

2. Operational status of information security

Due to the escalation of global geopolitical tensions and the ongoing conflict between Ukraine and Russia, there has been a surge in malicious cyber activities worldwide. These actions are carried out by groups with support from national governments and criminal organizations. Their objectives include disrupting corporate operations, sabotaging critical national infrastructure, and profiting through fraud and extortion.

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The Company established the Global Information Security Council (GISC) to address these risks. GISC leads the Group companies to ensure compliance with the NSHD Group IT Security Standards, reducing the information security risk on a Group basis.

Specific activities include the enhancement of initiatives to raise employee security awareness to improve employees' ability to respond to phishing and business fraud e-mails. In addition, a global information security incident reporting program was rolled out to gather details of incidents from Group companies around the world to enable the Company to respond to threats and improve security accordingly. Furthermore, security assessment, on-site investigation, and penetration tests enabled the management to gain a deeper understanding of the Company's security system and prepare appropriate improvement plans.

Sharing of knowledge such as the above and collaboration between GISC and other departments enables the directors and Audit & Supervisory Board members to access information for execution of their duties.

3. Operational status of risk management

Based on the Nippon Sanso Holdings Corporation Global Risk Management Regulations, under the initiative of Representative Director and President as CEO, the Company assigned the risk management supervision manager, and person in charge of risk management promotion respectively in Taiyo Nippon Sanso Corporation, Matheson Tri-Gas, Inc., Nippon Gases Euro-Holding S.L.U., Thermos K.K., and Asia & Oceania region, to evaluate the risk from the managerial and medium- to long-term viewpoint, formulate countermeasures, and promote taking actions.

Also, for the purpose of enhanced risk management of the whole Group, we held the Global Risk Management Committee in February, discuss the important risks for the entire Group from the managerial and medium- to long-term viewpoint, while sharing the risk evaluation results and risk management status based on the common evaluation standard for the Group.

Furthermore, the Risk Management Liaison Meeting meets to confirm risk information and the status of risk response, and share best practices among the Group.

As for technological risks associated with security, the environment, product quality/safety, and intellectual property, we confirmed efforts made by each Group company at the Global Strategy Review Committee held in February and determined a policy framework for initiatives to be taken as a holding company. Our technological risks liaison committee, whose members are responsible managers in the area of security, the environment, product quality/safety, and intellectual property of the Company and Group companies, holds a meeting twice a year, and we work on the issues raised by the committee.

The contents of the risk management activities mentioned above are reported to the Board of Directors.

4. Operational status of duties of directors

At the Board of Directors, the contents of duties commissioned to directors who execute the duties are determined by the resolution, and six executive officers are appointed. Also, important operational matters delegated to the Representative Director and President in accordance with corporate governance principles are discussed at management meetings and are subject to a final decision by the Representative Director and President.

Before the meeting of the Global Strategy Review Committee in February to propose the budget of the next fiscal year to the Board of Directors, the optimal allocation of resources in the whole Group is examined, while checking details of strategies of each operating company.

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