Nitto Denko : Group Integrated Report 2023

Introduction

Corporate Philosophy

The Nitto Group's Corporate Philosophy is comprised of three elements:

our corporate Mission, our Vision which aligns our way of thinking in attaining our Mission, and the Nitto Way, which is the set of values we practice.

Mission

Contribute to customers' value creation with innovative ideas

We at the Nitto Group relentlessly pursue products, systems, and ideas that customers find valuable.

Our Mission is to deliver safety, prosperity, comfort, and affluence not only to customers whom we contact directly but also to every stakeholder.

Vision

In order to achieve our Mission to 'Contribute to customers' value creation with innovative ideas' as one team, all Nitto Group employees around the world must hold the same vision, which is "Creating Wonders." Each and every employee is challenging themselves to wonder and inspire the world; in other words, we endeavor to create wonders in our everyday work and generate the power to change the world in many different domains.

The Nitto Way

The Nitto Way is a set of values that every Nitto employee is expected to practice to achieve Nitto's Vision for the future.

All Nitto Group employees should understand "The Nitto Way" and work vigorously, with attention to physical safety and mental wellbeing, to realize our "Mission" and "Vision."

Contents

1. Corporate Philosophy, Contents, Editing Policy

1. Footsteps of the Nitto Group

1. "Irreplaceable" Nitto Products

7 Top Message

13 Mid-term Management Plan, "Nitto for Everyone 2025"

1. Value Creation Process

1. Innovation Model

19 Nitto Group's ESG Management

21 Addressing Material Issues for Sustainability

25 Nitto Group's Financial Strategy as per the Chief Financial Officer

27 Nitto Group's R&D Strategy as per the Chief Technology Officer

31 Round-table Talk (Nitto's Initiatives for New Product Development)

33 Human Resources

35 Round-table Talk

(Nitto Group's Initiatives for DE&I)

1. Product Safety/Quality

1. Environment

43 Round-table Talk

(Initiatives to Reduce CO2 Emissions)

45 Business Strategies by Segment

1. A Dialogue with Directors

1. Directors and Auditors

1. Vice Presidents
2. Corporate Governance System

64 Findings on the Nitto Board Effectiveness Evaluation

65 Remuneration for Directors and Corporate Auditors

1. Message from a New Outside Director
2. Compliance
3. Risk Management

1. Business Results: 10-Year Summary

1. Consolidated Financial Statements

1. Highlights

1. Shareholder/Stock Information
2. Social Contributions

Editing Policy

It is with great pleasure that we publish this Integrated Report of the Nitto Group to inform our stakeholders of what we are doing to "simultaneously solve social issues and create economic value."

Described in this report are the past, present, and future of the Nitto Group - how it has grown to what it is today and how we will go about co-creating value into the future - which we hope will give you an overall picture of the Group. Please refer to our corporate website for more details and relevant information.

This report is available in Japanese and English and can be found on our corporate website.

Scope

This report covers the business activities of 103 companies including Nitto Denko Corporation and its 98 subsidiaries and 4 affiliates, as of March 31, 2023.

Time Period

Fiscal 2022 (April 1, 2022 - March 31, 2023)

Some performance figures and activities from periods other than the above are also included.

Reference Guidelines

This report has been prepared with reference to the following guidelines:

• Global Reporting Initiative (GRI) Standards by the Global Reporting Initiative
  GRI Content Index https://www.nitto.com/jp/en/sustainability/gri/
• International Integrated Reporting Framework by the IFRS Foundation

Since its inception in 1918, the Nitto Group has created numerous products by combining its proprietary technologies. Undaunted by the changing times, we have applied the technologies and products thus developed to branch out into businesses in various fields.

19832012

1918

Laying the Groundwork

1946

The Second Beginning

1961

Commencing Business in the Production of Industrial Materials

2007

Innovation for Customers

Laying the groundwork for starting insulation business at Osaki, Tokyo

Nitto Electric Industrial Co., Ltd. was formed in Osaki, Tokyo, on October 25, 1918. It was a time when electricity was rapidly becoming widespread as one of the infrastructures essential for industrial development. Nitto Electric Industrial was formed to get involved in the urgently needed domestic production of electrical insulating materials, important components of electrical equipment and machinery.

Starting over at Ibaraki, Osaka, after

WWII

After the plant in Osaki, Tokyo, was destroyed by air raids, Nitto restarted operations in Ibaraki, Osaka. Nitto's company credo, "Each product, each roll of tape is made with Nitto's exhaustive efforts. Everything we do is for dedication to our customers," was introduced in 1956. This policy endures today in our current brand slogan.

In 1957, the Nitto Group's unique marketing approach that holds up to this day, Sanshin Activities (three new activities), began.

Separating off Maxell

In 1961, Nitto separated off Maxell, the department dealing with consumer goods, aiming to take a leap forward as an industrial materials manufacturer. In 1962, the Toyohashi Plant, our main production site of adhesive tapes in Japan then and now, began operation.

The late 1960s saw Nitto go overseas, founding Nitto Denko America, Inc. and then Nitto Denko (Taiwan) Corp., Nitto's first overseas manufacturing site.

Advancing into the fields of medical care and electronics, commencement of overseas operation, and acceleration of M&As

In the aftermath of the oil crisis of 1973, the Nitto Group drove the development of its multi-core business to fortify itself with enough resources to survive economic fluctuations, making inroads into the fields of medical care and then the membrane business and acquiring Hydranautics in the U.S. in 1987.

In 1988, when Nitto celebrated the 70th year since its foundation, the company name was changed to Nitto Denko Corporation.

Establishing a business foundation for sustained growth

In order to respond speedily to dynamic changes in the market, the business division system was introduced in 1989. In 1996, the Nitto Group began implementing the Global Niche Top™ strategy, with the aim of achieving top global market share by determining markets with high growth potential and focusing its management resources into niche fields where the Nitto Group has a competitive advantage.

Placing ESG at the Core of Our

Management

In 2013, the "Nitto Denko" brand logo was renewed to the current "Nitto," and in 2014 the new brand slogan, "Innovation for Customers" was established. Nitto celebrated its 100th anniversary in 2018. In 2022, we declared the "Nitto Group Carbon Neutral 2050," thus accelerating our efforts to realize a decarbonized society.

Introduction

"Irreplaceable" Nitto Products

The Nitto Group delivers "irreplaceable" products that help to realize a sustainable future and support well-being for everyone by serving the global environment, humankind, and society as our "customers."

Please refer to our corporate website for details of

PlanetFlags/HumanFlags.

https://www.nitto.com/jp/en/sustainability/infocus/flags/

Optical films for VR

Impact on society

• Improve the image quality of VR devices and enhance the immersive experience
• Leverage VR technology in various social fields, such as education and medical care

Advanced Circuit

Impact on society

Improve the functionality of smartphones

Glass anti scattering film for automotive displays

Impact on society

• Prevent glass shattering of in-vehicledisplays in the event of a collision
• Reduce personal injury

Thin-film metal base board CISFLEX™

Impact on society

• Indispensable for HDDs accounting for the majority data center of storage media
• Support people's comfort and convenience in a smart society

Bio based adhesive tape with recycled films

Impact on society

• Life cycle CO2 emissions: -45%
• Contribute to resource recycling with recycled film and bio based adhesive

Polymer beads for synthesizing oligonucleotides NittoPhase™

Impact on society

• Contribute to manufacturing oligonucleotide therapeutics high purity and yield
• Contribute to developing new oligonucleotide
  therapeutics by synthesizing various oligonucleotides

Contract manufacturing for bulk oligonucleotide therapeutic

Impact on society

• Accelerate oligonucleotide therapeutic development for pharmaceutical companies and drug discovery companies
• Contribute to promoting oligonucleotide therapeutics with
  advanced manufacturing technology

Medical films

Impact on society

Providing people with medical products of stable quality

Low VOC double-sided tape

Impact on society

Life cycle

CO2 emissions: -41%

VOC emissions: -90%

RO membranes for ZLD (Zero Liquid Discharge)

Impact on society

• CO2 emissions from wastewater treatment: -63%
• Contribute to water resource recycling and energy conservation by efficiently reusing wastewater

Vision

Chapter

01 Top Message

Daring to Challenge What Only Nitto Can

Hideo Takasaki

Representative Director, President

CEO, COO

Taking Advantage of Changes to Build a Resilient Corporate Structure

In fiscal 2022, the Nitto Group achieved revenue of 929.0 billion yen and an operating income of

147.2 billion yen, both record highs, despite the difficult business environment. We could not hope to accomplish this without everyone in the Group forging ahead with their business.

This past year was highly unpredictable, with geopolitical risks including China's zero COVID policy and Russia's invasion of Ukraine, price surges, and rising interest rates. On the other hand, we benefited from the yen's depreciation against other currencies, so our operating environment was mixed, to say the least.

As much as it is hard to anticipate what to expect in the global economy, I believe it important that business managers keep abreast of management risks by running simulations within a certain margin. It is also important to respond to changes flexibly while building a resilient corporate structure immune to the external environment. I think it's safe to say that the brilliant showings in fiscal 2022 are attributable to the fact that both officers and employees united as one to address burning issues common throughout the Group.

To build a resilient corporate structure, it is vital that we transform our business portfolio. While the information and communication technology (ICT) business, which offers circuit materials, and the medical business, which includes oligonucleotide therapeutics, keep growing, the Nitto Group is trying to establish new mainstay businesses by aggressively investing in them. I am pleased to say that we are moving step by step toward building a robust business portfolio.

When I joined Nitto some 45 years ago, I remember the president of the company often saying, "From changes arise opportunities." This phrase

is still entrenched in my mind nearly half a century later. At the risk of sounding too general, we become

restless when change arrives. His positive thinking that change comes hand in hand with opportunity left a lasting impression on me as a new recruit.

On its way to sustained growth, the Nitto Group has created a large number of Niche Top products as we constantly explore the ever-changing markets.

Achieving Sustained Growth by Simultaneously Pursuing Restructuring and Growth Strategies

Looking back on the past 10-plus years, the Nitto Group has encountered major changes, a.k.a. adverse situations, many times. Still fresh in my memory is the global recession triggered by the economic

and financial crisis in 2008, which resulted in our business performance dropping significantly, albeit temporarily. Yet we took things positively, rather than being unnecessarily intimidated by the change, and navigated the company accordingly. Our solution was to "discontinue" or "downsize" some of our operations, which is not very easy to do during ordinary times, while investing a lavish amount of money in products that we believed would grow. It is this approach of pursuing both restructuring and growth strategies that underpins the Nitto Group's sustained growth.

And now, a clear and present change is happening to the global environment. It is never easy to reduce the negative impact that business activities may cause on the environment, by achieving carbon neutrality and other initiatives. To address this challenge, we are focusing on proposing products that help our customers reduce their environmental impact, while properly assessing risks and opportunities. Hence PlanetFlags/HumanFlags.

In the field of contributions to human life, we have launched numerous products already. We thus believe that we must add to the list of such products in the field of contributions to the environment going forward. As you can imagine, it is no easy task to ask users of our existing products to replace them