Oji : Jun.29, 2023 Corporate Governance Report

Corporate Governance Report

Oji Holdings Corporation

Last Update: June 29, 2023

Oji Holdings Corporation

President: Hiroyuki Isono

Contact: +81-3-3563-1111

(Corporate Administration Dept.,

Corporate Governance Div.)

Securities Code: 3861

https://www.ojiholdings.co.jp/english/

The corporate governance of Oji Holdings Corporation (the "Company") is described below.

1. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and

Other Basic Information

1. Basic Views

Drawing on the fundamental values and the behavior principles that the Oji Group (the "Group") has carried down as a company since its founding, the Group has formulated the Oji Group Corporate Code of Conduct by which the Group as a whole engages in corporate activities with an awareness of its responsibility as a corporate citizen and a strong sense of ethics. The Group will continue to strive toward enhancing its corporate governance, regarding it as one of the highest priority issues, by ensuring efficiency, soundness and transparency of the management, while building relationships of trust with its diverse stakeholders. In doing so, the Group aims to increase its corporate value and become a company that is trusted by society.

[Reasons for Non-compliance with the Principles of the Corporate Governance Code]

The Company complies with all the principles of the Corporate Governance Code revised in June 2021, including all principles for companies listed on the Prime Market applicable after April 4, 2022.

[Disclosure Based on the Principles of the Corporate Governance Code]

The Company has formulated the "Fundamental Policies on Corporate Governance" and posted it on its website.

The Fundamental Policies on Corporate Governance:

• https://www.ojiholdings.co.jp/english/group/policy/governance.html>

[Principle 1.4] (Strategic Shareholdings)

The Group strategically holds shares that are expected to contribute to the sustainable growth of the Group and the improvement of corporate value over the medium- to long-term as part of its management strategy for the purpose of business alliances and strengthening and maintenance of long-term and stable relationships with business partners.

The Article 18 of the "Fundamental Policies on Corporate Governance" stipulates the following regarding strategic shareholdings.

Article 18. The Group, as part of its management strategies, shall strategically hold shares that are deemed to contribute to the sustainable growth of the Oji Group and the enhancement of its medium- to long-term corporate value, from the perspectives of business collaboration as well as strengthening and maintenance of long-term stable relationship with business partners.

2. The Group shall verify the appropriateness of strategic shareholdings at the Board of Directors every year, by concretely examining the purpose of holding the shares, as well as whether the benefits and risks associated with holding the shares are commensurate with the cost of capital. The Group, then, shall proceed

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with reducing strategic shareholdings by selling the shares for which there is insufficient rationale in a timely and appropriate manner.

3. The Group, taking into account the management policies of issuing companies involved in strategic shareholdings, shall comprehensively assess the impact of each proposal on the Group which include whether the proposal would contribute to enhancing the medium- to long-term corporate value of the issuing companies, or whether it would lead to harm shareholder value. The Group, then, shall exercise its voting rights, and engage in dialogue with issuing companies and other parties regarding the content of the proposal.

At the Board of Directors meeting held in December 2022, the appropriateness of strategic shareholdings as of the end of March 2022 was examined through the specific examinations for each share which determined whether the purpose of holding was appropriate and whether the benefits and risks associated with holding were commensurate with the cost of capital. The Company proceeds with reducing the strategic shareholding by appropriately selling the shares for which there is insufficient rationale.

[Principle 1.7] (Related Party Transactions)

The Article 19 of the "Fundamental Policies on Corporate Governance" stipulates the following regarding related party transactions.

Article 19. The Company shall make efforts so that dealings between Officers, major shareholders and other parties do not harm the mutual interests of the Company and its shareholders, and shall engage in the following initiatives.

1. Directors and Corporate Officers, when engaging in dealings with the Company on behalf of themselves or third parties, shall follow the provisions of the Companies Act as well as the Group Regulations to obtain prior approval from and perform after-action reporting to the Board of Directors.
2. The Company shall confirm the presence of dealings between the Group and its Directors, Corporate Officers, or their relatives to the second degree every year, and shall strive to grasp the dealings by these parties that involve conflicts of interest.
3. Major dealings involving the Company and its major shareholders, subsidiaries, affiliates, and other related parties shall be reported to the Board of Directors.

[Supplementary Principle 2.4.1] (Ensuring Diversity)

Please refer to "III.3. Measures to Ensure Due Respect for Stakeholders - Others" of this Report.

[Principle 2.6] (Roles of Corporate Pension Funds as Asset Owners)

In order to enhance the expertise of operations and fulfill its role as an asset owner, the Company complements its expertise as well as knowledge by appointing individuals with expertise and knowledge in pension fund management as investment executors and employing operational consulting firms. In addition, the Company strives to improve qualifications of its personnel by participating in seminars held by the Pension Fund Association of Japan and other pension business managing financial institutions.

As for the operational aspect, the Asset Management Committee makes decisions on investment activities and monitors the investment status and financial condition as necessary, taking into account the interests of corporate pension beneficiaries.

[Principle 3.1] (Full Disclosure)

(i)Management philosophy, management strategies and business plans

The Group strived to work on the manufacturing which supports a new future and contributing to a sustainable society, by exploring "Beyond the Boundaries in the Future", based on the three themes of its management philosophy namely "Creation of Innovative Value", "Contribution to the Future and the World", and "Harmony with Nature and Society".

In addition, the Group recognizes that "compliance, safety, and environment," which is the basis of corporate survival, is the highest priority and most important issue for management. The Group will continue its effort to ensure that all of its corporate officers and employees fully understand the ideas of complying with laws and regulations to fulfil its corporate social responsibility, eradicating occupational accident risks, and preventing environmental accidents.

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In May 2022, based on its management philosophy, the Group formulated the Purpose of "Grow and manage the sustainable forest, develop and deliver the products from renewable forest and Oji will bring this world a brighter future filled with hope" as the Group's vision. The Group considers the core of its business to be forests, the Group's cherished asset. The appropriate cultivation and management of forests help to enhance the many functions of forests which are of public benefit, including absorbing and fixing carbon dioxide, conserving biodiversitym cultivating water resources, and preserving soil. A lineup of its products utilizing forest resources can be used to replace fossil resource-derrived materials and products. The Group will strive to address environmental and social issues through business activities rooted in forest resources.

Toward the realization of the Group's vision, the Group formulated a Long-term Vision for 2030 based on the basic policy of "Toward Further Growth and Evolution," and is working to improve corporate value unders three policies: "Initiatives for Environmental Issues, " "Initiatives for Profitability Improvement," and "Initiatives for Product Development."

• Initiatives for Environmental Issues

The Group will implement initiatives on environmental issues through fuel conversion to zero use of coal, expansion of renewable energy to reduce greenhouse gas emissions, as well as acquisition, expansion, and effective use of forest plantaions to increase the net amount of carbon dioxide absorbed and fixed by forests.

• Initiatives for Profitability Improvement

In addition to deeping existing business through means such as cost reductions and improving operations, the Group will expand the business with promising businesses and eco-friendly products through strategic investment and M&As.

• Initiatives for Product Development

The Group will offer new wood-derived products, by developing eco-friendly materials and productsm and commercializing plastic alternatives.

Through these initiatives, the Group will strive to achieve net sales of 2.5 trillion yen or more by FY2030 and the "Environmental Action Program 2030", which aims to reduce GHG emissions by at least 70% in FY2030 compared to FY2018 levels to improve corporate value and contribute to society.

The Group formulated its FY 2022-24Medium-term Management Plan to serve as a milestone for its Long-term Vision for 2030. Under this Medium-term Management Plan, the Group endeavors to maintain stable consolidated operating profit of 150 billion yen or more and consolidated profit attributable to owners of parent of 100 billion yen or more.

By providing various values to society through its business, the Group aims to contribute to the realization of a genuine enriched society and to be a corporate group that constantly stays ahead of the needs of the times, challenges innovation, and grows sustainably.

Please refer to the Company's disclosures on its website and materials for management briefings. Management philosophy, management strategies:

• https://www.ojiholdings.co.jp/english/group/policy/philosophy.html> Management Plan:
• https://investor.ojiholdings.co.jp/en/ir/library/plan.html>

Financial Results & Presentation:

• https://investor.ojiholdings.co.jp/en/ir/library/result.html>

1. Basic views and guidelines on corporate governance

For basic views, please refer to "I.1. Basic Views" of this Report.

For guidelines, please refer to the "Fundamental Policies on Corporate Governance".

• https://www.ojiholdings.co.jp/english/group/policy/governance.html>

1. Board policies and procedures in determining remuneration of senior management and Directors

The Company has designed its compensation programs with an emphasis on the roles performed by the Director compensation program such that the Board of Directors promotes sustainable growth and increasing medium- to long-term corporate value of the company and pursues enhanced profitability and capital efficiency. The specifics of the Director compensation program and determination policies are set forth in the Fundamental Policies on Corporate Governance (Article 13). Director compensation comprises base compensation, bonuses that reflect short-term performance, and stock-based compensation that reflects medium- to long-term improvement in corporate value. Determinations are made by the Board of Directors based on recommendations submitted by the Compensation Committee.

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The Article 13 of the "Fundamental Policies on Corporate Governance" stipulates the following regarding Director compensation program and determination policies.

Article 13. Compensation for Directors shall comprise base compensation, compensation reflecting short-term performance, and stock-based compensation reflecting medium- to long-term improvement in corporate value, and the total amount shall be within the limit amount resolved at general meetings of shareholders. Compensation for Outside Directors shall comprise base compensation only.

1. Compensation for Corporate Officers who do not concurrently serve as Directors shall comprise base compensation and compensation reflecting short-term performance.
2. Compensation for Directors and Corporate Officers shall be decided by the Board of Directors based upon reports from the Compensation Committee.
3. Compensation for Audit & Supervisory Board Members shall be decided through discussion among the Audit & Supervisory Board Members, within the limit amount resolved at general meetings of shareholders.

1. Board policies and procedures for appointment and dismissal of senior management as well as nomination of candidates of Directors and Audit & Supervisory Board Members

At the Company, the Fundamental Policies on Corporate Governance (Articles 5, 6, and 10) stipulate as a Director nomination policy that candidates be nominated for Director who possess excellent character and insight and who may contribute to the sustainable growth as well as the increase of medium- to long-term corporate value of the Group and that candidates be appointed for Audit & Supervisory Board Members who are capable of executing the duties of Audit & Supervisory Board Members, and who possess excellent character and insight as well as high level of specialization and extensive experience.

When nominating candidates for Directors, the Nomination Committee, an advisory body to the Board of Directors, deliberates and recommends to the Board of Directors. As for nomination of candidates for Audit

• Supervisory Board Members, the Nomination Committee recommends to the Board of Directors with the consent of the Audit & Supervisory Board, following consultation with the Nomination Committee. The Nomination Committee consists of three Independent Outside Directors, the Chairman, and the President, and the Board of Directors receives reporting from the Committee, deliberates and makes decisions.

The Article 5, the Article 6, and the Article 10 of the "Fundamental Policies on Corporate Governance" stipulate the following regarding nomination policy of Directors and Audit & Supervisory Board Members and roles of the Nomination Committee and the Compensation Committee.

(Policies for Director Nomination)

Article 5. The Board of Directors shall nominate candidates for Directors who possess excellent character and insight and who may contribute to the sustainable growth as well as the increase of medium- to long-term corporate value of the Group. However, any nomination shall be conducted following consultation with the Nomination Committee.

2. Individuals with high level of expertise and broad insight, who are capable of expressing opinions from a standpoint independent of the management and from viewpoints of various stakeholders, shall be selected as candidates for independent Outside Directors.

(Roles of the Nomination Committee and Compensation Committee)

Article 6. The Nomination Committee and the Compensation Committee shall be established as advisory bodies to the Board of Directors.

2. The Nomination Committee shall deliberate the following issues/matters and report to the Board of Directors.

1. Nomination policies for candidates for Directors and Audit & Supervisory Board Members, and selection policies for Corporate Officers
2. Nomination of candidates for Directors and Audit & Supervisory Board Members, and selection of Corporate Officers
3. Dismissal of Directors, Audit & Supervisory Board Members and Corporate Officers who do not fulfill the nomination and selection policies
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4 Succession planning for the President and Chief Executive Officer 5 Selection and dismissal of Advisors

3. The Compensation Committee shall deliberate the following issues/matters and report to the Board of Directors.

1 Evaluation of Directors and Corporate Officers

2 Compensation structure and standards of Directors and Corporate Officers 3 Analysis and evaluation of the effectiveness of the Board of Directors

4 Compensation structure and standards of Advisors

(Policies for Audit & Supervisory Board Member Nomination)

Article 10. The Board of Directors shall nominate candidates for Audit & Supervisory Board Members who are capable of executing the duties of Audit & Supervisory Board Members, and who possess excellent character and insight as well as high expertise and rich experience. However, any nomination shall be conducted with the consent of the Audit and Supervisory Board, following consultation with the Nomination Committee.

2. Individuals with considerable knowledge of finance and accounting shall be nominated as at least one of the Audit & Supervisory Board Members.

1. Explanations with respect to individual appointment, dismissal and nomination of Directors and Audit & Supervisory Board Members

The Company explains reasons for appointments of candidates of Directors and Audit & Supervisory Board Members in its referential material of a General Meeting of Shareholders. Please refer to the said material that is posted on the Company's website.

• https://www.ojiholdings.co.jp/english/ir/stock/meeting.html>

Please refer to descriptions in "II.1. Organizational Composition and Operation - Directors, Audit & Supervisory Board Members" of this Report for reasons for appointments of Independent Outside Directors and Independent Outside Audit & Supervisory Board Members.

[Supplementary Principle 3.1.3] (Sustainability Initiatives) (Sustainability Initiatives)

Please refer to "III.3. Measures to Ensure Due Respect for Stakeholders - Implementation of Environmental Activities, CSR Activities etc." of this Report.

(Investment in Human Resources)

Please refer to "III.3. Measures to Ensure Due Respect for Stakeholders - Others" of this Report.

(Investment in Intellectual Property)

The Group creates innovations by refining a range of core technologies accumulated from paper manufacturing and forestation, which are the roots of its founding.

The Group is developing new materials derived from wood fiber towards a decarbonized society, such as bioethanol, biomass plastics, cellulose nanofibers, and cellulose composites, as well as pharmaceutical materials from sulfated hemicellulose.

Through these developments, the Group will continue to promote sustainable value creation.

Promotion of Innovation by the Group is explained in detail on the Company's website and Integrated Report. Please refer to the following website.

The Company's website <https://www.ojiholdings.co.jp/english/r_d/>

The Oji Group Integrated Report <https://investor.ojiholdings.co.jp/en/ir/library/integrated.html>

The Group regards intellectual property as an important management resource and actively utilizes it as a source of business competitiveness and in forming collaborative relationships with other companies. The intellectual property rights of the Group are centrally managed by the Company, which obtain and exercises the rights in accordance with the Group policies and licenses the rights to Group companies for effective use within the Group. The Group will further promote IP activities for the strategic use of interectual property, which is directly linked to business strategy.

The Group's research and development expenses: 9.3 billion yen (FY2022)

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