Corporate Governance Report (Latest version: April 3, 2023)

Corporate Governance Report

CORPORATE GOVERNANCETOYO INK SC HOLDINGS CO., LTD.

Last Update: April 3, 2023

Toyo Ink SC Holdings Co., Ltd.

Satoru Takashima, Representative Director, President

Contact: General Affairs Department 03-3272-5731

Securities code: 4634

https://schd.toyoinkgroup.com/en/

The corporate governance of Toyo Ink SC Holdings ("the Company") is described below.

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

Basic Information

1. Basic Views

The Toyo Ink Group ("the Group") aims to enhance the overall value of the entire Group under a holding company system by strengthening groupwide strategic capabilities, speeding up management, and striking a balance between optimization on a groupwide scale and for individual lines of business.

The Group's management framework revolves around the "Toyo Ink Group's Philosophy System," which takes the Group's basic position on Group company management and distils it into a Corporate Philosophy, Corporate Policy and a set of Guiding Principles, and a "CSR Value System," which consists of a CSR Charter and CSR Action Guidelines that clearly underline the Group's commitment to social responsibility.

By putting the Toyo Ink Group's Philosophy System and CSR Value System into practice, the Group will contribute to improving the sustainability of consumption, life and the global environment through science-driven manufacturing, with the aim of being "a company that contributes to the enrichment of life and culture throughout the world," as stated in the Group's Corporate Policy.

To achieve that, the Group has made it a top priority to evaluate its own corporate activities from the same point of view as its stakeholders, and to ensure balanced management from an economic, social, human and environmental standpoint, in order to create tangible and intangible corporate value and fulfill its social responsibilities.

To make that a reality, the Group is implementing the following measures.

• Adequately implementing approval and affiliate management regulations applicable to Group companies, to enable delegation of executive capabilities to individual operating companies and to strengthen corporate governance
• Improving internal control systems
• Strengthening the legal functional capabilities of General Meetings of Shareholders, the Board of Directors, the Audit and Supervisory Committee, accounting auditor and other such parties, in order to improve leadership and monitoring capabilities
• Disclosing information quickly, accurately and widely, in order to improve management transparency
• Strengthening and improving compliance systems
• Promoting environmental preservation on a global scale

These and other measures are intended to establish good relationships with all of the Group's stakeholders, including shareholders, suppliers, local communities and employees, and to enhance corporate governance.

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

Updated

The Company is implementing all of the principles under the Corporate Governance Code.

Disclosure Based on the Principles of the Corporate Governance Code

Updated

【Principle 1.4 Cross-Shareholdings】

The Company holds shares of companies as it deems necessary for policy reasons as part of its management strategy, including business alliances, the maintenance and strengthening of business relationships and the stable

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procurement of raw materials.

The Board of Directors examines the benefits of holding these cross-held listed stocks every year, comparing them with the cost of capital and the status of transactions of each individual stock, and the Company reduces the number of stocks it holds when it determines that it is no longer appropriate to hold the stocks, taking into consideration the situation of the companies and market trends.

In FY2022, the Company sold all of the shares of nine stocks that it held and some of the shares of three stocks that it held.

Voting rights in relation to cross-shareholdings for listed shares will be exercised in an appropriate manner on a case-by-case basis, taking into account whether or not the relevant proposal will help to enhance the corporate value of the issuing company over the medium to long term, whether or not it will contribute to the profits of all shareholders, including the Company, and the qualitative and overall impact it will have on the Group in terms of management and business. Where an issuing company has special circumstances, such as the occurrence of significant damage to its corporate value or a serious compliance violation, or where there is a concern that an issuing company may damage the corporate value of the Company as its shareholder, judgment over whether or not to approve will be made carefully by collecting sufficient information through dialogues with the issuing company or by other means.

【Principle 1.7 Related Party Transactions】

The Group will carry out all transactions, including related party transactions, in accordance with its own internal regulations, having sought necessary approvals in line with the importance and nature of the relevant transaction. Transactions whereby the related party is a major shareholder, or equivalent, will be subject to the same terms and conditions as transactions with third parties, to ensure that transactions are carried out legitimately.

【Principle 2.4 Ensuring Diversity, Including Active Participation of Women】

Based on its corporate philosophy, "People-oriented management," the Group believes that recruiting diverse human resources regardless of gender, age, nationality or disability and accepting their diverse values, thoughts and ideas will generate innovative ideas and innovation and promote the creation of value through diversity.

One of the most important issues is the promotion of the active participation of women. In terms of promoting a comfortable working environment, the Company has created an environment where employees are able to work actively while balancing childcare and work, and in 2010 the Company acquired Kurumin mark certification. By introducing a half-day off system and then also enhancing its assistance system, the Company also received Eruboshi certification in 2017, and currently 100% of employees are returning to work after childcare leave. Regarding the promotion of the active participation of women, approximately 37% of the new graduates hired in April 2023 are women. In addition, the Company aims to establish an education system to develop women candidates for managerial positions.

The Group will facilitate the advancement of women in terms of both ease of work and careers and promote the appointment of women to managerial positions.

【Supplementary Principle 2.4.1 Ensuring the Diversity in Promotion to Core Positions】

The Group set itself a target of increasing the percentage of managers in Japan that are women to 8% by FY2023. The Group will provide career training for female future leaders and implement other initiatives to encourage female employees to take the first step in trying new jobs and duties with confidence and courage.

In the Group's view, it is unnecessary to set a numerical target for the percentage of managers in Japan that are foreign nationals and midcareer hires given that its policy is not to discriminate on the basis of nationality or career background in the context of employment and career development. The Group endeavors to ensure diversity in accordance with the policy described later in this report.

As of January 2023, the percentage of managers in Japan that are women was around 4.5%, the percentage that are foreign nationals was less than 1% and the percentage that are midcareer hires was around 32%.

The Group's policies to cultivate human resources and develop an internal environment to ensure diversity are follows.

The Group cultivates human resources based on a policy of developing abilities through diverse practical work experience related to overseas business both in Japan and overseas.

In anticipation of future needs, the Group also cultivates human resources through practical training at overseas subsidiaries aimed primarily at young and middle-ranking employees.

In order to (i) provide information and training for mutual respect and the effective use of differences among

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employees and (ii) promote diversity, the Company established the Diversity and Inclusion (D&I) Promotion Office, a dedicated organization, to promote diversity and inclusion in 2023 to develop an environment, design programs and consider measures that will enable the active participation of diverse human resources.

【Principle 2.6 Roles of Corporate Pension Funds as Asset Owner】

The Company has adopted a contract-type defined benefit corporate pension plan and manages the pension assets. Under the pension scheme of the Fund, the assets are managed by diversifying them appropriately after listening to opinions from the asset management consultant and asset management organizations, to secure investment earnings

on a long-term basis for the purpose of securing resources for stable payment in the future.

Management of the pension assets is entrusted to multiple asset management organizations, and each organization is left to select individual investment destinations and exercise voting rights, so as to prevent a conflict of interest between beneficiaries of the corporate pension and the Company. In addition, information about the management status is obtained regularly from each management organization, and details are shared by the Asset Management Committee, which is composed of executives in charge of personnel and managers from personnel and finance departments, and management status is managed appropriately.

Further, managers and persons in charge from the personnel department, which is the department in charge, cooperate with asset management consultants to ensure appropriate asset management and participate in pension management seminars and similar sessions hosted by asset management organizations, as part of their efforts to strengthen their expertise.

【Principle 3.1	Full Disclosure】
i) Company objectives (e.g., business principles), business strategies and business plans;

Details of the Company's Corporate Philosophy are published on the Company's website for reference. ◇Corporate Philosophy: Company > Toyo Ink Group's Philosophy System

(https://schd.toyoinkgroup.com/en/corpinfo/philosophy.html) ◇Management Plan: Company > Strategy

(https://schd.toyoinkgroup.com/en/corpinfo/strategy.html)

ii) Basic views and guidelines on corporate governance based on each of the principles of the Code;

Details of the Company's basic position on corporate governance are included under Section I-1. (Basic Views) of this report.

The Company's Basic Corporate Governance Policies are published on the Company's website for reference. ◇Basic Corporate Governance Policies: Investors > Corporate Management > Corporate Governance.

(https://schd.toyoinkgroup.com/en/ir/management/governance.html)

1. Board policies and procedures in determining the remuneration of the senior management and directors;
   The Company believes the executive remuneration system is an important part of its corporate governance and has

established the five polices below based on this understanding. The Company will also ensure that the system adopts an objective perspective through the Nomination and Remuneration Advisory Committee which is chaired by an Outside Director

1. Remuneration should be at a level that reflects economic conditions and corporate performance.
2. It should be at a level that enables the Company to attract and retain talent to increase its corporate value.
3. The remuneration system should embody the Company's Corporate Policy, reflect its medium- and long-term management strategies and strongly inspire sustainable growth.
4. Remuneration should adopt the performance-linked system and inspire the achievement of the disclosed performance forecasts.
5. It should be designed to be fair and rational from a perspective of accountability to the stakeholders. It should be determined through an appropriate process that increases fairness and transparency.

For more information, see II-1. (Director Remuneration, Disclosure of Policy on Determining Remuneration Amounts and the Calculation Methods Thereof) of this Report.

1. Board policies and procedures in the appointment/dismissal of the senior management and the nomination of director candidates;
   When a candidate for Director is nominated, the following matters (a) to (d) are determined comprehensively by the Chairman, President and Director in charge of personnel affairs. The President nominates candidates for the posts of Directors and Audit and Supervisory Committee Member. The nomination of candidates for the post of Director is discussed by the Nomination and Remuneration Advisory Committee, which is attended by three independent Outside Directors, and candidates for Directors who are members of the Audit and Supervisory Committee are approved at the meeting of the Audit and Supervisory Committee concerning submission of the proposal for the appointment to the General Meeting of Shareholders, before they are determined through deliberation and a

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resolution at a meeting of the Board of Directors.

(a) Criteria for nomination of Chief Executive Officer

In accordance with the Company's Corporate Policy, the Company nominates the Chief Executive Officer, based on a comprehensive assessment of:

• the nominee's ability to balance short-term,medium-term and long-term perspectives and to make sophisticated management decisions;
• the nominee's familiarity with the Group's business gained through experience serving as an executive director; and
• the nominee's awareness of the need to strictly enforce the law and corporate ethics.

1. Appointment and nomination of candidates for Executives and Directors who are not members of the Audit and Supervisory Committee

In accordance with the Company's Corporate Policy, the Company nominates candidates for Executives and Directors, based on a comprehensive assessment of:

• their expected ability to contribute to the further development of the Group and related industries as a whole;
• their ability to accurately identify issues in their division and work with other Executives to resolve those issues; and
• their awareness of the need to strictly enforce the law and corporate ethics.

1. Appointment and nomination of candidates for Directors who are members of the Audit and Supervisory Committee

In accordance with the Company's Corporate Policy, the Company nominates candidates for Audit and Supervisory Committee Members, based on a comprehensive assessment of:

• their ability to audit Directors' performance, prevent violations of the law and the Company's articles of incorporation before they occur, and maintain and improve sound management and public trust in the Group; and
• their ability to conduct audits from a neutral, objective perspective, and contribute to ensuring sound management.

1. Appointment and nomination of candidates for Outside Directors

Taking the Company's criteria for independence for independent officers into consideration, the Company nominates candidates for Outside Directors, based on a comprehensive assessment of:

• their extensive expertise and experience in fulfilling leadership roles in areas such as management, legal affairs, finance and accounting, personnel and labor relations, and the chemical industry; and
• their ability to get to the heart of issues affecting the Group, adequately share their opinions with management, and provide guidance and supervision.

Concerning the removal of an Executive, consultation will be sought from the Nomination and Remuneration Advisory Committee in light of the criteria for removal stipulated in the Rules on Disciplinary Actions against Directors.

v) Explanations with respect to the individual appointments/dismissals and nominations based on iv).

The reasons for the nomination of candidates for Directors are already available on the Company's website for reference of the Notice of the Annual General Meeting of Shareholders.

◇Notice of the Annual General Meeting of Shareholders: Investors > IR Archives > Other Documents (https://schd.toyoinkgroup.com/en/ir/archives/others.html)

Reasons for the nomination of Outside Directors are also stated in II-1. (Directors, Outside Directors' Relationship with the Company) of this Report.

【Supplementary Principle 3.1.3 Sustainability Initiatives】

In its long-term corporate vision, SIC27, the Group defines the concept of "sustainable growth" as the Toyo Ink Group growing sustainably and contributing to improvement of society's sustainability. In addition, and the Group has set the basic vision of promoting a range of sustainability activities centered on the achievement of carbon neutrality in 2050 and interim goals in 2030 by formulating its sustainability vision, TSV2050/2030, as a practical long-term goal for the Group's sustainability activities. Framework to promote sustainability and disclosures of climate change-related financial information based on the TCFD recommendations are published in the Company's website and Integrated Report 2022.

With respect to human capital, the Group sees human resources as its most important management capital and actively invests in them, establishing the "Toyo Ink Vocational College", introducing a human resource rotation program, promoting women's participation and advancement in the workplace to increase diversity, and ensuring safety and health in the workplace as a manufacturer. Similarly, in terms of the creation of new intellectual property, the Company has renewed its R&D structure to promote the development of new products and the creation of new

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businesses which meet the needs of society. In addition, the Group is endeavoring to promote open innovation and strategically acquire patents, and is actively disclosing information about these activities through its integrated report and other means.

◇Long-Term Corporate Vision "SIC27": Company > Strategy (https://schd.toyoinkgroup.com/en/corpinfo/strategy.html)

◇Sustainability Vision "TSV2050/2030":

CSR > CSR of the Toyo Ink Group > Sustainability Vision "TSV2050/2030" (https://schd.toyoinkgroup.com/en/csr/group/tsv.html)

◇Integrated Report 2022: CSR > Download Reports > Integrated Report (https://schd.toyoinkgroup.com/en/ir/archives/pdflib/report/2022/integrated_report2022en.pdf)

◇Sustainability Data Book 2022: CSR > Download Reports > Sustainability Data Book (https://schd.toyoinkgroup.com/en/csr/doc/reports/sust_databook2022en.pdf)

【Supplementary Principle 4.1.1 Scope of Delegation to Management】

In addition to matters that require a decision from the Board of Directors in accordance with the law or the Company's articles of incorporation, important operational matters such as annual business plans are submitted for approval by the Board of Directors in accordance with the Regulations of the Board of Directors. In addition, in order to transfer decision-making authority for the execution of business, decisions regarding the execution of business may be delegated to the Representative Directors in accordance with the Articles of Incorporation and the Board of Directors Regulations.

Decisions regarding other important matters in relation to management are made by the Group Management Committee in accordance with the Regulations of operating the Top Management Committee. To ensure effective supervision by the Board of Directors, matters determined by the Group Management Committee are then reported to the Board of Directors.

Operations relating to matters other than those submitted to the Board of Directors or the Group Management Committee are handled directly by the relevant Director in accordance with responsibilities determined by the Board of Directors. Such operations may also be delegated to a responsible Executive Officer. Even in cases such as these however, there are approval regulations in place for matters that can only be acted upon with approval from the Representative Directors, due to their importance or nature.

【Principle 4.9 Independence Standards and Qualification for Independent Directors】

Details of independence standards for Outside Directors and Audit and Supervisory Committee Members are included under II -1. (Matters Concerning Independent Directors) of this report.

【Supplementary Principle 4.10.1 Authority and Roles of the Nomination and Remuneration Committee】 The Company has established Nomination and Remuneration Advisory Committee aimed at further enhancing

transparency and objectivity in processes for determining the nomination and remuneration of Directors.

The Nomination and Remuneration Advisory Committee consists of a majority of independent Outside Directors. The two Representative Directors attend the committee as members but an independent Outside Director serves as chair to ensure independence.

The Company positions the committee as advisory bodies which are mandated by the Board of Directors to deliberate on candidates for Directors and remuneration proposals presented by the Representative Directors before their proposal to the Board of Directors and to confirm the appropriateness of such candidates and proposals. The Representative Directors make proposals to the Board of Directors, based on utmost respect for the opinions of the committee. Details of procedure are stated in Principle 3.1. iv) of this section.

【Supplementary Principle 4.11.1 Policy on Diversity of the Board of Directors】

The Company's Board of Directors shall be composed of appropriate personnel, taking into consideration diversity and expertise within the number of Directors stipulated in the Articles of Incorporation, and at least one-third of the Directors shall be independent Outside Directors in accordance with the Company's independence standards as stipulated in Principle 4-9 above.

The criteria for nominating Directors and the procedures for their election are described in Principle 3-1 (iii)(iv) above. For the Director skills matrix, see the Attachment to this Report.

【Supplementary Principle 4.11.2 Concurrent Positions Held by Directors】

Details of executive positions held concurrently by Directors at other listed companies are included in the Notice of the Annual General Meeting of Shareholders and the Annual Securities Report, which are posted on the Company's

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