Nihon Unisys : 【Delayed】Corporate Governance Report

Nihon Unisys, Ltd.

Corporate Governance Report

Note) This is an English translation of the Corporate Governance Report of Nihon Unisys, Ltd. prepared for reader's convenience. Should there be any inconsistency between the translation and the original Japanese text, the latter shall prevail.

Last Update:	Jun. 28, 2021
Company:	Nihon Unisys, Ltd.
Representative:	Akiyoshi Hiraoka
	Representative Director,
	President & CEO
Contact:	Planning Sect., Legal Dept.
Phone:	[phone]
Securities Code:	8056
URL:	https://www.unisys.co.jp/

The following is an overview of corporate governance of Nihon Unisys, Ltd. (the "Company").

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

1. Basic Views

A mechanism of corporate governance which enables management to make prompt and sound management decisions under appropriate and effective supervision is indispensable for enabling the Nihon Unisys Group to continuously grow and increase its mid-andlong-term corporate value, and the Company shall create, maintain and ceaselessly improve this mechanism.

Furthermore, the Company believes that a company`s "raison d`etre" lies in its contribution to society. Based on this belief, the Company stipulates as part of its corporate philosophy 'Listen sincerely to our stakeholders to improve our corporate value' in order to create relationships of trust with all stakeholders, and shall proceed with its business activities in accordance with this principle.

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

The Company complies with every principle of the Corporate Governance Code.

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

[Principle 1-4 / Supplementary Principle 1-4[1]Cross-Shareholdings]（1） Policy related to 'Cross-Shareholdings'

The Company may sometimes hold shares of its business partners, if they are found to contribute to the enhancement of the Company's corporate value, such as leading to the expansion of its revenue base through maintaining or strengthening relationships with such business partners.

The Company acquires such shares after adjudicating the appropriateness of acquiring them pursuant to its internal regulations. After acquiring the shares, the Company's Board of Directors examines the appropriateness of holding such shares each year, and based on such examination, the Company proceeds the reduction of cross-shareholdings.

- 1 -

（2） Contents Examined by the Board of Directors

The Company examines the appropriateness of each and every listed stock that it holds at Board of Directors meetings by taking into consideration purposes for holding, consistency with its business strategies and business related profits, etc.

The Company verified the stocks that it held as of the end of March 2021 at the Board of Directors meeting convened in June 2021. The results are stated below.

・The Company examined if the holdings of those stocks are still meaningful and in compliance with the business strategies from a mid- to long-term perspective. It confirmed that some stocks were to be sold due to diminished significance in holding them.

・In addition, the Company examined the business related profits with respect to the other stocks from the perspective of capital cost, and it confirmed that holding them is economically rational.

(3) Responses to indications to sell the Company's shares by cross-shareholders

When cross-shareholders that hold the Company's shares indicate their intension to sell the Company's shares, the Company will never prevent them from selling them. It will appropriately respond to their indication of sales.

（4） Concepts on Exercising Voting Rights relating to "Cross-Shareholdings"

With respect to the voting rights related to shareholdings, the Company decides to vote for or against an individual proposal based on the content of that proposal and from the viewpoint of shareholder value of portfolio companies and consistency with its business strategy. The Company exercises voting rights for each proposal by itself.

[Principle 1-7 Procedure for Transactions between Related Parties]

1. Transactions involving conflict of interests with directors or corporate officers of the Company are checked by the departments concerned (such as the Legal Department) before being approved by the Board of Directors. The results of these transactions are reported to the Board of Directors.
2. Transactions between the Company and its shuyokabunushi (meaning a shareholder that holds voting rights constituting 10% or more of all shareholders' voting rights, pursuant to the definition by the Financial Instruments and Exchange Act; hereafter, the "Major Shareholder") other than the above are reported to or approved by the Board of Directors pursuant to standards put in place in advance.

[Principle 2-6 Function as a Corporate Pension Asset Owner]

・The Company together with its group company UNIADEX, Ltd., has joined the Nihon Unisys Company Pension Fund. The Company has assigned personnel appropriately skilled for operating the pension and managing the Fund to the fund secretariat.

・The Fund has been making efforts to encourage secretariat personnel to acquire expertise and enhance their skills, such as obtaining certifications approved by the Japan Association for Financial Planners.

・The Fund operates in accordance with the "Key Policies for the Management of Pension Assets" established pursuant to the Fund's provisions. The Fund makes it a rule to have registrations/cancellations of investment products examined by the 'Asset Management Committee' before having them submitted to and examined by the council, which is partly comprised of delegates appointed by the Company. Such registrations/cancellations are approved thereafter.

The 'Asset Management Committee' is operated by the two councilors of the Fund as well as personnel from the Accounting Department/Financial Department due to their expertise in asset management. Furthermore, the 'Asset Management Committee' has been using an external pension consulting company to complement its expertise and reliability.

・The Fund conducts quantitative and qualitative assessments on a quarterly basis, including on its stance on acceptance of Japan's Stewardship Code in order to monitor institutions contracted to undertake asset management.

[Principle 3-1 (i) Management Philosophy, Management Strategies and Management Plan] ■ Corporate Philosophy

The Company sets out below its corporate philosophy, which is the basis for its management and rooted in the social responsibility which the Nihon Unisys Group bears as a whole.

- 2 -

Our Mission

Work with all people to contribute to creating a society that is friendly to people and the environment.

Our Vision

Be a group that strives to be sensitive to the expectations and needs of society and that thinks through how ICT can contribute to meet them.

Our Values

1. Pursuit of High Quality and High Technology
   Always have the latest knowledge that is useful for society while improving our skills.
2. Respect for Individuals and Importance of Teamwork
   Identify each other's good points, encourage each other to improve those good points and harness the strengths of each person.

3.Attractive Company for Society, Customers, Shareholders and Employees Listen sincerely to our stakeholders to improve our corporate value.

■Vision 2030 and Management Policy

The Company formulated Vision 2030 towards 2030 and the new Management Policy (2021 -2023) beginning from fiscal 2021 to indicate the direction of the Group. Please refer to the following our company website. （https://www.unisys.co.jp/com/management_policy.html）

The outline is as follows.

Vision 2030, which says "We will develop the Digital Commons which is a platform that helps create a society where everyone can live happily", aims to create and provide a business ecosystem and platform that can connect various services, products, companies, and users as a Digital Commons, a common asset of society in order to enable a sustainable society with the power of technology.

The Management Policy (2021 -2023) to achieve Vision 2030 promotes business activities from two perspectives: "For Customer" promoting customer DX that contributes to the sustainable growth of customers, and "For Society" promoting social DX that promotes the resolution of social issues together with customers and partners in various industries.

The Company will build on our customers' best practices in promoting digital transformation, promote digital transformation for society, and expand our business ecosystem together with our customers and partners within a broad framework that encompasses a whole society.

The Company will also promote corporate culture reforms and investment strategies to support these initiatives.

[Principle 3-1 (ii) Basic Approach to and Policy for Corporate Governance]

• Basic Approach of Corporate Governance
  The basic approach to corporate governance is as described in '1 Basic Views' of ' I. Basic Views on

Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information' of this report.

• The basic policy on corporate governance is set out in 'Corporate Governance and Internal Control Principles', which can be found posted on the below website:https://www.unisys.co.jp/invest-e/com/pdf/internal_control_rules.pdf

[Principle 3-1 (iii) Policy and Procedure for Setting Remuneration for Directors]

The remuneration for executive directors shall consist of a) fixed remuneration (monthly remuneration), b) bonus linked to a short-term performance, and c) restricted stock remuneration linked to medium- to long- term performance(the Restricted Stock Remuneration). The ratio of a):b):c) is set at 4:4:2 .

The above ratio assumes that 100% of the short-term performance profit target is achieved in the final year of the evaluation period for c) stock remuneration and 100% of each condition of stock remuneration is achieved. In addition, non-executive directors, such as outside directors, are paid only fixed remuneration that is not linked to business performance.

The Nomination and Remuneration Committee is delegated to decide contents of remunerations for each director in order to reflect objective and fair opinions outside of the Company.

[Principle 3-1(iv) / Supplementary Principle 4-3[3] Policy and Procedure for Appointing/Dismissing Senior Management and Nominating Director/Auditor Candidates]

■Nomination of Director Candidates

- 3 -

For director candidates who are concurrently serving as corporate officers (hereinafter referred to as 'senior management'), the Company will select those who have the appropriate knowledge and experience with high motivation and ethical sense and carry out the Company management accurately and efficiently.

Director candidates from outside the Company are nominated, by taking diversity into consideration, from individuals who have extensive management experience and expertise and who are capable of advising on and overseeing the overall management from an external, objective and professional point of view.

For senior management and director positions, candidates are nominated by the Nomination and Remuneration Committee, which partly consists of one or more independent outside directors, pursuant to the selection standards and procedures it has established. The Board of Directors then appoints the successful candidates based on those nominations.

■Nomination of Auditor Candidates

For auditor candidates, the Company will select those who have the appropriate knowledge and experience to audit directors' execution of duties from a fair and objective perspective and who also have a high ethical sense. The candidates are nominated by the Nomination and Remuneration Committee, which partly consists of one or more independent outside directors, pursuant to the selection standards and procedures it has established. Auditor candidates are approved by the Audit & Supervisory Board and then appointed by the Board of Directors. At least one of the auditor candidates shall have the appropriate expertise in finance and accounting.

■Dismissal of Senior Management including CEO

In the event that a member of senior management, including the CEO, violates laws and regulations or the articles of incorporation, commits an act of fraud, act of tort, or act of betrayal, or it is judged that they have not sufficiently served their office or fulfilled their function, the Company will remove such member[s] from their senior management position[s] if it determines that the removal is justifiable based on deliberations by the Board of Directors.

[Principle 3-1 (v) Reasons for Appointing and Dismissing Senior Management as well as Nominating Director and Auditor Candidates]

Reasons for appointing and dismissing senior management and nominating director and auditor candidates are described in the reference documents that accompany the notice of the general shareholders' meeting (https://www.unisys.co.jp/invest-e/stock/meeting.html).

[Principle 4-1-1 Scope of Matters Delegated to Management]

The Company`s Board of Directors has the role of supervising management as a whole, including the performance by directors and corporate officers of their professional duties, as well as deliberating on and deciding key management policies and other matters important for management.

To this end the board deliberates on matters as set out in laws and regulations as well as in the Company`s Articles of Incorporation, and even matters that need consideration from various viewpoints including those of outside directors.

The Board of Directors delegates decision-making authority for matters other than those resolved or reported by it, in order to enable prompt and efficient decision-making. This delegation is implemented according to the importance of individual items and pursuant to the Company`s internal rules, such as internal rules for Executive Council.

[Principle 4-1-3 Succession Plan for Chief Executive Officer]

In order to ensure the transparency of the selection process of senior management including the Chief Executive Officer, the Nomination and Remuneration Committee, which includes an independent outside director approves a plan regarding successors to senior management ('Succession Plan') and reports it to the Board of Directors.

In the Succession Plan, integrity is an important attribute required of senior management, as are seven other crucial competencies which are: vision and-vision-building skills (foresight); acumen/ability to perceive essence (insight); determination; innovation; messaging skills (passion); implementation/accomplishment ability (execution), and receptivity to diversity and adaptability (diversity and inclusion).

Furthermore, the Company has continuously implemented a management leadership program to produce senior management candidates since the fiscal year 2018, pursuant to the Succession Plan.

[Principle 4-9 Standards for Judging Independence of Outside Directors/Auditors]

- 4 -

The Company`s "Standards on the Independence of Outside Directors/Auditors" are as follows.

■ Standards on the Independence of Outside Directors/Auditors

The Company deems that outside directors and outside auditors as defined by the Companies Act have independence if they satisfy the independence criteria stipulated by the Tokyo Stock Exchange and do not fall under any one of the categories below：

1. Major shareholders holding voting rights equivalent to 10% or more of the total voting rights of the shareholders of the Company, or in the case of a corporation or organization, an executive of that corporation or organization
2. A major client of the Company or its subsidiaries, or executive of a corporation or organization that deals with the Company or its subsidiaries as a major business partner (*1)
3. An executive of a financial institution to which the Company owes significant borrowings (*2)
4. A person who receives significant amounts of compensation or other economic benefit (*3) (other than their remuneration as a director) as a consultant, accountant, or lawyer for the Company or its subsidiaries, or where a corporation or organization, a person belonging thereto
5. An executive of a corporation or organization that receive significant donations (*4) from the Company or its subsidiaries
6. A person who served a corporation or organization falling under any of the categories (1) to (5) above as an executive within the past 3 years
7. A spouse or relative within two degrees of kinship of a person falling under any of the categories below：
   ・A person falling under any of the categories (1) to (5) above
   ・A person who is a director or executive of a subsidiary of the Company

• 1 Classification into the category of 'major client of the Company or its subsidiaries' is judged according to the net sales that the Company or its subsidiaries had with the client in the fiscal year immediately before: whether or not they exceed 2% of the consolidated net sales of the Company.
  Classification into the category of a 'corporation or organization that deals, as their major clients, with the Company or its subsidiaries' is judged according to the net sales that the corporation or organization had with the Company or its subsidiaries in the fiscal year immediately before: whether or not they exceed 2% of the consolidated net sales of the corporation or organization that deals with the Company or its subsidiaries, or ¥10 million,

whichever is higher.

*2 Classification into the category of 'significant borrowings' is judged according to the amount of those borrowings: whether or not they exceed 2% of the gross assets of the Company for the fiscal year immediately before.

*3 Classification into the category of 'significant amounts of compensation or other economic benefit' is judged according to the benefit that the person has received from the Company (other than their remuneration as a director) in the fiscal year immediately before: whether or not the person has received remuneration or other economic benefit of ¥10 million or more; or where the person belongs to a corporation or organization, whether or not that corporation or organization has received from the Company or its subsidiaries remuneration or other economic benefit that exceeds 2% of the consolidated net sales of the corporation or organization for the fiscal year immediately before or ¥10 million, whichever is higher.

*4 Classification into the category of 'significant donations' is judged according to the amount of donations that have been received from the Company or its subsidiaries: whether or not they exceed ¥10 million a year or 2% of the annual total costs of the corporation or organization of the fiscal year immediately before, whichever is higher.

[Principle 4-11-1 Balance, Diversity and Extent of Knowledge, Experience and Capabilities of the Board of Directors]

The Company has appointed directors and corporate auditors with diverse knowledge and experience, including ESG/Sustainability and global business, necessary to achieve Vision 2030 and the Management Policy (2021-2023).

The skill matrix of the Company's directors and corporate auditors is described in the reference documents of the notice of the ordinary general meeting of shareholders. Please refer to the following URL.

（https://www.unisys.co.jp/invest-j/stock/meeting.html）

- 5 -