Focused on Growth. Driven by People. Integrated Report 2019 Year Ended March 31, 2019 Philosophy Guiding Principles Progressive, united in creativity, “Market-driven forward-looking collaborative innovation: We pledge to listen to the views of stakeholders and to contribute—through Improving the future both our gas technologies and collaboration through gases” with partners in other industries—to the creation of a spiritually and materially wealthy society. We pride ourselves on our ability to act on customer feedback and to partner with a wide range of industries to help improve the quality of life. Market responsiveness and collaborative innovation are our two core values. These values are at the heart of everything we do as we shape the future through gas technologies, crafting a harmonious relationship between people, society and the planet. We are the Taiyo Nippon Sanso Group, where professionals come together. Disclosure System This report contains important basic information that Taiyo Nippon Sanso particularly wishes to communicate to stakeholders. For more detailed non-financial information, please visit the CSR section of the Company’s corporate website. Financial information Non-fi nancial information Important Printed Integrated Report 2019 report Basic information on the Company’s overall operating activities IR information CSR information Detailed fi nancial and Detailed information share/shareholder on the Company’s Website information for CSR initiatives for (Updated) investors all stakeholders https://www.tn-sanso.co.jp/en/ir/ https://www.tn-sanso.co.jp/en/csr/ Detailed CONTENTS Our Business Model ESG Information The Taiyo Nippon Sanso Group’s Value Creation Process .....2 The Taiyo Nippon Sanso Group’s ESG Initiatives .................30 Milestones in Value Creation .................................................4 Corporate Governance .......................................................32 The Taiyo Nippon Sanso Group’s Business Model ................6 A Dialogue Between the Outside Directors .........................36 Members of the Board of Directors, Members of Our Strategic Focus the Audit & Supervisory Board and Executive Offi cers .......40 A Message to Stakeholders ..................................................8 Working with Stakeholders .................................................44 The Taiyo Nippon Sanso Group’s Financial Strategies .........14 Environmental Protection Initiatives .....................................46 Non-Financial Highlights .....................................................48 The Front Line of Value Creation Special Features Financial and Corporate Information Technologies That Support Efforts to Ensure Safe, Six-Year Summary ..............................................................50 Secure and Stable Supplies of Industrial Gases ................16 Management’s Analysis of Operating Results and Health, Integrity and Resourcefulness: Financial Position ..............................................................51 Fostering the Next Generation of The Gas Professionals ...18 Consolidated Financial Statements .....................................54 Strategic Perspectives ........................................................20 Investor Information ............................................................91 Global Network ...................................................................93 Corporate Data ...................................................................94 Editorial Policy We strive to guarantee management transparency and believe in the importance of building relationships of trust with stakeholders through dialogue. Accordingly, in this report we place a priority on ensuring that stakeholders understand our overall value creation process. Since fi scal year 2017, we have published an annual integrated report. The purpose of this report is to provide fi nancial information, including that related to corporate strategies and operating conditions, and non-fi nancial information, such as that related to environmental protection and social contri- bution initiatives and to corporate governance. Information has been selected with consideration to relevance to give shareholders, investors and other stakeholders an accurate overall picture of the Taiyo Nippon Sanso Group, its operating activities and its approach to value creation. In response to feedback from stakeholders, we enhanced the content of our integrated report 2019 as outlined below. Section Principal content Pages Progress in the fi rst year of the Ortus Stage 2 medium-term management plan and A Message to Stakeholders 8–13 outlook for the remaining years The Taiyo Nippon Sanso Medium- to long-term fi nancial strategies, including fi nancing strategies related to major 14–15 Group’s Financial Strategies acquisitions in fi scal year 2019 Segment reports (performance, strategies and key initiatives) from the executives in Strategic Perspectives 20–29 charge Corporate Governance Management structure and information on the Company’s governance system 32–35 Non-Financial Highlights Key ESG-related data 48–49 Scope of Reporting This report covers the activities of Taiyo Nippon Sanso and the companies of the Taiyo Nippon Sanso Group. In principle, non-fi nancial information is for Taiyo Nippon Sanso and its Group companies in Japan and overseas, although in some cases the scope varies. Period Covered Data in this report is for fi scal year 2019, ended March 31, 2019, although some fi scal year 2020 activities are also featured. Guidelines Used This report was prepared in accordance with Guidance for Integrated Corporate Disclosure and Company–Investor Dialogue for Collaborative Value Creation, published by the Ministry of Economy, Trade and Industry; Environmental Reporting Guidelines (2018 Edition), published by Japan’s Ministry of the Environment; and the GRI Sustainability Reporting Guidelines (2013), published by the Global Reporting Initiative (GRI). Taiyo Nippon Sanso Corporation | Integrated Report 2019 1 The Taiyo Nippon Sanso Group’s Value Creation Process We continue working to address key social imperatives, thereby helping to create social value and increase economic value and at the same time achieving continued growth. Industrial gases, the raw material for which is air, an infinite resource, play a key role in modern life, supporting everything from basic industries such as steel and chemicals to cutting-edge fields such as electronics and medicine. Going forward, we will endeavor to increase the application of our state-of-the-art gas technologies with the aim of responding to issues that affect society and the environment, contributing to sustainability and enhancing our corporate value. Management foundation Business domains Corporate philosophy “Market-driven collaborative innovation: Improving the future through gases” • Ortus Stage 2 (medium-term management plan) Page 9 • Compliance • Risk management • Corporate governance Industrial gases Electronics-related Stable supplies that products Management resources support diverse industries Provision of state-of-the-art solutions Technological prowess Page 16 • Stable production of high-grade products Reportable segments • Production of air separation units • Product development capabilities • Gas Business in Japan derived from gas control technologies • Gas Business in the United States • Gas Business in Europe Supply base Page 16 • Safe and stable supply capabilities • Gas Business in Asia and Oceania • Multiple supply modes • Thermos • Four-hub global supply network Sales channels • Extensive sales and service network • Robust supply chain centered on official dealers • Supply network Human resources Page 18 • Diverse global labor force of approximately 20,000 individuals • Ability to foster human resources with the ability to drive sustainable growth Medical Energy Financial foundation Supply of medical gases and Environment-friendly LPG that • Ability to generate stable cash flows stable isotopes supports modern lifestyles • Fund-raising capabilities Group capabilities • Extensive product and service portfolios • Broad network of business bases 2 Taiyo Nippon Sanso Corporation | Integrated Report 2019 Outputs Steel Food Installs on-site plants at Provides Bistranza-brand steel production facilities products, which represent that ensure stable supplies applications of nitrogen- of industrial gases, thereby fi lled packaging, freezing supporting increased pro- and other food-related gas duction effi ciency Carbon technologies Oxygen Nitrogen Nitrogen dioxide O2 N2 N2 CO2 Chemicals Life sciences/medical Provides stable supplies of Produces Water-18O stable nitrogen, essential to the isotope, used in reagents for Plant and safety of many production positron emission tomography engineering facilities, via pipeline net- (PET) diagnostics through the Production of top-class works extending across application of air separation large-scale industrial technologies, and has estab- air separation units Oxygen Nitrogen complexes Oxygen Nitrogen lished the world’s most O2 N2 O2 N2 extensive supply framework Electronics Energy Supplies nitrogen and Supplies environment- electronics materials gases friendly, safe LPG for Value chain from total gas centers use in homes, as well (TGCs) built on sites as in commercial and adjacent to large-scale other premises • Development semiconductor fabs Nitrogen Argon Electronic and production materials LPG N2 Ar gases • Supply Transportation • Sale equipment and machinery • Use by various Supplies gases