三井住友建設（1821） – Corporate Governance

Corporate Governance CORPORATE GOVERNANCE Ⅰ basic information 1. Basic approachSumitomo Mitsui Construction Co., Ltd. Last Update: June 7, 2022 Sumitomo Mitsui Construction Co., Ltd.President and Representative Director Shigetoshi Kondo Inquiries: 03-4582-3000 Securities Code: 1821 https://www.smcon.co.jp The status of our corporate governance is as described below. Basic concepts on corporate governance, capital structure, corporate attributes, and otherThe Group has constructed an efficient and fair management system, and in order to maintain close relationships with all stakeholders,including all shareholders, as well as customers, the local community, and employees, etc., as well as for transparent, fair, prompt, anddecisive decision making, by improving sustainable growth and medium to long term corporate value, has adopted the following five pointsas the basic policy for its corporate governance.1. Prompt management decision making2. Highly strategic organizational design3. Ensuring the transparency and rationality of corporate acts4. Establishing an appropriate internal control system5. Performing accountability through proper disclosureUnder this basic policy, we shall construct and operate an appropriate internal control system as a corporate group, shall work on the preparation and enhancement of the compliance system on an ongoing basis, and shall conduct a prompt and accurate response to various risks that have a significant effect on management. [Reasons for not implementing each of the principles of the Corporate Governance Code] Updated All principles are stated in accordance with the codes after the June 2021 revision. In order to ensure the transparency and fairness of officer personnel and officer remuneration, we have established the Nomination and Remuneration Advisory Committee as an advisory body to the Board of Directors. Currently, the committee is composed of three Inside Directors, four Outside Directors, and two Outside Audit & Supervisory Board Members (part-time), and the majority of the members are independent officers, including the Outside Audit & Supervisory Board Members; therefore, we have determined that the committee is sufficiently independent and that the structure is appropriate for strengthening the independence, objectivity, and accountability of the functions of the Board of Directors. In addition, the authorities, roles, etc. of the Nomination and Remuneration Advisory Committee are described in “II Status of management organizations and other corporate governance systems related to managerial decision making, execution, and supervision 2. Matters relating to functions such as the execution of business, auditing, supervision, nomination, and the determination of remuneration (overview of the current corporate governance system) □ Decisions on the appointment, dismissal, and remuneration of officers” of this report. [Disclosures based on each of the principles of the Corporate Governance Code] Updated [Cross-shareholdings policy] The Group, in comprehensive consideration of business strategy and business relationships with trading partners, etc., and from the perspective of maintaining and strengthening trading relationships with the companies that we have invested in to improve corporate value in the medium to long term, has cross-shareholdings. For individual cross-shareholdings, we verify the economic rationality, including the objective of the holding and whether or not the benefits and risks in conjunction with the holding are commensurate with the cost of capital, etc., as well as the future outlook, etc. Based on the results of the verification, the Group’s policy is to reduce the number of shares with diminished meaning behind their holding by selling them. Based on the results of the FY2021 verification, we sold shares of nine companies held by the Group (298 million yen). In regard to the exercising of voting rights for cross-shareholdings, we make decisions of approval or disapproval based on whether or not the content of the proposal is contrary to the medium to long term improvement in corporate value of the company being invested in, and whether or not any major issues have arisen in relation to corporate governance at the company being invested in. [Transactions between related parties] Transactions with officers: Pursuant to the Board of Directors Rules, these are subject to the passing of a resolution at a meeting of the Board of Directors. Transactions with major shareholders (holdings of 10% or more of voting rights): The Board of Directors verifies market price and transaction conditions, etc., in the same manner as for other general transactions, and a resolution is passed at a meeting of the Board of Directors. (1) Concepts, human resource development policy, and internal environmental improvement policy for ensuring diversity, as well as theimplementation status thereofThe Company believes that the source of competitiveness is “human resources” and that securing diverse human resources is the drivingforce for enhancing corporate value and for sustainable growth. Based on the motto — “Respect for Employees’ Vitality” — stipulated inour Corporate Principles and in order to realize a work style that respects diversity, we promote diversity and inclusion by creating aworking environment that allows each employee to fully exercise their abilities.With regard to female employees, we believe that building an “environment where women can continuously work with peace of mind” inall workplaces will lead to the realization of a comfortable working environment for not only female employees, but all employees. Wepromote the active participation of women with a view to long-term career development, such as promoting female employees tomanagerial positions, converting their career paths from non-career tracks to career tracks, establishing career consultation desks, and responding flexibly to their life events. In addition, in order to cultivate future female executives, we formulate and implement a “Female Executives Training Plan” to systematically train female executive candidates over a certain period of time. With regard to foreign national employees, in conjunction with setting up a consultation desk for foreign employees working in Japan and their families as well as conducting business Japanese language training courses for foreign employees and foreign students who have received job offers from the Company, we have also prepared an English version of training materials for new recruits. With regard to mid-career recruits, we conduct training for mid-career recruits with the aim of enhancing their overall understanding of our management philosophy, policies, and business, as well as creating a sense of belonging by getting them familiar with our corporate culture. For details, please see our company website. Corporate Report [Foundation Strategies] Human Resources (= Human Assets) and Diversity: https://www.smcon.co.jp/corporatereport_2021/english/foundation/03.html Diversity initiatives: https://www.smcon.co.jp/csr/diversity/ (2) Voluntary and measurable targets as well as current status of efforts in ensuring diversity The targets and current status concerning female employees (the Company only) are as follows. ・Target: 3% or more by the end of FY2024 (2.4% as of March 31, 2022) ・Target: 5% or more by the end of FY2024 (1.3% as of March 31, 2022) With regard to foreign national employees, the Company is promoting employees suitable for managerial positions taking into account their experiences, qualities, skills, etc., regardless of nationality. Although we have not set a target for the appointment of foreign national employees to managerial positions, we are giving due considerations to it in anticipation of the future progression of globalization, increase of foreign national employees, etc. With regard to mid-career employees, the Company is promoting employees suitable for managerial positions taking into account their experiences, qualities, skills, etc., regardless of employment type. Although we have not set a target for the appointment of mid-career employees to managerial positions, we are giving due considerations to it in anticipation of the future diversification, increase, etc. of mid-career employees. For details, please see our company website. Corporate Report [Foundation Strategies] Human Resources (= Human Assets) and Diversity: https://www.smcon.co.jp/corporatereport_2021/english/foundation/03.html Diversity initiatives: https://www.smcon.co.jp/csr/diversity/ [Demonstration of function as corporate pension asset owner] The Company has introduced a defined contribution pension plan, and conducts on going education for employees once per year. [Enhancement of information disclosures] (1) We publish our management philosophy and management strategy (medium term management plan) on our website. Management Philosophy: https://www.smcon.co.jp/en/corporate/corporate-principles.html Medium Term Management Plan (2022–2024): https://www.smcon.co.jp/topics/assets/uploads/investor/keikaku_oshirase_20220304.pdf (2) Our basic concepts and basic policy on corporate governance are as stated in “I. Basic concepts on corporate governance, capital structure, corporate attributes, and other basic information 1. Basic concepts” of this report. (3) The policies and procedures for determining individual officer remuneration are as described in “II. Overview of management organizations and other corporate governance systems related to managerial decision making 2. Matters relating to functions such as the execution of business, auditing, supervision, nomination, and the determination of remuneration (overview of the current corporate governance system)” of this report. (4) The policies and procedures for appointment and dismissal of management level executives as well as the nomination of candidate directors and audit & supervisory board members by the Board of Directors are as described in “II. Overview of management organizations and other corporate governance systems related to managerial decision making 2. Matters relating to functions such as the execution of business, auditing, supervision, nomination, and the determination of remuneration (overview of the current corporate governance system)” of this report. (5) The reasons for the individual appointment (dismissal) of management level executives, directors, and audit & supervisory board member candidates are disclosed on the Company’s website. Notification of convocation of general meeting of shareholders: https://www.smcon.co.jp/investor/stock-information/generalmeeting/ (1) Our company’s efforts for sustainability In order to resolve long-term social issues, the Company is putting into practice sustainable business activities by taking advantage of the strengths it has cultivated over many years, including its technological capabilities, and by encouraging individual officers and employees to take future-oriented actions. For details on our sustainability concepts, policies, and initiatives, please see our company website. Basic Policy on Sustainability: https://www.smcon.co.jp/en/corporate/sustainability-policy.html (2) Investments in human capital, intellectual property, etc. The Company is striving to create a corporate culture where diverse human resources can play an active role, and to develop a system and environment in which each employee can demonstrate their abilities. For details on our initiatives relating to human resources, please see our company website. Corporate Report [Foundation Strategies] Human Resources (= Human Assets) and Diversity: https://www.smcon.co.jp/corporatereport_2021/english/foundation/03.html Medium Term Management Plan (2022–2024): https://www.smcon.co.jp/topics/assets/uploads/investor/keikaku_oshirase_20220304.pdf (3) Impact of risks and economic opportunities related to climate change on the Company’s business activities and revenues The Company announced its support for the Task Force on Climate-related Financial Disclosures (TCFD) in May 2021, and is promoting responses to risks and opportunities related to climate change. We will also incorporate our response to risks and opportunities related to climate change into our Medium-Term Management Plan (2022–2024) to achieve a sustainable society and the Company’s sustainable growth. For details on our response to climate change risks, please see our company website. Climate change initiatives: https://www.smcon.co.jp/csr/climate-change/ The Company has introduced an executive officer system to separate the supervisory function of the Board of Directors from the business execution function of executive officers. In regard to matters to be entrusted to executive officers, these matters are made subject to a clear resolution of a meeting of the Board of Directors, and the responsibilities, division of duties, and decision-making authority are clarified in subordinate rules, in accordance with the matter being entrusted. [Effective use of independent outside directors In order to further enhance the independence and objectivity of the supervisory function of the Audit & Supervisory Board and the monitoring and supervisory function of the Board of Directors, we have appointed four independent, outside directors, and communications and coordination, etc., with management being handled by the Secretariat of Board of Directors, an organization under the direct control of the Board of Directors. In addition, outside directors and the Audit & Supervisory Board regularly hold meetings at which they share information and exchange opinions on important managerial issues and the state of the Board of Directors, etc., and aim to work together. [Independent determination criteria and qualities of independent outside directors] The Company selects persons as independent outside directors on the condition that they meet the requirements for independent officers set forth by the Tokyo Stock Exchange. It should be noted that for persons involved in transactions, there is the requirement of not being a stakeholder of a “specified related business operator.” In addition, we regard persons affiliated with an advising law firm or corporate accounting office as not being independent. From the perspective of maintaining a system appropriate to carry out business activities as a company listed on the Prime Market of the Tokyo Stock Exchange, in consideration of diversity including gender and internationality, members of the Board of Directors must possess not only skills in corporate management, sales and marketing, technology and IT, risk management, compliance, and auditing, but also skills in terms of global competence, sustainability, as well as diversity promotion and human resource development. As a comprehensive construction company mainly engaged in civil engineering and building construction, any person to be appointed an Inside Director of the Board must have considerable experience in businesses in these two fields. Outside Directors will be appointed to constitute at least one-third of the Board, and they include those who have managerial experience at other companies and will supplement the skills of Inside Directors for conducting appropriate decision-making and supervision. Following discussions within the Nomination and Remuneration Advisory Committee, where the majority of committee members are independent Outside Directors and part-time Outside Audit & Supervisory Board Members, the Board of Directors will decide upon the policy pertaining to the nomination of director candidates and the specific proposals for candidate nomination while respecting the opinions of said Committee to the greatest possible extent. For details on the skills and diversity required of each Director, please see our company website. Concepts in relation to the composition of the Board of Directors: https://www.smcon.co.jp/en/assets/uploads/investor/board_composition_and_skills_matrix.pdf The number of members will be determined within the scope stipulated in the Articles of Incorporation depending on current sales and business content. The main concurrent positions of directors and audit & supervisory board members are disclosed on the Company’s website. Notification of convocation of ordinary general meeting of shareholders: https://www.smcon.co.jp/investor/stock-information/generalmeeting/ Securities report: https://www.smcon.co.jp/investor/library/security-report/ An overview of the results of assessments on the current situation concerning the effectiveness of the Board of Directors conducted by directors and audit & supervisory board members is disclosed on the Company’s website. We seek advice and opinions for further improvements, and endeavor to contribute to the effectiveness of the Board of Directors. Overview of the results of assessments on the effectiveness of the Board of Directors: https://www.smcon.co.jp/investor/assets/uploads/corporate-governance/CG_evaluation20210611.pdf We endeavor to utilize opportunities to provide executive training, etc., for directors, and to cultivate their qualities as managers. In addition, we provide members of the Board of Directors with opportunities to learn the knowledge required for business management, including corporate law and corporate governance, as well as for regular training on management information, and aim to cultivate their skills so that they can achieve their missions as members of the Board of Directors. [Policy on constructive dialog with shareholders] (1) We hold various meeting as an opportunity for communication with shareholders and investors, including general meetings of shareholders, annual financial results briefings for analysts, and individual meetings, and we endeavor to provide explanations on the corporate management and business activities of the Company, and aim to enhance content based on the opinions and requests, etc., of shareholders and investors. (2) These aforementioned dialogs with shareholders and investors are supervised by the Division Director the Corporate Planning Division and the Division Director the Administration Division, and assistance is provided by the managers of the Public Relations Office, Planning Department, and General Affairs Department. The related internal departments that assist with dialog engage in business while actively collaborating in matters such as the creation and review of disclosure materials and the sharing of information, towards the realization of constructive dialog. (3) The content of dialog with all shareholders and investors is reported by the Division Director the division concerned to the Board of Directors, and an explanation is provided on the Company’s response policy as necessary. (4) When engaging in dialog with shareholders and investors, we appropriately manage insider information in accordance with our internal regulations entitled “Insider Trading Management Regulations.” It should be noted that the period from the day following the quarterly settlement date until the settlement announcement date has been positioned as a “silent period” in which we refrain from dialog concerning settlement information. [Formulation and publication of management strategy and management plan] The Company regularly calculates the cost of capital. We formulate our business operations and management strategy based on the calculated cost of capital, and are aware of achieving an ROE (return on equity) that is at a level which exceeds the cost of shareholders’ equity in the Company. In addition, in regard to the formulated management strategy, we check and analyze the progress status each year, and conduct reviews on the allocation of management resources, including investment in new technology development and human resource development. In the future as well, towards improving corporate value, we shall endeavor to secure profits that exceed the cost of shareholders’ equity. As for the status of response to other codes revised in June 2021, it is as described in “V Other 2. Other matters relating to the corporate governance system” at the end of this report. 2. Capital Composition Foreign stockholding ratio Updated At least 20% and under 30% [Status of Major Shareholders] Updated Name or Title The Master Trust Bank of Japan, Ltd. (Trust Account) City Index Eleventh Co., Ltd. Custody Bank of Japan, Ltd. (Trust Account) Mitsui Fudosan Co., Ltd. Sumitomo Realty & Development Co., Ltd. NORTHERN TRUST GLOBAL SERVICES SE, LUXEMBOURG RE LUDU RE: UCITS CLIENTS 15. 315 PCT NON TREATY ACCOUNT MSIP CLIENT SECURITIES JP JPMSE LUX RE BARCLAYS CAPITAL SEC LTD EQ CO JUNIPER NOMURA AYA Number of Shares Held (Shares) Ratio (%) 20,375,200 13.03 5.60 3.57 3.45 3.41 2.07 1.86 1.84 1.56 1.54 8,765,800 5,592,900 5,397,965 5,340,413 3,250,120 2,916,900 2,884,886 2,449,700 2,419,100 Presence or absence of controlling shareholders (excludes parent company) ――― Presence or absence of parent company None Supplementary Explanation Updated ○ [Status of major shareholders] Described based on the registry of shareholders current as of March 31, 2022. ○ The Company holds 6,382,878 treasury shares, however, when calculating the ratio in [Status of Major Shareholders], these treasury shares were not included in the total number of issued shares. 3. Corporate Attributes Listed exchange and market classification Updated Settlement Date Industry Number of (consolidated) employees as of the end of the immediately preceding fiscal year Tokyo Prime March Construction Over 1,000 (Consolidated) sales in the immediately preceding fiscal year Between 100 billion yen and 1 trillion yen Number of consolidated subsidiaries as of the end of the immediately preceding fiscal year Between 10 and 50 4. Guidelines on measures to protect minority shareholders at the time of transactions, etc., with controlling shareholders ――― 5. Other special circumstances that have a major impact on corporate governance Updated ○ About listed subsidiaries The corporate group of the Company includes the listed subsidiary SUMIKEN MITSUI ROAD CO., LTD., and the ratio of voting rights in said company held by our Company is 53.94% (as of March 31, 2022). Said subsidiary, through the laying of roads and parking lots, the construction of condominium exteriors, as well as the manufacture and sale of asphalt mixes, is involved in a part of the construction business of the Group, and conducts corporate activities that emphasize profitability in order to contribute to mutual development, under the basic policy of the maintenance of voluntary action and independence. The situation of it being a listed company leads to the maintenance of social credibility, and as it is a major tool for expanding public works, we are aiming to ensure that the company maximizes its corporate value against the background of its social credibility as a listed company; we believe that this will directly lead to an increase in the corporate value of the Group itself. The Company respects the interest of minority shareholders in the management of subsidiaries that have minority shareholders, and performs appropriate procedures for the setting of transaction conditions, etc., as well, based on the same principle of competition as other partner companies, so as to ensure that no unjust or unreasonable transactions are forced. The Company has constructed an internal control system to cover the corporate group, and in order to improve the corporate value of the Group, engages in ongoing initiatives to improve and strengthen the compliance system, provides a prompt and accurate response to various risks that may have a significant impact on management, and in addition, has formed a highly transparent corporate group through the making of proper information disclosures to stakeholders and society. Ⅱ supervision of management decisions, as well of other corporate governance systems Status of business management organizations for the determination, execution, and 1. Matters relating to institutional composition and organizational management, etc. Organizational Form Company with an Audit & Supervisory Board [Director-related] Number of Directors Under the Articles of Incorporation 18 Tenure of Directors Under the Articles of Incorporation 1 year Chair of the Board of Directors Chairman Number of Directors Appointment Status of Outside Directors Number of Appointed 10 4 4 Outside Directors Number of Outside Directors Designated as Independent Officers Relationship with the Company (1) Sakio Sasamoto Jun Sugie Tamao Hosokawa Tsukasa Kawada Name Affiliation From company another Other Other Other Relationship with the Company (*) a b c d e f g h △ i j k △ ○ *Options for relationship with the Company *If the individual falls applicable under “current / recent” for each item, then “○”, if applicable in the “past”, then “△” *If the near relative falls applicable under “current / recent” for each item, then “●”, if applicable in the “past”, then “▲” a b c d e f Business executor of listed company or subsidiaries thereof Business executor or non-executive director of parent company of listed company Business executor of sibling company of listed company Party that has a listed company as a major trading partner, or the business executor of such a party Major trading partner of a listed company, or the business executor thereof Consultants, accounting professionals, and legal professionals who have obtained large sums of money or other property from a listed company other than in the form of officer remuneration Major shareholders of listed company (in the case of a major shareholder being a corporate entity, the business executor of said corporate entity) Business executor (individual only) of trading partner of listed company (which does not fall applicable under any of d, e, and f) Business executor (individual only) of company at which an outside officer concurrently serves Business executor (individual only) of recipient of donation from a listed company Other h i j k g Relationship with the Company (2) Updated Name Independent Officer Supplementary Explanation on Conforming Items Sakio Sasamoto is originally from our Company’s business partner, JFE Holdings Co., Ltd., and has a wealth of experience in management through his work as Senior Managing Executive Officer of JFE Holdings Co., Ltd., Audit & Supervisory Board Member of said company, as well as President and Representative Director of JFE Life Co., Ltd. (He retired from all positions in the Group in June 2016). He has served as (part time) Outside Director of the Company since June 2016. Jun Sugie has a wealth of work experience, including through having served in key positions at the National Tax Agency, as director the Japan Securities Depository Center, Inc., as outside Director of IDOM Co., Ltd., and as Vice Chairman and Managing Investment Trusts Director of Association, Japan. He has served as (part time) Outside Director of the Company since June 2019. the In addition to being active as a journalist, Tamao Hosokawa has also served as a Director of the Japan Institute for National Fundamentals, a Member of the Council for Cabinet Office Gender Equality, and a Member of the Council for Tokyo Metropolitan Information Disclosure / Personal Information Protection. In addition, she was a Director of the Chiba Institute of Technology, which is a business partner of the Company (She retired from this position in January 2020). She has served as (part time) Outside Director of the Company since June 2019. Tsukasa Kawada has held important positions such as ambassadors of various countries during his tenure in the Ministry of Foreign Affairs (He retired in November 2020), and has excellence knowledge and experience in the international field. He also serves as an advisor to Mitsui Sumitomo Insurance Co., Ltd., which has a business the Company. He has served as (part time) Outside Director of the Company since June 2021. relationship with Reason for Appointment it for has has that been determined shareholders, insight in can be used the Company, and the management of He was appointed as Outside Director so that his wealth of managerial experience can be used the Company. This Outside Director has no special relationship with in addition, in consideration of the annual amount of transactions between the Group the JFE Holdings Group having and accounted on average for less than 1% of consolidated sales in each of the past three years, as well as of other factors, as there are no concerns of a conflict of interest with general been determined that his independence has been ensured, and therefore he has been designated as an independent officer. He has been appointed as an Outside Director so that his high level of specialist knowledge in the accounting and tax fields in and broad experience and management the management of the Company. Said Outside Director has no special relationship with the Company; as there are no concerns of a conflict of interest with general shareholders, it his independence has been ensured, and therefore he has been designated as an independent officer. She has been appointed as an Outside Director so that her objective perspective and broad insight as a journalist can be used in the management of the Company. This Outside Director has served as Director of the Chiba Institute of Technology, which is a business partner of the Company (She retired from this position in January 2020), however, in consideration of the annual amount of transactions between the Group and said corporate entity having accounted on average for less than 1% of consolidated sales in each of the past three years, as well as of other factors, as there are no concerns of a conflict of interest with general shareholders, it has been determined that her independence has been ensured, and therefore She has been designated as an independent officer. He has been appointed as an Outside Director so that his excellent knowledge and experience in the international field can be utilized in our management such as strengthening overseas business and promoting globalization This Outside Director also serves as an advisor to Mitsui Sumitomo Insurance Co., Ltd., which has a business relationship with the Company. However, in consideration of the annual transaction amount of the Group and the Group was less than 1% of the consolidated sales of the Group and the Group on average over the past three years, as well as of other factors, as there are no concerns of a conflict of interest with general shareholders, it has been determined that his independence has been ensured, and therefore he has been designated as an independent officer. Sakio Sasamoto ○ Jun Sugie ○ Tamao Hosokawa ○ Tsukasa Kawada ○ Committee Chair (Chairman & CEO) 2 Outside Directors 2 Outside Directors Presence or absence of a voluntary committee equivalent to a nomination committee or remuneration committee Yes Establishment status of voluntary committees, member composition, and attribution of committee chair (Chairman & CEO) Voluntary committee equivalent to nomination committee Voluntary committee equivalent to remuneration committee Name of Committee All Committee Members (people) Full-time committee (People) Inside Directors (People) Outside Directors (People) Outside Experts (People) Other (people) Nomination and Remuneration Advisory Committee Nomination and Remuneration Advisory Committee 9 9 0 0 3 3 4 4 0 0 Supplementary Explanation In order to ensure the transparency and fairness of officer personnel and officer remuneration, we have established the Nomination and Remuneration Advisory Committee as an advisory body to the Board of Directors. The committee is composed of Chairman & CEO, President & COO, the Director in charge of the Personnel Department, Internal Directors, Outside Directors, Outside Audit & Supervisory Board members (part time) with representation rights. The other two committee members are outside audit & supervisory board members (part time). There were eight meetings held in FY2021. Below is the attendance status of the individual members in office as of March 31, 2022. (Position) (Attendance Status in FY2021) (Committee Member Name) ・Sakio Sasamoto ・Hideo Arai ・Shigetoshi Kondo ・Shoji Kimijima ・Jun Sugie ・Tamao Hosokawa ・Tsukasa Kawada ・Aizou Murakami ・Yukihiro Hoshi Director (Outside) Representative Director, Chairman Representative Director, President Representative Director, Executive Vice President Director (Outside) Director (Outside) Director (Outside) Audit & Supervisory Board Member (Outside) Audit & Supervisory Board Member (Outside) 100% (8 out of 8) 100% (8 out of 8) 100% (8 out of 8) 100% (8 out of 8) 100% (8 out of 8) 100% (8 out of 8) 100% (6 out of 6) *Appointed in June 2021 100% (8 out of 8) 100% (8 out of 8) [Audit & Supervisory Board Related] Presence or Absence of Audit & Supervisory Board Yes Number of Audit & Supervisory Board Members Under the Articles of Incorporation Number of Audit & Supervisory Board Members 6 5 Coordination Status of Audit & Supervisory Board Members, Accounting Auditors, and Internal Audit Department ・ The accounting auditor holds regular meetings on audit plans, quarterly reviews, and audit reports, etc., as well as other meetings as appropriate, at which reports and explanations are received on the audit implementation status, issues identified as a result of an audit, the establishment status of a system for ensuring that the duties of the accounting auditor are performed appropriately, as well as assessments of the establishment and operation status of internal control in relation to financial reporting, etc. In addition, explanations on the implementation status of audits are also provided by the Audit & Supervisory Board Members, and efforts are made to strengthen communication through the frank exchanging of opinions. ・We have put in place a system for the regular reporting on the status of audits to the Audit & Supervisory Board by the General Manager of the Audit Department, which is the internal audit department. In addition, as a general rule, the full-time Audit & Supervisory Board Members and the General Manager of the Audit Department hold monthly meetings to share information, such as detailed reports on audit plans, the implementation status of audits, and issues identified as a result of audits. Appointment Status of Outside Audit & Supervisory Board Members Number of Appointed Outside Audit & Supervisory Board Members Number of Outside Audit & Supervisory Board Members Designated as Independent Officers 3 3 Relationship with the Company (1) Name Yoshiyuki Kato Aizou Murakami Yukihiro Hoshi j k l m Affiliation another Relationship with the Company (*) f g h a b c d e j k l m i △ another △ From company Attorney From company *Options for relationship with the Company *If the individual falls applicable under “current / recent” for each item, then “○”, if applicable in the “past”, then “△” *If the near relative falls applicable under “current / recent” for each item, then “●”, if applicable in the “past”, then “▲” a b c d e f g h Business executor of listed company or subsidiaries thereof Non-executive director or accounting advisor of a listed company or a subsidiary thereof Business executor or non-executive director of parent company of listed company Audit & Supervisory Board Member of the parent company of a listed company Business executor of sibling company of listed company Party that has a listed company as a major trading partner, or the business executor of such a party Major trading partner of a listed company, or the business executor thereof Consultants, accounting professionals, and legal professionals who have obtained large sums of money or other property from a listed company other than in the form of officer remuneration Major shareholders of listed company (in the case of a major shareholder being a corporate entity, the business executor of said corporate entity) Business executor (individual only) of trading partner of listed company (which does not fall applicable under any of f, g, and h) Business executor (individual only) of company at which an outside officer concurrently serves Business executor (individual only) of recipient of donation from a listed company Other i Relationship with the Company (2) Name Independent Officer Supplementary Explanation on Conforming Items Yoshiyuki Kato ○ Aizou Murakami ○ (He institution used by from retired Yoshiyuki Kato from Sumitomo is Mitsui Trust Bank, Limited, which is the the financial Company the Company in June 2012), and has specialist and broad knowledge and insight in trust banks. He has served as Outside Audit & Supervisory Board Member of the Company since June 2012. Aizou Murakami is the representative director of Kioi Law Offices, and has expert knowledge and experience as an attorney. He has served as (part time) Outside Director of the Company since June 2012. Reason for Appointment He was appointed as Outside Audit & Supervisory Board Member so that his experience in internal audits, etc., that he has accumulated at trust banks can be used in the audits of the Company’s Audit & Supervisory Board. This Outside Audit & Supervisory Board Member does not have any interest in the Company, and in addition, in consideration of the amount of borrowings of the Group from Sumitomo Mitsui Trust Bank Group accounting on average for less than 3% of the average total consolidated assets of the Company in the past three years, there are no concerns of a conflict of interest with general shareholders, and therefore, it has been determined that independence has been secured, and he has been designated as an independent officer. He has been appointed as Outside Audit & Supervisory Board Member so that his specialist knowledge and experience as an attorney can be used in the audits of the Company’s Audit & Supervisory Board. Said Outside Audit & Supervisory Board has no special the Company; as there are no concerns of a conflict general shareholders, it has been determined that his independence has been ensured, and therefore He has been designated as an independent officer. relationship with interest with of He has been appointed as Outside Audit & Supervisory Board Member so that his wealth of experience in manufacturing, safety and the environment, as well as risk management, etc., can be used in the the Company’s Audit & audits of Supervisory Board. This Outside Audit & Supervisory Board Member has no special relationship with the Company, and in addition, in consideration transactions of between the Group and the Sumitomo Metal Mining Co., Ltd. Group having accounted on average for less than 2% of consolidated sales in each of the past three years, as well as of other factors, as there are no concerns of a conflict of interest with general been determined that his independence has been ensured, and therefore he has been designated as an independent officer. the annual amount of shareholders, has it Yukihiro Hoshi ○ Yukihiro Hoshi comes from Sumitomo Metal Mining Co., Ltd., a business partner of the Company (He retired from the Company in June 2018), and in has a wealth of experience the manufacturing, environment, risk management, etc. He has served as (part time) Outside Director of the Company since June 2018. safety as well and as [Independent Officer Related] Number of Independent Officers 7 Other Matters Relating to Independent Officers ――― [Incentive Related] Implementation status of measures relating to the granting of incentives to Directors Introduction of performance-linked remuneration system, and others Supplementary Explanation on Applicable Items In order to share the benefits and risks of stock price fluctuations with all shareholders, and to further increase the appetite to contribute to an increased stock price and corporate value, by resolution of the general meeting of shareholders held on June 28, 2018, a remuneration system was introduced for Directors (excludes Outside Directors) in which they are allocated restricted shares of the Company. Furthermore, by resolution of the meeting of the Board of Directors held on April 22, 2022, a performance-linked monetary remuneration system was introduced for Directors (excluding Outside Directors) of the Company. Performance-linked monetary remuneration shall be determined based on indicators of the Company’s performance. Evaluation indicators shall include average consolidated operating income for the period under evaluation, external ESG evaluation, and the degree of achievement of targets for human resource-related indicators. Persons Eligible for Stock Options Supplementary Explanation on Applicable Items ――― [Director Remuneration Related] Disclosure Status (of Individual Director Remuneration) Individual remuneration is not disclosed Supplementary Explanation on Applicable Items The number of Directors paid remuneration in the applicable fiscal year and the total amount of such remuneration is disclosed in the securities report and the business report. (The same disclosures are made for Audit & Supervisory Board Members) Presence or absence of decision-making policy for amount of remuneration or the calculation method thereof Yes Content of disclosure of decision-making policy for amount of remuneration or the calculation method thereof [1] Matters relating to the decision-making policy for the content of remuneration, etc., of individual Directors At the meeting of the Board of Directors held on April 22, 2022, the Company, based on the report from the Nomination and Remuneration Advisory Committee, partially revised the decision-making policy for the content of remuneration, etc. of individual Directors prescribed at the meeting of the Board of Directors held on February 24, 2021, and an overview of this is provided below. 1. Basic Policy Remuneration for Directors (excludes Outside Directors) of the Company is comprised of standard monetary remuneration, performance-linked monetary remuneration for increasing the incentive to improve performance and for enhancing the consistency between management strategy and Director remuneration, as well as restricted share-based remuneration which serves as a medium- to long-term incentive in order to share the benefits and risks of stock price fluctuations and to further improve the motivation to contribute to improving the stock price and corporate value. Outside Directors, in consideration of their monitoring and supervisory role, are only paid the standard monetary remuneration. 2. Decision-making policy (includes the policy for determining the timing or conditions for the granting of remuneration, etc.) for the amount of monetary remuneration, etc. (excludes performance-linked remuneration and non-monetary remuneration, etc.), as well as the policy for the calculation thereof The standard remuneration (monetary remuneration) for Directors (excludes Outside Directors) of the Company is paid monthly, and the basic policy is to set the amount at an appropriate level in comprehensive consideration of the role of each position, as well as the business environment, performance, remuneration levels at other companies in related industries, as well as the treatment of employees. The standard remuneration (monetary remuneration of Outside Directors is paid monthly, and the basic policy is to set the amount at an appropriate level in consideration of the securing of talented personnel, and the effective demonstration of monitoring and supervisory functions as independent officers. 3. Decision-making policy for the content of non-monetary remuneration, as well as the amount or quantity of this, and the calculation method thereof (includes the policy for the determination of the timing or conditions for the payment of remuneration, etc.) a. Allocation and payment of restricted shares The Company, based on a resolution of a meeting of the Company’s Board of Directors, which was held after the ordinary general meeting of shareholders, as remuneration for Directors (excludes Outside Directors. Hereinafter referred to as “Eligible Directors”) until the next general meeting of shareholders, shall provide monetary remuneration receivables for the allotment of restricted shares, within the range of 60 million yen per year, and each Eligible Director shall receive an allotment of restricted shares through the payment of the full amount of said monetary remuneration receivables by the method of in-kind investment. It should be noted that the paid-in amount per restricted share shall be determined by the Company’s Board of Directors, based on the closing price of ordinary shares of the Company on the Tokyo Stock Exchange on the business day prior to the resolution date of the Company’s Board of Directors concerning the allotment (if no transactions were established on that day, the closing price on the immediately preceding day on which transactions were established), within a range that is not particularly favorable to the Eligible Director receiving said restricted shares. In addition, the aforementioned monetary remuneration receivables shall be paid on the condition that the Eligible Director has agreed to the aforementioned in-kind investment, and has executed a restricted share allotment agreement that includes the content stipulated in c below. b. Total Number of Restricted Shares The total number of restricted shares to be allotted by the Company to the Eligible Directors shall not exceed 150,000 shares in any fiscal year. However, in the event of a stock split of the ordinary shares of the Company (includes a gratis allotment of ordinary shares of the Company) or reverse stock split being conducted, or in the event of the need arising to adjust the total number of restricted shares to be allotted in other cases, the total number of restricted shares shall be adjusted within a reasonable range, in accordance with the ratio of the stock split or the ratio of the reverse stock split, etc. c. Content of restricted share allotment agreement At the time of an allotment of restricted shares, based on the resolution of the Company’s Board of Directors, the restricted share allotment agreement to be executed between the Company and the Eligible Director receiving an allotment of restricted shares shall include the content described below. A. The content of the transfer restrictions An Eligible Director who has received an allotment of restricted shares may not transfer to a third party, pledge, provide as collateral, provide as an inter vivos gift, bequest, or dispose in any other manner of the applicable restricted shares for a 30-year period (hereinafter referred to as “Transfer Restriction Period”). B. Gratis acquisition of restricted shares The Company, in the event of an Eligible Director who has received an allotment of restricted shares having retired from their position as Director or Executive Officer of the Company in the period from the start date of the Transfer Restriction Period until the day prior to the date of the immediately following ordinary general meeting of shareholders of the Company, with the exception of where there is a reason recognized to be justified by the Company’s Board of Directors, the full amount of the restricted shares allotted to the Eligible Director (hereinafter referred to as “the Allotted Shares”) shall be acquired free of charge, as a matter of course. It should be noted that of the Allotted Shares, in the event of the transfer restriction based on the provisions on the reasons for the release of the transfer restrictions stated in c below not having been released as of the expiration of the Transfer Restriction Period of a above, the Company shall acquire these free of charge, as a matter of course. In addition, in the event of an Eligible Director having been made subject to criminal penalty of incarceration or above during the Transfer Restriction Period, or in the event of having been engaged in business that competes with the Company’s business without the prior permission of the Company, or in the event of it being recognized by the Board of Directors that such an Eligible Director has violated an important element of the internal regulations, etc., of the Company, the Company shall acquire the full amount of the Allotted Shares at no charge, as a matter of course. C. Release of transfer restrictions The Company, on the condition that an Eligible Director who has received an allotment of Transfer Restricted Shares has been in a position of either Director or Executive Officer of the Company for a continuous period from the start date of the Transfer Restriction Period until the date on which the immediately following ordinary general meeting of shareholders of the Company is held, shall release the transfer restriction on all of the Allotted Shares upon the expiration of the Transfer Restriction Period. However, in the event of an Eligible Director having retired from the position of Director and Executive Officer of the Company prior to the expiration of the Transfer Restriction Period due to a reason recognized to be justified by the Company’s Board of Directors, the number of the Allotted Shares subject to the release of the transfer restriction and the timing of the release of the transfer restriction shall be reasonably adjusted as necessary. D. Handling in the case of organizational restructuring, etc. The Company, during the Transfer Restriction Period, in the event of a proposal for a merger agreement in which the Company will become the extinguished company, for a share exchange agreement, share transfer plan, or other proposal relating to organizational restructuring, etc., in which the Company will become a wholly owned subsidiary, having been approved by a meeting of the general shareholders of the Company (however, in the case of approval by a meeting of the general shareholders of the Company not being required for the organizational restructuring, etc., the Board of Directors of the Company), by resolution of the Board of Directors, the transfer restrictions shall be released for the reasonably determined number of shares to be allotted, based on the period from the start date of the Transfer Restriction Period until the date of the approval of the organizational restructuring, etc., and prior to the effective date of the organizational restructuring, etc. In such a case, the Company shall acquire free of charge as a matter of course the Allotted Shares for which the transfer restrictions have not been released at the time immediately following the release of the transfer restrictions based on the provisions above. E. Other matters to be prescribed by the Board of Directors In addition to the above, the method for manifestations of intent and notifications in restricted share allotment agreements, the method of amending restricted share allotment agreements, and other matters to be prescribed by the Board of Directors shall be included in restricted share allotment agreements. 4. Policy on the determination of the ratio of monetary remuneration (standard remuneration and performance-linked remuneration) and non-monetary remuneration against individual Director remuneration, etc. The ratio of monetary remuneration (standard remuneration and performance-linked remuneration) and restricted share remuneration for Eligible Directors shall generally be set at an appropriate ratio in consideration of the business environment, performance, and remuneration levels at other companies in related industries, and the approximate ratios of which shall be as follows. ‧ Monetary remuneration (standard remuneration) 60%; monetary remuneration (performance-linked remuneration) 30%; restricted 5. Policy for determining the timing and conditions for the granting of remuneration, etc., to Directors share-based remuneration 10% (Described in 2 and 3 above) 6. Method for determining the content of individual Director remuneration, etc. The Company has the policy for the determination of individual Director remuneration, etc., determined at the Board of Directors, and in addition, upon consultation and a decision at the Board of Directors regarding the specific officer remuneration system and levels, etc., based on this policy, has the detailed individual remuneration determined within this range by the representative director authorized by the Board of Directors. When holding consultation and determining the officer remuneration system and levels, etc., at the Company’s Board of Directors, a condition for submission to the Board of Directors is the holding of consultation with the Nomination and Remuneration Advisory Committee, which is an advisory body to the Board of Directors, and in which the majority of committee members are outside officers. 7. Other important matters concerning the determination of the content of individual Director remuneration, etc. (Described above in 3c b) 8. Reasons for the determination by the Board of Directors that the content of individual Director remuneration, etc., for this fiscal year is in conformance with the decision-making policy As described above, at the Board of Directors, when holding consultation and determining the officer remuneration system and levels, etc., discussions were held based on the aforementioned decision-making policy, and it was determined that the individual Director remuneration, etc., for this fiscal year was in conformance with the aforementioned decision-making policy. [2] Matters relating to resolutions of a general meeting of shareholders regarding Director remuneration, etc. (1) At the 16th ordinary general meeting of shareholders held on June 27, 2019, a resolution was passed to set the total amount of annual Director remuneration as an amount no higher than 450 million yen (80 million yen for Outside Directors), and to include the employee portion of salary in this remuneration amount in the case of a Director who concurrently serves as an employee. As at the close of said general meeting of shareholders, the number of Directors was 9 (including 3 Outside Directors). In addition, at said ordinary general meeting of shareholders, a resolution was passed to set the total amount of annual Audit & Supervisory Board Member remuneration to an amount no higher than 108 million yen. As at the close of said general meeting of shareholders, the number of Audit & Supervisory Board Members was 5 (including 3 Outside Audit & Supervisory Board Members). (2) At the 15th ordinary general meeting of shareholders held on June 28, 2018, separate to the remuneration limit described in (1) above, a resolution was passed to set the total annual amount of monetary remuneration receivables to be paid as remuneration for restricted shares as an amount no higher than 60 million yen (Outside Directors are excluded). As at the close of said general meeting of shareholders, the number of Directors was 9 (including 2 Outside Directors). [3] Matters relating to delegation of determination of the content regarding individual Director remuneration, etc. As stated above, the Company delegates to its Representative Directors the determination of the amount of individual remuneration, etc. within the scope of the officer remuneration system and levels, etc. established by the Board of Directors. The reason for such delegation is to determine the content of individual remuneration in a timely and appropriate manner based on the performance of Directors. For the current fiscal year, the determination of the content of individual remuneration, etc., including monetary remuneration and non-monetary remuneration, has been delegated to Representative Director Shigetoshi Kondo. Furthermore, as stated above, appropriate exercise of the delegated authority is ensured by requiring consultation with the Nomination and Remuneration Advisory Committee, at least half of whose members are outside officers, as a condition for submission of proposals to the Board of Directors, and by having the Board of Directors discuss and determine the specific officer remuneration system and levels, etc. in advance. [4] Matters relating to performance-linked remuneration, etc. By resolution of the meeting of the Board of Directors held on April 22, 2022, the Company introduced a performance-linked monetary remuneration system for Directors (excluding Outside Directors). Performance-linked monetary remuneration shall be determined based on indicators of the Company’s performance. Evaluation indicators shall include average consolidated operating income for the period under evaluation, external ESG evaluation, and the degree of achievement of targets for human resource-related indicators. [5] Matters relating to non-monetary remuneration, etc. As stated above in “3. Decision-making policy for the content of non-monetary remuneration, as well as the amount or quantity of this, and the calculation method thereof (includes the policy for the determination of the timing or conditions for the payment of remuneration, etc.)” under “[1] Matters relating to the decision-making policy for the content of remuneration, etc. of individual Directors.” [Outside Director (Outside Audit & Supervisory Board Member) Support System] ・ A system has been put in place in which information that will contribute to the execution of duties is provided in a timely manner by the Secretariat of Board of Directors has been established as an organization under the direct control of the Board of Directors to Outside Directors. ・ An Audit & Supervisory Board Office has been established as the organization that reports directly to Audit & Supervisory Board Members, and a system has been put in place where information that will contribute to the execution of duties is provided in a timely manner by the applicable department to the Outside Audit & Supervisory Board Members. [Status of persons who have retired from the position of President and Representative Director, etc.] Names, etc., of consultants and advisors, etc., who are former President and Representative Director, etc. Name Job Title / Position Business Content Working Form / Conditions (Full or part time, presence or absence of remuneration, etc.) President, Etc., Retirement Date Tenure Yoshiyuki Norihisa Advisor Remuneration paid June 28, 2018 1 year renewal ・ Matters to the relating maintenance and expansion of trading with customers relationships ・ Matters relating industry groups, the financial world, and corporate group activities to ・ Matters relating to public interest activities, such as social contribution activities Total number of consultants and advisors, etc., who are former President and Representative Director, etc. 1 Other Matters ・ The Company, by resolution of the Board of Directors, based on consultations held at the Nomination and Remuneration Advisory Committee, appoints consultants as necessary from the persons who have retired as Chairman or President. ・ Consultants do not attend meetings of the Board of Directors or management meetings, etc., and are not involved in any managerial decisions. In addition, although they may give advice based on requests from the current management team, they do not have any authority to influence managerial decisions. 2. Matters relating to the business execution, audit and supervisory, nomination, and remuneration determination, etc., functions (summary of the current corporate governance system) Updated □ Officer Status ・ Directors (10): 6 Inside Directors / 4 Outside Directors, 9 males / 1 female ・ Audit & Supervisory Board Members (5): 2 Inside Audit & Supervisory Board Members / 3 Outside Audit & Supervisory Board Members, 5 males / 0 females ・ The Nomination and Remuneration Advisory Committee has been established as an advisory body to the Board of Directors which is aimed at ensuring the transparency and fairness of officer human resources and officer remuneration, as well as strengthening corporate governance. ・ The Company has executed contracts that limit liability under Article 423 Paragraph 1 of the Companies Act with the Outside Directors and all Au