Corporate Governance
Sumitomo Metal Mining Co., Ltd.
Last updated: February 15, 2024
(English translation released on March 21, 2024)
Sumitomo Metal Mining Co., Ltd.
President & Representative Director: Akira Nozaki
Contact: +81-3-3436-7705
Securities Code: 5713
URL: https://www.smm.co.jp/en/
The corporate governance of Sumitomo Metal Mining Co., Ltd. (“the Company”) is
as set out below.

I

Basic Philosophy of Corporate Governance, Capital Structure, Corporate Data,

and Other Basic Information
1.

Basic philosophy
The Company’s basic philosophy pertaining to corporate governance is set out in “Corporate
Governance Basic Policy, 2. Basic philosophy” and is displayed publicly on the Company
website at the address below.
Corporate Governance Basic Policy
URL: https://www.smm.co.jp/en/ir/management/governance/
UpdatedReasons for not applying a particular principle of Japan’s Corporate Governance Code
The Company writes this Corporate Governance Report by reference to all Principles of the
Corporate Governance Code revised as of June 1, 2021.

Supplementary Principle 4.1.3: The board’s engagement in succession planning for
the CEO and other top executives
The succession planning for holders of the office of chief executive officer (president anddirector) is conducted and executed appropriately on the basis of our corporate philosophy
and business plans.
With regard to the candidate for the successor to the president, the Governance Committee(Chair: Taeko Ishii, Director), composed of the chairman of the Board of Directors who is
not an executive officer and two independent outside directors, has opportunities todeliberate on the environment and methods for fostering the next president as well as
concerning the candidates, etc. Regarding the specific procedure for selecting the
successor to the president, after consulting with the Governance Committee about thecandidate recommended by the president and receiving advice on whether the candidate
has the qualifications, knowledge, experience, abilities, and insight worthy of a president

1and director, the president makes the final proposal to the Board of Directors, which makes
the final decision after due deliberation.
With regard to the selection of the candidate executive officers who will constitute the poolof candidates for future president, the president, based on recommendations from theexecutive officers, consults with the Governance Committee regarding the best lineup to
resolve the issues management faces, formulates the final proposal with reference to that
advice, and submits the proposal to the Board of Directors. The Board of Directors thenmakes the final decision after due deliberation.

Supplementary Principle 4.2.1: Management remuneration as an incentive
The Company’s financial results are significantly impacted by prevailing metal market
conditions and exchange rates, and thus do not necessarily correspond with the progressof management strategies and projects. Furthermore, projects related to resource
development and the construction of smelting and refining plants require extremely longtime periods from start to completion, and it is not unusual for the composition ofmanagement to have changed by the time the fruits of those projects can be reaped.
Given these characteristics of its business, the Company has considered how remuneration
should operate as a healthy incentive for individual directors and managers and has
consequently laid down its current remuneration system composed of performance-based
remuneration and bonuses based on consolidated financial results and assessment factors
such as the degree of attainment of personal targets under medium-to-long-term
management strategies. For the basic policies and procedures for remuneration, pleaserefer to section (iii) of “Principle 3.1: Full disclosure” below. At present, we do not believethat remuneration in the form of Company stock would effectively operate as a healthy
incentive for management, and thus have not introduced it.

Principle 4.8: Effective Use of Independent Directors
The Company appoints at least one-third of directors as independent outside directors.
As outlined in 3. “Reasons for selection of present corporate governance system” below,
the Company has positioned the three businesses of Mineral Resources, Smelting &Refining, and Materials as its three core businesses. Since all three businesses are related
to non-ferrous metals, they have a mutual organic relationship and we believe that thecurrent composition of the Board of Directors, which includes a certain percentage ofdirectors from within the company and a certain percentage of independent outside
directors, is optimal for making decisions on diverse management issues and for thegrowth of our business. We believe that it is in the best interests of the Company, its
shareholders, and other stakeholders to conduct thorough deliberations from a varietyof perspectives between internal director who possess a deep understanding of theCompany's business and internal affairs, and independent outside directors who are able
to offer opinions from the perspective of shareholders and other stakeholders.
However, as announced in the timely disclosure “Change of Outside Director (Obituary)”2

released on January 9, 2024, one of the Company’s independent outside directors
regrettably passed away on January 4, 2024, and retired his position on the Board of
Directors effective the same day. As a result, as of the date of submission of this report
the ratio of the Company's independent outside directors is less than one-third of thetotal number of directors.
With regard to the above circumstances, in preparation for the ordinary general meetingof shareholders scheduled to be held in June 2024 the Company will study ways to rectify
the situation and ensure that independent directors constitute at least one-third of its
Board of Directors.

UpdatedDisclosures pursuant to specific principles of Japan’s Corporate Governance Code
The Company writes this Corporate Governance Report by reference to all Principles of the
Corporate Governance Code revised as of June 1, 2021.

Principle 1.4: Cross-shareholdings
When advancing our business strategy, the Company may engage in strategic
shareholdings with business partners or other companies if it is judged that doing so willcontribute to strengthening our business base over the mid to long term. With regard to
existing cross-shareholdings, the Board of Directors verifies aspects such as the objectivesof holdings and whether the benefits therefrom cover the Company’s cost of capital every
year. As a result of this verification, with regard to shares whose holding is judged to havelittle significance, including shares considered no longer worth the cost of capital andshares judged to have become less relevant due to recent business changes, we willproceed with concrete consideration based on the premise of reduction. Furthermore, incases where a company cross-holding the Company’s shares expresses a desire to sell, we
will not prevent such a sale, etc. by suggesting a reduction in the size of the transaction,or by other means.
With regard to the exercise of voting rights in cross-shareholdings, the Company
determines whether to vote for or against each proposal after giving comprehensive
consideration, based on the financial results and other aspects of the financial condition ofeach of the issuing companies, to matters such as whether each proposal will contributeto increasing the corporate value of, or enhancing shareholders’ interests in, that company
over the medium to long term, and what impact it will have on the Company’s corporate
value or shareholders’ interests. In order to determine whether to approve or reject
proposals, the Company will engage in dialogue with the issuing company regarding thecontents of each proposal, etc., as necessary. Decisions on voting are made particularly
cautiously in circumstances such as cases of companies affected by major scandals or bypersistent losses.
In fiscal 2022, the Company sold all cross-shareholdings in five companies, and partial
cross-shareholdings in three companies.
3

As of May 31, 2023, the Company maintained cross-shareholdings in 48 publicly-listedcompanies. Each of the aforementioned cross-shareholdings was verified at the regular
Board of Directors meeting held in June 2023.
For details on cross-shareholdings, please see the Company's Annual Securities Report.

Principle 1.7: Related-party transactions
Transactions between the Company and our Directors or Audit & Supervisory Board
Members will require the prior approval of the Board of Directors so as to ensure that theinterests of the Company and the common interests of our shareholders are not harmed.
Additionally, the Company will survey whether or not such transactions have been carriedout and report our findings to the Board of Directors semiannually.
If any transaction with a major shareholder arises, it will be handled under the same
standards as transactions between the Company and our Directors. A major shareholder
is one who holds 10% or more of the voting rights of the Company.

Supplementary Principle 2.4.1: Ensuring diversity in the promotion of core humanresources
1. Approach to ensuring diversity
The SMM Group Corporate Philosophy calls for recognizing the dignity and value of
people based on respect for all individuals. The SMM Group Code of Conduct, whichsummarizes specific standards of conduct for officers and employees in achieving that
respect for individuals, stipulates that we “accept diversity and respect the individuality
and rights of people.” The Sumitomo Metal Mining Group Policy on Human Rights
declares that we will not allow discrimination, harassment, or bullying on the basis ofrace, religion, gender, age, sexual orientation, disabilities, nationality, or othercharacteristics in employment and work scenarios. Viewing diverse human resources
and the development and participation of human resources as material issues, we aim
to be “a company where all employees can take a vibrant and active part” as our Vision
for 2030.
In order to realize Diversity, Equity and Inclusion (DE&I), create new wisdom, andbecome an organization capable of advancing growth strategies, the Company iscommitted to securing, developing, and utilizing human resources while respecting thediverse values of each employee and providing equal opportunities, as well as
establishing a work environment that allows each and every individual can fully
demonstrate their abilities.
Based on this approach, in July 2023 we revised our human resource system to one
centered on a job grade system for managerial track employees, in order to take indiverse human resources, make use of diverse values, and enhance our corporate value
whilemaintainingamembership-style4

employment

mechanism

that

allowsorganizations and employees to grow from a long-term perspective. We will make ourCompany into one that continues to provide the sense of security and stability of thepast while also enabling new challenges, transformation, and growth as all employees
learn and grow autonomously.
2. Voluntary and measurable goals for ensuring diversity and progress toward theirachievement
1)

Women in managerial positions

In order to realize the Company's "Vision for 2030," we are working to promote
greater opportunities for women, including promotion to managerial positions, activeroles at production and mining sites, and assignment to overseas posts in addition todomestic locations. The Company aims to increase the number of women in
managerial positions to 20 or greater by the end of fiscal 2023 in the General
Employers Action Plan based on the Act on Promotion of Women’s Participation andAdvancement in the Workplace, and the number of women in managerial positions as
of February 2024 was 25. Furthermore, in the Company’s “Vision for 2030,” we aim
to have 50 women in managerial positions and a female employee ratio of at least
20%. In order to create an environment where women can naturally thrive, and topromote our growth strategy, we are implementing necessary measures from a
medium- to long-term perspective.
<Specific examples of initiatives>- Measures to support balance according to life stage- Training for the development of female leaders (participation in interactions withother industries)- Interviews with female employees returning to work after childcare leave to support
their career development
These efforts have been recognized in the form of the Kurumin certification by the
Minister of Health, Labour and Welfare as a company supporting childcare.
2)

Midcareer hires

The Company is actively promoting midcareer hiring. In addition to securing personnel
with specific expertise and skills, we are also working to further promote an open andvibrant organizational culture by incorporating the diverse knowledge and perspectives
that our members from different backgrounds offer. The Company hired 49 midcareer
career-track employees in fiscal 2022, and as we continue to expand our business inline with our growth strategy, we will proactively increase the number of midcareerhires from the current level through to fiscal 2030.
3)

Foreign nationals

The Company continues to hire regardless of nationality. As of February 2024, theCompany employs 13 non-Japanese employees, and as we expand our businessdomain and create opportunities for new business outside Japan, we continue to5increase the number of human resources who can play an active role globally,
regardless of whether they are new graduates or midcareer hires. Specifically, we
conducted a questionnaire to assess issues faced by foreign employees, along withinterviews with those who wanted them, feedback to superiors, and hearings on issues.
By holding round-table discussions with foreign employees in our Company andcommunicating the content through our Group in-house bulletins, we make all
employees aware of the activities of our global human resources and internally raiseawareness of the importance of creating workplace environments in which everyone
can play active roles. In addition, we are working to increase opportunities to appoint
foreign employees to core posts, including appointing locally-employed staff to key
positions at business sites outside Japan, (particularly those operating under theCompany's operatorship).
4)

Persons with disabilities

The Company is working across the organization to improve the environment for
persons with disabilities so that they can have pride, motivation, and joy in their work.
Among our specific initiatives, since fiscal 2019 we have accepted students from
special support schools near our workplaces to take part in workplace experiences. By
deepening understanding of our workplaces and work through the experience, we are
increasing the number of students who feel confident in joining our Company. Since
fiscal 2020, we have offered internships for university students with disabilities andactively recruited these students at workplaces that can make use of their expertiseand characteristics. To support retention, we arrange regular meetings with humanresource staff after joining the company to eliminate job-related anxieties andproblems and to offer support as needed. We also work to make a range ofimprovements to our workplace environment in order to accommodate employeeswith disabilities. By acting under the idea of normalization to create environments inwhich people with and without disabilities can work together, we are steadily
increasing our percentage of employees with disabilities. The employment rate ofpersons with disabilities in the SMM (in Japan) is 2.59% as of June 2023, and in the
Company’s “Vision for 2030,” we aim to raise this rate to at least 3% by 2030—higher
than the legally mandated rate (2.3%).
3. Policies for human resource development and internal environment development toensure diversity, and the status of their implementation
The SMM Group has set “a company where all employees can take a vibrant and active
part” as a key component of its “Vision for 2030,” and aims to be a company that
respects the humanity of each and every employee, and where employees feel pride,motivation, and joy in work, as well as a company that provides each and every
employee with opportunities to improve his/her capabilities, and grows together with
employees. We believe that autonomous growth by every employee will lead tosustainable growth for our Group. In order to build a new business model and adapt toa changing business environment, we provide all employees with opportunities to6

improve their capabilities and are developing human resources who can steadily executeon growth strategies. Our specific initiatives are outlined below.
- 3-year program for managerial-track new employees and hierarchical position-specificeducation- Programs to develop next generation of management (Officers’ Coaching School,
training to develop the next generation of executive managers, etc.)- Self-development support and recommendations- Initiatives to encourage autonomous growth (one-on-one meetings between
superiors/subordinates, etc.)- Career design training
In addition, based on the approach of “respect for all individuals” set forth in our
Corporate Philosophy, we respect the diverse values of all employees and are working
to foster a workplace environment in which all employees can fully demonstrate theirabilities. As the nature of the duties performed by each division and workplace in the
SMM Group often differs, we tailor our initiatives on an individual workplace basis, witheach workplace identifying its current work style and making improvements accordingly.
As a result of these activities, average total annual actual working hours have beensteadily decreasing, and we will continue our efforts to reduce the number of employees
working long hours.
Furthermore, as part of our efforts to create workplaces where diverse human resources
can play vibrant and active roles, we conduct Group-wide human rights training,
programs aimed at promoting understanding of LGBT issues, and training for new
employees and newly appointed site managers to promote a deeper understanding of
the need for promotion of diversity, and we confirm the effectiveness of these programs
throughquestionnaires

andemployeeengagement

surveysfollowing

their

implementation. In April 2021 we established a new "Work-Life Support Desk" whichhandles consultations and helps resolve issues in a wide range of areas including humanrights and harassment, workplace relations, balancing work with childcare and nursing
care, and career counseling. 18 consultations were responded to in fiscal 2022.
For information on our related approaches, policies and initiatives, refer to theCompany’s Sustainability Report below.
URL: https://www.smm.co.jp/en/sustainability/library/sustainability_report/

Principle 2.6: Roles of corporate pension funds as asset owners
The Company has established the Asset Management Committee and a structure to ensure
appropriate investment and management of corporate pensions. The committee advises
the president, who has responsibility for pension management, in such areas as the7formulation and revision of basic management policy and the strategic asset mix, and theevaluation of asset managers. The committee also endeavors to enhance the expertise of
secretariat personnel by such means as having them participate in pension-related
seminars.

Principle 3.1: Full disclosure(i)

Business principles and strategies

The SMM Group Corporate Philosophy and its source, Sumitomo Business Spirit, the SMM
Group Management Vision, which delineates what the Company aims to become on thebasis of the corporate philosophy, and the SMM Group Code of Conduct, which sets out
the standards of conduct required of officers and employees to fulfill its corporate
philosophy, are displayed publicly on the Company’s website at the addresses below.
SMM Group Corporate Philosophy
URL: https://www.smm.co.jp/en/corp_info/philosophy/principle/
The Sumitomo Business Philosophy
URL: https://www.smm.co.jp/en/corp_info/philosophy/sumitomo/
SMM Group Management Vision
URL: https://www.smm.co.jp/en/corp_info/philosophy/vision/
SMM Group Code of Conduct
URL: https://www.smm.co.jp/en/corp_info/philosophy/conduct/
Also, the 2021 3-Year Business Plan, which covers the period from fiscal 2022 throughfiscal 2024, is displayed publicly on the Company’s website at the address below.
URL: https://www.smm.co.jp/en/ir/management/plan/(ii)

Basic views and basic policy on corporate governanceThe basic policy on corporate governance, including the basic philosophy on corporate
governance, has been compiled as the “Corporate Governance Basic Policy” and isdisplayed publicly on the Company’s website at the address below.
URL: https://www.smm.co.jp/en/ir/management/governance/(iii)

Basic policies and procedures for the remuneration of senior management anddirectors

The policy regarding the determination of remuneration, etc. of individual directors(including directors who concurrently serve as Executive Officers) is as follows.
1.

Basic Policy
Remuneration for Directors of the Company is linked to the business performance of
the Company, and designed to motivate Directors to achieve mid to long-term goals,
based on the business structure of the Company, so that it functions as a sufficientincentive to contribute to sustainable growth, increase the corporate value of theGroup over the mid to long term, and to strengthen and maintain the managementbase. When determining the remuneration of individual Directors, the amount of
remuneration is calculated using a predetermined formula in order to ensure fairness,8and the Company maintains a basic policy of setting remuneration at an appropriate
level based on the responsibilities of each Director.
Specifically, the remuneration for Directors (excluding a Chairman and Director andOutside Directors) shall consist of basic remuneration and bonuses. Basic
remuneration shall consist of fixed remuneration (remuneration which is neither
performance-based nor non-monetary) and performance-based remuneration, etc.,
while bonuses shall be performance-based remuneration, etc. A Chairman and
Director and Outside Directors shall receive only basic remuneration and no bonuses.
Basic remuneration is calculated on an annual basis for each individual and paid eachmonth in monthly installments, while bonuses are paid once annually after approval
is obtained at the ordinary general meeting of shareholders.
2.

Basic Remuneration
1)

Policy on determination of remuneration, etc. for the President andRepresentative Director

Basic remuneration for the President and Representative Director is composed of
fixed remuneration and performance-based remuneration.
The amount of fixed remuneration will be a basic amount for calculation set byreferencing the remuneration trends of domestic companies in the same industry
and domestic manufacturing companies of the same size as the Company (“Basic
Amount for Calculation of Fixed Remuneration”) multiplied by a predetermined
position-specific coefficient.
As an evaluation of corporate management performance, performance-based
remuneration, etc., is paid as an amount calculated in accordance with the degreeof achievement of targets for net income attributable to owners of the parent andsafety during the previous fiscal year.
2)

Policyon

determinationofremuneration,

etc.

for

a

Chairman

andRepresentative Director
Basic remuneration for a Chairman and Representative Director is composed of fixed
remuneration and performance-based remuneration.
The amount of fixed remuneration will be the Basic Amount for Calculation of Fixed
Remuneration multiplied by a predetermined position-specific coefficient.
As an evaluation of corporate management performance, performance-based
remuneration, etc., is paid as an amount calculated in accordance with the degreeof achievement of a target for net income attributable to owners of the parent during
the previous fiscal year.
3)

Policy on determination of remuneration, etc. for a Chairman and Director andOutside Directors

Basic remuneration for a Chairman and Director and Outside Directors is composedof fixed remuneration.
The amount of fixed remuneration will be the Basic Amount for Calculation of Fixed
Remuneration multiplied by a predetermined position-specific coefficient.
In the event that the Chairman and Director or an Outside Director concurrently
9

serves as the chairperson of the Board of Directors, a predetermined amount of
fixed remuneration shall be paid in addition to the basic remuneration above.
4)

Policy on determination of remuneration, etc. for Directors who concurrently
serve as Executive Officers with special titles (Executive Vice President, Senior
Managing Executive Officers, Managing Executive Officers)

Basic remuneration for directors who concurrently serve as executive officers withspecialtitlesiscomposed

of

fixed

remuneration

andperformance-based

remuneration.
The amount of fixed remuneration will be the Basic Amount for Calculation of Fixed
Remuneration multiplied by a predetermined position-specific coefficient.
The amount to be paid as a performance-based remuneration will be determinedtaking into account job responsibilities, departmental performance, and individual
performance evaluations.
Representative Directors who concurrently serve as Vice President or Senior
Managing Executive Officers and Directors who concurrently serve as Managing
Executive Officers shall be paid fixed remuneration predetermined in considerationof their positions and responsibilities in addition to the basic remuneration above.
The amount of such fixed remuneration shall not exceed 10% of basic remuneration.
5)

Policy on determination of remuneration, etc., for Directors who concurrently
serve as Executive Officers (excluding Executive Officers with special titles)

Basic remuneration for Directors who concurrently serve as Executive Officers shallbe composed entirely of fixed remuneration predetermined in consideration of theirpositions and responsibilities and other factors. However, the basic remuneration
for their role as an executive officer shall be paid separately as an employee salary.
3.

Bonuses
Bonuses for Directors shall be paid to Directors, excluding a Chairman and Director
and Outside Directors, as a reward for their performance in the corresponding fiscal
year, and shall be proposed and deliberated at the ordinary general meeting ofshareholders for the corresponding fiscal year in the case that net income attributableto owners of the parent exceeds a certain amount.
The bonus amount for the President and Representative Director, Chairman of theBoard and Representative Director, and Directors who concurrently serve as Executive
Officers shall be calculated by multiplying the base amount, which is determined by
the degree of achievement of the target for net income attributable to owners of theparent for the corresponding fiscal year, by a position-specific coefficient, etc..
The specific amount paid to each individual will be determined by reflecting theindividual performance evaluation of each Director.

4.

Policy on determination of ratio of fixed remuneration and performance-based
remuneration, etc.
The ratio of fixed remuneration and performance-based remuneration, etc. for eachdirector is determined according to the calculation method for each of the above
remuneration types. However, the ratio of remuneration is determined in a mannerthat provides an appropriate incentive to increase corporate value based on
10consultation and advice from the Governance Committee, which is composed of the
Chairman of the Board, who does not concurrently serve as an Executive Officer, andIndependent Outside Directors.
In the case that net income attributable to owners of the parent does not reach thespecified level, bonuses will not be paid.
5.

Delegation of decisions regarding details of individual remuneration, etc. of
Directors to third parties
The President and Representative Director shall be delegated the authority todetermine specific details of individual remuneration based on a corresponding
resolution by the Board of Directors, and the authority granted shall be thedetermination of the amount of basic remuneration and bonuses for Directors.
Regarding the specific procedure involved, the President and Representative Director,
who has been delegated authority by the Board of Directors, shall determine thespecific amount of remuneration for each director after consulting the GovernanceCommittee and obtaining its advice. When finalizing remuneration, the Secretary
Office shall prepare a request for approval, which shall be approved by the President
and Representative Director.
Results are reviewed by the Chairman of the Board, who is a member of theGovernance Committee, as well as by Audit & Supervisory Board members.

(iv)

Policies and procedures in the nomination of director candidates, appointment or
dismissal of senior management, and nomination of Audit & Supervisory Board
member candidates

With regard to the selection of executive officer candidates, the president, based on therecommendations of the executive officers, comprehensively considers the knowledge,
experience, abilities and insight of the candidates and, after receiving advice from theGovernance Committee regarding the best lineup to solve the issues management faces,
proposes the candidates to the Board of Directors, which makes the final decision afterdue deliberation.
The policy when nominating director candidates is for the President to comprehensively
consider the knowledge, experience, abilities, and insight of the candidates, after which
the final decision is made through the same procedures as above. The GovernanceCommittee has opportunities to deliberate on the environment and methods for fostering
the next president as well as concerning the candidates, etc. In the event that an
executive officer has rendered him or herself markedly ineligible, for example by having
acted unlawfully, improperly, or disloyally, and a dismissal recommendation is made to
the Board of Directors after the Governance Committee gives advice on the matter, theindividual concerned may be dismissed by resolution of the Board of Directors.
With regard to the nomination of Audit & Supervisory Board member candidates, thepolicy is for the President to comprehensively consider the qualifications, knowledge(including that of finance, accounting, and law), experience, abilities, and insight of thecandidates and, after obtaining the prior approval of the Audit & Supervisory Board, topropose the qualified candidates to the Board of Directors, which will then determine the11nominations.
Reasons for the nomination of director (including directors who are executive officers)
candidates and Audit & Supervisory Board member candidates will be stated in thereference materials of the General Meeting of Shareholders.
(v)

Reasons for the nomination of candidates for directors and Audit & Supervisory
Board members and for individual nominations, appointments, and dismissals
relating to appointments and dismissals of senior management

The reasons for individual nominations of candidates for directors at the 98th ordinary
general meeting of shareholders (held on June 23, 2023) are stated in the reference
documentation for that meeting. The said reference documentation is displayed on thefollowing Company’s website.
URL: https://www.smm.co.jp/en/ir/stock/meeting/

Supplementary Principle 3.1.3: Disclosure of initiatives on sustainability, etc.
1. Initiatives related to sustainability
The SMM Group’s Corporate Philosophy calls for co-existence with the global environmentand society. It sets out ways of building and maintaining the relationships of trust indicatedin the Sumitomo Business Spirit, and advocates respect for all individuals to achieve aforward-minded and vibrant company. This is due to the fact that as mining must be
conducted where the targeted natural resources are present, typically in projects that spanyears or even decades, mine operation in particular demands that we build and maintainrelationships of trust with varied stakeholders in areas of operations as a prerequisite forthe continuity of our business.
The Sumitomo Metal Mining Group Sustainability Policy describes our stance in working
toward the sustainability that are pursuing through co-existence with the global
environment and society and respect for all individuals. The policy clearly positions
contribution to the sustainable development of society as an issue for our management,
and further defines the aim of our sustainable growth as enhancing the degree of ourcontribution and ensuring its sustainability.
We have specified issues to be given priority in achieving our Sustainability Policy,
identifying these as material issues. We also set out the evaluation that we seek to earnfrom society through our initiatives to tackle these material issues, in the form of Vision
for 2030. The SMM Group Sustainability Policy and Vision for 2030 are disclosed publicly
on the Company's website at the address below.
URL: https://www.smm.co.jp/en/sustainability/

For more details on the Company’s sustainability initiatives, please refer to our
Sustainability Report. To create this report as a tool for engagement with all stakeholders,
we followed the Mining Principles of the International Council on Mining and Metals (ICMM)
to which we belong and made reference to requirements and disclosures under the GRI
Standards.
URL: https://www.smm.co.jp/en/sustainability/library/sustainability_report/

12

2. Investment in human capital
From the perspective of investment in human capital, the Company is actively investing inhuman resources, including conducting human resource development to ensure diversity andpromoting corporate health and wellness, in order to realize the objective of “a company
where all employees can take a vibrant and active part” set out in its Vision for 2030. Specificinitiatives for utilizing the Company's human capital are outlined above in Supplementary
Principle 2.4.1: Ensuring diversity in the promotion of core human resources, and also
disclosed in the Company's Sustainability Report.
3. Investment in intellectual property
Within the selection and concentration that the Company performs in its core businesses ofmineral resources, smelting and refining, and materials, research and development costs areallocated according to order of priority. In order to realize our Vision for 2030, we arepromoting collaboration between our three businesses—mineral Resources, smelting &refining, and materials—and continuing to develop processes for lithium refining, battery
recycling, and new smelting technologies, in addition to developing products that reducegreenhouse gas emissions, such as battery cathode materials, as well as near-infrared ray
absorbing materials derived from our proprietary technology.
We disclose major R&D projects, accomplishments, and R&D expenditures in our Integrated
Report, Sustainability Report, and Annual Securities Report.
4. Impact of climate change on the Company's business and profits
The Company has listed climate change as a material issue in Vision for 2030, andstrengthened efforts to achieve the vision of “a company that actively undertakes climatechange countermeasures, by reducing emissions and stably supplying products contributing
to a low-carbon society, a future with zero greenhouse gases (GHGs). Specifically, in
December 2023, we established interim targets and a roadmap toward carbon neutrality, in
addition to conducting analyses of the impact of climate change on our business and profits
in two scenarios—a 1.5°C increase scenario and a 4.0°C increase scenario. In addition, wesummarize climate-related risks and opportunities from the perspective of four core elementsof corporate management and operations (governance, strategy, risk management, andmetrics and targets) in line with TCFD recommendations, and disclose information on eachof these elements in our Sustainability Report.
Interim targets and the roadmap toward carbon neutrality are disclosed on the Company's
website.
URL: https://www.smm.co.jp/en/news/release/uploaded_files/20231226_EN.pdf

13

Supplementary Principle 4.1.1: Outline of scope of matters delegated to the
management by the board
In accordance with laws and regulations and the Company’s Articles of Incorporation,
decisions for business execution are delegated to the management by the Board of
Directors.
Specifically, pursuant to the Regulations of the Board of Directors it lays down, the Boardof Directors adopts resolutions concerning important matters such as those relating to
general meetings of shareholders, directors, executive officers, management policies,
business plans, risk management, sustainability, organization and personnel affairs, andprojects, and with regard to matters to which the said regulations’ criteria do not apply,
decisions are delegated to the president, executive officers, and others pursuant to otherrules laid down by the Board of Directors.

Supplementary Principle 4.2.2: Development of a basic policy for the company’ssustainability initiatives; board supervision of allocation of management resources
and implementation of business portfolio strategies
Following deliberation by the Board of Directors, the Company has established the "SMM
Group Sustainability Policy" as its basic policy on sustainability initiatives. This basic policy
states that the Company will address business issues that contribute to the sustainable
development of society and work to improve our sustainable business growth andcorporate value. We have specified issues to be given priority in achieving our
Sustainability Policy, identifying these as material issues, set out the evaluation that weseek to earn from society through our initiatives to tackle these material issues, and havedisclosed them as Vision for 2030.
The SMM Group's sustainability initiatives are led by the Sustainability Committee, which
is chaired by the President and deliberates on the following matters:- Revision or abolition of material issues, Vision for 2030, and the Sustainability Policy- Important items related to annual plans and other sustainability promotion activities, andindicators for evaluating our level of achievement toward Vision for 2030
- Regular evaluation of sustainability promotion activities reflecting issues and opinions
obtained through engagement with stakeholders, and corrective measures- Provision of information on sustainability promotion activities, exchanges of information,
explanation of key measures, sharing of awareness, and setting of important themes
related to sustainability activities
Regarding board supervision of allocation of management resources and implementationof business portfolio strategies, the company implements it based on the Supplementary
Principle 5.2.1 “Basic policy regarding business portfolio and the status of review of such
portfolio” below.

14

Principle 4.9: Independence standards for independent directors
Independence standards are set out in “Corporate Governance Basic Policy, Article 6-(3)3 Independence standards” and are displayed publicly on the Company’s website at theaddress below.
URL: https://www.smm.co.jp/en/ir/management/governance_policy/

Supplementary Principle 4.10.1: Appropriate involvement and advice regarding
consideration of nomination and compensation by the Nomination Committee andCompensation Committee
The Company is a company with an Audit & Supervisory Board and maintains a policy of
appointing independent outside directors as one-third or more of its directors (the reason
that the ratio of the Company's independent outside directors is less than one-third of all
directors as of the date of filing of this report is described in Principle 4.8: Effective Use of
Independent Directors). We have established the Governance Committee, a committeethat advises the President from an objective standpoint regarding material matters ofcorporate governance, such as the nomination and compensation of Directors andExecutive Officers. Under this framework, the Company is working to increase
management transparency and strengthen corporate governance. Details are outlined
below in “II Business Management Organization and Other Corporate Governance Systems
Pertaining to Management Decision-Making, Execution, and Supervision; 1. Mattersrelating to organizational composition, operation, etc.; Directors; Existence of optional
committees equivalent to nomination committee or remuneration committee.”

Supplementary Principle 4.11.1: View on the appropriate balance between knowledge,
experience, and skills of the board as a whole, and also on diversity and appropriate
board size
The Board of Directors will achieve a diverse composition by including both members fromwithin the Company who are thoroughly familiar with each area of the Company’s businessas well as outside experts with knowledge, experience, abilities, and insight different fromthat of the members from within the Company. Based on “what the Board of Directors
should ideally be,” as stated in II.3 “Reasons for selection of present corporate governancesystem,” the skill matrix for the Company's directors and Audit & Supervisory Board
members was created and is shown in the appendix to this report. Each skill item has been
selected through discussions by the Board of Directors, focusing on those required torealize the Company's long-term vision and “Vision for 2030.” As the knowledge,
experience, ability, insight, and other attributes required of the Company's Board of
Directors may change in response to changes in management strategies and the external
environment, the Board of Directors will continue to discuss the necessary knowledge,
15

experience, ability, insight, and other attributes, and update the skills matrix as necessary.
The size of the Board of Directors will be appropriate to conducting active discussions andensuring the briskness of the Board. One third or more of the Directors will be Independent
Outside Directors in order to strive for greater managerial transparency (the reason thatthe ratio of the Company's independent outside directors is less than one-third of all
directors as of the date of filing of this report is described in Principle 4.8: Effective Use of
Independent Directors).

Supplementary Principle 4.11.2: Holding of concurrent positions by directors andauditors
The situation regarding the holding of concurrent positions by directors and Audit &Supervisory Board members is as set out in the Company’s business reports and reference
documentation for general meetings of shareholders. The said business reports andreference documentation are displayed on the following the Company’s website.
URL: https://www.smm.co.jp/en/ir/stock/meeting/

Supplementary Principle 4.11.3: Analysis and evaluation of the effectiveness of theboard as a whole, and the results thereof
The Board of Directors analyzes and evaluates the effectiveness of its performance fromthe perspective of appropriate decision-making for business execution and enhancing
monitoring functions, and discloses a summary of these results.
Regarding “what the Board of Directors should ideally be,” which is the basis of the analysis
and evaluation of the effectiveness of its performance, this is described below in II.3
“Reasons for selection of present corporate governance system.”
In fiscal 2022, the Board of Directors analyzed and evaluated the effectiveness of its
performance, with the following results:
1. Process of analysis and evaluation
With the help of an external evaluator (law firm), based on issues from the previous
fiscal year, the Board of Directors prepared and implemented questionnaires for the
directors and Audit & Supervisory Board members. The compilation and analysis of thequestionnaire responses was entrusted to the external evaluator. The Board of Directors
deliberated on the effectiveness of the Board of Directors at the ordinary meeting heldin February 2023, based on the compiled questionnaire responses, the evaluation by theexternal evaluator, and the “what the Board of Directors should ideally be (aiming for a
Board of Directors that emphasizes decision-making functions)” confirmed in fiscal 2016,
and confirmed its evaluation and future actions.
2. Overview of the analysis and evaluation results
1) The questionnaire responses and external evaluator’s analysis and evaluation results
were as follows:(1)

Since most of the items related to the effectiveness of the Board of Directors
were rated highly, in general, the Board of Directors can be evaluated as16

functioning effectively.
(2)

In the open-ended response section of the questionnaire, many positive
opinions were expressed about the current system and operation, and many
matters are pointed out as opinions to improve the current situation.

(3)

It is desirable to continue to discuss how the Board of Directors should
deliberate strategies and visions. Additionally, the matters pointed out in thepast fiscal years (such as securing human resources) should be continuously
discussed about how to make further improvements toward implementation.

2)

In response to the questionnaire responses and the external evaluator’s analysis
and evaluation results, the Board of Directors conducted deliberations on each of
the following matters.

(1)

With respect to deliberations at Board of Directors meetings, some responses
suggest that the meetings should further extend discussions of businessstrategy, management issues, sustainability, etc. In response to this, the Board
confirmed that the following would be carried out:a.

Continuously ensure that the agenda includes business strategy andmanagement issues.

b.

Extend opportunities to discuss sustainability in addition to semiannual
reports from the Sustainability Committee.

(2)With respect to initiatives related to the matters pointed out in the past fiscal
years (in particular, securing human resources, etc.), the Board of Directors
confirmed that they would deliberate them based on the measures of theexecutive side.

(3)

The Board of Directors confirmed other matters, such as extending informationthat facilitates deliberations of the agenda and providing the Board of Directors
with more effective feedback concerning opinions on capital markets.

3. Future actions
The Board of Directors confirmed that steps will further enhance the effectiveness of theBoard of Directors by continuing to address the above issues.

Analysis and evaluation of the effectiveness of the audits and the Audit &Supervisory Board, and the results
In order to ensure managerial soundness and increase the corporate value of theCompany’s group, the Audit & Supervisory Board Members audit the execution ofduties by directors and executive officers in accordance with the audit policies, audit
plans, and other such matters prescribed by the Audit & Supervisory Board. In order
to confirm and improve the effectiveness of the audits performed by Audit &Supervisory Board members and the Audit & Supervisory Board’s activities, anevaluation of their effectiveness is conducted.
Through this evaluation of the effectiveness, we review the audits and activities of the
Audit & Supervisory Board, consider issues to be improved and how to address them,and incorporate the findings in the next fiscal year’s audit plan and day-to-day audit
17

activities.1. Evaluation process
In order to carry out the evaluation of effectiveness from an independent and objective
standpoint, we requested advice on analysis and evaluation from Misono Sogo
Advisory LLC, an outside professional organization. Based on the results, the Audit &Supervisory Board discussed the matter and conducted a self-evaluation.
The specific evaluation process was as follows:(1) Questionnaire of all Audit & Supervisory Board members (two Standing Audit &Supervisory Board members and two outside Audit & Supervisory Board members)(2) Interview with the chairperson of the Audit & Supervisory Board (Senior Standing
Audit & Supervisory Board member) by outside professional(3) Interview with the administrative office of the Audit & Supervisory Board by outside
professional(4) Discussions with participation by all Audit & Supervisory Board members (fourtimes in total)
2. Overview of evaluation results
Through the above process, the Audit & Supervisory Board confirmed the following
points and evaluated that the audits by Audit & Supervisory Board members andactivities of the Audit & Supervisory Board were functioning well and sufficiently
effective.
-

Through their attendance at Board of Directors meetings, discussions among
Audit & Supervisory Board members, and auditing activities by Audit &Supervisory Board members, the Audit & Supervisory Board members haveconducted audits based on a perspective of appropriateness and made necessary
representations of their opinions.

-

The Audit & Supervisory Board members, including outside Audit & Supervisory
Board members, have attended Management Committee meetings, Executive
Officers’

meetings,

Sustainability

Committee

meetings,

Internal

ControlCommittee meetings, and other important meetings, and checked the status ofbusiness execution by directors and executive officers and whether the internal
control system is properly maintained and operated. They have also actively
expressed their opinions at important meetings, etc. based on their insight andexperience.
-

The Audit & Supervisory Board members have regularly conducted interviews
with executives, including representative directors, have established an
atmosphere where they can openly exchange opinions with management, andhave made recommendations as necessary based on information andobservations obtained through audits conducted by Audit & Supervisory Board
members.

-

On-site audits at domestic and foreign sites, including offices, mines, plants, andaffiliated companies, are emphasized. A Standing Audit & Supervisory Board
member and an Outside Audit & Supervisory Board member have conducted onsite audits as a pair (24 sites were visited in fiscal year 2022). Through these site
visits, Audit & Supervisory Board members have checked with their own eyes the18business execution status, specific issues, and how the internal control system ismaintained and operated, and provided advice as necessary.
-

At meetings of the Audit & Supervisory Board, the Standing Audit & Supervisory
Board members have shared information they collected through inspection ofimportant approval and other such documents and reports from relevant
divisions, as well as the results of their audit activities, with Outside Audit &Supervisory Board members, and the Audit & Supervisory Board members haveheld discussions.

-

Outside Audit & Supervisory Board members spend enough time and effort tofulfill their duties adequately, including the aforementioned on-site audits as pairs
by a Standing Audit & Supervisory Board member and an outside Audit &Supervisory Board member.

-

Audit & Supervisory Board members share information and exchange opinionswith Outside Directors by having meetings or in other ways.

-

Based on the evaluation results and other factors, the Audit & Supervisory Board
establishes a PDCA cycle to improve its effectiveness by identifying relevant
issues and incorporating initiatives to address them in its audit plan and day-today audit activities.

3. Future steps
Through discussion among all members, the Audit & Supervisory Board defined theroles of the Company’s Audit & Supervisory Board as follows: Monitor and restrain the
management, have a strong sense of involvement in corporate management under
the condition that they are non-executive, and provide the management with objective
opinions as Audit & Supervisory Board members based on their professional insights
and experience.
For Audit & Supervisory Board members to fulfill these roles, it is necessary to havesystems and initiatives whereby they understand the corporate management from an
objective perspective and respond promptly and flexibly in light of internal and externalchanges.
Therefore, the Audit & Supervisory Board confirmed that as matters to be focused on
this fiscal year the following actions will be taken to further increase effectiveness.
Firstly, in order to maintain an objective perspective on management it is important
for the Audit & Supervisory Board to regularly reflect on its operation and review its
activities. Accordingly, we will incorporate a discussion on the role and effectivenessof the Audit & Supervisory Board as a regular item in the Board's annual schedule.
Next, in order to further enhance on-site audit activities and identify internal andexternal changes in a timely manner, we will place particular emphasis on thefollowing:-

Further enhancement of on-site audits: We will continue to place emphasis on
on-site audits to appropriately identify changes in the business situation. To thisend, we will review the way information is shared by full-time members to
outside members in advance of on-site audits to further extend these audits.
19-Strengthening communication with departments: During communication withthe business divisions, corporate planning division, and other departments, wewill strive to strive to achieve more meaningful communication by clarifying ourawareness of issues (topics) identified through day-to-day Audit & Supervisory
Board member activities. This fiscal year, we are considering topics such as theCompany’s function of corporate planning.

-

Updating information and knowledge: We will update Audit & Supervisory Board
members with information and knowledge about corporate management andother important topics, including providing training by external instructors.

In addition to the above, we have confirmed that we will continue to examine specificissues identified in the process of evaluating the effectiveness, and strive for
improvement by reflecting them appropriately in future audit plans and audit activities.
By further improving the effectiveness of audit activities, the Audit & Supervisory
Board and its members will strive to contribute to strengthening the management
infrastructure and improving the corporate value of the Company’s group.

Supplementary Principle 4.14.2: Training policy for directors and auditors
The training of directors and Audit & Supervisory Board Members is based on the selfimprovement of each individual, and therefore the Company contributes to selfimprovement by providing opportunities for training either directly or as an intermediary,and provides support for the costs thereof.
Specifically, the Company will provide training on the legal liabilities of officers, compliance,and legal knowledge for newly appointed Directors, Audit & Supervisory Board Members,
and Executive Officers when assuming office. The Company will provide various kinds ofinternal training for Directors, Audit & Supervisory Board Members, Executive Officers, andothers and endeavor to obtain timely and appropriate information through lectures bylawyers and other external experts and through other such means. Additionally, theCompany will provide information on other training opportunities such as external seminars.
Including the above, the Company will bear the entire amount of any expenses necessaryfor Director, Audit & Supervisory Board Member, and Executive Officer training.

Principle 5.1: Policy for constructive dialogue with shareholders
The Company believes that receiving the understanding and support of all of ourshareholders and investors is essential for the sustainable growth and increased corporate
value of the Company over the mid to long term. Therefore, in consideration of increasing
corporate value over the mid to long term, the Company will develop the following IR
activities to achieve constructive dialogue with our shareholders and investors in order toreceive a deeper understanding of the Company.
(i)

The President will coordinate dialogue with shareholders and investors andinformation disclosure, and the Executive Officer supervising the Public
Relations & Investor Relations Department will be the officer in charge of such20

dialogue and disclosure.
(ii)

The officer responsible for information disclosure (the General Manager of the
Public Relations & Investor Relations Department) will decide whether or not
information should be disclosed.

(iii)

When preparing materials for disclosure, the Public Relations & Investor
Relations Department will collaborate with the relevant divisions, including
each business division, the Sustainability Department, and the Legal
Department, and conduct disclosure appropriately and in a fair and timely
manner.

(iv)

The Company will implement measures to receive deeper understanding of ourbusiness. The President, heads of respective business divisions, officer
responsible for IR, and the Company's directors, including outside directors,
will attend, within a reasonable scope, financial results briefings and businesspresentations held for institutional investors and securities analysts, andmeetings with investors in Japan and overseas, and provide explanations, inaddition to briefings conducted by the President regarding financial results andbusiness strategies as well as briefings for individual investors. Additionally,
the Company will establish a section on our website for individual investors andwill endeavor to disclose IR information in a manner that is easy to understand.

(v)

The Company will regularly provide feedback on the views and requests
learned through communication with our shareholders and investors tomanagement and directors and make use of those views and requests inmanaging the Company.

(vi)

In order to prevent the divulgence of any information that could influence shareprices during the preparation period of financial results announcements and toensure fairness, the Company will establish an about two-week “quiet period”
prior to the announcement of quarterly and full-year financial results andrefrain from commenting or answering questions on those results during that
period. Additionally, matters regarding information disclosure will be stated oninternal memorandums for approval to verify the management of information.
The responsible division will also thoroughly ensure that, during dialogue withshareholders and investors, no insider information is disclosed and no selective
disclosure of nonpublic material information is made in accordance with thefair disclosure rule. Furthermore, if it becomes known that selective disclosureof nonpublic material information has occurred, the said information shall be
publicized promptly in principle.

In order to enhance IR activities and constructive dialogue with shareholders, theCompany conducts periodic surveys of its shareholder registry to ascertain the
distribution of shareholders and identify substantial shareholders.

21Supplementary Principle 5.2.1 Basic policy regarding business portfolio and thestatus of review of such portfolio
The Company manages its business portfolio based on return on capital employed (ROCE)
for each business unit (on a consolidated basis). In the event that ROCE falls below its
benchmark value during the medium-term management plan period, it will be designatedas a “business requiring confirmation of continuation.” In principle, during the following
two years the continuity of the business will be verified and improvements and changes
implemented, with a final decision on continuation of the business to be made in the year
after. The Board of Directors periodically monitors the status of businesses assigned thisdesignation. In the Medium-Term Management Plan starting in 2021, the Company has
set the benchmark value for ROCE at 5.5%.

Action to Implement Management That Is Conscious of Cost of Capital and StockPrice
We believe that maintaining a firm financial base while steadily carrying out growthstrategy for achieving our long-term vision, “Becoming a World Leader in the Non-Ferrous
Metals Industry”, with consideration for the characteristics of our business (outlined below),
will lead to the enhancement of our medium- to long-term corporate value. Specifically,
we will launch and bring to fruition large-scale projects such as the Quebrada Blanca 2
Project, the Cote Gold Project, and investments to expand production capacity for
automotive battery cathode materials. At the same time, we will implement the measuresdescribed in the 2021 3-Year Business Plan such as battery recycling and thecommercialization of silicon carbide (SiC).
In addition, we will manage our business based on return on capital employed (ROCE) in
order to increase the profitability of our investments and improve capital efficiency.
Although we set forth a dividend policy in the 2021 3-Year Business Plan namely“consolidated payout ratio to be 35% or more in principle,” with a basic financial strategy
of maintaining the consolidated equity ratio of over 50%, on February 8, 2024, the Board
resolved that DOE (dividend on equity ratio*) of 1.5% shall be added as a minimum
indicator, and that the dividend policy shall be changed to “dividends from surplus shall be
paid out with a consolidated payout ratio to be 35% or more and a minimum indicator to
be DOE of 1.5% in principle.” This new dividend policy will take effect from the year-end
dividend for the fiscal year ending March 31, 2024.
*DOE (dividend on equity ratio) = Annual total dividends / Consolidated net assets
attributable to owners of parent
Moreover, we are aiming to further enhance corporate value by eliminating asymmetry of
information, enriching our financial and non-financial information disclosure, andstrengthening sustainability initiatives.

22

Business Characteristics of Our Company (non-ferrous metals)•

As non-ferrous metal prices are determined in trading markets typified by the London
Metal Exchange (LME), profit and loss in the non-ferrous metals business is greatly
affected by the market environment.

•

Demand for the non-ferrous metals (copper, nickel, etc.) that we handle in our businessis expected to continue growing steadily. However, as non-ferrous metal resources,
which are limited natural resources, become depleted through mining and must be
constantly replaced, a battle for first-class assets is taking place, centered on major
non-ferrous players.

•

In addition to the growing difficulty of developing new mineral resources at increasingly
higher elevations and greater depths, the costs of materials procurement, labor, andother inputs have also increased in recent years.

•

We spend time to carefully consider participation in mineral resource development
projects from various angles, but once the decision to invest is made, investments on
the scale of hundreds of billions of yen are quickly required.

•

Harvesting the fruits of investments requires years. Without a financial base able towithstand such time scales, we would be unable to continue our business and wouldcease to be a candidate partner for mineral resource development.

23

2.

Capital structure

Foreign shareholding ratio

30% or more

Largest shareholders
Number ofName or company nameshares owned

Percentage (%)

The Master Trust Bank of Japan, Ltd. (Trust Account)

45,010,100

16.38

Custody Bank of Japan, Ltd. (Trust Account)

18,050,000

6.57

Toyota Motor Corporation

11,058,000

4.02

STATE STREET BANK WEST CLIENT-TREATY 505234

5,231,415

1.90

JP MORGAN CHASE BANK 385632

3,764,878

1.37

Sumitomo Realty & Development Co., Ltd.

3,745,055

1.36

SUMITOMO LIFE INSURANCE COMPANY

3,737,000

1.36

STATE STREET BANK AND TRUST COMPANY 505001

3,432,542

1.25

BNYM AS AGT/CLTS NON TREATY JASDEC

3,348,505

1.22

NIPPON LIFE INSURANCE COMPANY

3,109,932

1.13

Controlling shareholder (except for parent company)---

Parent company

None

Supplementary remarks
1.

The capital structure is as of September 30, 2023.

2.

The Company holds 16,051,698 shares of treasury stock.

24

3.

Corporate data

Stock market where listed and market section

Tokyo Stock Exchange Prime Market

Fiscal year-end

MarchType of business

Non-ferrous metals

Number of employees (consolidated) at end of
previous fiscal year
Net sales (consolidated) in previous fiscal year
Number of consolidated subsidiaries at end of
previous fiscal year
4.

Policyonmeasurestoprotect

1,000 or more

¥1 trillion or more

50 or more, but fewer than 100

minorityshareholders

when

conducting

transactions, etc., with controlling shareholder

5.

Other special circumstances that may materially impact corporate governance
There are no subsidiaries listed on the domestic financial exchanges.

25

II

Business Management Organization and Other Corporate Governance Systems

Pertaining to Management Decision-Making, Execution, and Supervision1.

Matters relating to organizational composition, operation, etc.

Organization form

Company with Audit & Supervisory Board Members

Directors
Number of directors stipulated in articles ofincorporation
Term of office of directors stipulated in articles
of incorporation

1 yearChairman

Chairperson of the board of directors

Number of directors

10serving

7

Status of appointment of outside directors

Appointed

Number of outside directors

Updated2

Updated2

designated independent officers

whenconcurrently as president)

UpdatedNumber of outside directors(except

Relationship with company (1)Name
Taeko Ishii
ManabuKinoshita*

Attribute

Relationship with the company*
a

b

c

d

e

f

g

h

i

j

k

LawyerFromanother△company

Categories of relationship with the company“〇” when a category applies to the person currently or recently; “△” when it applied in thepast.
“●” when a category applies to a close relative of the person currently or recently; “▲” when
it applied in the past.
a

An executive of the listed company or a subsidiary thereofb

An executive or a nonexecutive director of the parent company of the listed companyc

An executive of a sister company of the listed company
26

dA person or an executive thereof for which the listed company is a major business
partnere

A major business partner of the listed company or an executive thereoff

A consultant or accounting or legal professional who receives a large amount ofmonetary consideration or other property from the listed company besides
remuneration as an officerg

A major shareholder of the listed company (or an executive of the said major
shareholder if it is a corporation)hAn executive (the said individual only) of a business partner of the listed company(where any of d, e, or f above do not apply)i

An executive (the said individual only) of a company with which there is mutual
appointment of outside officersjAn executive (the said individual only) of an organization that receives donations fromthe listed company

k

Other

Relationship with company (2)Name

Independent officer

Supplementary
remarks concerning

Reasons for selection

applicable categories
Ms. Ishii has specialist knowledge
and abundant experience as alawyer, especially in the field oflabor law.
She is expected to participate in the
Board decision-making by providing
her advice regarding complianceand personnel/labor related fields,
which is aimed toward thesustainable growth and mid- toTaeko Ishii〇

long-term enhancement of the—corporate value of the Company
and its groups by utilizing her
knowledge and experience. She isalso expected to perform a check
function on management by
participating in decision-making at
the Board of Directors from an
independent and objective
standpoint, and to oversee themanagement on behalf ofshareholders and other stakeholders

27

by being involved in decision
making regarding nominations andremuneration of directors andexecutive officers as a member of
the Governance Committee.
Accordingly, the Company expects
that she will realize the further
improvement of quality of thedecision-making by the Board of
Directors and the enhancement of
the monitoring function. Ms. Ishii iscurrently an Outside Director of theCompany and a member of theGovernance Committee and has
been appointed as an Outside
Director as she is currently serving
the role shown above.
As she is considered devoid of riskof conflict of interest with generalshareholders, she is designated an
independent officer.

ManabuKinoshita〇

Mr. Kinoshita had held

Mr. Kinoshita had served as Senior

responsibilities such as

Executive Vice President of NEC

serving as SeniorCorporation and has abundant

Executive Vice President

knowledge and experience inof NEC Corporation, themanaging a company and regarding

Company’s businessdigital business. He is expected topartner.

participate in the Board decision-

During fiscal 2022, theremaking by providing his advice

were no sales of theregarding material business andCompany to NEC

digital fields where the businessCorporation. Althoughenvironment is changing

the Company engaged insignificantly, which is aimed towardbusiness with NEC

the sustainable growth and mid- to

Corporation regarding

long-term enhancement of thethe purchase of thecorporate value of the Company

equipment and software,and its groups by utilizing his

and in such areas asknowledge and experience. He is

maintenance and leasealso expected to perform a checkfees, etc., the amountfunction on management bypaid to NEC Corporation

participating in decision-making atby the Company

the Board of Directors from an28amounted to ¥125

independent and objective

million, which accounted

standpoint, and to oversee thefor 0.0% of the non-management on behalf ofconsolidated net sales ofshareholders and other stakeholders

NEC Corporation.

by being involved in decision
making regarding nominations andremuneration of directors andexecutive officers as a member of
the Governance Committee.
Accordingly, the Company expects
that he will realize the further
improvement of quality of thedecision-making by the Board of
Directors and the enhancement of
the monitoring function. Mr.
Kinoshita is currently an Outside
Director of the Company and amember of the GovernanceCommittee and has been appointed
as an Outside Director as he iscurrently serving the role shown
above.
As he is considered devoid of risk of
conflict of interest with generalshareholders, he is designated an
independent officer.

29

Existence of optional committees equivalent to nomination

Yes

committee or remuneration committee

Status of establishment of optional committees, membership, and attributes of chairperson
Total
Committee
name

comm
ittee
mem
bers

Full-

Insidetime

direct

mem

ors

bers

Outsi

Outsi

de

de

Other

Chair-

directexperspersonors

ts

Optional
committee

Governancequivalent toenomination

Committee

3

0

1

2

0

0

3

0

1

2

0

0

OutsideDirectorcommittee
Optional
committee

Governancequivalent toeremuneration

Committee

OutsideDirectorcommittee
Supplementary remarks
1. Structure of the Committee and approach to independence
The Governance Committee consists of the Chairman of the Board, who is not an executive
officer, and all independent outside directors (if there is no Chairman of the Board, theCommittee shall consist solely of independent outside directors). As the Company requiresthat at least one-third of its directors be independent outside directors, the majority of themembers of the Governance Committee are independent outside directors (the reason thatthe ratio of the Company's independent outside directors is less than one-third of all
directors as of the date of filing of this report is described in Principle 4.8: Effective Use of
Independent Directors). In principle, the Chair of the Committee is selected from among
the Company’s independent outside directors.
Although as announced in the timely disclosure “Change of Outside Director (Obituary)”
released on January 9, 2024, one of the Company’s independent outside directors
regrettably passed away on January 4, 2024, and retired his position on the Board of
Directors effective the same day, as of the date of filing of this report the majority of themembers of the Company’s Governance Committee are independent outside directors.
2. Names of Committee members
Taeko Ishii(Outside Director; Chair)

Manabu Kinoshita(Outside Director)

Yoshiaki Nakazato(Chairman of the Board)

3. Authority and role of the Committee
The Governance Committee provides advice on the following matters:
1) Nomination and dismissal of directors, representative directors, qualified executive

30

qualified executive and executive officers2) Determination of remuneration and bonuses for directors and qualified executive3) Other material issues related to corporate governance in addition to the preceding
items
4. Status of activities
In fiscal 2021, four meetings were held (nomination: one time, remuneration; two times,
general governance: one time), with all members in attendance at all meetings.

31

Audit & Supervisory Board Members
Audit & Supervisory Board established
Number

of

Audit

&

Supervisory

Yes
Board

Members stipulated in articles of incorporation
Number

of

Audit

&

Supervisory

Board

Members

5

4

Status of coordination between Audit & Supervisory Board members, the accounting auditor,
and the internal auditing department.
The Internal Audit Department regularly undertakes internal audits on the status of businessexecution across the Group.
The Department provides an explanation of its audit plans to Audit & Supervisory Board
members and the Audit & Supervisory Board while passing on all relevant information. At thesame time, Audit & Supervisory Board members provide details of audit plans determined atmeetings of the Audit & Supervisory Board to the Internal Audit Department, accompany staffof the Internal Audit Department as required when conducting internal audits, and attend
meetings when reports on the results of internal audits are delivered to executive officers andthe heads of operational divisions. In fiscal 2022, Audit & Supervisory Board members
attended such meetings 19 times. KPMG AZSA LLC, the Company’s accounting auditor, audits
the consolidated financial statements and the effectiveness of the internal control overfinancial reporting. Audit & Supervisory Board members provide details of audit plans to the
independent the accounting auditor. Audit & Supervisory Board members in turn receive
explanations regarding audit plans and reports on audit results and reports reviewing eachquarter from the accounting auditor. In this manner, close collaboration is maintained
between the accounting auditor and Audit & Supervisory Board members.

32

Status of appointment of outside Audit & Supervisory
Board members
Number of outside Audit & Supervisory Board
members
Number of outside Audit & Supervisory Board
members designated independent officers

Appointed

22

Relationship with company (1)Name
Wataru Yoshida
Shoji Wakamatsu*

Attribute

Relationship with the company*
a

b

c

d

e

f

g

h

i

j

k

l

m

From anothercompany
Certified public
accountant

Categories of relationship with the company“〇” when a category applies to the person currently or recently; “△” when it applied in thepast.
“●” when a category applies to a close relative of the person currently or recently; “▲” when
it applied in the past.
a

An executive of the listed company or a subsidiary thereofb

A nonexecutive director or an accounting advisor of the listed company or a subsidiary
thereofc

An executive or a nonexecutive director of the parent company of the listed companyd

An auditor of the parent company of the listed companye

An executive of a sister company of the listed companyf

A person or an executive thereof for which the listed company is a major business
partnerg

A major business partner of the listed company or an executive thereofhA consultant or accounting or legal professional who receives a large amount ofmonetary consideration or other property from the listed company besides
remuneration as an officeri

A major shareholder of the listed company (or an executive of the said major
shareholder if it is a corporation)j

An executive (the said individual only) of a business partner of the listed company(where any of f, g, or h above do not apply)k

An executive (the said individual only) of a company with which there is mutual
appointment of outside officersl

An executive (the said individual only) of an organization that receives donations fromthe listed company

m

Other

33

Relationship with company (2)Supplementary
Name

Independe

remarks concerning

nt officer

applicable

Reasons for selection

categories
Mr. Yoshida has a wealth of financial
institutional experience and knowledgeof corporate management. He is
expected to carry out effective audits,
especially regarding finance andoverseas projects, based on his own
knowledge and experience in order toensure the soundness of the Group's
management and improve its corporate
value over the medium to long term,
while fully coordinating with full-time
Audit & Supervisory Board Members. In
addition, as part of the audit process he
WataruYoshidais expected to participate in important〇—

meetings, including Board of Directors
meetings, and during the decisionmaking process to actively express his
frank opinions from an independent andobjective standpoint, including not only
the legality but also the appropriatenessof proposals. Mr. Yoshida is currently an
outside Audit & Supervisory Board
member of the Company, and is
performing the role shown above
appropriately.
As he is considered devoid of risk of
conflictofshareholders,interestwithhedesignatedindependent officer.

34

isgeneralanMr. Wakamatsu has many years ofauditing and management experience at
an audit firm and a wealth of knowledge
about accounting. He is expected tocarry out effective audits, especiallyregarding accounting, based on his own
knowledge and experience in order toensure the soundness of the Group's
management and improve its corporate
value over the medium to long term,
while fully coordinating with full-time
Audit & Supervisory Board Members. In
addition, as part of the audit process heis expected to participate in important
meetings, including Board of Directors
meetings, and during the decisionmaking process to actively express his
Shoji
Wakamatsu〇

frank opinions from an independent and—objective standpoint, including not only
the legality but also the appropriatenessof proposals. Although Mr. Wakamatsu
has not been involved in corporate
management other than as an outside
Audit & Supervisory Board member, in
addition to the above reasons, he has
been involved in the management of anaudit firm, and accordingly theCompany has appointed him as an
outside Audit & Supervisory Board
Member as it has determined that he isable to properly perform the roles
stated above.
As he is considered devoid of risk of
conflictofshareholders,interestwithhedesignatedindependent officer.

35

isgeneralanIndependent officers
Number of independent officers

Updated

4

Other matters relating to independent officers
All the Company outside directors and Audit & Supervisory Board members meet the criteria
for independence established by the Tokyo Stock Exchange as well as our own internal
independence standards, and all outside directors and Audit & Supervisory Board members
have been declared as independent officers, pledging that there is no conflict of interest withthat of shareholders. We also publish our standards governing the independence of outside
officers on the following website as part of our Corporate Governance Guidelines [Article 6(3)-3 Independence Standards].
URL: https://www.smm.co.jp/en/ir/management/governance_policy/
As announced in the timely disclosure “Change of Outside Director (Obituary)” released on
January 9, 2024, one of the Company’s independent outside directors, Kanji Nishiura,
regrettably passed away on January 4, 2024, and retired his position on the Board of
Directors effective the same day.

Incentives
Status of implementation of measures to grantIntroduction of a system of performance-

incentives to directors

based remuneration

Supplementary remarks concerning applicable item
As of the conclusion of the 80th ordinary general meeting of shareholders (held on June 29,2005), the system of retirement benefits for directors was abolished. The remuneration of
the Company’s directors (excluding Chairman and Director and outside directors) is linked tobusiness performance each year.

Persons eligible to receive stock options

Supplementary remarks concerning applicable item36

Directors’ remuneration
Status of disclosure (of individual director

Only certain items individually disclosed

remuneration)

Supplementary remarks concerning applicable item
Total amount of directors’ remuneration
Directors whose total consolidated remuneration etc. is 100 million yen or more are disclosed
individually in the Company’s Annual Securities Report.
The Company’s Annual Securities Report and Business Report are posted on the Company’s
website for public examination.
The total amount of remuneration, etc., for each category of officer, the total amount of
remuneration, etc., by remuneration type, and the number of eligible officers are as follows.
1) Directors (excluding outside directors)- Total amount of remuneration, etc.: 405 million yen (includes 85 million yen in
director bonuses)- Total amount of remuneration etc. by remuneration type: Fixed remuneration 245
million yen, performance-based remuneration 160 million yen- Number of eligible officers: 52) Audit & Supervisory Board Members (excluding outside Audit & Supervisory Board
members)
Total amount of remuneration, etc.: 68 million yen
Total amount of remuneration etc. by remuneration type: Fixed remuneration 68
million yen
Number of eligible officers: 33) Outside Directors
Total amount of remuneration, etc.: 43 million yen
Total amount of remuneration etc. by remuneration type: Fixed remuneration 43
million yen
Number of eligible officers: 34) Outside Audit & Supervisory Board members
Total amount of remuneration, etc.: 24 million yen
Total amount of remuneration etc. by remuneration type: Fixed remuneration 24
million yen
Number of eligible officers: 2

37

Policy for determining remuneration

Yesamounts or calculation method

Disclosure of policy for determining remuneration amounts or calculation methods
1. Policy on determining the details of remunerations for each Director
As described above in I: Basic Philosophy of Corporate Governance, Capital Structure,
Corporate Data, and Other Basic Information; 1. Basic Philosophy; Disclosures pursuant
to specific principles of Japan’s Corporate Governance Code; Principle 3.1: Full disclosure;"(iii) Basic policies and procedures for the remuneration of senior management anddirectors."
2. Matters related to performance-based remunerations, etc.
1)

Details of performance indicators selected

The

indicators

employedbytheCompanytodetermine

performance-based

remunerations include consolidated results (profit attributable to owners of parent, profit
before tax), division results (return on capital employed [ROCE], free cash flows, andsegment income), the degree of attainment of personal targets under medium-to longterm management strategies, and safety record (number of occupational accidents).
2)

Reasons for selection of above indicators

With regards to the reasons that these indicators have been selected, the Company’s
consolidated results (profit attributable to owners of parent, profit before tax) werechosen as the Company views these indicators as key measures of its corporate
management performance, and has set profitability targets that it aims to achieve aspart of its long-term vision. Performance indicators for division results were selected inorder to evaluate the three criteria of efficiency, cash flows, and absolute value of profit
in a balanced manner. Regarding the degree of attainment of personal targets under
medium-to

long-term

management

strategies,

webelievethatthesteadyimplementation of plans with a medium-to long-term perspective is essential in order toincrease our corporate value in a sustainable manner. Regarding the setting of safety
record as a performance indicator, we believe that securing a safe workplace is ouroperating foundation as a company engaged in the mining and manufacturing industries,
including the smelting and refining industry.
3)

Method of calculating the amount of performance-based remunerations, etc.

The amount of performance-based remunerations, etc., is calculated by adding anamount reflecting individual performance to an amount of position-specific performancebased remunerations, etc.
i.

Methodofcalculatingtheamountofposition-specificperformance-based

remunerations, etc.
The amount of performance-based remunerations, etc., for each position is calculated
by multiplying the basic amount for calculation of the base compensation, which is
calculated from profit attributable to owners of parent, by the position-specificcoefficient. The amount of position-specific performance-based remunerations, etc.
related to basic remunerations shall be calculated using profit attributable to owners
38

of parent for the previous fiscal year, and the amount of position-specific performancebased remunerations, etc. related to bonuses shall be calculated using profit
attributable to owners of parent for the current fiscal year.
Amount of position-specific performance-based remunerations, etc. related to basic
remunerations = Profit attributable to owners of parent for the previous fiscal year x
Position-specific coefficient x Certain coefficients not based on performance
Amount of position-specific performance-based remunerations, etc. related to bonuses= Profit attributable to owners of parent for the current fiscal year x Position-specificcoefficient x Certain coefficients not based on performanceii. Method of calculating the amount reflecting individual performanceWith respect to the amount reflecting individual performance related to the basic
remunerations for the President and Representative Director, the total score shall becalculated based on a 4:1 ratio of “achievement level of the published forecast ofcompany-wide performance” and “achievement level of safety record” for the previous
fiscal year. The individual performance evaluation coefficient is determined, in therange of 90% to 160%, based on the predetermined coefficient table according to thetotal score (in this table, profit before tax is taken into account), and the amountreflecting individual performance is calculated.
With respect to the amount reflecting individual performance related to the basic
remunerations for Directors who concurrently serve as executive officers with special
titles (Executive Vice President, Senior Managing Executive Officers, Managing
Executive Officers), the total score shall be calculated by scoring the “comparison ofdivision results with the previous fiscal year,” “achievement level of the publishedforecast of division results,” “the degree of attainment of personal targets under
medium-to long-term management strategies,” and “achievement level of safety
record” each for the previous fiscal year, and weighting them at a ratio of 2:4:4:1, andthen the amount reflecting individual performance is calculated in the same manner as
above.
With respect to the amount reflecting individual performance related to the bonus for
the President and Representative Director, the total score shall be calculated based on
a 4:1 ratio of “achievement level of the published forecast of company-wide
performance” and “achievement level of safety record” for the current fiscal year. With
respect to the amount reflecting individual performance related to the bonus for
Directors who concurrently serve as executive officers, the total score shall becalculated by weighting “comparison of division results with the previous fiscal year,”“achievement level of the published forecast of division results,” “the degree ofattainment of personal targets” and “achievement level of safety record” each for thecurrent fiscal year at a ratio of 2:4:4:1, and the amount reflecting individual
performance is calculated in the same manner as above.
Amount reflecting individual performance related to the basic remunerations = Amountof basic remunerations for each position x Certain coefficients not based on
performance x Individual performance evaluation coefficient
Amount reflecting individual performance related to the bonus = Amount of bonus for39each position x Certain coefficients not based on performance x Individual performance
evaluation coefficientiii. Details of targets and actual results
Performance-based remunerations, etc. (basic remunerations), for Directors for thecurrent fiscal year is paid based on the performance of the previous fiscal year. Targets
linked to performance-based remunerations in the previous fiscal year included net
income attributable to owners of the parent of 104.0 billion yen on a consolidated basis,
profit before tax of 138.0 billion yen on a consolidated basis. With regard to divisional
operating results (segment income), target segment income was 37.0 billion yen in
the smelting and refining segment (aforementioned figures released in May 2021
results forecast). The target for safety record (number of occupational accidents of
employees in Japan in calendar year 2021) was one injury that resulted in absencefrom work and no more than five accidents of all types. Regarding performance of
these indicators, consolidated net income attributable to owners of the parent was
281.0 billion yen, consolidated profit before tax was 357.4 billion yen, and divisional
operating results (segment income) in the smelting and refining segment was 114.8
billion yen. For safety record (number of occupational accidents of employees in Japan
in calendar year 2021), there were 11 injuries that resulted in absence from work and
20 accidents of all types.

40Support system for outside directors (outside Audit & Supervisory Board members)
1.

The Company views the role and function of outside directors and outside Audit &Supervisory Board Members as follows.

1) Role and function of outside directors
Outside directors are expected to perform two functions: an advisory function and amonitoring function.
Regarding the advisory function, in order for the Company to achieve sustainablegrowth and increase its corporate value over the mid- to long-term, outside directors
are expected to enhance the quality of decision-making by the Board of Directors byproviding advice and making decision based on their experience and other factors,
without being bound by the Company's conventional way of thinking or frameworks.
Regarding the monitoring function, outside directors are expected to serve a check
function on management from an independent and objective standpoint via the Boardof Directors, as well as to supervise management on behalf of shareholders and otherstakeholders by providing advice during decision-making on director nomination,
remuneration, and other relevant matters as members of the Governance Committee.
2) Role and function of outside Audit & Supervisory Board Members
In order for the Company to achieve sound management and increase its corporate
value over the mid- to long-term, outside Audit & Supervisory Board Members are
expected to conduct effective audits based on their knowledge and experience in
specialized fields including finance, accounting, and legal matters, while maintaining
sufficient coordination with Standing Audit & Supervisory Board Members belonging
the Company.
In addition, as part of the audit process, outside Audit & Supervisory Board Members
are expected to participate in key meetings, including Board of Directors meetings,
and to actively express their forthright opinions from an independent and objective
standpoint during the decision-making process, including not only the legality but also
the appropriateness of proposals.
3) Outside Directors/Audit & Supervisory Board Members’ Liaison Committee
Outside Directors and Outside Audit & Supervisory Board Members receive reports at
Board of Directors meetings from the Internal Audit Department on the internal audit
plan and a summary of internal audits conducted in the previous fiscal year, as well as
ad hoc reports from the Internal Audit Department, Audit & Supervisory Board
Members, accounting auditors, and internal control divisions. Opportunities forexchange of opinion with Audit & Supervisory Board Members are also provided
periodically in order to promote mutual collaboration.
2.

In order to enable outside officers to execute the above roles and responsibilities
effectively, essential support is provided as follows.

1) To maximize the thoroughness of Board of Directors deliberations, materials are
distributed and explanations of agenda items given to outside directors and Audit &Supervisory Board members in advance.
2) In order to deepen outside officers’ understanding of Company business, they are
given opportunities to inspect the Company Group places of business. Opportunities
41

are also provided to address and explain large-scale projects and other subjects ofinterest to outside officers.
3) In order to share information and to enable the objective viewpoints of people
outside the Company to be reflected in management, meetings of an Outside
Directors Council consisting solely of outside officers and meetings between outside
officers and senior managers for direct exchanges of views are arranged.
Two personnel (occupying other positions concurrently) form a Board of Directors
secretariat and three personnel (two full-time, one occupying other positions concurrently)
form a secretariat for the Audit & Supervisory Board, both secretariats providing support
for the outside directors and outside Audit & Supervisory Board members respectively.

Persons who are retired president & representative directors
Names, etc., of advisers formerly president & representative directors, etc.
Service
Name

Position

Business/statusactivity

type/conditions(Full-time/parttime, with/without
remuneration )

—

—

—

—

Retirement
date from theoffice ofTerm ofpresident &officerepresentative
director—

Total number of advisers formerly president—

0& representative director, etc.

Other matters
The Company abolished its executive advisor system as of June 25, 2021.

42

2.

Matters

concerning

functionssuch

as businessexecution,

auditingandsupervision, nomination, and remuneration determination (Overview of the current
corporate governance system)

UpdatedThe Company’s governance is a system for ensuring that business execution and associatedmonitoring and supervision are each functioning fully within the Company’s management.
To achieve that it operates by using audit and supervisory board and executive officer
systems, conducting governance through a three-part organizational structure in which
decision-making and supervision is addressed by the Board of Directors, business execution
by the president and the executive officers, and auditing by the Audit & Supervisory Board
members and the accounting auditor. In addition, the Company has established a
Governance Committee in order to increase management transparency and enhance
corporate governance.
The Board of Directors conducts decision-making that includes the making of decisions onimportant matters relating to business execution such as those stipulated in the Companies
Act, and is responsible for monitoring functions over all corporate management, including
the performance of duties by the representative director and executive officers.
In accordance with laws and regulations and the Articles of Incorporation, the Board of
Directors delegates business-execution decisions to the representative director and executive
officers, clearly defining their authority and responsibilities. Fundamental to businessexecution decision-making by the representative directors and executive officers is the
conduct of investigation and screening followed by approval through systems such as theringi process, and meetings of the Management Committee will be convened in the event ofmanagerially important matters that necessitate deliberation. This system ensures thatrational management judgments are made from diverse perspectives and prudent decisionmaking takes place. In addition, the Company engages in sustainability promotion activities,
compliance activities, the Company’s own unique risk-management activities, and internal
control in order to address management issues that contribute to the sustainable
development of society, and to achieve sustainable business growth and enhance corporate
value.
All Audit & Supervisory Board members coordinate as necessary with other members, theInternal Audit Department, and the accounting auditor, including through the exchange of
information, auditing business execution by directors in accordance with Regulations of the
Audit & Supervisory Board, Audit & Supervisory Board Auditing Standards, laws andregulations, audit policies laid down by the Audit & Supervisory Board, audit plans, etc.
The specifics of the Company’s corporate governance system are set out below.
1.

Decision-Making and Supervision
1) Directors and Board of Directors
The Company’s Articles of Incorporation provide for up to 10 directors, each with a termof office of one year. The composition of the Board of Directors is characterized by its
diversity, being composed not only of internal officers with extensive knowledge of every
field of the Company’s business activities, but also of outside experts with knowledge,
experience, capabilities, and opinions with perspectives that differ from those of the43inside directors. In addition, with the aim of achieving more transparent management,
the Company has a policy of ensuring that at least one-third of the directors are
independent outside directors, and thus at the 98th ordinary general meeting ofshareholders held on June 23, 2023 selected three such directors, including a personwith experience as top manager, among its eight directors (the reason that the ratio of
the Company's independent outside directors is less than one-third of all directors as ofthe date of filing of this report is described in Principle 4.8: Effective Use of Independent
Directors). The selection of directors is conducted to the utmost extent on the basis ofeach candidate’s personal character, with no indispensable requirements for diversity
with regard to gender or nationality.
The Board of Directors is responsible for determining the execution of important businessmatters and supervising corporate management in general, including the execution ofbusiness by the representative director and corporate officers, and determines matters
stipulated in laws and regulations and the Articles of Incorporation, as well as importantmatters related to execution of the Company’s business. Standards defining the matters
the Board must discuss are clarified in internal regulations, such as the Board of Directors
Rules. Specifically, these matters include requirements stipulated in the Companies Act
of Japan, such as passing resolutions related to steps such as the disposal or takeoverof assets, borrowing, or investments valued above a certain limit, as well as working tostrengthen the Board’s monitoring function, including enhancing reporting that enables
the “discussion and deliberation of important management issues and policies, etc.” in
response to evaluations of the effectiveness of the Board of Directors. In addition, during
the fiscal 2021 evaluation of the effectiveness of the Board of Directors, the Company
recognized the opinion that it was necessary to review the items to be discussed by orreported to the Board of Directors in order to contribute to strengthening monitoring by
the Board. Accordingly, in October 2022, the Company conducted a comprehensive
review of the monetary standards and the items required to be discussed by the Boardof Directors in order to enhance the monitoring function while following the management
model in principle. We have striven to further strengthen the Board's monitoring function,
primarily led by the outside directors, by streamlining agenda items in order to secure
more time for discussion of each matter, while being mindful not to impair the Board's
management function.
In addition, with a view to further enhancing discussions at the Board of Directors
meetings, a new “matters for discussion” category was established on July 1, 2023, in
addition to matters requiring resolution and matters to be reported, in light of theopinions expressed during the fiscal 2022 evaluation of the effectiveness of the Board of
Directors. Going forward, the Board of Directors plans to hold discussions on
management strategies and important management issues from a mid- to long-term
perspective.
Regular Board of Directors meetings are held once per month, but the structure alsoenables extraordinary Board of Directors meetings to be held whenever required,permitting flexible decision- making. In fiscal 2022, 17 meetings were convened. The
attendance record of each officer in office as of March 31, 2023, is outlined below.
44

Name

Attendance Record

Yoshiaki Nakazato

17/17 (100%)(Director)

Attended all 17 Board of Directors meetings held (12 regular,
5 extraordinary)

Akira Nozaki

17/17 (100%)(Director)

Attended all 17 Board of Directors meetings held (12 regular,
5 extraordinary)

Toru Higo

17/17 (100%)(Director)

Attended all 17 Board of Directors meetings held (12 regular,
5 extraordinary)Nobuhiro Matsumoto

17/17 (100%)(Director)

Attended all 17 Board of Directors meetings held (12 regular,
5 extraordinary)Takahiro Kanayama

16/17 (94%)(Director)

Attended 16 (12 regular, 4 extraordinary) out of 17 Board of
Directors meetings held (12 regular, 5 extraordinary)Kazuhisa

17/17 (100 %)Nakano (Director)

Attended all 17 Board of Directors meetings held (12 regular,
5 extraordinary)

Taeko Ishii

17/17 (100%)(Director)

Attended all 17 Board of Directors meetings held (12 regular,
5 extraordinary)

Manabu Kinoshita

17/17(100%)(Director)

Attended all 17 Board of Directors meetings held (12 regular,
5 extraordinary)

Koji Imai

17/17 (100%)(Audit & Supervisory

Attended all 17 Board of Directors meetings (12 regular, 5

Board Member)

extraordinary)

Nozawa Tsuyoshi

13/13 (100%)(Audit & Supervisory

Attended all 13 Board of Directors meetings (9 regular, 4

Board Member)

extraordinary) held following appointment

Wataru Yoshida

17/17 (100 %)(Audit & Supervisory

Attended all 17 Board of Directors meetings held (12 regular,

Board Member)

5 extraordinary)

Shoji Wakamatsu

16/17 (100%)(Audit & Supervisory

Attended 16 (12 regular, 4 extraordinary) out of 17 Board of

Board Member)

Directors meetings held (12 regular, 5 extraordinary)

Resolutions by and matters reported to the Board of Directors are in turn reported to
Executive Officers’ Meetings to ensure that information is shared among officers.
45

2)

Governance Committee

The Company has established the Governance Committee to increase managementtransparency and enhance corporate governance. The Governance Committee iscomposed of the Chairman of the Board, who does not concurrently serve as an executive
officer, and independent outside directors (or solely of independent outside directors in thecase that there is no Chairman of the Board), and provides advice to the President froman objective standpoint regarding important corporate governance matters such as thenomination and remuneration of directors and executive officers, etc.
2.

Business Execution

1)

Delegation of authority by the Board of Directors
In accordance with laws and regulations and the Articles of Incorporation, the Board of
Directors delegates decision-making regarding business execution to the President andexecutive officers, and supervises the execution of duties by the President and executive
officers.

2)

Executive officer system
As provided by its Articles of Incorporation, the Company has adopted an executive officer
system.
To strengthen their executive capabilities, the executive officers’ authority andresponsibilities have been clearly defined, and substantial authority has been delegated tothem.
There are currently 23 executive officers (including four who serve concurrently as
directors). They are entrusted with important positions such as heading a business division,or a division or a department at the Company’s head office, and are granted specificauthority to perform their duties in each such position. In addition, executive officers reporton the status of business execution once a month at Executive Officers’ Meetings.
As in the case of directors, a system of performance-based remuneration has been
introduced for the remuneration of executive officers. Advice from the GovernanceCommittee is obtained with regard to the determination of the specific amounts ofremuneration.

3)

Management Committee
The membership of the Management Committee includes the president, senior managing
executive officers, and other related executive officers, and its meetings may also beattended by the chairman of the Board of Directors, outside directors, and Audit &Supervisory Board members.
The Management Committee deliberates on important matters requiring carefulconsideration from a wide range of perspectives prior to their submission for the Board of
Directors resolutions or approval by the president, deciding whether or not matters should
be submitted to the Board of Directors, and assisting the president’s decision-making.

4)

Sustainability Committee

The Company has systemized its social and environment initiatives as sustainability
46

promotion activities and is expanding them throughout the Group. In order to promotethese activities, the Sustainability Committee has been established. The Sustainability
Committee is comprised of the President, the executive officer in charge of the Corporate
Planning Department, and others, and may be attended by the Chairman of the Board,
outsidedirectors,

and

Audit

&

Supervisory

Board

members.

7

Sustainability

Subcommittees and 4 Management System Working Groups have also been establishedunder the Sustainability Committee, and the Company has also established the Corporate
Value Enhancement Strategic Committee, DX Promotion Committee, and Carbon Neutral
Promotion Committee.
5)Internal Control Committee
The Company has established an Internal Control Committee for the purpose of promoting
the creation of internal-control systems and maintaining and improving these systems byregularly evaluating their effectiveness. The Internal Control Committee consists of the
President, the executive officer in charge of the Internal Audit Department, and othermembers. Audit & Supervisory Board members may also attend committee meetings.

6)

Internal audits
The Internal Audit Department has been established for the purpose of conducting internal
audits as part of the auditing and supervision of business execution. This internal auditing
is conducted throughout the Sumitomo Metal Mining Group, the department generalmanager and staff members implementing internal audits on a regular basis. The Internal
Audit Department provides appropriate information, including reporting periodically to theBoard of Directors on its annual internal audit plans and a summary of the previous fiscal
year’s internal audits (including countermeasures in the case that serious problems are
discovered), and Audit & Supervisory Board members are present when the Internal Audit
Department reports internal audit results to executive officers and other personnel.

3. Auditing
1)

Audit & Supervisory Board members and Audit & Supervisory Board

The Company’s Articles of Incorporation provide for up to five Audit & Supervisory Board
members, and currently there are four (composed of two standing and two part-time[outside] members). The Company considers that the present composition and number ofAudit & Supervisory Board members is suitable for ensuring the appropriate managementof the Audit & Supervisory Board.
Standing Audit & Supervisory Board members belonging to the Company gather in-house
information in an accurate and timely manner, and audit operations appropriately basedon this information, while independent outside Audit & Supervisory Board members
conduct audits in a manner that takes advantage of knowledge of their respective specialist
fields and diverse perspectives.
Audit & Supervisory Board members audit the execution of duties by directors and othermatters in accordance with the audit plan determined at Audit & Supervisory Board
meetings. Standing Audit & Supervisory Board members formulate draft audit policies and47

plans, attend important meeting such as Board of Directors meetings, view important
documents approved, interview representative directors and other key persons, andperform site audits of offices, plants, and affiliated companies. Similarly, in addition toattending important meetings such as Board of Directors meetings, the Company's outside
Audit & Supervisory Board members also perform site audits together with standing Audit& Supervisory Board members. Audit Reports on site audits performed by Audit &Supervisory Board members are also shared with the representative directors and otherrelevant persons.
Meetings of the Audit & Supervisory Board are held once a month prior to the meetings ofthe Board of Directors on the days upon which regular Board of Directors meetings are
held, and other meetings are held whenever necessary. In fiscal 2022, 18 meetings wereconvened. The attendance record of each Audit & Supervisory Board member in office asof March 31, 2023, is outlined below.
Name

Attendance Record

Koji Imai

18/18 (100%)(Audit & Supervisory

Attended all 18 Audit & Supervisory Board meetings held

Board Member)
Nozawa Tsuyoshi

11/11 (100%)(Audit & Supervisory

Attended all 11 Audit & Supervisory Board meetings held

Board Member)

following appointment

Wataru Yoshida

18/18 (100%)(Audit & Supervisory

Attended all 16 Audit & Supervisory Board meetings held

Board Member)
Shoji Wakamatsu

18/18 (100%)(Audit & Supervisory

Attended all 18 Audit & Supervisory Board meetings held

Board Member)
Among the Audit & Supervisory Board members, Shoji Wakamatsu, who is an outside
member, is a qualified certified public accountant and a certified public tax accountant,and thus has an advanced level of expertise in the fields of finance and accounting.
2)

Accounting auditor

For fiscal 2022, the name of the Company’s accounting auditor, the certified public
accountants in charge of the audit, and details of the staff who assisted with it are as
set out below.
1) Name of accounting auditor
KPMG AZSA LLC
2) Certified public accountants in charge of the audit
Designated limited liability partners and engagement partners Kensuke Sodekawa,
Kenya Yakuwa, and Yukihiro Kase
3) Number of staff who assisted with the audit
Certified public accountants: 11; Others: 26
48

4. Conclusion of limited liability agreements
The Company has concluded agreements prescribed in Article 427 Paragraph 1 of theCompanies Act (liability limitation agreements) with the outside directors and Audit &Supervisory Board members, under which each officers’ liability shall be limited to 10 million
yen or to the minimum amount of liability prescribed by law, whichever is higher.

3.

Reasons for selection of present corporate governance system

UpdatedIn line with its Corporate Governance Basic Policy, which summarizes the Company’s basic
philosophy for corporate governance and the framework therefor, the Company believes thatits governance is a system that ensures that business execution and the associatedmonitoring and supervision are each functioning fully by using audit and supervisory board
and executive officer systems with which to conduct governance through a three-part
organizational structure in which decision-making and supervision is addressed by the Boardof Directors, business execution by the president and the executive officers, and auditing by
the Audit & Supervisory Board members and the accounting auditor.
Positioning Mineral Resources, Smelting & Refining, and Materials as its three core businesses,
the Company aims to realize its Long-term Vision “Becoming a World Leader in the NonFerrous Metals Industry.” Since all three businesses are related to non-ferrous metals, they
have a mutual organic relationship and their business contents and scale are such that theBoard of Directors can make decisions itself regarding diverse management issues.
Furthermore, from the viewpoint of the stronger coordination currently being promoted
among the three businesses, it will further stimulate the Company’s growth if the Board of
Directors itself comprehensively makes decisions rather than giving strong independence toeach business segment and permitting them to make their own decisions. To this end, we
consider that in principle a management model would be appropriate for the Company’s
governance, rather than a monitoring model that oversees overall business execution after
the fact.
Furthermore, in view of the distinctive characteristics of the Sumitomo Metal Mining Group’sbusiness operations, it is important to strengthen the management infrastructure(particularly regarding compliance, safety, and the environment) and therefore necessary toestablish a system whereby auditors can point out issues to directors and executive officers
without hesitation. From this viewpoint, we have adopted an organizational structure of acompany with an Audit & Supervisory Board in which auditors with guaranteed independent
authority can be expected to exercise their auditing functions stably over a period of four
years. At present auditors do not have the right of convocation regarding decisions of theBoard of Directors or the right to vote on the Board of Directors. The resulting inability ofauditors to propose the removal of a director to the Board of Directors is an issue forcompanies with an Audit & Supervisory Board. We are striving to overcome this issue by
appointing multiple outside directors (at least one third of members), have them become
members of the Governance Committee, and deal with the appointment and dismissal of
directors and executive directors in the Governance Committee.
The reason that the ratio of the Company's independent outside directors is less than onethird of all directors as of the date of filing of this report is described in Principle 4.8: Effective
Use of Independent Directors.

49

III

Status of Implementation of Measures Relating to Shareholders and Other

Stakeholders

1.

Measures to invigorate general meetings of shareholders and facilitate theexercise of voting rights
Supplementary remarks
In order to enable shareholders to fully deliberate theagenda of the general meeting of shareholders, theCompany

strivesconvocation

notice

to
at

send

out

and

disclose

the

an

early

date

each

year.

Notification of the 98th ordinary general meeting of
Early dispatch of notices ofconvocation of general meetingsof shareholders

shareholders

wasdisclosed

on

the

Tokyo

Stock

Exchange and the Company's website on May 25 of thecorresponding year, prior to the sending of notices ofconvocation.
The Company sends out notices of convocation three
weeks prior to the date of general meetings ofshareholders. The notice of convocation of the 98th
ordinary general meeting of shareholders was sent onJune 1, 2023.

Scheduling AGMs avoiding theThe 98th ordinary general meeting of shareholders waspeak dayheld on Friday, June 23, 2023.

Use of electronic means toexercise voting rights

Since the 83rd ordinary general meeting of shareholders
on June 26, 2008, it has been possible to exercise voting
rights by electronic means (Internet, etc.)

Participation in Electronic Voting

Since the 83rd ordinary general meeting of shareholders

Platform and other steps toon June 26, 2008, it has been possible for institutional

enhance conditions for voting byinvestors to exercise voting rights through the Electronic

institutional investors

Voting Platform.
English versions of the convocation notice, etc. were

Provision of convocation notices

disclosed on the Tokyo Stock Exchange and the(summaries) in English

Company’s website on May 26, the day following thedisclosure of the Japanese-language versions.
Materials related to the ordinary general meeting ofshareholders, such as convocation notices, etc. are also
posted on the Company’s website.

Other

In addition, the proceedings of the ordinary general
meeting of shareholders are streamed live online inorder to enhance the disclosure of information toshareholders.

50

2.

IR activities

UpdatedExplanation by
Supplementary remarks

company
representative inpersonIn order to obtain the trust ofshareholders and investors and receive
an appropriate appraisal, the Company
strives to voluntarily and proactively
disclose information that it deems
Preparation andbeneficial to shareholders and investors,

publication of disclosurein addition to items mandated forpolicydisclosure by stock exchange rules, theFinancial Instruments and Exchange Act,and other laws and regulations.
An IR policy has been laid down and isposted on the Company’s website.
https://www.smm.co.jp/en/ir/policy/
1)

Results briefings held in
teleconference format upon eachannouncement of quarterly results.

2)

Briefings to explain progress of theCompany’s management strategy asa rule twice a year upon release ofRegular briefings foranalysts andsecond-quarter and full-year results.
3)

Briefings at times of importantannouncements, such as of three-institutional investors

Yes

year business plans.
4)

Briefings regarding individual
businesses, etc. are held asnecessary.
In fiscal 2022, the Company held
briefings on its sustainability
initiatives.

•

Representative directors, otherofficers, and members of theInvestor Relations Department visit

Regular briefings foroverseas investors on an annual

overseas investors

basis, and individual meetings withinstitutional investors in North
America, Europe, and Asia are held
as necessary.

51

Yes

•

The Company also participates in avariety of conferences hosted by
securities firms.

IR materials such as financial results andother materials for timely disclosure,annual securities reports/quarterly
reports, results-briefing materials,
conference materials, integrated reports,
Posting of IR materials

sustainability report, stock information,

on website

convocation notices for general meetingsof shareholders, business reports,
resolution notices, shareholder news, andpress- release materials are posted on
the Company’s website.
https://www.smm.co.jp/en/ir/

Establishment of IR
unit (staff in charge)

The Company has established the Public
Relations&

Investor

Relations

Department.
•

The Company holds multiple briefings
for individual investors at securities
firms, etc. (held twice in fiscal 2022).

•

The Company is working to enhance
its corporate communications andOther activities

improveits

websiteinorder topromote interest among individual
investors.

The

Company

also

responds diligently to inquiries fromindividual

investors

received

telephone or other channels.

52

by

3.

Measures to respect the position of stakeholders
Supplementary remarks
Through the SMM Group Corporate Philosophy, SMM GroupInternal rules andother provisions forrespecting the positionof stakeholders

Management Vision, and Sumitomo Metal Mining Group’s
Sustainability Policy, the Company is committed to fulfilling its
responsibilities to stakeholders and actively working to build asustainable society. As part of that, the Company aims to ensure
proper information disclosure to its shareholders and otherstakeholders.

Implementation ofenvironment
conservation
activities, CSR
activities, etc.

On October 1, 2008, the Company systemized its existing socialand environment initiatives as sustainability promotion activities
to expand them throughout the Group. In the Sumitomo Metal
Mining Group’s Sustainability Policy, the Company states its
commitment to addressing management issues that contributeto the sustainable development of society, thereby achieving
sustainable business growth and enhancing its corporate value.
The goal of Sumitomo Metal Mining Group sustainability
promotion activities is to ensure sustainable co-existence withsociety and the global environment.
Sustainable co-existence with the global environment meansthat the Company will be ever mindful of the fact that its
corporate activities depend on a healthy planet and that the
Earth’s resources are limited.
Sustainable co-existence with society means that, through suchmeans as dialogue and interaction with stakeholders, theCompany is endeavoring to enhance enterprise value.
The Sustainability Committee (headed by the president) has
been established to ensure promotion of sustainability promotion
activities. Under this, 7 Sustainability Subcommittees and 4
Management System Working Groups have also been
established, and the Company has also established the
Corporate Value Enhancement Strategic Committee, DX
Promotion Committee, and Carbon Neutral Promotion
Committee. The 7 Sustainability Subcommittees formulate andwork to achieve nine “Visions” in relation to the 11 MaterialIssues outlined in its “Vision for 2030.” The 4 Management
System Sectional Committees work to address issues related torisk management, compliance, quality, and responsible mineralprocurement. The Corporate Value Enhancement Strategic
Committee is dedicated to enhancing corporate value by
ensuring the sustainable growth of the Group’s business
operations. The DX Promotion Committee and the Carbon
Neutral Promotion Committee are working respectively toachieve digital transformation (DX) and carbon neutrality basedon the SMM Group Corporate Philosophy, the SMM GroupManagement Vision, and the SMM Group “Vision for 2030.”
In order to further strengthen sustainability promotion activities
and SDGs and ESG correspondence, in April 2022, in accordancewith the restructuring of its sustainability promotion framework,
53the Company renamed the former CSR Department establishedin April 2019, to the Sustainability Dept.
Previously, the status of the Sumitomo Metal Mining Group’s
sustainability promotion activities was reported in the annual
Integrated Report. However, from fiscal 2023, in addition to theIntegrated Report, a new annual Sustainability Report has been
published to expand and enhance the disclosure of sustainabilityrelated information (the most recent issue was published in
October 2023).
The Sustainability Report and the Integrated Report are
published on the Company's website.
Formulation of policies
for provision of
information to
stakeholders

The Company has formulated an IR Policy. It is posted on thefollowing Company website.
https//www.smm.co.jp/en/ir/policy/
Initiatives to promote diversity:
For the Company, a company that seeks to be a “World Leader
in the Non-Ferrous Metals Industry,” it has become increasingly
important to create a working environment in which diverse
human resources can become more active, and company-wide
steps are being taken to create such an environment.
In July 2012 the Company formed the Female Activation Support
Group, and in October 2015 established the Diversity Promotion
Section within the Human Resources Development Department

Other(currently the Human Resources Dept.), and has conducted arange of initiatives to assist the creation of an environment thatenables diverse human resources to manifest their fullcapabilities, and also promote respect for human rights.
In addition to initiatives related to women, foreign nationals, andpersons with disabilities, the Company also implements a variety
of measures to support employees at different stages of theirlives, including promoting awareness of available systems among
employees raising children or caring for family members andworkplace training programs as well as LGBT awareness training
for executives and employees.

54

IV

Matters Relating to Internal-Control Systems, etc.

1.

Basic approach to internal-control systems and status of development
1.

Basic policy
The building of internal control is one of the most important management issues for
ensuring the sustained growth of the Sumitomo Metal Mining Group (including Sumitomo
Metal Mining, both here and hereinafter). With regard to the matters referred to in item 2
onward, the policy is to build a structure in which Sumitomo Metal Mining Group officers(including executive officers, both here and hereinafter) and employees can all play theirrespective roles and responsibilities that are clearly defined, and to build a structure thatcan be revised in a timely and appropriate manner and improved constantly.

2.

Systems to ensure that the performance of duties by the Company’s directors andemployees conforms with laws and regulations and the Articles of Incorporation(Article 362(4)(vi) of the Companies Act, and Article 100(1)(iv) of the Ordinance for
Enforcement of the Companies Act)
1) The Company endeavors to nurture a corporate culture in which duties are performed
in a sound and legally compliant manner, by having officers set an example ofcompliance with the SMM Group Code of Conduct, which sets out the standards ofconduct required of officers and employees, and by having officers educate employees
and ensure they are thoroughly acquainted with it.
2) The system in place is one in which, based on the Regulations of the Board of Directors,
agenda items and matters reported at meetings of the Board of Directors are compliant
with the Companies Act. In addition, matters of particular management importanceare considered from diverse, expert perspectives, including with regard to legality, in
meeting formats or through the ringi process in accordance with rules such as theRegulations on Head-Office, etc. Authority Criteria, the Management Committee
Regulations, and the Approval Regulations.
3) With regard to the status of the performance of duties by officers and employees,
internal audits by the Internal Audit Department are conducted regularly and whenevernecessary. The Internal Audit Department reports to the Board of Directors on aregular basis regarding the internal audit plan for the current fiscal year and asummary of the internal audits conducted the previous fiscal year (including the
response status to any major problems identified, if any.)4) Also in place is an internal reporting hotline system to ensure that, if the performanceof duties by officers or employees is in violation of laws, regulations, the Articles ofIncorporation, etc., the said violations do not go ignored or unaddressed.

3.

Systems for the storing and management of information relating to the performanceof duties by directors of the Company (Article 100(1)(i) of the Ordinance for
Enforcement of the Companies Act)
Minutes of general meetings of shareholders, minutes of Board of Directors meetings, ringi
documents, and other information relating to the performance of duties by officers are
stored and managed appropriately in accordance with laws and regulations, the Document

55

Regulations, the Approval Regulations, and other rules.
4.

Regulations and other systems relating to management of risk of loss by the Company(Article 100(1)(ii) of the Ordinance for Enforcement of the Companies Act)To address risk management, the Regulations on Risk-Management Systems have been
established and the following framework is used to systematically implement companywide risk management. Units that include management personnel have been establishedto pursue this implementation. The president has overall control of risk management as
the senior officer responsible, and this activity is conducted systematically on a companywide basis.
1) With regard to management and business risks associated with the implementation of
growth and business strategies and cross-organizational risks, addressing the risks andconsidering in meetings and setting mid- to long-term policy and directions.
2) With regard to individual risks such as Quality, Environment, Compliance, head-officeorganizations, and units with jurisdiction over each such risk have instituted internal
regulations and rules and are addressing the risks on the basis of the risk-management
structure they created.
3) With regard to critical situations, addressing by transitioning to crisis management
system based on internal regulations.
5.

Systems to ensure that the Company’s directors perform their duties efficiently(Article100(1)(iii) of the Ordinance for Enforcement of the Companies Act)
1) The executive officer system has strengthened those officers’ executive capabilities byclearly defining their authority and responsibilities and delegating substantial authority
to them. Specifically, the executive officers are entrusted with important positions suchas heading a business division, or a division or a department at the Company’s head
office, and are granted specific authority to perform their duties in each such position
pursuant to the Regulations on Head-Office, etc. Authority Criteria and other rules.
2) Appropriate allocation of management resources within the Sumitomo Metal Mining
Group is conducted in accordance with three-year business plans, budgeting systems,
etc. In addition, performance-management systems enable the progress of businessplans within the Group to be managed, and a system is in place under which
performance assessments can be reflected in the remuneration of management andother personnel.

6.

Systems to ensure the appropriateness of business within the corporate group
comprising the Company and its subsidiaries (Article 100(1)(v) of the Ordinance for
Enforcement of the Companies Act)
1) System for the reporting to the Company of matters relating to the performance of
duties by directors, etc., of subsidiaries (Article 100(1)(v)(a) of the Ordinance for
Enforcement of the Companies Act)
A system has been built to enable prior consultation, etc., with the Company to take placein accordance with internal regulations and rules when decisions are taken on importantmanagement matters at subsidiaries. Another system has been built for reporting to theCompany regularly with regard to business results and whenever important businessmatters arise.
562) Regulations and other systems relating to management of risk of loss by subsidiaries(Article 100(1)(v)(b) of the Ordinance for Enforcement of the Companies Act)In accordance with the Regulations on Risk-Management Systems, a system has been built
for the promotion and monitoring of risk management at subsidiaries in a manner tailoredto accord with factors such as the characteristics of the business being conducted and of
the local region.
3) Systems to ensure that subsidiaries’ directors, etc., perform their duties efficiently(Article 100(1)(v)(c) of the Ordinance for Enforcement of the Companies Act)a.

By means of three-year business plans, budgeting systems, etc., a system has
been built to indicate Sumitomo Metal Mining Group management policies tosubsidiaries and to make it possible for the Company to participate in theformulation of subsidiaries’ business plans and budgets.

b.

A system has also been built for assigning officers from the Company tosubsidiaries and making it possible for them to participate in decision-making andother tasks with regard to important management matters at subsidiaries.

4) Systems to ensure that the performance of duties by subsidiaries’ directors, etc., andemployees conforms with laws and regulations and the Articles of Incorporation(Article 100(1)(v)(d) of the Ordinance for Enforcement of the Companies Act)a.

The Company has built a system for nurturing a corporate culture in which duties
are performed at subsidiaries in a sound and legally compliant manner, by
establishing the SMM Group Code of Conduct that is in principle applicable to all
subsidiaries, by having officers at each subsidiary set an example of compliancewith the code, and by having those officers educate the subsidiary’s employees
and ensure they are thoroughly acquainted with it.

b.

With regard to the status of business execution at subsidiaries, internal audits by
the Company’s Internal Audit Department are conducted regularly and whenevernecessary. The Internal Audit Department reports to the Board of Directors on aregular basis regarding the internal audit plan for subsidiaries for the current fiscal
year and a summary of the internal audits conducted the previous fiscal year(including the response status to any major problems identified, if any.)c.

Also in place is an internal reporting hotline system to ensure that, if theperformance of duties by subsidiaries’ officers or employees is in violation of laws,
regulations, the Articles of Incorporation, etc., the said violations do not go ignoredor unaddressed.

57

7.

Matters relating to employees in cases in which Audit & Supervisory Board members
request the assignment of employees to assist them in their duties (Article 100(3)(i)of the Ordinance for Enforcement of the Companies Act)
Employees are assigned to work as Audit & Supervisory Board secretariat personnel inorder to support Audit & Supervisory Board members in the performance of their duties.
The number of secretariat members, their required qualifications, working arrangements,and other factors are determined through discussions with the Audit & Supervisory Board
Members.

8.

Matters relating to ensuring the independence from directors of the employees referred
to in 7 above and the effectiveness of instructions to those employees (Article
100(3)(ii) and (iii) of the Ordinance for Enforcement of the Companies Act)
1) If there are to be staff changes among Audit & Supervisory Board secretariat personnel,
the Audit & Supervisory Board members will be consulted in advance.
2) If Audit & Supervisory Board secretariat personnel do not abide by Audit & Supervisory
Board members’ instructions, and Audit & Supervisory Board members request they
be replaced or otherwise addressed, such a request will be dealt with seriously.

9.

Systems for the Company’s directors and employees, as well as subsidiaries’ directors,
auditors, and employees, to report to the Company Audit & Supervisory Board
members (Article 100(3)(iv) of the Ordinance for Enforcement of the Companies Act)
1) A system has been built to ensure that matters required to be reported to theCompany’s Audit & Supervisory Board members pursuant to the Companies Act orother laws are certain to be so reported, by prescribing matters to be reported to theBoard of Directors in the Regulations of the Board of Directors and other internal
regulations.
2) If illegal acts, etc., occur within the Sumitomo Metal Mining Group, they are reported
to the Company’s standing Audit & Supervisory Board members in accordance with
the Basic Compliance Regulations.
3) With regard to the status of use of the internal reporting hotline system, a system has
been built for reporting to the Company’s standing Audit & Supervisory Board
members in accordance with the Internal Reporting Regulations.
4) The results of internal audits by the Company Internal Audit Department relating to
the status of execution of Sumitomo Metal Mining Group business are reported to allof the Company’s Audit & Supervisory Board members.

10.

System for ensuring that the persons reporting incidents referred to in 9 above do notreceive unfavorable treatment because they have made those reports (Article
100(3)(v) of the Ordinance for Enforcement of the Companies Act)

It is stated explicitly in the Internal Reporting Regulations, etc., that it is prohibited to give
unfavorable treatment to persons using the internal reporting hotline system because they
have used the said system.
11.

Matters relating to policy on procedures for the prepayment or reimbursement ofexpenses arising in relation to the performance of duties by Audit & Supervisory Board
members or on other treatment of expenses or debts arising in relation to theperformance of the said duties (Article 100(3)(vi) of the Ordinance for Enforcement of58

the Companies Act)
When Audit & Supervisory Board members request the Company to prepay or reimburse
expenses, etc., in relation to the performance of their duties, the said expenses or debts
are dealt with pursuant to the Companies Act.
12.

Other system for ensuring that audits by Audit & Supervisory Board members are
conducted effectively (Article 100(3)(vii) of the Ordinance for Enforcement of theCompanies Act)

1) When important management meetings are held, such as those of the Management
Committee and management information liaison meetings, Audit & Supervisory Board
members are given the opportunity to attend them in accordance with internal
regulations and rules.
2) Ringi documents to be approved by the president are shown to the standing Audit &Supervisory Board members, with the exception of items specified by standing Audit& Supervisory Board members.

2. Basic approach to elimination of antisocial forces, and status of implementation
1.

Basic approach
The SMM Group Code of Conduct has been instituted as the set of standards of conduct
required of officers and employees of the Company and its Group companies, and it
declares, both in-house and externally, the severance of relationships with antisocial forces
as follows.
SMM Group Code of Conduct
15.

Severance of Relationships with Socially Disruptive Forces

We will staunchly eliminate socially disruptive forces and have no relations whatsoever
with them.
2.

Status of implementation of measures to eliminate antisocial forces
Sumitomo Metal Mining and its Group companies adhere to the SMM Group Code of
Conduct and have also formulated a manual for handling improper demands with the aimof severing relationships with antisocial forces. Details of the status of implementation of
the in-house structure and implementation measures are as follows.
1)

In order to ensure that basic policy for the severance of relationships with antisocial
forces is entrenched firmly, all officers and employees of the Company and its Group
companies are familiarized with the SMM Group Code of Conduct by the provisionof training, particularly at the time employees are hired, and also of other educationand training.

59

2)

3)

4)

If improper demands are made by antisocial forces, or a situation occurs thatsuggests they may be imminent, an organizational response is made in accordancewith the manual for handling improper demands under the overall control of thegeneral manager of the General Affairs Department.
In order to sever relationships with antisocial forces, the Company and its Group
companies have built close collaborative relationships with police stations and othersuch dedicated organizations, providing them with information, obtaining advice,
etc. In addition, they have created structures for obtaining legal advice from thelaw firms they retain.
The Company and its Group companies also participate actively in classes andtraining course held by organizations such as Centers for the Elimination of
Boryokudan, and endeavor to gather up- to-date information.

60

V

Other Matters

1.

Introduction of defense measures against takeovers
Introduction of defense measures against takeovers

No

Supplementary remarks concerning applicable item
The basic policy regarding the persons who control decisions on the Company’s financial
and business policies
Overview of basic policy
The Company will not reject a large-scale acquisition of the shares from the outset if itwill contribute to the enterprise value of the Company and, in turn, the common
interests of its shareholders. The Company also believes that any decision on a
proposed acquisition that would involve a transfer of control of a stock company must
ultimately be made in accordance with the intent of its shareholders as a whole.
Nonetheless, there are some forms of corporate acquisition that deteriorate thecorporate value of the target company and the common interests of its shareholders.
The Company believes that persons who would make a large-scale acquisition of sharesin the Company in a manner that is harmful to the enterprise value of the Company or
the common interests of its shareholders would be unsuitable as a person who would
control decisions on the Company’s financial and business policies. The Company also
believes that it is necessary to ensure the enterprise value of the Company and, in turn,the common interests of its shareholders, by taking the necessary and reasonablecountermeasures against a large-scale acquisition by such persons.
From the above perspectives, the Company previously decided to introduce
countermeasures to be taken if the shares in the Company are subject to a large-scaleacquisition.
However, there has recently been an increasing number of cases in Japan where
shareholders’ intent with respect to the necessity of takeover defense measures against
a large-scale acquisition of shares initiated without obtaining the consent of the target
company’s board of directors is confirmed at the time when a proposal for a large-scaleacquisition is actually made by a specific person (i.e., acquirer) based on the specificfeatures of the acquirer and the details of the proposal, as well as the purpose, manner,and terms of the large-scale acquisition and other specific facts. Taking into account the
recent trend described above and dialogue with institutional investors, the Company has
decided not to renew its takeover defense measures at a stage where a specific acquirer
has not emerged. The Company believes that it is desirable to confirm shareholders’intent on appropriate countermeasures as necessary when an acquirer has actually
emerged and a proposal for a large-scale acquisition of the shares in the Company is
made.
The Company continues to strive to ensure and enhance its corporate value and thecommon interests of its shareholders by promoting its 3-Year Business Plan under the61

fundamental strategy of aiming to become “a world leader in the non-ferrous metals
industry” as stated in its long-term vision, and if the shares in the Company are subject
to a large-scale acquisition, the Company will take appropriate measures as necessary
under the circumstances and to the extent permitted under the Financial Instruments
and Exchange Act, the Companies Act, and other relevant laws and regulations after
requesting the acquirer to provide necessary and sufficient time and information to
enable the shareholders to make a decision appropriately on whether or not to accept
the proposal and respecting the opinions of independent outside board members.

2.

Other matters concerning the corporate governance system, etc.

Internal system for timely disclosure of corporate information
1)

Corporate philosophy and code of conduct

In December 2003, the Company instituted the SMM Group Corporate Philosophy, settingout what the Company aims to achieve, and the SMM Group Code of Conduct, which lays
down the behavioral standards for all officers and employees required for fulfilling thecorporate philosophy, and in April 2004 they were both put into effect. The SMM Group
Code of Conduct was subsequently revised in October 2008, April 2015 and October 2022
in parallel with changes in the business environment.
The SMM Group Corporate Philosophy includes a pledge to “fulfill its responsibilities to its
stakeholders,” and thus proper information disclosure is a moral obligation for theCompany.
The SMM Group Code of Conduct includes “Compliance: Abidance by Laws and Rules,”where a pledge is made to “comply with foreign and domestic laws and rules, and conformto social norms.”
2)

Systems based on internal regulations

Adhering to the SMM Group Corporate Philosophy and the SMM Group Code of Conduct, inorder to address information disclosure appropriately and in a fair and timely manner, theCompany sets out rules for managing insider information in the Regulations on Disclosureof Information to Media Organizations and Investors and the Regulations on Insider
Trading Prevention and Information Management.
Specifically, the handling of information relating to decisions made, information relating toevents, and information relating to financial results (hereinafter collectively referred to as“Important Facts”) is as follows. (a. below is stipulated in the Regulations on Insider
Trading Prevention and Information Management, and b. and c. below are provided for in
the Regulations on Disclosure of Information to Media Organizations and Investors.)a.

If Important Facts arise or are predicted to arise at the Company or its subsidiaries,
the heads of the departments with jurisdiction over those Important Facts (in thecase of subsidiaries, the departments with jurisdiction over those subsidiaries) filereports to that effect to the general manager of the Legal Department.

b.

With regard to the Important Fact so reported, the general manager of the Legal
Department then decides whether that fact falls into the category of a matter for62

timely disclosure, and notifies the general manager of the Public Relations &Investor Relations Department, the officer responsible for information handling.
c.

The general manager of the Public Relations & Investor Relations Department
makes disclosure in accordance with the regulations laid down by the Tokyo Stock
Exchange or other such institution.

3)

Timely-disclosure screening through the ringi process

Fundamental to business decision-making at the Company is the conduct of investigationand screening followed by approval through the ringi process. Screening for timely
disclosure is conducted through ringi documents that are circulated during this decisionmaking process as the circumstances demand in each case63

Flowchart for Timely Disclosure of Corporate Information

64

Corporate Governance System

General Meeting of Shareholders

Decision-Making and Supervision

Auditing
Independent

Audit &

Board of Directors

Coordination

Governance
ReportingBusiness Execution

Reports to All
Audit&Supervisory Board

PresidentInternal Control
Committee

Executive
Officers

Management
Committee

OperatingInternal Audit
Department

7 Sustainability
subcommittees

4 Management
Systems

Sustainability Committee

Corporate Value
Enhancement65

DX Promotion
Committee

Carbon Neutral
Promotion
Committee

Skills Matrix for Board of Directors
CategoKnowledge, experience, ability, etc. possessed by Directors and Audit & Supervisory Board Members that theryCompany believes will contribute significantly to the effectiveness of the Board of Directors.
Name

Yoshiaki Nakazato
Akira

Directors

Nozaki
Toru Higo
Nobuhiro
Matsumoto
MasaruTakebayashi

GeneralGlobalCorporate

Capability

Business/

Management/(International

Marketing

Sustainability

Experience)

R&D/

Quality/

Manufacturing/

Safety/Engineering

Environment

Finance/

Human

Legal/

Accounting

Resources

Compliance

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

Taeko Ishii

Audit &
Supervisory
Board
Members

Manabu Kinoshita

〇
〇

〇

〇

Koji Imai
Tsuyoshi Nozawa
Wataru Yoshida

〇
〇

〇

〇
〇

〇

〇
〇

Shoji Wakamatsu

〇

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〇

Notes 1. The Company has created the skills matrix for directors and Audit & Supervisory Board Members based on II.3 “Reasons forselection of present corporate governance system” above. Each skill item has been selected through discussions by the Board of Directors,
focusing on those required to realize the Company's long-term vision and “Vision for 2030.” As the knowledge, experience, ability, insight,
and other attributes required of the Company's Board of Directors may change in response to changes in management strategies and theexternal environment, the Board of Directors will continue to discuss the necessary knowledge, experience, ability, insight, and otherattributes, and update the skills matrix as necessary.
2. For the policies and procedures for nominating director and Audit & Supervisory Board Member candidates, refer above to I. Basic
Philosophy of Corporate Governance, Capital Structure, Corporate Data, and Other Basic Information; Disclosures pursuant to specificprinciples of Japan’s Corporate Governance Code; Principle 3-1: Full Disclosure “(iv) Policies and procedures in the nomination of director
candidates, appointment or dismissal of senior management, and nomination of Audit & Supervisory Board member candidates".
3. Fields in which the Company believes directors and Audit & Supervisory Board Members can make a particular contribution to theeffectiveness of the Board of Directors are indicated with a "〇". In addition, the Company has established the following guidelines todetermine whether members fulfill each respective requirement.

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Fields

Guidelines for fulfillment

General・Experience as a corporate officer (director with representative rights) of a publicly listed company or equivalent

Corporatecompany

Management/

・Knowledge, experience, etc. that contributes to “strengthening the management base” as outlined in “what the

Sustainability

Board of Directors should ideally be” established by the Company.
・Experience as a director, division head, department head or equivalent managerial position, or experience in chargeof practical operations in a division related to sustainability such as ESG/CSR / experience working for an external
evaluation organization
・Consulting/academic research experience, etc. in the General Corporate Management/Sustainability field・Experience holding responsibility for conducting dialogue with shareholders, local community, local residents, etc.

Global Capability

・Experience at an overseas subsidiary as a corporate officer, in business operations, or on assignment / Experience at(Internationalan overseas office of a government agency

Experience)
Business/・Experience as president, officer responsible for corporate planning, division head, department head or equivalentMarketingmanagerial position, or experience in charge of practical operations.
・Experience as a responsible officer, division head, department head or equivalent managerial position, or experiencein charge of practical operations in a division related to the Company's core businesses (Mineral Resources, Smelting& Refining, Materials).
・Experience as a responsible officer, division head, department head or equivalent managerial position, or experiencein charge of practical operations related to mergers and acquisitions in business divisions or business investments.
・Experience in charge of practical operations at a financial institution, investment bank, or professional services firm
・Experience as president or equivalent officer of an affiliate (operating company).
・Experience as a responsible officer, division head, department head or equivalent managerial position, or experiencein charge of practical operations in a division related to sales and marketing.

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R&D/

・Experience as a responsible officer, division head, department head or equivalent managerial position, or experience

Manufacturing/in charge of practical operations in a division related to research and development.

Engineering

・Experience as a responsible officer, division head, department head or equivalent managerial position, or experiencein charge of practical operations in a division related to manufacturing technology/management or engineering /Possession of international qualifications related to the manufacturing technology/management or engineering field.

Quality/・Experience as a responsible officer, division head, department head or equivalent managerial position, or experience

Safety/in charge of practical operations in a division related to quality/safety/environmental management.

Environment

・Possession of auditor qualifications related to public certification bodies for quality, safety, and the environment,such as ISO.

Finance/・Experience as a responsible officer, division head, department head or equivalent managerial position, or experience

Accounting

in charge of practical operations in a division related to financial management or financing / Experience in charge ofpractical operations related to finance at a financial institution.
・Experience as a responsible officer, division head, department head or equivalent managerial position, or experiencein charge of practical operations in a division related to the accounting field / Experience working for an accounting
firm, etc. / Possession of qualifications as a certified public accountant or certified tax accountant.

Human

Experience as a responsible officer, division head, department head or equivalent managerial position, or experience

Resourcesin charge of practical operations in a division related to human resources (diversity promotion) / Experience as amember of the nomination or compensation committee of another company / Experience as a consultant, academic
researcher, lawyer, etc. related to the human resources field.

Legal/

・Experience as a responsible officer, division head, department head or equivalent managerial position, or experience

Compliancein charge of practical operations in a division related to legal affairs or compliance promotion / Practical experience asa legal professional (judge, prosecutor, lawyer) / Academic researcher in the legal affairs and compliance promotion
field.
・Experience working in regulatory affairs for a regulatory agency.

69