Corporate Governance
Last Updated: March 28, 2024

RESONAC HOLDINGS CORPORATION
Hidehito Takahashi, President and Chief Executive Officer
Contact: 03-6263-8000 (Governance Group, Legal Department)
Securities Code: 4004
https://www.resonac.com/jp
The corporate governance of Resonac (the “Company”) is described below.

I.

Basic Views on Corporate Governance, Capital Structure, Corporate Attributes and Other
Basic Information

1. Basic Views
The Company believes in the importance of continuously enhancing its corporate governance in terms of
supporting efforts to create the functions required of an advanced materials partner according to the times;
contributing to the sustainable development of global society; and realizing the Group's Purpose of "Change
society through the power of chemistry."
In order to continuously enhance our corporate value, the Company shall ensure soundness, effectivenessand transparency of management and swift decision-making. The Company shall also build a system thatallows us to demonstrate our corporate value and fully take advantage of our resources, with a focus on
objectives such as strengthening our management and technological foundations and improving thecapabilities and motivation of our employees.
[Reasons for Non-compliance with the Principles of Japan’s Corporate Governance Code]
It is described based on the code revised in June 2021, includes principles for the prime market.
(Supplementary Principle 4-8-2: Election of the lead Independent Outside Director)
The Company has appointed four Outside Directors and three Outside Audit & Supervisory Board Members
to increase the effectiveness of oversight from an independent and objective standpoint. At every Board of
Directors’ meeting, each Outside Director/Auditor has actively participated in unfettered and constructive
discussions about management and other issues. The Company has held informal meetings (in June and
September) for all Directors/Auditors to exchange opinions, so that they are able to fully share information.
For these reasons, the Company has not appointed Lead Outside Director among them. However, theCompany considers that there has been sufficient cooperation between Outside Directors/Auditors and the
management.
[Disclosure Based on the Principles of Japan’s Corporate Governance Code]
It is described based on the code revised in June 2021, includes principles for the prime market.
(Principle 1-4: Cross-Shareholdings)
The Company has decided that it shall not cross-hold shares with other companies in principle. With regard
to existing cross-shareholdings, the Company shall reduce the amount of them. In November 2023, theBoard of Directors of the Company reviewed and judged the suitability of each cross-shareholdings throughcost-benefit analysis of capital and other measures based on the results of the evaluation of profitability andfeasibility of the relevant cross-shareholdings. The Company has been promoting sale of cross-held shareson the basis of its policy that it shall not cross-hold shares with other companies in principle. In 2023, theCompany sold three brands of cross-held shares out of four brads the Company had cross-held before.
Specific information about the Company’s cross-held shares and reduction of them is described in the1Company’s Annual Securities Report.
URL for the Annual Securities Report (in Japanese only):https://www.resonac.com/jp/ir/library.financial.html
The Company’s policy on review on the appropriateness of cross-shareholdings and voting right exercise
standard are described in the Company’s Corporate Governance Basic Policies.
(Principle 1-7: Transactions among Related Parties)
The Company gains approval from the Board of Directors in accordance with laws and regulations as wellas its Rules of Board of Directors for competitive transactions and conflict of interest transactions between
the Company and its Directors or Corporate Officers. In addition, the Company reports the results of the saidtransactions to the Board of Directors.
(Supplementary Principle 2-4-1: Policies and Targets for Ensuring in-House Diversity)
Aiming to realize its Purpose, “Change society through the power of chemistry,” and as a Co-creative
Chemical Company, the Company has been striving to co-create solutions for social issues together withvarious stakeholders on the basis of the Company’s wide-ranging technology platform.
To promote creation of solutions, it is important for the Company to acquire human resources consisting oftalent with diversified skills, experiences, and demographic structure, have an environment that allows each
person to display his/her ability, adopt various ideas and turn them into collective knowledge. Therefore, theCompany has defined its basic principles in human resource management as DE&I, which is an abbreviation
for Diversity (recognizing each personality’s worth), Equity (providing each person with fair and equal
opportunities and an environment appropriate for each person’s personality to do great things), and Inclusion(accepting each person’s personality and making it easy for each person to express his/her personality),
thereby deepening DE&I as a management issue.
How the Company is deepening DE&I and the Company’s target figure for the proportion of womenmanagers are described in the Company’s Integrated Report.
URL for the Integrated Report: https://www. resonac.com/sustainability/report/report.html(Principle 2-6: Roles as Asset Owners of Corporate Pension Plan)
To manage funds securely and effectively for its defined benefit pension plan, the Company has organized
the Pension Management Committee consisting of experts from each of Human Resources and Finance &Accounting. The Committee deliberates on the formulation and review of basic investment policies for thepension funds and a policy asset mix. In addition, we have established a structure that allows us to cooperatewith an investment-consulting firm in deliberating basic investment policies so that we can ensuresustainable and proper pension funds management.
(Principle 3-1: Full Disclosure)(1) For company goals (Vision, etc.), management strategies and business plans.
Please refer to the Group’s vision, management strategies and mid-term business plan on its website.
（URL: https://www.resonac.com/corporate）(2) Basic views and basic policies on corporate governance
Details of basic views are described in “1.1 Basic Views” in this report. Concerning basic policies,“Corporate Governance Basic Policies” is posted on the Company’s website.
(URL: http://www. resonac.com/corporate /governance.html)(3) The Board of Directors’ policies and procedures in determining the compensation of the senior
management and Directors
Remuneration of Executive Directors and Corporate Officers shall consist of base remuneration, short-term
performance-linked remuneration, and mid- to long-term performance-linked remuneration. In addition to
the amount of base remuneration, which is determined based on titles and other factors, the amount of
performance-linked remuneration shall be determined in consideration of corporate and individual
performance and other factors based on the performance evaluation system. In determining remuneration,
the Remuneration Advisory Committee, an advisory body to the Board of Directors, shall deliberate mattersrelated to the remuneration and report the results of its deliberation to the Board of Directors.
Outline of the Board of Directors’ policies in determining the compensation for directors and its new
director compensation scheme is as described at the end of this Report.
(4) Board of Directors policies and procedures in the appointment/dismissal of the senior management and2the nomination of candidates for Directors and Audit & Supervisory Board Members
Candidates for Directors shall be persons who have the knowledge, experiences and capabilities required tofulfill their duties as Directors. The Company selects senior management members by considering corporate
and individual performance and other factors. Candidates for Audit & Supervisory Board Members shallhave the knowledge, expertise and capabilities required to fulfill their duties, including those with strong
expertise in finance and accounting. In electing and nominating Audit & Supervisory Board Members, theNomination Advisory Committee, an advisory body to the Board of Directors, shall deliberate mattersrelated to nomination and report the results of its deliberation to the Board of Directors. If there is a fact
concerning the senior management, including CEO, that may meet the Dismissal Standards given below, theNomination Advisory Committee shall deliberate the applicability of the Dismissal Standards, and report theresult of deliberation to the Board of Directors. Then the Board of Directors shall make a final decision on
dismissal of the relevant Director.
Chairpersons and Composition of the Nomination Advisory Committee and the Remuneration Advisory
Committee are described in Principle 4-10-1 of this Report.
(Criteria for selecting candidates for Directors and Audit & Supervisory Board Members)
1. Directorsa) Inside Director
・ A candidate must have high principles, wide-ranging insight, strict ethical view, fair judgement, andexecutive power, which are essential characteristics for carrying out Director’s duties.
・ A candidate must have enough knowledge and experience concerning businesses of the Group, which
are essential for realizing management vision of the Group.
・ A candidate must be well-educated, and maintain strong willpower, physical and mental health enoughto fulfill Director’s obligations.
b) Outside Director
・ A candidate must have high principles and objective judgment enough to give pertinent advice on the
management of the Group.
・ A candidate must be a talented one who satisfies the above-mentioned condition and has expertise in thefield the candidate is engaged, such as a corporate executive, an expert on laws or accounting, and a person
who once served at public agencies.
2. Audit & Supervisory Board Membersa) Inside Audit & Supervisory Board Member
・ A candidate must have knowledge and experience rich enough to appropriately and fairly audit theCompany’s Directors’ performance of their duties.
・ A candidate must have high principles, wide-ranging insight, strict ethical view, and fair judgement.
b) Outside Audit & Supervisory Board Member
・ A candidate must have knowledge and experience rich enough to fairly and objectively judge audit of
the Company’s Directors’ performance of their duties.
・ A candidate must be a talented one who satisfies the above-mentioned condition and has expertise in thefield the candidate is engaged, such as a corporate executive, an expert on laws or accounting, and a person
who once served at public agencies.
(Dismissal Standards of the senior management)a) If a Director greatly damages corporate value of the Company due to negligence of the Director’s duties.
b) If it is revealed that a Director does not meet the criteria for nomination of candidates for Directorsc) If a Director cannot continue to perform the Director’s duties for reasons of health.
(5) Explanations about respective elections or dismissals of senior management members and nominationsof candidates for Directors and Audit & Supervisory Board Members
The Company gives explanations on its nomination of Directors and Audit & Supervisory Board Members,
including reasons for their election in reference documents for the General Meeting of Shareholders. In
addition, the Company appropriately discloses reasons for dismissals.
(Supplementary Principle 3-1-3: Grappling with Sustainability)
The Company has positioned sustainability at the core of its management, aiming to “Change society
through the power of chemistry” on the basis of the Company’s purpose. As a part of this, the Company has

3formulated “Sustainability Vision 2030” and identified material issues for sustainability (materialities). The
Company will define measures and targets related to materiality, implement these measures, and achieve its
Long-term Vision.
CEO supervises the Company’s sustainability-related activities, and CSuO is responsible for promotion of
the Company’s sustainability-related activities. Important matters concerning sustainability including theCompany’s sustainability-related policies and plans are discussed and decided at the Management
Committee, then brought for discussion and resolved at the Board of Directors’ Meetings. In addition, theCompany has endorsed principles of TCFD (Task Force on Climate-related Financial Disclosures). The
Company shall evaluate risks and opportunities to be brought to the Group by climate change, strengthen
resilience of the Group through analysis of climate-change scenarios, and promote sound dialogue withstakeholders.
For detail, please refer to the Company’s Website and the Integrated Report.
URL for the Company’s Website on sustainability: https://www.resonac.com/sustainability
URL for the Integrated Report: https://www. resonac.com/sustainability/report/report.html
URL for the Company’s intellectual property strategy: https://www.resonac.com/rd/ip
URL for Environment, social and governance (ESG) information:
https://www.resonac.com/sustainability
URL for Challenges to Realize Carbon Neutrality:
https://www.resonac.com/sustainability/environment/solution.html(Supplementary Principle 4-1-1: Range of Scope of Delegation)
The Company has defined the scope of delegation of authority to the management by setting rules formatters to be resolved by Board of Directors and matters to be reported to the Board of Directors in the“Rules of Board of Directors.”(Principle 4-9: Independence Standards and Qualification for Independent Outside Directors)
The Board of Directors shall establish independence standards and qualifications for our Independent
Outside Directors in accordance with the Independence Standards as defined by laws and regulations andTokyo Stock Exchange, and nominates the candidates who meet these independence standards andqualifications. For the independence standards, please refer to “Attachment to the Corporate Governance
Basic Policies.”(Supplementary Principle 4-10-1: Appropriate Involvement of Independent Outside Directors in the Process
to Investigate Nomination of Executives and Remuneration to Them)
The Company has established Consultative Committee for Nomination of Directors and Audit &Supervisory Board Members and Consultative Committee for Remuneration to Directors and Corporate
Officers. Each Committee consists of three members or more including Independent Outside Directors.
Members of the two committees are selected from Directors and Audit & Supervisory Board Members.
Presently, Consultative Committee for Nomination of Directors and Audit & Supervisory Board Members
consists of six members including four Independent Outside Directors, deliberates nomination and dismissalof Directors and Audit & Supervisory Board Members, selection of key executives, plan for selection andtraining of candidates to succeed the presidency and other key positions, etc., and reports results of thedeliberation to the Board of Directors. Consultative Committee for Remuneration to Directors and Corporate
Officers consists of six members including four Independent Outside Directors, deliberates policy on andamount of remuneration to be paid to each Director and Corporate Officer, etc., and reports result of thedeliberation to the Board of Directors. Independent Outside Directors chair both Consultative Committees.
(Supplementary Principle 4-11-1: View on Total balance of knowledge, experience, skills and diversity, sizeof the Board of Directors)
The Board of Directors is composed of persons with knowledge, experiences and skills required to fulfill
duties as Directors; the size of the Board of Directors shall be designed to ensure prompt decision-making
and appropriate oversight of business execution. In addition, one-third or more of the Board of Directors
shall consist of Independent Outside Directors with extensive experience and broad insight in order to secure
the appropriateness of business execution and to increase the effectiveness of oversight. As of March 2024,
the Company has two female Directors (22%).
The Company shall disclose its policy on and procedures for nomination of Directors via the Corporate

4

Governance Report, the Company’s website, etc. The Board of Directors shall identify the skills necessary
to improve its effectiveness, and disclose the status of fulfillment of such skills, as attached at the end of thisReport.
(Supplementary Principle 4-11-2: Directors and Audit & Supervisory Board Members also serving as
officers at other listed companies)
The Company discloses facts about its Directors and Audit & Supervisory Board Members concurrently
serving as Directors or Audit & Supervisory Board Members at other listed companies in its annual business
reports.
(Supplementary Principle 4-11-3: Results of evaluation on overall effectiveness of the Board of Directors)
1. Method of Evaluation
The Company evaluates the effectiveness of the Board of Directors every year, aiming to strengthen corporate
governance and improve effectiveness of the Board of Directors in and after the next year. To be specific, in
December 2023, the Company surveyed respective Directors and Audit & Supervisory Board Members
through unidentified questionnaires and free descriptions to evaluate the effectiveness of the Board of
Directors in fiscal 2023. Based on the collected self-evaluation results and discussions about the reform of theBoard of Directors at Board members’ informal meetings (in June and September) for exchange of views, all
Directors and Audit & Supervisory Board Members discussed the topic at the Board of Directors’ meeting
held in March 2024, evaluated the effectiveness of the Board of Directors in fiscal 2023, and formulated an
execution plan for fiscal 2024. Note that we have outsourced the questionnaire survey and aggregation of theresults to an outside institution in order to ensure its objectivity and enhance future effectiveness of the Boardof Directors.
2. Evaluation Results(Actions taken in 2023)
Issues recognizedin fiscal 2022

・・・

Action plan forfiscal 2023

・
・
・
・

Actions taken in
fiscal 2023

・
・
・
・

・

・

The Board of Directors should examine how the Board of Directors should be in order to allocate
greater percentage of discussion to that about substantial strategies and future risks.
The Board of Directors should revise standards for bringing up matters for discussion in order togive priority medium- to long-term issues over other issues.
The Board of Directors should continuously improve all kinds of mutual understanding andinformation sharing.

Take action to expedite separation of execution and supervision.
Draw up agenda for the Board of Directors based on purposes and roles which the Board of
Directors aims to fulfill.
Secure opportunities for communication and improve the way of communication from the present
state.
Establish new mechanism for information sharing and improve the way of information sharing
form the present state.

Matters discussed at the Board of Directors’ meetings shifted from matters to be independently
executed to strategic/important matters (since the middle of fiscal 2023).
(Please refer to the Chart 1: Changes in the characteristics of matters discussed at the Board of
Directors’ meetings caused by changes in standards for bringing up matters for discussion to theBoard of Directors’ meetings.)
Discussed how the Board of Directors’ meetings should be (at the end of the year), including how
the institutional design should be.
With regard to matters to be executed, at the Board of Directors’ meetings, Directors received
comprehensive report on matters related to lawsuits, environment, and M&A in the first half ofthe fiscal year, and Directors also received report on strategic matters related to sustainability,
human resource development, technology, and digitalization in the second half of the fiscal year.
Upgraded the whole process of the Board of Directors’ meetings including prior explanations(sharing contents of questions and answers exchanged before the meetings, specifying risks andalternatives concerning matters to be discussed, early sharing of important matters to be discussed
by utilizing the procedure for receiving report on off-topic matters, etc.)
Had opportunities for Outside Directors to communicate with one another exclusively. (TheCompany plans to prepare exclusive opportunities for Outside Officers [i.e., Outside Directors
and Outside Members of Audit and Supervisory Board] with one another in and after fiscal
2024.)

5

Chart 1: Changes in the characteristics of matters discussed at the Board of Directors’ meetings caused bychanges in standards for bringing up matters for discussion to the Board of Directors’ meetings
FY 2022
Matters related to Annual
General Meeting/Board
5%

FY 2023

Execution cases
39%

5%
20%

Budget/Settlement
15%63%Strategic/companywide issues

Strategic/companywide
issues41%

13%【Strategic/companywide issues】

Report on the management ofbusiness (by Business
Headquarters/Units and CXOs)
・Talent review
・Strategies for R&D and intellectual
properties
・Governance systemSustainability-related issues
Progress in risk managementetc.

(Action plan for fiscal 2024)
Action plan for fiscal 2024 based on the reviews of business execution in fiscal 2023 is as follows.
Issues recognizedin the review of the
management ofbusiness in fiscal
2023

・

・

・

Action plan forfiscal 2024

・・・Discrepancies exist in the skills which are recognized as being necessary for the members of
the Board of Directors that aims to be a monitoring board. Discussion on this matter requires
a lot of time. It is also necessary for the Board of Directors to discuss how the Board of
Directors will protect its independence.
Many Directors thought there was an improvement in the adequacy of bills. However, someof directors said we need more thorough discussion on bills. The Company must haveappropriate agenda for monitoring business processes including mechanism for risk
management which aims to strengthen governance of the group.
Some Directors said it is necessary to improve information sharing with consultative
committees. Some Directors also said it is necessary for the Board of Directors to havesubstantial discussion about requests from investors.

Continue discussion on how the Board of Directors’ meetings should be (including
composition foof the Board of Directors and skills of each Director) in order to make it
function effectively as a monitoring board.
Formulate and implement agenda optimized for the Board of Directors to function as amonitoring board.
Enhance effectiveness of the Board of Directors through continuous improvement in various
opportunities of communication and information sharing.

(Supplementary Principle 4-14-2: Training policy for Directors and Audit & Supervisory Board Members)
In addition to offering training to new Directors and Audit & Supervisory Board Members, the Company
shall provide Directors and Audit & Supervisory Board Members with opportunities for internal andexternal training and bear the necessary expenses so that they may regularly update their knowledge about
management strategies, revision of laws and regulations, corporate governance, and other matters.
(Principle 5-1: Policy for Constructive Dialogue with Shareholders)
The Company shall actively hold constructive dialog with investors including shareholders and utilize
feedback information to improve its management, thereby realizing sustainable development of theCompany and increasing the Company’s corporate value in medium- to long-term.
The Company shall hold exchange of views and dialogue with shareholders and investors, aiming to deepen
mutual understanding on the Company’s corporate governance and sustainability, in addition to thecompany’s business strategy and growth story.
Directors and Corporate Officers including CEO and CFO, Outside Directors and Outside Audit &Supervisory Board Member shall hold dialogue with shareholders and investors within the range of6

rationality on the basis of shareholder’s/investor’s request and matters of concern. The IR section will
manage this process in cooperation with relevant sections.
The Company’s basic policies on information disclosure and dialogue are described in the Corporate
Governance Basic Policies.
URL for the Company’s Corporate Governance Basic Policies:
https://www.resonac.com/corporate/governance.html?intcid=glnavi_corporate_governance[Dialogue with shareholders and investors]
Major dialogues held in 2023 (those in parentheses were the Company’s major participants to the dialogues)
Financial results briefing for analysts and investors (CEO, CFO)
Visit to investors outside Japan (CEO)Meetings to explain the Company’s sustainability policy to analysts and investors (CEO, CFO, CHRO,
Outside Directors, etc.)
Small meetings with investors (CEO, CFO, CTO, Outside Directors, etc.)
Individual meetings with analysts and investors (CEO, CFO, CSO)
ESG engagement with investors (CFO, CSuO, CHRO)
Reception of investors’/analysts’ visit to the Company’s business bases (Head of each business base)
Briefing for individual investors (CFO)
The state of implementation of dialogues is explained in the Company’s Integrated Report, Website, etc.
P54 of the Integrated Report: “Management’s Communication with Shareholders and Investors”
https://www.resonac.com/sites/default/files/2023-09/pdf-sustainability-report-integratedreportRESONAC23_English.pdf
Sustainability Meetinghttps://www.resonac.com/sustainability/meeting?intcid=glnavi_sustainability_meeting
Resonac’s human resource management, 5 issues to be solved proposed by institutional investors (inJapanese)https://www.resonac.com/jp/corporate/resonac-now/20230822-202303.html
Analyst×CFO×CSO, Basic financial strategy aiming to continue creation of value (in Japanese)
https://www.resonac.com/jp/corporate/resonac-now/20220413-analyst.html[To realize management conscious of capital costs and stock price]
For detail of the Company’s activities aiming to realize management conscious of capital costs and stock
price, please refer to the Integrated Report. At the briefing of 2023 financial results held in February 2024,
CEO explained that the Company will enhance its corporate value by aggressively investing insemiconductor materials business, which is promising, accelerating creation of co-creative innovation,
executing corporate culture reform and human resource development, making the most of improvement inmarket environment and market opportunities, improving internal productivity, and optimizing businessportfolio. CEO also explained that the Company will aim to achieve a rise in the Company’s stock price andPBR (Price Book-value Ratio) of more than 1 times.
URL for the Integrated Report:
https://www.resonac.com/sustainability/report/report.html?intcid=glnavi_sustainability_report_report_02
URL for the CEO presentation materials for the briefing of 2023 financial results:
https://www.resonac.com/sites/default/files/2024-02/en_vision2024_e.pdf

2. Capital Structure
Foreign Shareholding Ratio

30% or more

7

[Status of Major Shareholders]Name

Number of Shares Owned(Shares)

Shareholding Ratio(%)

The Master Trust Bank of Japan, Ltd. (T)31,835,500

17.56

Custody Bank of Japan, Ltd. (T)10,364,525

5.72

KOREA SECURITIES DEPOSITORY SAMSUNG

9,063,200

5.00

JPMorgan Securities Japan Co., Ltd.

5,966,678

3.29

STATE STREET BANK AND TRUSTCOMPANY 505223

5,578,376

3.08

SSBTC CLIENT OMNIBUS ACCOUNT

5,200,185

2.87

Fukoku Mutual Life Insurance Company

4,516,800

2.49

Goldman Sachs Japan Co., Ltd.

3,417,140

1.88

Dai-ichi Life Holdings, Inc.

2,700,000

1.49

STATE STREET LONDON CARE OF
STATE STREET BANK AND TRUST,BOSTON SSBTC A/C UK LONDONBRANCH CLIENTS- UNITED KINGDOM

2,553,074

1.41

Controlling Shareholder (except for Parent)―

ParentNone

Supplementary Explanation

3. Corporate Attributes
Listed Stock Market and Market Section

Tokyo Prime

Fiscal Year-End

DecemberType of Business

Chemicals

Number of Employees (Consolidated) at Endof the Previous Fiscal Year

1,000 or more

Net Sales (Consolidated) for the Previous
Fiscal Year¥1 trillion or more

Number of Consolidated Subsidiaries at Endof the Previous Fiscal Year

100 or more

4. Policy for Measures to Protect Minority Shareholders in Conducting Transactions with Controlling
Shareholder―

8

5. Special Circumstances Which May Have Material Impact on Corporate Governance―

II. Business Management Organization and Other Corporate Governance Systems regarding
Decision-making, Execution of Business, and Supervision in Management
1. Organizational Composition and Operation
Organization Form

Company with Audit & Supervisory Board[Directors]
Maximum Number of Directors Stipulated in
Articles of Incorporation

12

Term of Office Stipulated in Articles ofIncorporation

1 yearChairperson of the Board

Chairman and Director (Not Serving as President)

Number of Directors

9

Appointment of Outside Directors

Appointed

Number of Outside Directors

4

Number of Independent Directors Designatedfrom among Outside Directors

4Outside Directors’ Relationship with the Company (1)NameAttribute

Relationship with the Company*
a

b

c

d

e

f

g

h

Kozo Isshiki

From another company

Noriko Morikawa

From another company△

Tetsuo Tsuneishi

From another company△

Kenji Yasukawa

From another company

〇

i

j

k

* Categories for “Relationship with the Company”“” when the director presently falls or has recently fallen under the category;“” when the director fell under the category in the past;“” when a close relative of the director presently falls or has recently fallen under the category; and“” when a close relative of the director fell under the category in the pasta. Executive (a person who executes business; hereinafter, the same) of the Company or its subsidiaryb. Non-executive director or executive of the parent of the Company
c. Executive of a fellow subsidiary of the Company
d. Party whose major client or supplier is the Company or an executive thereof
e. Major client or supplier of the Company or an executive thereof
f. Consultant, accounting professional or legal professional who receives a large amount of monetaryconsideration or other property from the Company besides compensation as a director

9g. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a
corporation)h. Executive of a client or supplier of the Company (which does not correspond to any of d., e., or f.) (thedirector himself/herself only)
i. Executive of a corporation to which outside officers are mutually appointed (the director himself/herself
only)
j. Executive of a corporation that receives a donation from the Company (the director himself/herself only)
k. OtherOutside Directors’ Relationship with the Company (2)Name

Kozo Isshiki

Noriko Morikawa

Designation as
Independent
Director

Supplementary
Explanation of
the Relationship

Reasons for Appointment○

We have appointed him as Outside
Director, hoping that he would give us
advice on the appropriateness of ourbusiness execution based on his wealthof expertise and experience in business
management and the financial industry.
Mr. Isshiki served as an executive
director of Development Bank of Japan
Inc. until May 2005, from which theCompany has borrowed funds.
However, Development Bank of Japanis not a major creditor for the Company
as the amount of the borrowing
represents less than 2% of our total
assets. Therefore, based on conclusionthat his appointment would not cause
any conflict of interests with ourordinary shareholders, we haveappointed him as Independent Director.

○

We appointed Ms. Morikawa for
Outside Director, hoping that she would
give us advice on the appropriateness ofour business execution based on her
wide-ranging experiences and judgment
she gained through her service with anaccounting company and withelectronics and automotive parts
companies as director in charge ofadministrative section. Though Ms.
Morikawa was an executive director of
Bosch Corporation until December
2018, we appointed her as an
Independent Director because we
confirmed that Bosh Corporation does
not meet the condition to be recognizedas our key business partner and judgedthat Ms. Noriko Morikawa does nothave conflicting interests with ourordinary shareholders.

Ms. Noriko Morikawa
was an executive
director of Bosch
Corporation until
December 2018, and theCompany and Bosch
Corporation has
business relations.
However, our annualtransactions with Bosch
Corporation are lessthan 2% of our overall
net sales.

10Tetsuo Tsuneishi

Kenji Yasukawa○○

Voluntary Establishment of Committee(s)Equivalent to Nominating Committee orRemuneration Committee

Mr. Tsuneishi served as
Corporate Director andChairman of the Boardof Tokyo Electron Ltd.
and as Corporate
Director of Tokyo
Electron Device Ltd.
until June 2022. The
two companies havebusiness relationshipwith us. However, thebusiness accounts forless than 2% of our total
annual sales.

We have appointed him as Outside
Director, hoping that he would give us
advice on the appropriateness of ourbusiness execution based on his wealthof expertise and experience in overseas
business and management of asemiconductor production equipment
manufacturing company in the course ofits growth. He served as Corporate
Director and Chairman of the Board ofTokyo Electron Ltd. and as Corporate
Director of Tokyo Electron Device Ltd.
until June 2022. However, we haveappointed him as Independent Director
since the two companies do not fall into
the category of our main customers andthe appointment will not cause any
conflict of interests with our ordinary
shareholders.

Mr. Yasukawa served as
Representative Director,
President & CEO of
Astellas Pharma Inc.
until March 2023, andhas been serving as
Representative Director,
Chairman of the Board,
Astellas Pharma Inc.
since April 2024.
Astellas Pharma Inc. hasbusiness relationshipwith us. However, thebusiness accounts forless than 2% of our total
annual sales.

We have appointed him as Outside
Director because he has experience in a
major Japanese pharmaceuticalcompany which has been developing
business globally and has recently
undergone a corporate merger, andthere, he engaged in development workin the U.S. and was as well involved incorporate strategy and sales
management. He possesses wideranging experience and expertise as an
executive in a leading company inwhich diverse human resources thrive.
He served as Representative Director,
President & CEO of Astellas Pharma
Inc. until March 2023, and has been
serving as Representative Director,
Chairman of the Board, Astellas Pharma
Inc. since April 2024. However, wehave appointed him as Independent
Director since the two companies do not
fall into the category of our main
customers and the appointment will notcause any conflict of interests with ourordinary shareholders.

Established

Committee’s Name, Composition, and Chairperson’s Attributes
Committee Equivalent toNominating Committee
Committee’s Name

Nomination Advisory Committee

11

Committee Equivalent toRemuneration Committee
Remuneration Advisory Committee

Total Committee Members

66

Full-time Members

00Inside Directors

22

Outside Directors

44Outside Experts

0

0

Other

0

0

Chairperson

Outside Director

Outside Director

Supplementary Explanation
To strengthen functional independence, objectivity and accountability of the Board of Directors, theCompany shall establish the Nomination Advisory Committee and the Remuneration Advisory Committee,
advisory bodies to the Board of Directors. Independent Outside Directors represent the majority of its
members for the Nomination Advisory Committee, and Independent Outside Directors represent the
majority of its members for the Remuneration Advisory Committee. Both Committees report to the Board of
Directors after deliberating matters related to election of candidates for Directors and Audit & Supervisory
Board Members, appointment of senior management, and remuneration of Directors and Corporate Officers,
respectively.
[Audit & Supervisory Board Members]
Establishment of Audit & Supervisory Board
Members

Established

Maximum Number of Audit & Supervisory
Board Members Stipulated in Articles ofIncorporation

6

Number of Audit & Supervisory Board Members

5

Cooperation among Audit & Supervisory Board Members, Accounting Auditor and Internal Audit
Department
Audit & Supervisory Board Members periodically hold meetings with Accounting Auditor where themembers receive audit programs and explanations about the status of the internal control, priority audit andother matters, and exchange opinions. Audit & Supervisory Board Members accompany Accounting Auditor
in their audit site-visits as needed and receive reports on any progress of the audit. Audit & Supervisory
Board Members also hold meetings periodically with the Internal Audit Department where they are updatedon audit results including the status associated with the internal control system. They may request theInternal Audit Department to investigate the status of the internal control system as needed.
Appointment of Outside Audit & Supervisory
Board Members

Appointed

Number of Outside Audit & Supervisory Board
Members3

Number of Independent Auditor Designated fromamong Outside Audit & Supervisory Board
Members

312Outside Audit & Supervisory Board Members’ Relationship with the Company (1)NameAttribute

Masako Yajima

Attorney at law

Yasuyuki Miyasaka

Certified Public
Accountant

Kiyoko Toda

From anothercompany

Relationship with the Company*
a

b

c

d

e

f

g

h

i

j

k

l

m

○

* Categories for “Relationship with the Company”“” when the audit & supervisory board member presently falls or has recently fallen under the category;“” when the audit & supervisory board member fell under the category in the past;“” when a close relative of the audit & supervisory board member presently falls or has recently fallen under
the category; and“” when a close relative of the audit & supervisory board member fell under the category in the pasta. Executive (a person who executes business; hereinafter, the same) of the Company or its subsidiaryb. Non-executive director or accounting advisor of the Company or its subsidiaryc. Non-executive director or executive of the parent of the Company
d. Audit & supervisory board member of the parent of the Company
e. Executive of a fellow subsidiary of the Company
f. Party whose major client or supplier is the Company or an executive thereof
g. Major client or supplier of the Company or an executive thereofh. Consultant, accounting professional or legal professional who receives a large amount of monetaryconsideration or other property from the Company besides compensation as an audit & supervisory board
memberi. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a
corporation)
j. Executive of a client or supplier of the Company (which does not correspond to any of f., g., or h.) (theaudit & supervisory board member himself/herself only)
k. Executive of a corporation to which outside officers are mutually appointed (the audit & supervisory board
member himself/herself only)
l. Executive of a corporation that receives a donation from the Company (the audit & supervisory board
member himself/herself only)
m. Other13

Outside Audit & Supervisory Board Members’ Relationship with the Company (2)Name

Masako Yajima

Yasuyuki Miyasaka

Designation as
Independent
Auditor○○Supplementary
Explanation of
the Relationship

Reasons for Appointment

Ms. Yajima is a partner
attorney of Nishimura &Asahi. The Company
has requested hercolleague lawyers of thelaw firm for legal
services when needed.
The past three-year
average fee paid to thefirm was less than 2% of
its gross revenue.

We have appointed her as Outside Audit& Supervisory Board Member, hopingthat she would give us advice on theappropriateness of our businessexecution based on her strong expertiseand extensive knowledge and insights
about corporate legal affairs as aninternational lawyer. The Company hasrequested her colleague lawyers of
Nishimura & Asahi, where Ms. Yajima
is working concurrently, to handle legal
affairs as needed. Since the firm hasreceived neither a large amount ofmoney nor assets from us, andtherefore, her appointment will notcause any conflict of interests with ourordinary shareholders, we haveappointed her as Independent Outside
Audit & Supervisory Board Member.

President, Yasuyuki
Miyasaka CPA Office

We have appointed him as Outside
Audit & Supervisory Board Member,hoping that he would give us advice on
the appropriateness of our businessexecution based on his wealth ofexperience and extensive knowledge
and insights garnered through his
engagement with auditing in and outside
Japan through many years as a certified
accountant, and his expert knowledge
and rich experience of corporate financeand accounting. Mr. Miyasaka serves as
the President of Yasuyuki Miyasaka
CPA Office, which has no interest in the
Company. Since his appointment will
not cause any conflict of interest with
our ordinary shareholders, we haveappointed him as Independent Outside
Audit & Supervisory Board Member.

14

Kiyoko Toda○-

We have appointed her as Outside Audit& Supervisory Board Member, hopingthat she would give us advice on theappropriateness of our businessexecution based on her experience as alawyer who is rich in international
experience, and has high principles
about corporate laws. In addition, she
has been auditing Directors’
performance of their duties with focuseson legal affairs concerning globalizationof the Company’s operation, M&A andother issues, in order to secure
appropriateness and legality of
Directors’ performance of their duties.
Ms. Toda once worked for American
Express International, Inc., which has
no interest in the Company. Since her
appointment will not cause any conflictof interest with our ordinary
shareholders, we have appointed her as
Independent Outside Audit &Supervisory Board Member.

Audit[Independent Directors/Auditors]
Number of Independent Directors/Auditors

7

Matters relating to Independent Directors/Auditors―[Incentives]
Implementation of Measures to Provide
Incentives to Directors

Performance-linked remuneration

Supplementary Explanation
Outline of short-term performance-linked compensation, and medium-to-long-term performance-linked
stock-based compensation for Directors is described at the end of this report.
Recipients of Share Options
Supplementary Explanation―[Director Remuneration]
Disclosure of Individual Directors’ Remuneration

No individual disclosure

15

Supplementary Explanation
The amount of remuneration paid during fiscal 2023 is as shown below. As remuneration for Directors, 503
million yen was paid to twelve Directors, of which 69 million yen was paid to five Outside Directors. As
remuneration for Audit & Supervisory Board Members, 106 million yen was paid to five members, of which
39 million yen we paid to three Outside Audit & Supervisory Board Members.
For detail of remuneration paid to Directors and Audit & Supervisory Board Members during fiscal 2023,
please refer to the Business Report for the 115th Business Year (an annex to Notice of Convocation of the115th Ordinary General Meeting of Shareholders).
Policy for Determining Remuneration Amounts
or Calculation Methods Thereof

Established

Disclosure of Policy for Determining Remuneration Amounts or Calculation Methods ThereofRemuneration for Directors (excluding Outside Directors) consists of base remuneration, short-term
performance-linked remuneration, and mid- to long-term performance-linked remuneration. In addition to
the amount of base remuneration determined on titles and other factors, the amount of short-term
performance-linked remuneration shall be determined in view of corporate and individual performance andother factors based on the performance evaluation system. The mid- and long-term performance-linked
remuneration shall be paid in accordance with the Officer Stock Benefit Rules. Outside Directors shall be
paid basic remuneration only. The Board of Directors shall determine remuneration for Directors based on
the results of deliberation by the Remuneration Advisory Committee. Remuneration of Audit & Supervisory
Board Members shall consist only of basic remuneration and shall be determined through discussion by the
Audit & Supervisory Board.
Outline of director compensation scheme is described at the end of this Report.
[Supporting System for Outside Directors and/or Audit & Supervisory Board Members](1) System for Supporting Outside Director and Outside Audit & Supervisory Board Members
The Secretariat Group, General Affairs Department handles clerical works. The Governance Group, Legal
Department distributes handouts regarding agenda to be discussed at the Board of Directors’ meetings.
Managers of Governance Group, Legal Department explain the details beforehand.
(2) System for Supporting Outside Audit & Supervisory Board Members
We have assigned full-time staff members in the Audit & Supervisory Office who support Audit &Supervisory Board Members in fulfilling their duties. Those full-time staff members shall distributehandouts regarding agenda to be discussed at the Audit & Supervisory Board meetings to outside Audit &Supervisory Board Members beforehand. They shall also give Outside Audit & Supervisory Board Members
an opportunity to obtain information through on-site inspections.

[Status of Persons Who Have Retired from a Position Such as Representative Director and President]
Retired Representative Director and Presidents, etc. Holding Advisory or Any Other Position in the Company

Name

Title/
Position

Working Form andConditions(Full-time/Part-time,
Paid/Unpaid, etc.)

Responsibilities

16

Date of
Retirementfrom Position
Such asPresident

Term of
OfficeMitsuo
Ohashi

Honorary
Adviser・Advice on activities
outside the Company
・Involvement insocial contribution
activities

Part-time, Unpaid

January 3,
2005

1 yearupdateHideo
Ichikawa

Advisor▪ Advice on activities
outside the Company▪ Involvement insocial contribution
activities

Part-time, Paid

January 3,
2017

1 yearupdateTotal Number of Retired Representative Director and Presidents, etc. Holding
Advisory or Any Other Position in the Company

2

Other Matters▪ The Board of Directors shall decide whether to appoint an adviser or honorary advisor.
▪ President decides internal rules for treatments of advisors and honorary advisors after deliberation by the
Nomination Advisory Committee.
▪ Advisors and honorary advisors are not involved in the Company’s business execution or its supervision.
Nevertheless, advisors may advise us on specific management issues upon the request of the management.
▪ The “Date of Retirement from Position Such as President” described above states the date of retirement of
the President and Representative Director of the Company.

2. Matters on Functions of Business Execution, Audit and Supervision, Nomination and Remuneration
Decisions (Overview of Current Corporate Governance System)
1. Status of the oversight and decision-making function:
The Company, as a pure holding company, specializes in Group strategy and listed company functions.
While flexibly responding to business challenges, the Company appropriately allocates its management
resources in consideration of the entire Group, for business tie-up, M&A, etc.
The Company introduced a corporate officer system to explicitly divide management oversight and businessexecution functions, giving authority to Chief X Officers (CXOs) and chiefs of Business Headquarters/Units
to execute business. In order to strengthen functional independence, objectivity, and accountability of theBoard of Directors, the Company has organized the Nomination Advisory Committee and the Remuneration
Advisory Committee as advisory bodies for the Board of Directors. Independent Outside Directors represent
the majority of both committees.
a) Board of Directors
The Board of Directors meeting is held once or twice per month. The board consists of nine Directors,
including four Outside Directors (including one female member) and five Internal Directors (including
one female member). The board is chaired by Mr. Kohei Morikawa, Director and Chairman of theBoard. To increase agility of business execution, the Board of Directors delegates part of decisions onimportant business execution to President and other corporate officers. The Board of Directors mainly
focuses on deliberations and decisions concerning basic policies for management, establishment of theinternal control system, etc. as well as oversight of execution of duties by Directors and Corporate
Officers. We have also established an agile management system to quickly respond to changes in thebusiness environment, and limit the term of office of directors to one year to define management
responsibilities of Directors more clearly.
b) Audit & Supervisory Board
The Audit & Supervisory Board meeting is held once a month, in principle. The board consists of fivemembers, including three Outside Members (including two female members). The board is chaired by
Mr. Toshiharu Kato, Standing Statutory Member. The Audit & Supervisory Board Members attend theBoard of Directors’ meetings and other important internal meetings, offering opinions as necessary.
They also conduct audits on business execution through on-site investigations, interviews withresponsible persons, inspection of important documents, and other appropriate measures, so as to17

provide suggestions, advice, and recommendations for securing soundness in management. In addition,
Standing Statutory Members of the Audit & Supervisory Board concurrently serve as Audit &Supervisory Board Members of the business corporation to enhance audits on Group companies.
c) Nomination Advisory Committee
The Nomination Advisory Committee meeting is held three to four times per year. The Committee
reports to the Board of Directors after deliberating items related to nomination of candidates for
Directors and Audit & Supervisory Board Members as well as election of executive managers. The
Committee consists of Hidehito Takahashi (Representative Director and President), Nori Imai
(Director), Kozo Isshiki (Outside Director), Noriko Morikawa (Outside Director), Tetsuo Tsuneishi(Chairman, Outside Director) and Kenji Yasukawa (Outside Director).
d) Remuneration Advisory Committee
The Remuneration Advisory Committee meeting is held three to four times per year. The Committee
reports to the Board of Directors after deliberating items related to remuneration for Directors andCorporate Officers. The Committee consists of Hidehito Takahashi (Representative Director andPresident), Hideki Somemiya (Director), Kozo Isshiki (Outside Director), Noriko Morikawa (Outside
Director), Tetsuo Tsuneishi (Outside Director) and Kenji Yasukawa (Chairman, Outside Director).
2. Status of the operational execution function:(1) The Company ensures appropriate and efficient operations by appointing CXOs in charge of respectivefunctional areas and chiefs of Business Headquarters/Units in charge of respective business areas,clarifying their authority of management and division of duties.
(2) The Company and its business corporation Resonac have formed the Integrated Management
Committee that gives advice to President on important matters and serves as a body preceding theBoard of Directors.
(3) The Company sets the Group’s direction in Long-term Vision, Group Management Policy, etc. The
Company also sets financial goals in its annual budget, conducting performance management based on
the budget.
(4) The Company has appointed Chief Digital Officer (CDO) to ensure appropriate information
management, standardization and streamlining of operations, and enhancement of internal control,
thereby establishing and operating an optimum IT system.
(5) The Company has organized the Risk Management Committee and the Sustainability Promotion
Council which are chaired by the President and attended by Corporate Officers, etc. The Company has
also organized the Compliance Committee which is attended by area managers. These committees andcouncils are responsible for investigation, research and deliberation on specific items necessary for
appropriate business execution, and, when necessary, their conclusions shall get the approval of theManagement Committee.
3. Status of the Internal audit function:(1) Audit by the Audit & Supervisory Board Members: The Audit & Supervisory Board meeting is held
once a month, in principle. The board consists of five members, including three Outside Members(including two female members). The board is chaired by Mr. Toshiharu Kato, Standing Statutory Member.
The Audit & Supervisory Board Members attend the Board of Directors’ meetings and other importantinternal meetings, offering opinions as necessary. They also conduct audits on business execution throughon-site investigations, interviews with responsible persons, inspection of important documents, and otherappropriate measures, so as to provide suggestions, advice, and recommendations for securing soundness inmanagement. In addition, Standing Statutory Members of the Audit & Supervisory Board concurrently serve
as Audit & Supervisory Board Members of the business corporation to enhance audits on Group companies.
Mr. Toshiharu Kato, Standing Statutory Member of Audit & Supervisory Board, has garnered significant
expertise in finance and accounting because he served as Chief Financial Officer (CFO) in charge of thefinance and accounting section.
In order to enhance the functions of the Audit & Supervisory Board, five full-time staff members are
assigned to the Audit & Supervisory Board Office to support Audit & Supervisory Board Members.
(2) Internal Audit: The company has organized the Internal Audit Department (consisting of 26 full-time
staff members). The Company also has organizations in charge of auditing in each of Regional Headquarters
located in China and North and Central America (consisting of 5 full-time staff members in total). The
Internal Audit Department and these organizations of Regional Headquarters cooperatively execute internal
audit and continue making effort to improve effective ness of the internal auditing. They form annual

18internal audit plan under the provisions of the company’s Internal Audit Rules, obtain CEO’s approval forthe annual internal audit plan, and audit situations of governance, compliance, internal control system andconduct of business of the Group including affiliated companies. Basically, internal audit of affiliatedcompanies is conducted in three-year cycle, and that of business headquarters/units and functional areas ofmanufacturing companies is conducted in four-year cycle. In addition, the Company evaluates and reports
effectiveness of internal control concerning financial report under the provisions of Financial Instruments
and Exchange Act, based on the company’s Internal Control Rules over Financial Reports.
In fiscal 2023, the Internal Audit Department audited 34 cases in affiliated companies and 22 cases inbusiness headquarters/units and functional areas of manufacturing companies. The Internal Audit
Department offers opinion for improvement in countermeasures against errors and potential risks revealed
through internal audit, requests target organizations to formulate improvement plans and execute them,follows results of improvement, and prevents recurrence, thereby improving internal control of the Group.
The Internal Audit Department periodically shares recognition of the need for improvement with sectors
responsible for internal control which audit and monitor business execution, including financial andaccounting sector, Environment and Safety Department, and compliance sector, through meetings to
examine improvement plan for recognized problems, thereby accelerating improvement, requesting
application of countermeasures to similar processes, helping internal control section act autonomously, andimproving internal control within the Group.
The Internal Audit Department cooperates with the Accounting Auditor and Statutory Members of Audit andSupervisory Board by sharing recognition of risks, and having periodic sessions to report annual internal
audit plans, results of internal audit, and evaluation of the situation of internal control on financial report,
while paying special attention to the independence of each auditing body. The General Manager of Internal
Audit Department attends the quarterly meetings of Accounting Auditor and Statutory Members of Audit
and Supervisory Board to receive report on audit of financial results.
The Internal Audit Department submits written reports on results of each internal audit, with plans toimprove status of recognized problems, to CEO, General Managers of relevant Business
Headquarters/Units, CXOs, and Statutory Member of Audit and Supervisory Board in a timely manner. In
addition, in every quarter of the year, the Internal Audit Department reports execution and summary of
results of internal audit to the President and CFO. It also periodically reports results of internal audit andevaluation of internal control on financial report to the Management Committee, the Board of Directors, and
the Audit and Supervisory Board.
(3) Audit by Accounting Auditor: The Company has signed an audit agreement with KPMG AZSA LLC,
which conducts accounting audit. Certified Public Accountants who executed the audit are designatedlimited liability partners and executive members, namely Noriaki Sakurai, Shingo Iwamiya and Daio Aida.
Assistants to the audit service included 15 Certified Public Accountants and 33 other staff members.
Accounting Auditor reviews an annual audit schedule jointly with Audit & Supervisory Board Members andreport the results of audit. Accounting Auditor exchanges information and opinions as needed to facilitate
collaborations with other related parties.

3. Reasons for Adoption of Current Corporate Governance System
The Company is committed to effective corporate management by adopting the Audit & Supervisory Board
Member system to improve fairness and transparency of management.

III. Implementation of Measures for Shareholders and Other Stakeholders
1. Measures to Energize General Shareholders Meetings and Smooth Exercise of Voting Rights
Supplementary Explanations
Early Notification of General
Shareholders Meetings

The notice is sent on March 5, four days earlier than the statutory date on
March 11.

Scheduling General
Shareholders Meetings
Avoiding the Peak Day

The Ordinary General Meeting of Shareholders is held in late March.

19

Allowing Electronic or
Magnetic Exercise of Voting
RightsVoting rights of the Company may be exercised via the internet.

Participation in Electronic
Voting Platform and Other
Efforts to Enhance the Voting
Environment for Institutional
Investors

The Company has joined the Electronic Voting Platform for Institutional
Investors operated by ICJ, Inc.

Providing Convocation Noticein English (Translated Fully or
Partially)

We submit a convocation notice in English to the Tokyo Stock Exchange
and disclose it at the Company’s website.

Other

We consider shareholdings meetings as the opportunities for ourshareholders to understand the Company’s basic policies, and therefore, we
explain the details and status of the mid-term business plans at the meetings.
In addition, the convocation notice is posted on the Company’s website.

2. IR Activities
Supplementary Explanations

Explanation byRepresentative

Preparation and Publication ofDisclosure Policy

Posted on the Company’s website.

Regular Investor Briefings for
Individual Investors

We held an IR briefing session for individual
investors in March 2023, where CFO gave briefings.
The briefing with related documents is available forindividual investors on the Company’s website.

No

Regular Investor Briefings forAnalysts and Institutional
Investors

We hold periodic briefings about our financial
results, the long-term vision etc., which are available
in both Japanese and English on the Company’s
website.

Yes

Regular Investor Briefings forOverseas Investors

The Company discloses financial results etc. inEnglish on the Company’s website. We also pay avisit to overseas investors to hold briefings on aregular basis.

Yes

Posting of IR Materials on
WebsiteThe Earnings Report (Kessan Tanshin) and
explanatory documents for securities analysts areavailable online in both Japanese and English, with
the Annual Securities Report (Yukashoken
Hokokusho), the Integrated Report (Resonac Report)
and the report titled “To our shareholders” and thenotice of convocation of the general meeting ofshareholders.

Establishment of Department
and/or Manager in Charge ofIR

The Company has established the IR Office as anorganization responsible for timely disclosure and IR
activities.

20

OtherWe proactively deliver explanations to respective
institutional investors. We release news in both
Japanese and English at the same time on the
Company’s website. We also distribute important
news abroad under the contract with an international
news distribution company.

3. Measures to Ensure Due Respect for Stakeholders
Supplementary Explanations

Provisions to Ensure Due
Respect for Stakeholders inInternal Rules, etc.

Resonac aims to cooperate appropriately with all stakeholders including
shareholders in its business activities and be a trusted and respectedcompany. In “Sustainability Vision 2030” based on our Purpose, we aim toachieve our growth by solving social issues and become a company thatmakes friends from all over the world, declaring its intention to step up
commitment through engagement with stakeholders inside and outside theCompany.” It is essential for the Company to have dialogue withstakeholders in order to grasp stakeholders’ demand and expectation
appropriately and continuously grow and expand together with society.
Therefore, the Company strives to enrich opportunities for dialogue. In
addition, the Company has set forth this policy in “Our Code of Conduct”(revised in 2022), which was formulated as a behavioral guideline for theCompany’s employees.

21As a co-creative chemical company, Resonac has been striving to realize theCompany’s continuous growth and create corporate value in medium-to
long-term by identifying 3 important issues concerning sustainability(materialities) and 15 factors that form materialities. It is necessary for theCompany to solve these materialities in order to achieve its long-term vision
which was formulated on the basis of social expectation for the Company
and importance of issues for the Company. In the process to identify
materialities, each reginal office of the Group discussed their issues andsuggested candidates for materialities. Then the Company identified
materialities through discussion at the Sustainability Promotion Council
where all executives of the Company participated. The Sustainability
Promotion Council reported identified materialities to the Board of
Directors. The Company carries an ongoing review of materialities byexchanging opinions with internal and external stakeholders.
In 2022, the Company set non-financial key performance indicators (KPIs)
related to materialities. In 2023, the Company discussed appropriateness of
KPIs at the Sustainability Promotion Council on the basis of the results ofactual application of KPIs and discussion with outside stakeholders, andmonitored the situation. We also started to discuss risks and opportunities
for the Company taking materialities into consideration, and confirmed thebusiness environment.
The Company’s system to promote sustainability is described in Principle 31 of this Report.
Implementation ofEnvironmental Activities, CSR
Activities, etc.

For details of these activities, please refer to the webpages on our Website
explaining our sustainability-related policies and activities.
URL for Resonac’s sustainability activities:
https://www.resonac.com/sustainability
To achieve “Sustainability Vision 2030,” the Group is working mainly in thefollowing five important areas:
Strengthening sustainability management for integration withmanagement/business strategies
Creating sources of growth through development of business andtechnology with sustainability at the core
Solving cross-functional issues such as carbon neutrality
Creating values by strengthening stakeholder engagement
Developing employees’ sustainability awarenessIn 2022, we identified materiality for sustainability aiming to achieve Longterm Vision and contribute to the environment and society, and set anddisclosed non-financial goals. As the integrated new company, we
considered the direction of our efforts in the area of climate change and took
part in TCFD, strengthening employees’ involvement.
Our sustainability efforts are supervised by CEO and led by CSO. The
management team, corporate staff, business divisions and plants, and Group
companies are working together. The Sustainability Promotion Council
meets once a month to exchange views, with the attendance of CEO and allother CXOs as well as leaders of business divisions. Important matters are
discussed and decided at the Management Committee, and reported to theBoard of Directors. We organized several projects under the council to deal,
in a flexible and cross-functional manner, with specific issues such ascarbon neutrality, human rights, and Responsible Care (an initiative aiming
to protect the environment, safety, and health through the entire lifecycle ofchemical substances from development, production, distribution, use anddisposal).

22

For details, please see the “Sustainability” section on our web site.

Formulation of Policies for
Information Provision to
Stakeholders

The Company has stipulated Information Disclosure Basic Policies. We
release and disclose, on our website, the information helpful for ourshareholders and other stakeholders in understanding the Company, whether
or not such information falls under the Timely Disclosure Rules. In addition,“Our Code of Conduct” stipulates that “we timely and appropriately
disclose the Group’s information to enable stakeholders to properly evaluate
potential influence on them,” and we have been acting in line with thisprinciple.

23

[Development of corporate culture]
To encourage the Resonac Group’s employees to come together andincrease corporate value, we have positioned cultivation of corporate culture
based on our Purpose and Values as the core of our human resource strategy.
We are providing various training courses and venues for dialogues insideand outside respective divisions. We are also implementing a system of
Global Award to accelerate the embodiment of Purpose and Values.
URL for the Company’s human resource strategy:
https://www.resonac.com/sustainability/social/hr_ms.html[Respect for diversity]
To encourage embodiment of Purpose and Values, we need to secure
diversity and share the knowledge. We have been advancing the initiative todiversity, equity and inclusion. Through co-creative collaboration training
courses for managers and other opportunities, we aim to provide venues forconstructive discussions with psychological security regardless of attributes
such as position, division, and origin. Regarding promotion of women’s
energetic activities, the Company has set a target to increase the ratio of
female employees in managerial positions to 7% in Japan on a consolidated
basis and 13% on a global basis by the end of 2025. As of the end of 2023,
the Company has the ratio of female employees in managerial positions of
5.7% in Japan on a consolidated basis and that of 12.4% on a global
consolidated basis. As for employment of persons with disabilities, we arepromoting our efforts under the slogan of “transforming the only-one
individual personality into power,” and we joined The Valuable 500 in
September 2022.
Other

URL for the Company’s activities concerning diversity, equity andinclusion: https://www.resonac.com/sustainability/social/employee3.html[Promotion of health management]
The Resonac Group issued Resonac Health Declaration in 2022, which
pledged that “Through its health management, the Resonac Group shallestablish an environment where everybody can actively work in good
health, thereby contributing to sustainable growth of the people and thecompany and creation of affluent future. In addition, we have visualized
what we want to achieve through our health management as “HealthManagement Strategy Map” and disclosed it.
URL for the Company’s health management:
https://www.resonac.com/sustainability/social/health.html[Development of next-generation leaders, talent management]
The Resonac Group considers it important to promptly identify and develop
new leaders for the Group who can embody Purpose and Values at a highlevel. We have therefore established a talent management process thatcovers overseas affiliated companies as well. We have been promoting theappointment of high-performers regardless of his/her corporation,nationality, gender or age. Since 2022, we have been selecting candidates
for successors to major positions in respective divisions and formulating
development plans for individual candidates. We have launched an Overall
Talent Review Conference where the management team discusses tasks andcandidates for next-generation leaders from the viewpoint of total
optimization. We are positively offering opportunities for growth toemployees.
URL for the Company’s human resource development:24https://www.resonac.com/sustainability/social/employee.html

IV. Matters Related to Internal Control System
1. Basic Views on Internal Control System and Progress of System Development
The Resonac Group defines and appropriately operates the basic policies to “establish a system to ensure
appropriateness of business (internal control system)” as stated below.
1.

Framework for storing and managing information related to execution of duties by directors of theCompany(1) The Company shall handle, save, and maintain the minutes of the Board of Directors’ meeting andother management meetings, and other information related to execution of duties in accordancewith respective in-house rules.
(2) Audit & Supervisory Board Members of the Company can access, or can be provided with, theinformation saved and maintained as mentioned above every time when it is necessary.

2.

Policy and framework for managing risks of loss of the Group(1) The Group stipulates rules about risk management, sets up the Group’s risk management system,
and clarifies responsibility of the organization in charge of risk management.
(2) In order to enable the management of the Company to manage the Group taking the risks
surrounding the Group and their impacts on the Group into account, the Company shall set up anorganization dedicated to the Group’s risk management. This organization shall plan risk
management program for the entire Group including risk assessment, and manage execution of therisk management program.
(3) The Company shall extract important risks in accordance with frequency of occurrence andsignificance of impact of those risks. Risk Management Committee of the Company shalldeliberate courses of actions to be taken and their appropriateness as countermeasures against
those important risks, and report the results of committee deliberations to Management Committee
and the Board of Directors of the Company.
(4) The Company shall deliberate individual important matters at its Management Committee in termsof strategic risks, operational risks, and hazard risks.

3.

Framework ensuring the efficiency of execution of duties by directors of the Company(1) The Company’s Board of Directors shall appoint Corporate Officers in order to accelerate theconduct of business and authorize those Corporate Officers, who work under the President andCEO, to make a part of important decisions. The Company’s Board of Directors shallpredominantly deliberate and decide basic policies for establishing the internal control system,and supervise the performance of Directors’ and Corporate Officers’ duties.
(2) The Company shall appoint chief corporate officers each of whom supervise a designatedfunctional area (CXOs) and General Managers of Business Headquarters/Units each of whomsupervises a designated business headquarters/unit, and clearly define their authorities andallocation of duties, thereby enabling them to execute their duties appropriately and efficiently.
(3) The Company has Management Committee in order to enable the President to refer important
issues to the Committee for deliberation, and makes the Committee function as a conference tohave preliminary deliberation for Board of Directors’ Meetings.
(4) The Company establishes Long-term Vision and Group Management Policies in order to decide acourse of action for the management of the Group. The Company shall include each year’s
issues and targets of the entire Group in Annual Action Plans (budget), based on which we shallmanage our business performance.
(5) In order to realize appropriate information management, standardize business processes, improvebusiness efficiency, and strengthen internal control, the Company shall appoint Chief Digital
Officer (CDO), thereby establishing optimal IT system and making effective use of it.
(6) In order to verify that Directors of Group Companies are fulfilling their duties appropriately andefficiently, the Company establishes rules about internal audit, and the Company’s section in
charge of internal audit shall implement internal audit of each organization.

25

4.

5.

Framework ensuring that execution of duties by directors and employees of the Group complies withlaws and regulations and the Articles of Incorporation(1) The Company establishes “Our Code of Conduct” that stipulates code of conduct and rules whichshould be observed by all employees of the Group. The Company also establishes “Global
Compliance Standard” and other in-house rules in order to clarify matters that must be compliedwith by all employees of the Group and ensure compliance with laws and regulations.
(2) Based on the Global Compliance Standard, the Company appoints person in charge of complianceat each organization, and establishes an organization dedicated to compliance management of theentire Group.
(3) The Group Compliance Committee shall formulate action plans to enhance compliance of theGroup and evaluate the results of the implementation of action plans.
(4) The Company shall properly streamline and operate the internal control to ensure reliability offinancial reports, evaluate effectiveness of the internal control system every year, and improve theinternal control system when necessary.
(5) The Company establishes Whistleblowing System to accept whistleblowing about compliance,
ensure strict confidentiality of the Whistleblowing System, and, in cooperation with lawyers, theCompany shall cope with whistle-blown matters appropriately and quickly, while paying close
attention to prevention of whistleblowers’ disadvantage.
Framework ensuring appropriateness of business operation of the Group companies(1) The Group has established Purpose (the meaning of the Group’s existence) and Values (ourimportant values) as the Group’s corporate philosophy, and has been disseminating them.
(2) The Board of Directors of Resonac Holdings Corporation supervises the entire Group. Resonac
Holdings Corporation, which functions as a holding company, and Resonac Corporation, whichfunctions as a manufacturing company, shares the same management team, and operates
Management Committee and administrative departments of the two companies seamlessly,
thereby managing the Group efficiently and effectively.
(3) The Company shall formulate “Rules on Group Management” which stipulates principles on
management of Group companies. In addition, important matters of Group companies shall bedeliberated at the Company’s Management Committee and Board of Directors meetings. Group
companies are required to report information about their business conditions including financial
conditions to the Company.
(4) As a basic policy on Group management, the Company shall manage Group companies on aconsolidated basis via Business Headquarters/Units in charge of Group companies, etc. The
Company’s administrative division shall also support Group companies’ management inaccordance with each administrative department’s functions.
(5) The Company stipulates and enforces in-house rules and guidelines about principles on
management of the entire Group, and thoroughly makes Group companies share and observe thesein-house rules and guidelines.

6.

Items regarding the system for employees assisting duties of Audit & Supervisory Board Members of
the Company(1) The Company has established Audit & Supervisory Board Members’ Office in order to help Audit& Supervisory Board Members to perform their duties.
(2) The Company’s Internal Audit Department shall formulate and execute its audit plan incooperation with Audit & Supervisory Board Members.

7.

Items regarding the system ensuring independence of employees assisting duties of Audit &Supervisory Board Members from the directors, and ensuring effectiveness of instructions given tothem(1) The Company shall consult Audit & Supervisory Board Members and obtain their prior consent
for reassignment of the staffs of Audit & Supervisory Board Members’ Office and theirevaluations. Such staffs shall report exclusively to Audit & Supervisory Board Members.
(2) If the Company wants to punish a staff of Audit & Supervisory Board Members’ Office fordelinquency, the Company shall consult Audit & Supervisory Board Members and obtain theirprior consent.
(3) Directors shall not unfairly impose a constraint on the staff of Audit & Supervisory Members’

26Office in helping Audit & Supervisory Board Members to perform their duties.
8.

System to ensure Audit & Supervisory Board Members of the Company to be informed from Directors,
etc. of the Group(1) Audit & Supervisory Board Members can attend important meetings of the Company including
Management Committee.
(2) If the Company’s Director discover any fact that may cause a material damage on the Group, that
Director shall immediately report it to Audit & Supervisory Board Members.
(3) To enable Audit & Supervisory Board Members to have a full picture of important decision
making or business execution by the Directors, the Company shall keep them informed byexplaining matters discussed in important meetings such as the Board of Directors’ orManagement Committee meetings, sharing important documents about execution of duties such as
requests for approval, monthly financial documents and internal audit reports, briefings byrelevant divisions and departments of the Company.
(4) The Company’s Internal Audit Department shall report plan, progress and results of internal auditof Group companies including the Company and manufacturing companies to Audit &Supervisory Board Members without delay.

A system to protect Directors, etc. who reported to Audit & Supervisory Board Members of theCompany from unfair treatment
The Company shall establish in-house rules to prevent persons who reported to Audit & Supervisory Board
Members of the Company from being unfairly treated.
9.

10. Items regarding policy on procedures for advance payment or reimbursement of expenses incurred in
the execution of duties by Audit & Supervisory Board Members of the Company, and other expenses
incurred in the said execution of duties, or handling of debts
Audit & Supervisory Board Members’ Office shall deal with administrative procedures for advance payment
or reimbursement of expenses incurred in the execution of duties by Audit & Supervisory Board Membersof the Company, and other expenses incurred in the said execution of duties, or handling of debts. If Audit& Supervisory Board Members ask for advance payment or other way of expenditure to cover costs etc.
arising from execution of their duties, the Company shall immediately shoulder the said costs or debts
except cases considered as unnecessary for execution of their duties.
11. Framework ensuring the effectiveness of auditing by Audit & Supervisory Board Members of theCompany(1) President and Chief Risk Management Officer(CRO) shall hold periodic meetings with Audit &Supervisory Board Members to exchange views on issues that the Company should address,
priority audit issues, improvement of audit environments and other issues.
(2) The Internal Audit Department and Accounting Auditor shall cooperate with Audit & Supervisory
Board Members by reporting audit results and through periodic meetings, and deal with Audit &Supervisory Board Members’ necessary instructions.
(3) To increase the effectiveness of audit to be performed by Audit & Supervisory Board Members,
the Company shall give proper supports for Audit & Supervisory Board Members to visit andaudit sites.
(4) If Audit & Supervisory Board Members require to consult with specialists including lawyers andaccountants to obtain advice from them, the Company shall guarantee Audit & Supervisory Board
Members to have opportunities to obtain such advice.

2. Basic Views on Eliminating Anti-Social Forces and Progress of Related Efforts
We have stipulated, in the “Our Code of Conduct” approved at the Board of Directors meeting that all
employees are required to observe rules and regulations and behave under highly ethical standards. The“Guidance of Practice” including specific guidelines of the Code explicitly states that the Company shall nothave any relationship with anti-social groups or persons and resolutely decline any unreasonable claims
without easy concession. For this purpose, necessary information shall be collected by General Affairs

27

Department controlling the entire company, and general affairs divisions or departments of business sites
and affiliated companies under the control of CRO and the manager responsible for preventing unreasonable
concessions. They shall deliver trainings, share and familiarize relevant information and procedures against
anti-social groups within the Company. For each of specific cases, we shall take a firm action in cooperation
with the police authority and external professional bodies.

V. Other
1. Adoption of Anti-Takeover Measures
Adoption of Anti-Takeover Measures

Not adopted

Supplementary Explanation―

2. Other Matters Concerning Corporate Governance System
The below describes the internal system for timely disclosure of our corporate information.
1. Basic policies on the disclosure of information
The Company shall observe the relevant laws and regulations including Financial Instruments and Exchange
Act.
The Company shall1) conduct disclosure of material facts including corporate decisions and occurrence of material facts whichmight affect investors’ decisions, and information concerning financial results, based on the Timely
Disclosure Rules.
2) positively disclose information which does not come under the Timely Disclosure Rules but the company
considers useful for shareholders, investors, and other stakeholders in understanding the situation of theCompany through news releases, which the Company shall also publicize via its corporate website.
2. Status of Internal system for timely disclosure of Company information(1) Internal management system for timely disclosure of Company information
With regard to the disclosure of material facts related to account settlement and other important issues under
the Timely Disclosure Rules, the Company has been striving to secure appropriate disclosure of material
facts with ease of understanding, fairness, timeliness, and accuracy, while the General Manager of IR
section, the General Manager of Accounting section, and the General manager of Brand Communication
section (the person in charge of handling of information requiring timely disclosure at Tokyo Stock
Exchange) play key roles in the disclosure process.
When material decisions concerning account settlement or performance forecasts are made at theManagement Committee and Board of Directors meeting, General Manager of IR section executes timely
disclosure of those material facts at Tokyo Stock Exchange via TDnet, and General Manager of PR section
announces those material facts at press clubs, etc. When decided material facts (material facts decided to bedone or not to be done by authorized organizations or persons of the Company) or unintended material facts(material facts that occurred regardless of the intention of the Company) occur, the General Manager ofBrand Communication section, after consultation with relevant sections, discloses it at Tokyo Stock
Exchange. Disclosure of material facts which come under the Timely Disclosure Rules is conducted at
Tokyo Stock Exchange. Specifically, the disclosure is conducted via TDnet, which is operated by Tokyo
Stock Exchange, and the Company announces those material facts at press clubs, etc. The Company posts
relevant news releases concerning the disclosed information on the Company’s Website as soon as possible.
(2) Timely disclosure of information related to account settlement
When material decisions concerning account settlement or performance forecasts are made at theManagement Committee and Board of Directors meeting, General Manager of IR section executes timely

28

disclosure of those material facts at TSE via TDnet, and General manager of Brand Communication section
announces those material facts at press clubs, etc.
(3) Decided material facts and Unintended material facts
When “decided material facts” or “unintended material facts” occur, the Company strictly enforces in-house
information control, and General manager of Brand Communication section consults with relevant staff
departments, obtains CEO’s approval for the contents of consultation and disclosure of material facts,
discloses those material facts at TSE.

29

[Reference]
Corporate Governance Structure30[Reference]

Internal Management Structure for Timely Disclosure of Company Informationin Accordance with Timely Disclosure Rules set by TSE

Management Committee

Board of Directors(Instruction to disclose relevant information)~Information related to decided material facts,
unintended material facts, account settlement~”Material facts”
Information related toInformation related to

Account settlement,

Decided material facts,

Performance forecast

Unintended material facts

Business Divisions
Unintended
material facts(IR section)(Brand Communication

Staff Sections

section)*When unintended material facts
related to a business divisionoccur, the division informs therelated staff section of thosefacts and discusses suitablesteps. The staff section informs
the General Manager of Brand
Communication section of thematerial facts, and the General
Manager of Brand
Communication section

discloses the facts along theprocess of Timely Disclosure.

Person responsible for information control(General Manager, Brand Communication section)

Timely Disclosure/TDnet

Tokyo Stock Exchange

31[Reference]

Skill matrix
Resonac’s Corporate Philosophy
The Resonac Group has set its Purpose (the meaning of its existence) as “Change society through the power of chemistry,”and has also set four Values which the Group’s employees should consider important as “Passionate & Results-Driven,”“Agile & Flexible,” “Open Minds & Open Connections,” and “Solid Vision & Solid Integrity.” The Group has defined
combination of these Purpose and Values as the Group’s Corporate Philosophy. Under this Corporate Philosophy, theGroup strives to solve social issues through its business activities.

Medium- to long-term strategy to realize Corporate Philosophy
The Resonac Group has set its management strategy as the Long-term Vision, periodically updates this Long-term Vision,and executes business portfolio reform.

The Group has classified its businesses into five segments, namely,

Semiconductor and Electronic Materials, Mobility, Chemicals, Innovation Enabling Materials, and Others. The Group
expects that the markets for the Semiconductor and Electronic Materials segment and the Mobility segment will growfurther, the Chemicals segment will make profit stably, and the Innovation Enabling Materials segment will support
technical development in all businesses of the Group. We shall realize sustainable growth of the Group by making eachof these business segments fill its role and achieve its target EBITDA.
Major issues to be discussed at the Board of Directors’ meetings
To enhance the effectiveness of the Group’s Corporate Philosophy and medium- to long-term strategy based on the
Corporate Philosophy, it will be necessary for the Board of Directors to have lively discussion and quick decision making
about “the way to compete on the world stage,” “contribution to SDGs,” “well-disciplined business portfolio reform,”“innovation including technical synergy,” and “human-resource development.”

Identification of skills necessary for Directors
On the basis of above discussion, we formulated a matrix that indicates expertise and experience of each Director and each
Member of the Audit & Supervisory Board.

Name

Inside/outside Term of officethe company(years)GlobalBusinessInnovation and
Fusion of Technology

ESG andSustainability

Portfolio
Management●

Finance/Accounting

Personnel
Management/
Development

Director

Kohei Morikawa

8

●

●

●

Hidehito Takahashi

7

●

●

●

●

●

Hideki Somemiya

2

●

●

●

●

●

Tomomitsu Maoka

2

●

●

●

Nori Imai

-

●

●

●

●

Kozo Isshiki

Outside5

Noriko Morikawa

Outside4●

Tetsuo Tsuneishi

Outside1●

Kenji Yasukawa

Outside

-

●

●

8

4

Total

●

Audit & Supervisory
Board Member

Toshiharu Kato

5●

Mitsuo Katayose

-

●

●
●
●

●

8

●
●

●
●

●

●

●

●

●
●

5

3

●

Masako Yajima

Outside4●

Outside2●●

Kiyoko Toda

Outside

-

●

●

5

7

●

Yasuyuki Miyasaka

Total

●

●

●
6

Legal/Risk
Management

●

1

1

32

1

3

●
●
0

3

< Outline of Director Compensation Scheme>
The outline of SDK’s director compensation scheme in and after 2022 is as follows:
1. Basic policy
・Directors (excluding outside directors)
A compensation scheme appropriate for recruiting and maintaining excellent humanresources inside and outside Japan as SDK aims to become a world-leading chemicalcompany for advanced functional materials
A compensation scheme that will help motivate efforts to achieve financial goals andincrease medium-to-long-term enterprise value, thereby contributing to sustainablegrowth of the GroupA transparent, fair and rational process for deciding compensation from the viewpoint ofaccountability to all stakeholders, including shareholders➢➢➢

・Outside directors
A compensation scheme appropriate for the role and responsibility for supervising themanagement of SDK from an independent and objective standpoint➢

2. Composition and levels of compensation
The compensation for executive directors and corporate officers consists of basic
compensation (fixed compensation) based on position, short-term performance-linked
compensation, and medium-to-long-term performance-linked compensation (stock-based
compensation). In case of a standard amount for President and CEO, the proportions ofbasic, short-term performance-linked, and medium-to-long-term performance-linked
compensations are roughly 40%:30%:30%.
Compensations for other executive
directors and corporate officers are decided in line with the case of president. As for
director and chairman of the board (without right of representation), short-term
performance-linked compensation will not be given in view of its basic role of supervising
the management. Compensation paid to outside directors and members of the Audit &Supervisory Board will be only basic compensation in consideration of their roles andresponsibilities. In deciding the composition and levels of compensation, we will use
objective market research data provided by external specialized institutions (such as Willis
Towers Watson’s database regarding compensation for executives). We will consider
the results of comparison with global chemical or other material companies of a similar
scale.
Graph 1 Type of compensation and scope of payment
Type of compensation

Scope

Fixed
fluctuating

Composition

Executive
directors
corporate
officers

Basic/

Money ornot money

Fixed
Money

Director/
chairman of theboard(withoutrightofrepresentation)

Outsidedirectors

Members of
the Audit &Supervisory
Board

〇

〇

〇

〇

Short-term performancelinked（Bonuses）

〇

-

-

-

Medium-to-long-term
performance linked（Stock-based）

〇

〇

-

-

/

Fluctuating
Not money

33

Graph 2 Percentage of compensation components for President and CEO (image)Current
Basic (56%)••

Short-term (26%）

Mid-to-longterm (17%)

Right is fixed once in three
years;
Changing in the range of 80%100% depending on relative
TSR evaluation vs. TOPIX
growth; stock given atresignation

Changing in the range of 0%-180%
depending on evaluation of sales,
EBITDA and measures;
Added to next year’s basic monthly
pay

New
Basic (40%)•

Short-term（30%）
Basic
(56%)

Mid-to-long-term(30%) %)

Right is fixed every term (in and after 2025);
Changing in the range of 0%-200% depending
on relative TSR evaluation vs. competitors;
stock given at resignation

Changing in the range of 0%-200%
depending on evaluation of businessresults (EBITDA, its sales margin, ROIC)
and personal performance; paid in alump after the year-end

Composition is calculated based on standard amount.

3. Incentive compensation
Incentive compensation will be granted according to performance based on indexes oflong-term numerical goals included in the integrated company’s long-term vision. It is
intended to urge performance of tasks for realizing vision and strategy under thecompensation scheme linked to business results and enterprise value.
i) Short-term performance-linked compensation (bonuses)
Payment to each person is decided by multiplying standard value (decided in advancebased on position) by performance evaluation coefficient (changing in the range of 0%200%). The coefficient consists of overall business results evaluation (70%) andpersonal evaluation (30%). In the case of representative director and chairman of theboard, only overall business results evaluation is considered.
Indexes of overall business results evaluation consist of the amount of consolidated
EBITDA (20%), the ratio of consolidated EBITDA to sales (30%), and ROIC (20%). As
for the first two, evaluation is made relative to the degree of achievement of goals foreach term. As for ROIC, evaluation is made on the basis of the average for the past three
years.
Personal performance evaluation is made by the Compensation Advisory Committee
entrusted by the Board of Directors concerning individual goals, evaluation, and theamount of payment. In case of misconduct, SDK may nullify the right to receive benefit
or demand return of compensation, depending on the timing of misconduct and thetiming of its revelation. The Board of Directors will make a decision on the matter after
deliberations at the Compensation Advisory Committee.

34

Graph 3 Evaluation indexes of short-term performance-linked compensation (bonuses)
Weighting ofevaluation

Evaluation indexes
Consolidated EBITDA（amount）
Evaluationofoverall businessresults

20%

Ratio of consolidated EBITDA
to sales (%)

30%

ROIC

20%

Personal performance evaluation

30%

4. Medium-to-long-term compensation (stock-based compensation)
Under the new scheme, points are given by multiplying standard figures (decided in advancebased on position) by TSR evaluation coefficient (changing in the range of 0%-200%).
TSR evaluation coefficient will be decided based on SDK’s rank order of three-year relative
TSR evaluation (percentile, hereinafter “%ile”) by comparison with competitors in thechemical/textile industries having similar business models and of the same size or larger.
To encourage realization of the long-term vision, TSR coefficient will be set at 100% when
SDK’s rank order is in 60%ile, while it will be 0% when SDK’s rank order is below 20%ile.
To promote long-term sharing of value with shareholders, shares will be given in a lumpafter resignation according to cumulative points.
In case of misconduct, SDK may nullify the right to receive benefit or demand return ofcompensation, depending on the timing of misconduct and the timing of its revelation. The
Board of Directors will make a decision on the matter after deliberations at theCompensation Advisory Committee.
Graph 4 TSR evaluation period and share grant (image)2022

2022 plan

2023 plan

2024 plan

2023

2024

TSR evaluation period

2025

●

2026

2027

・ ・ ・

Point
fixed

●Share grant●

TSR evaluation period

TSR evaluation period

35

Resignation

Point
fixed

●Share grant

●

Point
fixed

●Share grantGraph 5 TSR evaluation coefficient
TSR evaluation
coefficient
200%

100%
33%
33
0%

TSR =

TSR rank
20%ile60%ile100%ileAverage closing stock price in Dec. of the last year + Total amount of dividends during the period
Average closing stock price in Dec. immediately preceding the evaluation period

5. Compensation governance
SDK’s Compensation Advisory Committee is chaired by an independent outside director,
and independent outside directors/auditors account for the majority of committee members.
The committee will make proposals and reports as necessary to the Board of Directors inview of the latest situation concerning executive compensation and market trends, resultsof comparison with relevant competitors, and other pieces of advice. To ensure highlevels of independence and objectivity, decisions on compensation for respective directors
will be entrusted to the Compensation Advisory Committee as from 2022. SDK has
appointed Willis Towers Watson, an external consultancy, as advisor.

36