REPORT2023

APRIL 1.2022-MARCH 31.2023
Sanyo Special Steel Report 2023
(Integrated Report)

CONTENTS
Corporate Philosophy

1

Top Message

2

Our Business

5

Global Business Development

6

Value Creation Process

7

Special Feature ①
Revision of 2025 Mid-Term Management Plan

8

11
Special Feature ②
Initiatives of Ovako Toward Carbon Neutrality
12
Special Feature ③
Round-Table Talk of External Directors
Toward Enhancement of Corporate Value andContribution to a Better Future

Topics14

Important ESG-related Issues

17

Environment

Corporate Philosophy

Confidence-based Management■ Editorial Policy
This report summarizes the Sanyo Special SteelGroup's environmental, social, and governance(ESG) initiatives aimed at realizing a sustainable
society.
■ Period and Scope of Coverage
This report contains information on the initiativesof Sanyo Special Steel and its Group companies in
FY2022 (April 1, 2022 to March 31, 2023), but also
includes information outside the period covered.

Environmental Management

18

Climate Change Prevention Initiatives

19

Information Disclosure According to TCFD
Recommendations

21■ Reference Guidelines and Other Documents"International Integrated Reporting Framework," IIRC

Contribution to a Resource-recycling Society

22

Reduction of Environmental Impact

22"Guidance for Integrated Corporate Disclosure andCompany-Investor Dialogue for Collaborative Value
Creation," Ministry of Economy, Trade and Industry

SocialCreating a Safe Workplace

24

Disaster Prevention Initiatives

25

Promotion of Diversity Management

26

Promotion of Corporate Health Management

27

Human Resource Development

28

Respect for Human Rights

28

Quality Improvement Initiatives

29

Expanding Technological Superiority

29

Promotion of DX

30

Realization of Sustainable Procurement

30"Environmental Reporting Guidelines 2018," Ministryof the Environment
Task Force on Climate-Related Financial Disclosures(TCFD) Recommendations■ Notes on forecasts
The forward-looking statements in this report are
based on the judgment of the Group based on theinformation currently available. These statements
are subject to a number of uncertainties, and actual
results may differ materially depending on a numberof factors.

Confidence of Society
We aim to earn the confidence of society by contributing to therealization of an affluent and culturally rich society and fulfilling
our responsibilities as a member of society through our "highquality special steel manufacturing."

Confidence of Customers
We aim to earn the confidence of our customers by rapidly andaccurately identifying their needs and appropriately providing
high-quality special steel products.

Confidence among People
We will build confidence among people by deepening
communication with all stakeholders and acting autonomouslyin accordance with social norms.

Governance

Enhancement of Corporate Governance31

Officers

33

Key Financial Data

34

1

Top Message
90th anniversary with gratitude andmoving toward our 100th and beyond

1933– tumultuous times

With our appreciation for those who have supported us over time,

Establishment and throughwe are aiming to make further developments and		Founded in 1933 as Sanyo Steel Works by YAMAMOTO Tousaku thefourth, our company commenced the manufacturing of bearing steel
upon its incorporation in 1935.
Having overcome the turmoil caused by World War II, we implemented
large-scale capital investment such as in manufacturing facilities forseamless steel tubes and expanded our business in response to therapid development of postwar Japanese industry.

gain trust from society.

Original 3-ton electric arc furnace (1933)

1960– Rapid growth and ordeal period
In 1964, successive capital investment implemented in response toexpanding demand for special steel came to completion. However,caught by securities market slumps arising in the same period, we had
no choice but to file an application under corporate reorganization law in1965.
Subsequently, efforts toward the enhancement of the business structurebore fruit, leading to the successful rebuilding of our company in 1973.

In commemoration of reaching our 90th year since establishment, we adopted the slogan,"90th anniversary with gratitude and moving toward our 100th and beyond."

Main building (current head office) constructed (1964)

1980– growth

During the time of high economic

Selected from among a large number of entries submitted by employees, this slogan embodies our appreciationfor everyone who has supported us over a long period of time and also our determination to make Sanyo Special

We achieved the relisting of our stock and completed the construction of
No. 2 Steelmaking Plant and a small and medium bar rolling mill (then,No. 2 Bar & Wire Rod Mill), which are our main factories today.
Furthermore, we entered into the metal powders business in 1988. In
the 1990s, we significantly advanced our technological capabilities,
exemplified by the development of ultra-high-cleanliness steel.

Steel even more long-standing."
Over its long history, Sanyo Special Steel has faced numerous crises and challenges including the turmoil
following World War II, corporate reconstruction after the application of corporate reorganization law in the 1960s,
the collapse of the bubble economy, and upheavals in the global economy. Taking on challenges such as, mostrecently, the rapid globalization of its businesses, its journey has never been smooth. Amid these circumstances, wehave been able to overcome many crises, undergo changes, and continue to grow, thanks to the efforts, support,
and cooperation of numerous stakeholders such as employees including former personnel, labor unions, affiliates,
cooperative companies, and business partners.

150-ton electric arc furnace (1982)

steel products of our Group will be in even greater demand around the world as important materials to support

This has been an era during which our business environment has
undergone drastic changes due to events such as the Lehman shockin 2008, the Great East Japan Earthquake in 2011, the COVID-19
pandemic in 2020, and the Russian invasion of Ukraine in 2022.
Amid this situation, we have been strengthening our business structure
to cope with changes in the environment and promoting the overseas
expansion of our business. Our business has been globally developed,
as exemplified by the acquisition of an Indian special steel manufacturer
MSSPL (now SSMI) as a subsidiary in 2018, and becoming a memberof the Nippon Steel Corporation Group and affiliating Ovako, a leading
European special steel manufacturer in 2019.

the development of society. Under these circumstances, the Sanyo Special Steel Group will further build up thereliability of the brand "Sanyo Special Steel - the confident choice" by, on a group-wide scale, strengthening its
business foundation and innovating technologies that are ahead of the times. Without evolution on a constant basis,companies become unable to meet the ever-changing needs of society and are thus doomed to deteriorate. We willcontinue to actively take on new challenges, striving to maintain our status as a company trusted by society as set
forth in our corporate philosophy.

MIYAMOTO Katsuhiro,
Representative Director and President

2000– a global special steel manufacturer

Promoting overseas expansion to be

Even under major social and industrial changes in the future, such as carbon neutrality, the highly reliable special

Acquiring Ovako, a European special steel manufacturer,
as an affiliate (2019)*The photograph shows Imatra Mill (Finland)2Top Message
Review of FY2022 and Current Business Environment

Revision of 2025 Mid-Term Management Plan

Business results for FY2022

Background of the revision

In FY2022, despite automobile production cutbacks due to supply
chain disruptions caused by semiconductor shortages and the lockdownof Chinese cities, and the soaring prices of raw materials and fuels
including the price of steel scrap, we managed to achieve consolidated
net sales of 393.8 billion yen, an increase of 30.6 billion yen on a
year-on-year basis, and consolidated ordinary income of 28.9 billion
yen, an increase of 7.2 billion yen on a year-on-year basis, due tofactors such as revised selling prices following the application of thescrap surcharge system, improved margins from the sophistication of
our product mix, and Ovako’s improved earnings including one-offs.
(The ordinary income of Ovako excluding one-offs was 19.3 billion yen,
substantively at the same level as in the previous year, FY2021.)

Forecasts for FY2023

In FY2023, while demand for special steel is expected to recoverfrom the second half of the year with a gradual recovery in automobile
production, which had been in decline due to semiconductor shortages
and other factors, and the gradually lessening impact of inventory
adjustment in the supply chain, our full-year sales volume is expected
to remain at the FY2022 level due to the continued adjustment
phase of demand in relation to construction and industrial machineryand concerns about a stagnant global economy attributable toinflation and high interest rates. Furthermore, while energy prices
have peaked, raw material prices remain high, and the transient
effects of Ovako are expected to wear off, in addition to inflationary
effects on various materials, etc. The demand environment to datehas been largely in line with our expectations, with the exception ofOvako’s energy costs which have remained lower than expected.
In times to come, however, the business environment of our Groupis considered to remain challenging as the recovery in demand forspecial steel is likely to be slower than anticipated due to economic
deterioration in Europe and the slow recovery of the Chinese economy.
Under these circumstances, our Group will continue our cost reduction
initiatives, secure base order volumes and margins through applicationof surcharges, and take other necessary actions, thereby aiming toachieve ordinary income of 20 billion yen, which is substantively thesame level as in FY2022.

Aiming to further increase its corporate value in the global highquality special steel market, Sanyo Special Steel has formulated andimplemented the 2025 Mid-Term Management Plan covering the period
from FY2021 to FY2025. In light of major changes in the businessenvironment that have arisen since the original plan was formulated,such as resource price inflation (decoupled from the steel supply
and demand cycle), intensifying human resource constraints, andaccelerated drive to EVs and carbon neutrality, as well as the fact that
our current financial results have been outperforming the original plan,
we revised the 2025 Mid-Term Management Plan on July 28.

Basic policies

Our Group, as a whole, will seek to strengthen our business baseand profitability in Japan and overseas by making aggressive investment
and flexibly allocating the necessary human capital, centrally for carbon
neutrality and DX, as well as by flexibly revising prices based on value
in use, expanding and enhancing the surcharge system, continuously
working to sophisticate our sales mix, and taking other relevant actions,
thereby aiming to achieve further profit increase on top of the FY2022
consolidated ordinary income of 19.3 billion yen excluding the oneoffs of Ovako and the consolidated ordinary income of 20 billion yen
projected for FY2023. Furthermore, we will strive to improve ourcorporate value and presence in the global special steel market, withthe aim of realizing 1x PBR through strengthening of our ESG initiatives
such as those for carbon neutrality and through management withcapital cost and our share price taken into account.

Synergies with Nippon Steel and Ovako

Initiatives
Pursuing Efficient
Production

Strengthening
Responsivenessfor
Customers

Supporting operational improvements of Ovako• Nippon Steel and Sanyo dispatched rolling and steelmaking experts to Imatra(Finland) and Smedjebacken (Sweden).
• Supported improving productivity and yield and reducing recurring problems and defects.
• Held regular meetings between Ovako and the Japan, made repetitive follow-ups
and feedbacks on progress of operational improvement initiatives.

Sales expansion through sharing customer information,
Improving sales margin by further differentiation.
• Enhancing joint sales & marketing, mutually utilizing each sales and marketing
network (ex. Utilizing Ovako’s network for European based Japanese customers).
• Promote product differentiation based on global presence.

Reducing
Utilization of resources and infrastructure of
Procurement Costs the whole group• Optimization of procurement items and purchase pricing.
• Utilization of by-products from blast furnaces in electric furnaces.
• Reduction of logistics costs by utilizing domestic transport infrastructure.

OthersFuture initiatives (towards 2024)
Continue and deepen initiatives andachieve full synergies by FY2024.
• Transferring operational improvement initiatives to all
production sites of Ovako• Establish optimum production allocation by region andcountries• Promotion of sales expansion among Nippon Steel andOvako• Strengthen proactive proposal capabilities throughcollaborative R&D• Continuing procurement optimization through utilizing
mutual resources• Enhancing procurement optimization in India

Regular exchange of development in several sectors;
Safety, Environment (CN), Quality and R&D, etc.
• Improvement of safety performance by establishment of awareness to ‘safety first’and sharing information on accidents.
• Sharing advanced CN initiatives of Ovako. Prevention of quality incidents(ex. material mix-up) through sharing know-how and information.
• Mutual evaluation of technological capabilities.

Impact of the shift to EVs and our activities
Structural changes in demand associated with the shift to EVs,
and growing need for smaller and lighter automotive parts, etc.

CASE*
Decrease in special steel
consumption per automobile(Engines and transmissions, etc.)• Growing need for our highly reliable special
steel products associated with the shift to EVs• Increase in demand for our special steel
products with properties that contribute to
the size and weight reduction of parts■ ECOMAX Series contributes toquietness■ High hardness and high toughness
steel replacing carburizing steels■ High temperature carburizing steel
ensuring ideal grain size
■ Advanced Tool Steels supreme fit
with high strengthened materials(*) CASE CASE:Connected, Autonomous, Sharing and Electric• With our strength in high high-cleanliness steel, accurately respond to new customer requirements
and environmental issues arising from changes in social and industrial structures• Strengthen supply chain competitiveness by enhancing collaboration with customers

Synergies Among Sanyo Special Steel, Nippon SteelCorporation (NSC), and Ovako
Sanyo Special Steel, NSC, and Ovako have planned to generatesynergies worth about 10 billion yen among them, on a 50% scale by
the third year (FY2021) and on a 100% scale by the sixth year (FY2024),
and have currently implemented specific collaborative measures.
We have dispatched engineers to Ovako to support its technical andoperational improvement toward better productivity, having beensteadily realizing cost reductions. In addition, as synergies with NSC, we
have implemented various initiatives including those seeking to reduce
distribution costs and the costs of materials, equipment, and ferroalloy
through utilization of the iron sources and transportation infrastructureof the group. These initiatives have also steadily yielded results.
Furthermore, various other activities have also been implemented,
including the production consolidation of the product types of eachcompany’s specialty and R&D collaboration utilizing the knowledge,
manpower, etc. of the NSC Group. In FY2022, the fourth year ofthese synergies, we achieved more results than planned. We arefocusing on bringing out full synergy effects by FY2024 as scheduled.
In order to survive among increasingly fierce global competition,
it is important to have rock-solid cost competitiveness as well as
technological and quality competitiveness. By utilizing the strengths
that are unique to us and continuously expanding and maximizing
synergies among the three companies, we will strive to further enhance
our corporate value and presence in the increasingly competitive global
special steel market.

Responses to the Shift to EVs
The shift toward electrification of automobiles for carbon neutrality
is accelerating around the world. Accordingly, it is expected that
automotive structures will significantly change, likely to cause an impact
on special steel consumption, as well. Besides, it is likely that steel used
for engines and transmissions will decrease, and that competition withcompeting manufacturers whose sales activities have mainly focused on
those fields will intensify.

New demand

At the same time, we foresee the rise of new demand following theshift to EVs. In particular, the downsizing and weight reduction of EV
parts for energy-saving purposes cause an increased load for some ofsuch parts, and the materials used for those parts inevitably require highperformance (strength), quality, and reliability. It is this aspect where
we believe our Group can take advantage of its high manufacturing
technologies to produce highly reliable and high-quality special steel.

Contribution to carbon neutrality

Furthermore, there is growing need for steel products with less CO2
emissions and for special steel that can contribute to reducing CO 2
emissions generated in the course of parts production at customers’sites. Each of Sanyo Special Steel, Ovako, and SSMI manufactures
special steel products by recycling materials with steel scrap as themain raw material, which puts them into a position of relative superiority
in terms of CO 2 emissions, as well. Special steel is characterized
not only by its properties as a steel material but also by its superior
functionality achieved by combining post-processes (processing
processes) such as forging and heat treatment. In this regard, ourGroup has enhanced its technologies, quality, and service capabilities,
for example, by working closely with customers on joint development
and meeting advanced needs including the reduction of processing
costs and the realization of weight reduction. Such collaboration andthe knowledge that we have built up through such collaboration have
led to the development of products such as "ECOMAXTM Series" and"TOUGHFITTM" which can contribute to the reduction of CO2 emissions
at customers’ sites by enabling them to omit or simplify processes.
Leveraging these strengths, we will promote the development of ecoproducts aimed at realizing a decarbonized society and meet newneeds arising from the shift to EVs, etc., will expand our technologicalsuperiority and strengthen our cost competitiveness through, forexample, the development of differentiated products, and will utilize
our technologies to steadily address demand in those non-automotive
fields which are expected to grow in the future (such as wind power
generation and railroad bearings).

• Further improvement of safety and quality• Promoting personnel exchanges

3Top Message
Toward Carbon Neutrality

Initiatives to Expand Human Capital

Roadmap to carbon neutrality by 2050

Initiatives for safety

Initiatives implemented by Ovako

Development of global human resources

Based on the roadmap of Sanyo Special Steel toward carbon neutrality, in addition to reducing our own CO2 emissions (Scopes 1 and 2) by 50%
or more compared to the FY2013 level by FY2030 through promotion of eco-processes, green energy utilization, and other actions, we are aiming tocontribute to reducing emissions by approximately 40% of the FY2013 level by employing eco-products that contribute to customers’ CO2 emission
reductions and eco-solutions that deploy energy-saving and productivity-enhancing technologies at overseas Group companies. For eco-processes, wehave been promoting the use of regenerative burners for heating furnaces, inverters for large motors, and LEDs for factory lighting among other items,
having made steady progress with the CO2 emissions during FY2022 (Scopes 1 and 2) being 540 thousand tons (a 36% reduction from the FY2013
level). In FY2022, partial use of electricity derived from renewable energy sources was started. In FY2023, we will introduce an internal carbon pricing
system to facilitate investment in energy conservation and further reduce CO2 emissions. To achieve carbon neutrality, it is necessary to reduce CO2
emissions not only in our own manufacturing processes but also throughout the entire life cycle of products covering raw material procurement andcustomers’ processing and use of such products as end products. In addition to Scope 1-2 emissions from our own manufacturing processes, we will
advance our initiatives to reduce emissions throughout the supply chain, including Scope 3 emissions, and put more of our energy into the developmentof eco-products that can contribute to the reduction of CO2 emissions generated in customers’ steel processing and parts manufacturing processes.
Having promoted the world’s pioneering initiatives, Ovako became carbon neutral in January 2022 and at the same time started selling green
steel with climate surcharges (premiums) applied to all of its steel products. In parallel with these actions, Ovako has been working on its initiatives toreduce CO2 emissions even further, starting operation of a plant for production of carbon-free hydrogen through the electrolysis of water with fossil-freeelectricity in September 2023.

Initiatives implemented by SSMI

SSMI signed an agreement with the Tata Power Group in August 2023 to purchase renewable-energy-based electricity from solar power generation.
By purchasing solar-power-based electricity from the same group starting in March 2024 and using it for SSMI’s own special steel production, SSMI is
expected to be able to reduce CO2 emissions generated from its own special steel manufacturing processes by approximately 25%.
In the midst of global demand for addressing climate change issues, the Sanyo Special Steel Group will promote initiatives to reduce CO2 emissions
and achieve carbon neutrality through its global business activities involving not only Group companies in Japan but also Ovako in Europe and SSMI in
India.

CO2 Reduction through “Eco-products”
Long-life bearing steel

Heat-resistant stainless steel tubes

High-hardness and high-toughness steel

For the Sanyo Special Steel Group as a group of
manufacturing companies, the safety and wellbeingof employees form the basic premise of its businessactivities and take precedence over everything else.
Based on this recognition, our Group promotes the
reduction of work-related risks and the creation of asafe workplace by "integrating top-down and bottomup approaches" and "implementing both hard and soft
measures" and also works to prevent accidents fromoccurring and to prevent the spread of damage in theevent of a disaster by raising employees’ awareness of
disaster prevention and conducting disaster drills.

In order for us to conduct business with confidence inthe face of fierce international competition, the technology
and skills to produce world-class, distinguishedproducts and the ability to reliably communicate withcustomers and other stakeholders around the world are
indispensable. For that reason, we are accelerating thedevelopment of global human resources. We develop a
global mindset among young and mid-career employees
and, by enabling them to gain experience, for example,
from working at overseas affiliates and studying abroadin accordance with our human development plan, work
to systematically develop human resources who can act
from diverse perspectives beyond borders and who can
produce results through sufficient communication withusers and other stakeholders around the world.

Promotion of participation by womenSize and weight reduction of parts byimproving durability and reliability

Improved heat recovery efficiency throughhigher strength

Failure rate reduction
and maintenance-free
operation
by extending productservice

Promotion of Transformation of Business Processes
and Business Models Through DX
Establishment of the DX Promotion Project Team
Digital technologies such as AI and IoT have made remarkableprogress in recent years, and the pace of their progress will continue toaccelerate in the future. The key to outpace increasingly intense global
competition is how to utilize such leading-edge technologies for one’s
own competitiveness. In addition, in Japan, human resource constraints
have intensified due to its declining labor population attributable to a
declining birthrate and an aging population. The reform of work styles byimproving operational efficiency and productivity is an urgent issue.
Against this backdrop, we set up a DX Promotion Project Team in
January 2023 to organize a structure to strongly promote companywide initiatives under my leadership. We will construct an integrated
information infrastructure for data utilization and promote thetransformation of business processes and business models, such as byusing the latest digital technologies to visualize information, make realtime information available, and automate and streamline operations(work). At the same time, by ensuring that all employees actively use
digital technologies to take on transforming our organization and culture,
we will strive to lay a foundation for quickly and flexibly responding tochanges in the business environment and society and maintain andstrengthen our competitiveness into the future.

Higher efficiencyof waste power
generation throughhigher corrosion
resistance

Reduced part hardening heat treatment load
through new chemical composition and newheat treatment technology

DX Roadmap
Establish infrastructure corresponding to changes inbusiness environment and society
Reinforce corporate competitiveness
STEP

3

~2030

Transform into Digital Company• Establish sophisticated businessfoundation• Enhance corporate value

STEP

2

~2027

Expand application ofdigital technology
STEP

1

~2025

• Improve efficiency of operationand production• Transform business process
and business model

Establish integrated information infrastructure• Establish integrated database• Visualize and “real-time” data

We have for some time driven forward the development of anenvironment for the active participation of women from both hard andsoft aspects. In June 2022, we appointed our first female executive
officer. In addition, the active participation of senior employees and thestable employment of persons with disabilities are currently regarded
as important issues. In this regard, we established a specializedorganization, Diversity (Human Resources Diversification andUtilization) Promotion Group, in January 2021 in our efforts to organize
a structure to support the active roles of all employees in the global
arena regardless of gender, age, etc.
We also put our energy into the facilitation of male employees’
participation in childcare and household duties, making efforts toimprove their work-life balance by encouraging them to take childcare
leave, develop multiskilled workplaces, and improve work efficiency.

Corporate health management

Furthermore, we formulated the "Sanyo Special Steel Declarationof Corporate Health Management" and have worked on improving
employees’ lifestyles and preventing mental health problems throughwalking events, etc. that seek to support them in making physical exercise
an established routine. On the basis of such efforts of ours, we have beenrecognized as a Certified Health & Productivity Management Outstanding
Organization (Large Corporation Category) for two consecutive years. We
will continue to promote the creation of a work environment in which all
employees can work in a fulfilling manner every day.
As the value in working diversifies, it is also very important to createa workplace culture that encourages employees to feel fulfilled with workand proud to work for Sanyo Special Steel. In addition to working on
the construction of new company housing for single employees to beopened in the spring of 2024 as part of the development of a fulfilling
living environment for young employees who have joined our company
from distant areas, and on the occasion of the 90th anniversary of thecompany’s founding, we are implementing anniversary projects for the
purpose of raising employees’ sense of belonging and deepening mutual
understanding between organizations, among other purposes. We will
promote communication and deepen dialogue within the company on aregular basis, without distinction of rank or organ, and work on creating aworkplace where all employees can work comfortably and find fulfillment.

Safety patrol participating by President

Overseas language training
for new employees
in planning positions

Illustration of the new single dormitory

Further Enhancement of Corporate GovernanceIn order to ensure that Sanyo Special Steel is firmly trusted
by various stakeholders including shareholders, customers, andcommunities, we are making efforts to strengthen corporate governanceby establishing a corporate governance structure suited to our Group’sbusiness, thereby seeking to improve the efficiency, soundness,transparency, etc., of our management.

Transitioned to a Company with an Audit & Supervisory
Committee

By June 2022, Sanyo Special Steel completed its transition
to a Company with an Audit & Supervisory Committee in order toaccelerate management decision-making, enhance discussions of basic
management policies at Board of Directors meetings, and strengthen
the supervisory function of the Board of Directors in the execution ofoperations.

Reflection of ESG indicators in executive compensation

In addition to the conventional performance-linked numericalindicators for executive compensation, we have decided to reflect five
more ESG indicators in performance-linked compensation in FY2023
in order to further strengthen our ESG initiatives toward sustainablegrowth.
We will continue to make ongoing efforts to enhance corporate
governance in order to live up to the trust and confidence placed in us
by our shareholders, suppliers, and other stakeholders, achieve soundand sustainable growth of our Group, and enhance our corporate value
over the medium- to long-term.
We hope that this report, which introduces our initiatives, will help
you to better understand the activities of Sanyo Special Steel Group,
and we look forward to your continued support and assistance.

4

Our BusinessHighly reliable steel that supports
global manufacturing

Advanced clean
steel technology

Japanese,
European, and Indian
manufacturingbases

In the Steel Products business, we manufacture and sella variety of special steel products, including bearing steel,engineering steel, stainless steel, heat-resistant steel, andtool steel.
The Sanyo Special Steel Group's special steel products
are used as materials for some of the most important parts ofautomobiles, industrial machinery, and plants, contributing to
the functional improvement of end products and the reductionof environmental impact in the manufacturing processes ofour customers.

Steel Products

Bearing steel

Engineering steel

Stainless steel

Heat-resistant steel

Tool steel

High alloy

High-voltage powertransmission
lines
High alloy

Metal powders

Metallurgical

Formed andfabricated materials

Bearing steel

Transmission
gears/shafts
Bearings

Engineering steel

Metal Powders

Powder metallurgy
high-speed steel

Example of additive
manufacturing
product

Powder metallurgy
products

Sputtering target
materials

Transmission
gears/shafts
Extrusion dies

Supply system to meet global needs

Global supply
chain

In the Formed and Fabricated Materials business, wemanufacture and sell formed and fabricated materials madefrom special steel bars and tubes.
In addition to Japan, the Sanyo Special Steel Grouphas established a supply system for formed and fabricatedmaterials in North America and China, which are growthmarkets for the automotive industry, thereby contributing
to the simplification of the processing process and local
production for local consumption for customers who are
expanding their business globally.

Formed andFabricated Materials

Formed andfabricated materials

Forged androlled rings

Die-forgedproducts

Powder metallurgy
high-speed steel

Piping/Flanges

Stainless steel

PunchesHigh alloy

Bearings

Metal Powders business that provides
solutions to customers through its
materials and technologies

Formed and Fabricated Materials
business that meets the needs ofglobally operating customers

Metal Powder Manufacturing & Sales Division
General Manager of the Metal Powder Technology Department

Formed & Fabricated Products Division
General Manager of the Planning Group

AIKAWA Yoshikazu
Integrated
production fromhigh-cleanlinesssteel

Tool steel

Formed andfabricated materials

metal powder products.
Sanyo Special Steel manufactures high-performance
metal powders with low impurities and excellent flowability
and powder metallurgy products formed by our unique
technology to support the development of advanced
technologies in various settings, from the front lines ofresearch and development to manufacturing sites.

Metal powders

Bearing steel

Bearings

Bearing steel

powdertechnology
High-performance metal powders that Sphericalwith good
Evaluation andflowability
analysis system
support the development of advanced
technologies
In the Metal Powders business, we manufacture and sellElectro-magnetic
wave absorber

In the Metal Powders business, we deal with a variety of alloy powders, primarily ironbased alloy powders, cobalt-based alloy powders, and nickel-based alloy powders. Our
target markets are wide-ranging, including aerospace, automobiles, electronic components,and medical care. Also, our customers have a great variety of needs. Under thesecircumstances, we have established a development system that allows alloy designs andproperty evaluation according to individual needs, on the basis of which we develop new
products. In particular, we are currently focusing on the development of products with the
keywords "response to DX" and "contribution to carbon neutrality," for both of which social
needs are growing. In relation to DX, we have commercialized, among other products,
sputtering target materials, which can contribute to higher-capacity recording media, andmagnetic powders for noise absorption, which can assist electronic devices in smooth
information processing. Additionally, we are also working on expanding our "NOVASHAPETM
Series," metallic powder products for 3D printers, as eco-products to contribute to carbon
neutrality.
We will continue to provide customers with solutions from both material and technologicalaspects by taking advantage of our vacuum melting and inert gas atomization facilities,
which can produce spherical powders having good flowability and enabling a wide range ofalloy designs, and by utilizing the knowledge that we have accumulated as a special steel
manufacturer.

HIROTA Kyoko
In the Formed and Fabricated Materials business, we provide customers with formed andfabricated materials whose added-value is enhanced by processing our high-cleanlinessspecial steel into a variety of forms close to end products such as bearings. Santoku
Tech Co., Ltd., our subsidiary, manufactures formed and fabricated materials for highperformance bearings used for industrial machinery and high-speed railroads in Japan. Also,
we have established formed and fabricated materials business companies in China and
Mexico, which engage in an integrated manufacturing process covering forging to turning (forthe company in Mexico, up to partial heat treatment), to meet overseas customers’ needs
for local production aimed for local consumption, centrally automobile-related needs.
Special steel products demonstrate their superior functionality that is derived not only
from the properties of their steel materials but also from the combinations of their materials
and processing processes such as forging and heat treatment. The Sanyo Special SteelGroup has developed processing technologies based on the properties of materials byreflecting CAE analysis technology in the designs of dies and processes, and has built
a system capable of producing, through integrated processes, high-quality formed andfabricated materials from high-cleanliness steel prepared by employing high-cleanlinesssteel production technology. We will continue to leverage our strengths in terms oftechnology and quality based on our domestic and overseas supply chains and integrated
processes and thereby meet the needs of customers that are expanding their businesses
globally.

5

Global Business Development
Head OfficeIntegrated Special
Steel Works
Secondary Processing
Works
Formed and FabricatedMaterials Works

Ovako Group AB

Sales Offices(FY2022)
Sales volume : 608 thousand tons
Net sales: 171.1 billion yen

Ovako Group AB
President & Chief Executive Officer

Marcus Hedblom
Ovako's determined commitment to Safety,
Sustainability, and CompetitivenessIn these uncertain times, our steadfast foundation serves
as a cornerstone for progress at Ovako. We remain
resolute in our commitment to improving safety, reducing
carbon emissions, and fortifying our competitive edge
through utilizing synergies with Nippon and Sanyo.
Clear ambition within safety – a zero accident workplace
Ovako has reduced accidents with sick leave, LTIFR, with
95% since 2015. Our dedicated safety work continues,
and safety is our number one priority in everything we do,every day. We are among the safest steel companies in
Europe, but we must never let down the guard. Maintaining
and continuing our efforts in the safety work will always be
top focus for Ovako.
Current business environment
Business is currently characterized by relatively low
demand and attractive margins. The peak of the current
cycle seems to have been around March 2022 and weare still in decline on a rolling-12-month basis. Our main
scenario is that we will see the cycle bottoming out during
the second half of 2023 and then gradually start to recover
towards the end of the fiscal year.
A new chapter in Swedish steel history
An Important step in our sustainability journey is theconstruction of Sweden's largest electrolyzer, set to
produce fossil-free hydrogen. On September 5, 2023, we
inaugurated the world's first fossil-free hydrogen plant
for heating steel before rolling. With the new facility in
Hofors, a new chapter begins in Swedish steel history withsignificant potential for global emissions reductions.
Relentless pursuit of sustainability
Our dedication to sustainability continues to intensify, andI wish to express my deep gratitude for the commitment ofour dedicated colleagues who lead and support this everyday. We have already reduced carbon emissions by animpressive 58% since 2015, and we have an ambitious
target of 80% reduction by 2030. As we move forward on
this journey, we invite all stakeholders to join us in shaping
a more sustainable future. Together, we will work towards
a more sustainable tomorrow.

Sanyo Special Steel Co., Ltd.
Ningbo Sanyo Special Steel Products Co., Ltd.

Sanyo Special Steel Manufacturing India Pvt., Ltd.（SSMI）
Managing Director(FY2022)
Sales volume : 894 thousand tons
Net sales: 193.2 billion yen

Sanyo Special Steel
Manufacturing India Pvt., Ltd.

Dilipkumar Pachpande
Sanyo Special Steel
Manufacturing deMéxico, S.A. de C.V.

(FY2022)
Sales volume : 105 thousand tons
Net sales: 21.6 billion yen

Global Network to Meet Special Steel Needs Around the WorldThe Sanyo Special Steel Group has integrated special
steel manufacturing bases in Japan, Europe, and India tomeet the needs of special steel in all regions of the world
through a tripolar global structure. In addition, we haveestablished a supply chain in the growing automotive market
through our Formed and Fabricated Materials business tomeet the local procurement needs of our customers who are
expanding their business globally. By making full use of these
global networks, we will steadily capture the growing global
demand for special steel over the medium- to longterm andprovide a stable supply of high-quality special steel products
to customers around the world, thereby achieving profitable
growth for the Group and enhancing corporate value.

North
America
3%

Other
1%

North
America
3%

Asia
17%
Net salesby region(FY2022)

Europe
41%

Japan
38%

Asia
21%
Japan
Number of33%
employees
by region(FY2022)

Europe43%

SSMI is strategically positioning itself in the Indian manufacturingindustry, particularly in the production and sale of high-quality
special steel. The company is focused on capturing both domestic
demand and international demand for high-grade steel materials.
SSMI aims to improve its competitiveness and maximize groupsynergies by collaborating with other Sanyo and Nippon SteelGroup companies. Importantly, SSMI is committed to sustainability
as a fundamental pillar of its business strategy.
The company acknowledges its role in economic growth,environmental preservation, and social well-being. The
commitment to sustainable development is deeply ingrained in thecompany's projects, ensuring equitable growth while considering
environmental and social responsibilities.
Key Sustainability Initiatives:
Climate Action Leadership
SSMI is a pioneer in taking steps to mitigate climate change.
It has set ambitious Science Based Targets to reduce CO 2
emissions intensity by 40% by 2030, with the ultimate goal ofachieving Carbon Neutrality by 2050.
Renewable Energy Adoption
SSMI is transitioning from fossil fuel energy to renewablesources, aiming to reduce its carbon footprint and decrease its
dependence on non-renewable resources.
Natural Gas Substitution
The company is replacing traditional fuels with natural gas, acleaner and more efficient energy source, to reduce emissions
while maintaining operational integrity.
Energy Efficiency Improvements
SSMI is continually working on implementing energy-efficient
processes to reduce costs and minimize its environmental
impact.
Resource Efficiency and Circularity
The company is actively focusing on resource efficiency andadopting circular economy principles to optimize resource usage
and minimize waste throughout its value chain.
Collaboration for Clean Energy
SSMI has partnered with Tata Power Renewable Energy Limited(TPREL) to establish a Captive Solar plant, demonstrating its
commitment to clean and green energy solutions and reducing
CO2 emissions in steel manufacturing.
SSMI sees sustainability not as a mere checkbox but as
the essence of its business. The company understands thesignificance of its actions in shaping the future and is committed
to integrating economic, environmental, and social responsibility
into its core strategy. By doing so, SSMI aims to leave a lasting
positive impact on the planet and society while ensuring the longterm growth and profitability of its business, in collaboration withstakeholders, towards a more sustainable and prosperous future.

6

Value Creation Process
Since its establishment in 1933, the Sanyo Special Steel Group has played a role in a resource-recycling society by manufacturing special steel products from iron and steel scrap, a recycled resource, and has contributed to industrial and economic development by providing
highly reliable, high-quality special steel products.
We will continue to strive for the sustainable growth of the Group and contribute to the realization of a sustainable society through the practice of our corporate philosophy, "Confidence-based Management," which aims to establish confidence of society, confidence of customers,
and confidence among people.

InputsBusiness Activities

Inputs

Outputs

Business Activities(Six capitals)(Initiatives of the Sanyo Special Steel Group)

Financial capital
Shareholders' equity: 206.3 billion yen
Interest-bearing debt (net): 66.7 billion yen
D/E ratio: 0.31 times

Understandinguser needs

Manufacturing
technology
development
Product development

Steel Products

Metal Powders

Manufacture
Quality assurance
Sales

Formed andFabricated Materials(End of March 2023)

Manufactured capital

P.6 Global Business Development

Natural capital(resources and energy)

Iron and steel scrap/ferroalloy
Energy (electricity and natural gas)
Industrial water
More than 90%

Establishment of a solid corporate structure bystrengthening the business foundation
Corporate philosophy "Confidence-based Management"

Establishment of conﬁdence with all stakeholders

ca
lc
om
mun
ities

Co
to ntribucom local tion
mu
nit
y
e
nc
de

nc

e

inv

de

and

Co

d ers

Str
dis ategy
and closu
Ap dial rediv prop ogue
ide riatnd es

S h a re h o l

ers

e
nc

Rewardingwork
environment

Confidence

a rtn

de

"Confidence-baced
Management"(Values created)

Creation of economic value

Enhancement of corporate
value in the global
special steel market

Creation of social value
Contribution to the realizationof a sustainable society
Development of an affluent andculturally rich society
Carbon-neutral society

sp

Synergies Among Sanyo Special Steel,

P.3 Nippon Steel Corporation (NSC), and Ovakosuperiority

Practice ofcorporate philosophy

nfi

Coexistence with local communities
Partnerships with customers
and suppliers
Collaboration with NSC and Ovako

an
et)

es

Social capital

Confidence

Co(End of March 2023)

P.14 Commercialization of "TOUGHFITTM"

Bu
Provision ofhigh-quality
products

Sales volume for FY2022: 1,607 thousand tonssinGroup employees: 6,285

s

f
no l
ctio enta
duRe ironmv
en act
imp

e

nc
de
pl
nfi
Co
he
t (t
men
Environ

Human capital

tor

ir
Fa de
tra

P.29 Further expansion of technological superiority

es

Co
nfi

Intellectual capital

Provision of high-performance, high-quality,and highly reliable productsthat are utilized in various fields of society

Eco-products toward carbon neutrality

C usto m ers(Research and development expenses: 2.0 billion yen / FY2022)

Shareholder return
Annual dividend for FY2022: 100 yen per share(Interim: 55 yen Year-end: 45 yen)

Outcomes

Global branding of"Sanyo Special Steel- the Confident Choice"P.22 Efficient Use of Water Resources

Basic research technology
Manufacturing and product development
technology
Evaluation and analysis technology

FY2022 Earnings
Net sales: 393.8 billion yen
Ordinary income: 28.9 billion yen

Management Plan "2025 Medium-term Plan"nfi

of water used in the
production process
is reused

Outputs(Major achievements of business activities)

Bearing steel
Largest domestic
market share

Global manufacturing bases

Approximately 95%
of raw materials arerecycled materials

Outcomes

Workplace where each and every diverse
individual can work in a safe, healthy andfulfilling manner every day
Human resources who can think and act
autonomously and global human resources

Establishment of a resource
recycling society
Realization of a safe and secure society
Diversity and inclusion

P.28 Human resource development

Lo

Employees

Corporate governance
Autonomous internal control

Environmental conservation and CO2
emission reduction
Partnerships with customers and suppliers
Synergies with NSC and Ovako

7

Special Feature ❶Revision of 2025 Mid-Term Management Plan
Aiming to further increase our corporate value in the global high quality specialty steel market, Sanyo Special Steel has formulated and implemented the 2025 Mid-Term Management Plan, covering the period from FY2021 to FY2025. In light of major changes in businessenvironment that have arisen since the original plan was formulated, such as resource price inflation (decoupled from steel supply and demand cycle), intensifying human resource constraints and accelerated drive to EVs and carbon neutrality, as well as the fact that our current
financial results are outperforming the original plan, we have decided to revise the 2025 Mid-Term Management Plan.

Outline of Mid-Term Management Plan
Business Environment

Priority Measures to Realize the Five Core Pillars

Five Core Pillars

Financial Targets

1 Further Enhance Corporate Value

Net sales

Carbon Neutrality

Intensifying Human
Resource Constraints

2
3
4
5

Approx. 420 billion yen

Ordinary income Approx. 22 billion yen

and Global Presence

Resource Price Inflation(decoupled from steel supply
and demand cycle)

Approx. 7 %ROEReinforce Profitability of
all Global Operations

Approx. 8 %ROE(excluding goodwill amortization)

3,633

Achievement of
Carbon Neutrality by 2050

CAPEX

Number of
employees

Promotion of DX

Approx. 6,500

3Initiatives to Achieve 1x PBR

ROE

3,860

●

Continuous improvement of margins and sophistication of sales mix●

Exploring growth opportunities that will contribute to enhancing the corporate value and presence●

Aiming to achieve 1x PBR through management with the cost of capital and stock price taken into accountReinforce Profitability of all Global Operations●

Steel Products business:(Domestic) Securing appropriate margins by strengthening market-sector-specific foundations(Overseas) Ovako: Strengthening of its profit structure through cost optimization by leveraging its advantage interms of carbon neutrality
SSMI : Enhancement of its presence in the Indian market by improving its costs and strengthening
its sales capabilities●

Formed and Fabricated Materials business: Strengthening of its profit structure on the basis of its integrated
competitiveness in the global supply chain●

Metal Powders business: Achievement of profit growth by capturing highly-profitable fields in which demand is
expected to increase

×

PER

＝

Strengthen ESG Initiatives●

Strengthening of governance- and ESG-related initiatives and appropriate information disclosure●

In addition to diversity and health management, focusing on developing global human resources andimproving employee engagement
Further promote
female managers

PBR

●

2,800

●

Sustainable profit growth × Exploring growth opportunities●

Through seamless dialogue with investors, promotion of thesituation surrounding the implementation of CN and ESG
Initiatives→ Aiming to reflect them in the share priceTransient

18

●

220
193

200

2023 ……… FY2025(Forecast)(Revision)

Increase in the tradable share ratio by reviewing crossshareholdings held
→ Aiming to reduce the cost of capital

Revision of the dividend policy→ Dividend payout ratio (DPR): approx. 35%
		 DPR excluding goodwill amortization: approx. 30%
With the per-share dividend level also taken into consideration

FY2025(Original)

Planning period
Further increase profit compared to FY2022 ordinary
income (excluding one-offs of Ovako) of 19.3 billion yen,and FY2023 forecast ordinary income of 20 billion yen●

Target ROE for FY2025 revised to 8% (excl. goodwill amortization)

Promote corporate
health management

Health management
ratingSafetyindex

Ratio of female
managers

Board effectiveness evaluation
by external directors

Achievement of Carbon Neutrality by 2050●

Group-wide promotion of "eco-processes," "green energy utilization," "eco-products," and "eco-solutions"●

Acceleration of the leadership of Ovako that is a leader in terms of carbon neutrality●

Deepening of technology to meet needs for high reliability in the fields of "EVs," "wind power generation,""railroads," and "hydrogen society"

●

●

140

2022

4

Reform work styles
and promote work-life balance

Addition of ESG indicators to the executive compensation
CDP climatechange score

96

2021

Strengthening of the corporate foundation by securing human capital and by making capital investment, etc.

Approx. 16 billion yen(FY2023 - FY2025)

4,200Transient198●

Investment of Resources

Progress and New Targets of
the Mid-Term Management Plan

3,938

2

Further Enhance Corporate Value and Global PresenceStrengthen ESG Initiatives(End of FY2025)

Ordinary income (Billion yen)
Net sales (Billion yen)

1

5Strengthening of group-wide initiatives, steered by the Carbon Neutrality Promotion Committee chaired by the President

Promotion of DX●

Establishment of the DX Promotion Project Team led by the President●

Enhancement of business and operational efficiency and execution of process reform, based on the two pillars ofbusiness reform and factory reform●

Aiming to sophisticate the business structure and increase the corporate value through DX implementation leading tooperational transformation
8

Special Feature ❶Revision of 2025 Mid-Term Management Plan

To strengthen our presence inthe global special steel market

Taking advantage of our technological superiority in highcleanliness steel, we sell approximately one million tons of special
steel products annually, both domestically and overseas. Of thistotal, about 20% is directly exported to overseas countries, andthe majority is sold to domestic customers. Many of such domestic
customers globally conduct business in fields such as bearings,
automobiles, construction machinery, and industrial machinery.
Accordingly, our special steel is sold worldwide in the form ofprocessed metal products.
On the basis of our estimation, it is our understanding thatapproximately 80% of the special steel we sell is used globally.

●Capturing growing overseas special steel markets
As for future trends in demand for special steel, taking our core
field of the automotive industry as an example, while domestic
automobile sales in Japan are not expected to grow significantly
due to an aging society and a declining birthrate in the country
among other factors, automobile sales around the world are
expected to continuously grow, especially in emerging countries.
Against the backdrop of these trends, in addition to our domestic
sales offices, we have established local subsidiaries in the US,
China, and Thailand to directly work on growing overseas special
steel markets and capture demand. Furthermore, other than the
Steel Products business sector, with respect to our Formed andFabricated Materials business, we are developing our forging
and turning business in China (Zhejiang Province) for Japanesebearing manufacturers. Similarly, we are also developing ourforging and turning business in Mexico, with the steady North
American economy taken into account.

Aiming to realize technologicalrenovation to meet the expectationsof globally operating customers

Director, Member of the Board,
Managing Executive Officer

Director, Member of the Board,
Managing Executive Officer

OMAE Kozo

YANAGIMOTO Katsu●Sales alliance with overseas Group companies
Meanwhile, in recent years, against the backdrop ofincreasing political and economic frictions and tensions between
regions, there has been an ever-accelerating trend toward
local procurement of raw materials, parts, etc., coupled with the
expansion of overseas operations by customers. In response
to such changes in the environment, we are working onstrengthening our sales cooperation with SSMI of India, whichbecame a subsidiary in 2018, and Ovako of Sweden, whichbecame a subsidiary in 2019.
Ovako has the technological capability to produce special
steel products of the same high quality as our products and is not
only a leading supplier of special steel in Europe but also a wellestablished world-leading special steel manufacturer in terms ofcarbon neutrality. In cooperation with our parent company, NSC,
the three companies of NSC, Sanyo Special Steel, and Ovako
have set up a marketing project for each field and region, haveformulated and implemented sales strategies that take advantage
of each company’s strengths, and follow up their implementation.
Also, since India is the most promising region in terms of future
growth in demand for special steel, we are providing full sales andtechnical support to SSMI while making efforts to expand the saleof special steel in cooperation with NSC and Ovako.
The fact that we have special steel manufacturing subsidiaries
overseas, and that we can develop a global sales network withthe four companies including NSC is a major advantage that ourcompetitors do not have. We will utilize this strength to the fullest
to intensify our presence in the global special steel market.

We are committed to technology development under thepolicies of "sincerely listening to the voices of customers" and"providing technologies and products that go with the times byutilizing our excellent production technologies and development
capabilities."
During the 90 years since our founding, we have developed
many distinctive production technologies and products, including
high-cleanliness steel, to respond to the expectations and trustthat customers and society have for "Sanyo as a technology
company." Global and flexible responses are required to theneeds for development of advanced technology and products
corresponding to recent major environmental changes. For thatreason, our Group as a whole aims to "expand our technologicalsuperiority" under the 2025 Mid-Term Management Plan. I would
like to discuss the status of our technological development under
the ongoing Mid-Term Management Plan and also our future
initiatives and issues beyond the plan.

●Development toward carbon neutrality by 2050
For our Group, the realization of carbon neutrality is the mostimportant company-wide theme, and we believe that the role oftechnology development is also significant. In addition to, among
other matters, "long-life bearing steel for automobiles, wind power
generation, and railroads" and "high-performance powders for
AM (additive manufacturing)" which take advantage of our strong
production technology, we will strive to develop technologies
and products that can contribute to "customers’ eliminationand simplification of their processes" and "realizing a hydrogensociety.

●Global collaboration
As the special steel market is becoming increasingly
globalized, we cooperate with Ovako of Europe and SSMI of India
in a wide range of areas in terms of technological development,
as well. Although requirements differ depending on the market
environment and local conditions, including in the case of theFormed and Fabricated Materials business at NSSP of China and
SMM of Mexico, our Group will, with Sanyo Special Steel playing
a central role, take on technological and quality challenges andfurther enhance cooperation so as to be able to diffuse andpractice "reliable manufacturing as the Sanyo Special SteelGroup" on a global scale.

●Initiatives aimed at further expanding
our technological superiority
Not only the special steel industry but all manufacturingindustries are constantly in the midst of global competition, andinitiatives for technological innovation are activities for surviving
medium- and long-term competition. We believe that suchtechnological innovation is possible only if we can manage both"identifying the direction that customers and markets demand" and"maintaining our excellent technological development capabilities
that can materialize such demand." The "ability to sincerely
listen to the voices of global customers" and the "technologicalcapabilities to materialize those voices" are both exerted byindividuals. We recognize that it is an important task under theongoing Mid-Term Management Plan to actively earn the trustof our customers without becoming content with the status quo
and to develop excellent human resources who are eager toimprove their technical skills. By implementing this task, we willcontinuously strive to respond to our customers as "Sanyo as atechnology company."

9Special Feature ❶Revision of 2025 Mid-Term Management Plan

Aiming for business model transformation
to respond to market globalization andchanges in customer needs

Aiming to achieve 1x PBR throughmanagement with the cost of capitaland share price taken into accountDirector, Member of the Board,
Managing Executive Officer

Director, Member of the Board,
Managing Executive Officer

OI Shigehiro

TAKAHASHI Kozo

In January 2023, we set up a DX Promotion Project Team,
which is led by the President, and have intensively implemented"Sanyo DX," a basic policy of the 2025 Mid-Term Management
Plan. DX is the concept of "transforming" people’s lives for the
better through the utilization of advanced digital technology. I
believe that the adoption of digital technology itself does notconstitute DX since digital technology itself is just a means,
and that the key point is to "transform" the very business modelthrough the use of such technology. With this in mind, we haveestablished five working groups (WGs) in the Project Team topromote DX.

The Operation Efficiency WG strives to collect various types ofdata from production facilities in real time, analyze and evaluate
such data using AI (artificial intelligence), and further improve
quality by immediately providing feedback for maintaining andmanaging the optimal conditions of facilities and for improving thequality and productivity of special steel produced. The Production
Process Reform WG strives to collect facility operation information
by utilizing digital technology and to enable the sales, engineering,
and administrative divisions as well as production sites to makeuse of more accurate forecasts obtained through analysis of theinformation by comparing it with the plan created in cyberspace.

●Initiatives of each WG●With a view to total optimization and collaboration

The System Infrastructure Reform WG aims to fundamentallyreform our systems for the purpose of utilizing an enormous
quantity of data and ensuring security, among other purposes.
The Business Efficiency WG works on enabling all employees toreform their operations and on developing human resources tosustain such reformed operations. The Business Process Reform
WG seeks to optimize, on a company-wide scale and by making
the data held by each division shared with other divisions, theQCD (quality, costs, and delivery dates) of our work, which meansa series of business operations in which the engineering divisionassigns quality specifications to the details of each order received
by the sales division from a customer and passes the order onto
the production division whose departments then engage in the
production of the relevant product according to the specifications,subsequently the product is delivered to the customer, and thepayment for the product is collected.

Currently, in order to solve the "problems" of each WG, whatneeds to be done within each WG and how each WG should be
are being organized. In other words, we are just beginning to see
the "vertical connection" of each WG.
However, when considering the DX of Sanyo Special Steel asa whole, it is important to set out the "horizontal connection" ofthe WGs with a view to total optimization and collaboration. We
consider it necessary to firmly organize and establish vertical andhorizontal connections in order to execute our DX in its entirety inthe most efficient manner.
DX cannot be realized overnight. However, in order to deal
with "changes in the business environment," such as market
globalization and changing customer needs, we will implement
our DX with a strong determination to transform our business
operations themselves and also our business model.

In the revision of the 2025 Mid-Term Management Plan, apolicy of aiming for 1x PBR through management with the costof capital and stock price taken into account was set. We haveregarded our share price as the market appraisal of us, haveconstantly paid attention to it and its trends, and have internallyshared such trends. We consider that the setting of our shareprice as a specific target of our management plan is a major
turning point for our Group.

●Issues with our shares
The stocks of companies in the steel industry, including
Sanyo Special Steel, have long been regarded as those whosebusiness performance is susceptible to economic cycles andvolume fluctuations. However, in recent years, we have sought
appropriate margins suitable for the value of our products andhave promoted measures such as the expansion of the surcharge
system, which has enabled us to secure relatively stable earnings.
In addition, with the acquisition of SSMI of India in June 2018
and Ovako of Europe in March 2019 as subsidiaries, our Group
has a tripolar structure consisting of Japan, Europe, and India tocapture the global demand for special steel, which has grown overthe medium to long term. Most recently, consolidated businessperformance has expanded due to Ovako’s improved earnings,
among other factors.
On the other hand, as an issue on the stock front, we believethat investors view Sanyo Special Steel as a brand with a highrisk of price volatility, partly due to a low volume of trading in themarket. In addition, as circumstances unique to us, the liquidityof our shares is low. In light of the listing criteria for the Prime
Market, we must consider improving the liquidity, among otherrelevant factors.

●Toward 1x PBR
In improving the PBR, it is important to strengthen profitability
as well as Sanyo Special Steel’s reputation in the stock market.
With respect to shareholder returns, we have revised ourdividend policy to set the consolidated dividend payout ratio
at around 35% as a standard level, comprehensively taking
account of the funds required for investment in growth and otherpurposes. Also, we will take even further steps to eliminate crossshareholdings with business partners, financial institutions, etc. inorder to facilitate the market circulation of our shares.
Furthermore, since highly reliable special steel continues to beindispensable for social evolution, it is possible for our Group to
aim for medium- to long-term profit growth by capturing the global
demand for special steel even in the situation where it is difficult
to envisage domestic economic growth. Treating the global trend
toward decarbonization and innovations of information technology
as significant opportunities for our Group, we will actively makeinvestment primarily in carbon neutrality and DX, flexibly deploy
the human capital required for sustainable growth to strengthen
our corporate foundation, and explore opportunities that willfurther enhance our corporate value, thereby intensifying ourpresence in the global special steel market.
Moreover, we will strive to achieve 1x PBR by strengthening
investor relations activities to widely disseminate the ESG
initiatives on which we will further focus, as well as the growthstory of our Group.

10Special Feature ❷Initiatives of Ovako Toward Carbon Neutrality
Playing a part in the recycling of iron and steel resources in the European region through its special steel production business withiron and steel scrap as the main raw material, Ovako has long promoted world-leading initiatives for the realization of sustainable special
steel production and has already reduced CO2 emissions from its own manufacturing processes by 58% compared to the FY2015 level. In
April 2020, Hofors Mill successfully heated steel before rolling using hydrogen as a fuel. For the practical realization of this technology, theconstruction of a carbon-free hydrogen generation plant was commenced at Hofors Mill in June 2021. Furthermore, in January 2022, Ovako
became carbon neutral by offsetting its remaining CO2 emissions through a carbon offset program and commenced the sale of green steel.
Ovako has a total of three special steel manufacturing bases in Sweden and Finland, and the CO2 emissions of each of these bases
are at the same level as or lower than one-fifth of the global average for steel. In Europe, customers demanding materials with low CO2
emissions are already on the increase, and being carbon neutral is a strong advantage.
Additionally, Ovako is actively working with customer industries toward carbon neutrality, as exemplified by its participation in the"Polestar 0 project" through which Polestar, a local EV manufacturer (an EV brand of Volvo Cars), aims to realize automobile production
with net zero greenhouse gas emissions; and by working with SKF, a major bearing manufacturer, and successfully realizing the bearing
production that can reduce CO2 emissions by 90% or more compared to the production of conventional products.

CO2 emissions per ton of Ovako’s products(Scopes 1 + 2 + 3)
Kg CO2/t hot-rolled steel products
3000
Upstream
Core
2500

~2600

Total

1500
1000

0

389

439

467

SmeBoxImatra(FY2019 results)

HoforsOn September 5, 2023, Ovako has inaugurated fossil-free hydrogen plant built at Hofors mill in Sweden, and held a ceremony in thepresence of Swedish Prime Minister Ulf Kristersson and many other prominent guests.
This plant will generate about 4,000m3 of fossil-free hydrogen per hour through electrolysis of water using fossil-free electricity. By using
fossil-free hydrogen produced at this plant as fuel for production of special steel, Ovako will be able to significantly reduce CO2 emissions
from the process of heating steel before rolling at Hofors mill.

Ulf Kristersson, Swedish Prime
Minister (center), Katsuhiro
Miyamoto, President of Sanyo(left), and Marcus Hedblom, Ovako
CEO (right) at the inauguration
ceremony.
Ulf Kristersson, Swedish Prime
Minister (right) and Ovako officers
starting up the hydrogen plant(from left: Marcus Hedblom CEO,Rickard Qvarfort Head of Business
Unit Hofors Hellefors, and Katsuhiro
Miyamoto President of Sanyo)

In his speech at the ceremony,
Prime Minister Kristersson praised
Ovako's initiative, saying, "WhatOvako is accomplishing here today
is a crucial step – this is green
transition in action, not just words''.

Ovako will be able to reduce CO2 emissions in steel production by approximately
50% (about 20 thousand tons annually) at Hofors mill. In addition, this technicalsolution will be the first step in development of hydrogen infrastructure that canbe utilized in the transport sector; for example, development of fossil-free freighttransportation using fuel cell-powered trucks. The solution is also expected tocontribute to improving stability of the power grid. Moreover, the residual heat canbe utilized in local area heating networks.

2000

500

Completion of the Construction of a Carbon-free Hydrogen Plant

Globalaverage

Sources: Climate declarations and company estimates, verified by KPMG

Breakdown of Ovako’s CO2 emissions (Scopes 1 + 2)
Other

2%

Electricity

2%

Steelmaking
processes, etc.
2022
(coal coke, etc.) (calendar year)
32% CO2 emissions

190,000 t-CO2

64%

Heating processes, etc.
(LPG, natural gas, etc.)

Electrolyzer of Hydrogen plant of Ovako

Working with Major European Bearing
Manufacturer SKF on the Realizationof Bearing Production Reducing CO2
Emissions by 90% in Comparison with
the Production of Standard Products
Using carbon-neutral steel produced by Ovako, the productionof bearings with 90% less CO2 emissions compared to standard
products was made possible at SKF’s Gothenburg Plant which
had achieved net-zero emission.
Ovako and SKF aim for net-zero carbon bearing production
with a view to early transition to a sustainable society, and theabove-mentioned achievement is an important step towardattaining the aim.

Shifting to Carbon Neutrality by Utilizing an Offset Program
For the purpose of further accelerating initiatives for early resolution of the issue ofclimate change, Ovako has become carbon neutral (net zero CO2 emissions in its own
manufacturing processes) since January 2022. Ovako purchases carbon credits applicableto the Clean Development Mechanism (CDM), which invests in greenhouse gas emission
reduction projects primarily in developing countries, to offset its remaining CO2 emissions(Scopes 1 and 2) until it achieves zero CO2 emissions in its manufacturing processes.
In conjunction with this, a climate surcharge system was introduced for steel productprices to promote further initiatives to address climate change issues and investment in
new technologies.

Participation in the "Polestar 0 project"that Aims for Automobile Production withNet Zero Greenhouse Gas Emissions
For the ultimate goal of zero CO 2 emissions toward theresolution of the climate change issue, Ovako participates in the"Polestar 0 project" in partnership with Polestar, Volvo Cars’ EV
brandThis project aims to realize climate neutral (net zero
greenhouse gas emissions) automobile production by 2030
in collaboration with the entire supply chain. As a materials
manufacturer upstream in the supply chain, Ovako is expected
to play the roles of supplying materials with the lowest possible
carbon footprint and of increasing the use rate of recycled raw
materials to reduce the need for procurement of mined resourceseven further.
Through various
initiatives, Ovako
will continue tocontribute to theearly realization ofa carbon neutral
society.

Marcus Hedblom CEO, Ovako (left) andRickard Gustafson CEO, SKF (right)

11

Special Feature ❸Round-Table Talk of External Directors

Toward Enhancement of Corporate Value andContribution to a Better Future
Independent External Director,
Member of the Board

Independent External Director,
Member of the Board

Independent External Director,
Member of the Board, andAudit & Supervisory Committee Member

Independent External Director,
Member of the Board, andAudit & Supervisory Committee Member

USUKI Masaharu

FUJIWARA KayoYOGI Hiroshi

TOIDE Iwao

External Directors’ Impressions of Sanyo Special Steel

Initiatives for ESG Including Carbon Neutrality

FUJIWARAFirst of all, I believe that Sanyo Special Steel has worldleading technological capabilities in the production of special
steel. I feel that we manage to provide society with a good cycle
by recycling iron and steel resources to provide highly reliable
special steel products and by helping customers reduce theircarbon footprints and environmental burden. This is also a sourceof pride for me as an external director. I think that our growth in
the future will be based on our continued provision of products ofhigh social value with reliable quality that please many customers,
through practicing our Corporate Philosophy "Confidence-based
Management: Confidence of Society x Confidence of Customers x
Confidence among People."

TOIDE"Iron" is an essential element for humanity. However, because
the steel industry emits large amounts of CO2, it is necessary to
reduce the CO2 emissions generated in manufacturing processes
with a view to achieving carbon neutrality by 2050. In addition
to putting our energy into our own carbon neutrality, we have
Ovako as our subsidiary, which was one of the first companies
in the world to achieve carbon neutrality and focuses on further
initiatives such as installing hydrogen plants. I think this is
excellent as a corporate initiative and also in terms of its impact
on management.

TOIDE
I believe that our significant strength lies in our humanresources and corporate culture that support our technicalcapabilities. They were not built up overnight but havecontinuously been cultivated over the long history of our company,
and constitute an indispensable foundation for us to continue
growing and demonstrating our strengths.
Also, as a corporate group, we have excellent companies
that actively incorporate the latest technology and endeavor toenhance their social value, such as Ovako, a Swedish special
steel manufacturer. Furthermore, NSC, the parent company
supporting our entire Group, is also a very important player. I thinkthat having a stable business foundation as a member of the NSC
Group is very promising in terms of our future growth.

USUKI
The provision of sufficient prior explanations about proposals
to external directors and the implementation of regular opinion
exchange sessions, etc., separately from board meetings,
are very good initiatives for us, who have different areas ofexperience, to engage in discussions on management. Also, thenumber of occasions for discussing important issues related to themedium- to long-term growth of our Group, such as discussions
on the Mid-Term Management Plan and overseas business, isincreasing. In particular, it is important to review and optimize the
Mid-Term Management Plan not only when it is formulated but
also periodically to check its progress and according to changes
in the business environment. Our Board of Directors meetings
continuously hold discussions in such manner. It is my opinion
that such discussions and operation have been made possible
because the President accepts the opinions of directors withsincerity, and also because directors, regardless of whether they
are internal or external directors, are willing to incorporate eachother’s opinions to create a good meeting body.
YOGI
I feel that the effectiveness of board meetings has beenenhanced over the years. One of the most important matters ofcorporate governance is whether it is possible to constantly steer
the company in a better direction under various circumstances,and whether it is possible to stop things when the company
is heading in the wrong direction. In addition, it is important toconstantly monitor the risk of "overriding of internal controls bymanagement," which is regarded as a very significant risk forinternal controls, and to ensure the atmosphere allows for rebuttals
where necessary. I believe that Sanyo Special Steel has managed
an environment in which the various opinions of the four external
directors are listened to with sincerity, primarily by the President,
and in which it is easy to express opinions in an open manner interm of "what is best for the Sanyo Special Steel Group."

FUJIWARA
In times to come, the need for products and technologies that
reduce environmental impact will increase further, including theincreased introduction of renewable energy sources and the size
and weight reduction of parts in line with the shift of automobiles
to EVs. Sanyo Special Steel is focusing on the implementationand further dissemination of eco-products that contribute to the
reduction of CO2 emissions not only in its own manufacturing
processes but also in the stage of parts manufacturing at
customers and during end product use.
For the realization of a carbon neutral society, it is important todetermine what iron is to be offered to each customer. I can seethat our officers and employees enthusiastically engage in workwith a sense of responsibility in order to provide long-life productsthat are even more durable and low-carbon than ever.
YOGI
Although it is a very hard task to deal with ESG including
carbon neutrality since a wide range of topics is involved, thePresident and other officers work on it diligently, employees havealso set up a Carbon Neutrality Committee and a DX Project
Team, and numerous departments come together and continue
holding discussions.

The implementation and activeness of such company-wide
initiatives are extremely important in continuing our responses
into the future. While the level of difficulty in this regard is
expected to increase as we move toward 2050, we will continue
to provide support so as to ensure that progress is continuously
made toward the accomplishment of various targets set by SanyoSpecial Steel by itself.
USUKI
ESG initiatives lead to the long-term enhancement of corporate
value by reducing business risks. I have seen a growing awarenessof ESG initiatives among our officers and employees after, among
other factors, the introduction of a system to partly reflect theresults of ESG initiatives in executive compensation. In the future,
I would like to focus on the "utilization of human capital," which
has received significant attention in recent years, to create anenvironment in which employees can work with a refreshing feelingevery day; in other words, a corporate culture in which they canwork in a healthy, safe, and energetic manner. I am willing to put
more of my energy into making this happen and to hold discussions
in board meetings on measures to realize such environment.
TOIDE
ESG is a value creation process itself. Although I feel our
Board of Directors understands it when holding discussions, it isimportant to reaffirm it periodically and discuss what we need to
do as members of society. Only then should we implement eachmeasure, confirm its progress one year later, and hold discussions
on how to make improvements; I hope to connect those processes
in such a manner. Also, I would like to receive honest feedback
from management, executives, and employees on what role we
as external directors should play to make a greater contribution.
On the basis of this feedback, we would like to improve ourselves
and make relevant efforts.

12

Special Feature ❸Round-Table Talk of External Directors

Toward Enhancement of Corporate Value andContribution to a Better Future
What is Expected from Future Sanyo Special Steel
FUJIWARA
With respect to the active participation of women, thepercentage of women in Sanyo Special Steel is still low, comparedto other industries. I think, in the current situation, the "benefitsof women’s participation" are not fully realized even by womenthemselves. Sanyo Special Steel is increasing opportunities forfemale employees to express their opinions, such as by organizing
round-table talks between female employees and female
external directors. In order to further promote such initiatives, I
hope that female employees to have the courage to speak up in
their workplaces, and I myself would like to encourage them todo so. In addition, our global operations have been expanded,
there will be more opportunities to interact with people fromdifferent cultures, religions, or values. When people from diverse
backgrounds work together, there are moments when you find thebeauty of diversity. At the same time, it is not easy to understandpeople who are different from you. However, I believe that the firststep is to communicate your opinion and listen to the opinions ofothers as colleagues of the same Sanyo Special Steel Group.
TOIDE
Having an impact on the company’s future competitiveness,
DX is a very important factor. Commonly applicable to many
Japanese companies, the ultimate objective of DX is businessmodel transformation by utilizing AI and IT. This is extremely
difficult to achieve, and there are not many companies that haveaccomplished it. Sanyo Special Steel is one of the companies
working on DX at the moment, and a variety of opinions havebeen received from work fields. As the process has just begun,
I would like Sanyo Special Steel to continue implementing its
initiatives.

FUJIWARA
In relation to DX, I participated in a workshop the other day andlistened to the opinions of some young individuals. With respect
to the questions "What is DX" and "What to do," many individuals
appear to start from details leading to the streamlining of theirown work or the enhancement of their productivity. DX is not a
top-down process; it is important for each individual employee torealize the importance of DX through its benefits related to theemployee, such as the streamlining of the employee’s own workor the enhancement of his/her productivity, and to be in a positionof promoting DX. In that sense, I feel that the current progressof Sanyo Special Steel is very good. The question is what will be
the next step. It is extremely difficult to review the work processes
that have been well-established over the course of the company’s
history in transforming its business through DX. This requires ahigh level of leadership, and thus I think it is a matter that should
be discussed and implemented by management including theBoard of Directors in an integrated manner.
YOGI
The greatest transformations of Sanyo Special Steel in recent
years were that it became a member of the NSC Group, and thatits overseas business rapidly expanded. In order to appropriately
respond to these transformations, it is important to enhanceinternal controls in the entire Sanyo Special Steel Group. As an
Audit & Supervisory Committee member, I have paid attention
to this point. In this situation, although serious efforts have been
made for the development and enhancement of human resources,
which is an important theme, my impression is that there is stilla long way to go. The key point for the corporate group including
Ovako, a leading company in terms of carbon neutrality, and forfurther expanding global operations, is global human resources.
Despite some sense of relief that the senior management
recognize the difficulty of developing human resources, havecreated a long-term roadmap, and have worked on humandevelopment, I feel it is my role to encourage management tocontinuously come out with the measures necessary to secureand develop global human resources in the future.
USUKI
For issues which have become hot topics in recent years,
such as management that pays attention to price-to-book ratio(PBR) improvement and the cost of capital, it is not always
possible for results to be produced in the short term. However,since investors should be interested in checking that the Board of
Directors discuss such issues and continue to do so in the future,
the corporate disclosure of information is becoming increasingly
important. For Sanyo Special Steel, too, the easy-to-understandcommunication of the topics covered by the Board of Directors
and the policies we are implementing, such as through Integrated
Reports, leads to enhancement in our corporate value. I suggestthat helping a wide range of external stakeholders understand andrecognize not only the quantitative aspects of our company but
also what we are working on, how we feel while working at it, andthe value we are creating will lead investors to value our company.
On my side, I am willing to work on ensuring that both the Boardof Directors’ "discussion" and the "communication of information"on our initiatives are enhanced.

FUJIWARA
On occasions of discussion including meetings of the Boardof Directors, we, external directors, also feel that we are offered
opportunities to study. By making efforts as a member of the teamthat takes on building a better future of Sanyo Special Steel, I alsofeel a sense of fulfillment in my own life.
I think that working at a company intrinsically "enriches theworker’s own life." The work of each individual leads to his/her own learning and growth, the growth of the company, andultimately the growth of society. I am willing to make efforts inensuring that our company is able to continue the chain of such
events.

13

Topics
Commercialization of High-carbon Steel TOUGHFITTM that can Contribute to Achieving
a Carbon-neutral Society

Participation in the GX League
Having endorsed the GX League Basic Concept, which aims to transform the economic
and social systems in their entirety to achieve carbon neutrality by 2050 in which corporate
growth, consumer happiness, and contribution to the global environment are simultaneously
achieved, we started taking part in the GX League in May 2023.
The GX League was established to provide a forum for discussion on the transformation of
the economic and social systems in their entirety and practice for the creation of new markets
with players who are taking on the challenge of GX (Green Transformation) to achieve carbon
neutrality by 2050. We will actively take part in various activities within the framework of the
GX League, such as voluntary emissions trading, the formation of rules for market creation,
the development of business opportunities, and interactions in the GX Studio.

Innovative high-carbon steel TOUGHFITTM, which has overcome thedisadvantage of being "hard but brittle," was commercialized.
Since the hardness of TOUGHFITTM can be increased without reducing
its toughness by employing quenching heat-treatment (through hardening)
without carburization, the application of TOUGHFIT TM can contributeto reducing CO 2 emissions in steel part manufacturing processes. In
addition, because this high-carbon steel equipped with both high hardness
and toughness leads to improvement in the fatigue life of each powertransmission part, it can contribute to CO2 emission reductions by enablingsize- or weight-reduced part designs leading to improved fuel efficiency.
The application of TOUGHFITTM to materials used for the wear resistantparts and power transmission parts of automobiles and construction andindustrial machinery can contribute to CO2 emission reductions throughsimplification of hardening heat treatment and size and weight reduction ofparts.

CDP Climate Change Score “B”
Sanyo Special Steel responded to the CDP climate change questionnaire for the first timein July 2022 and received a “B” score.
CDP is a British NGO that operates a global environmental disclosure system. In
cooperation with institutional investors, CDP requests companies to disclose information
about their activities regarding climate change and greenhouse gas emissions and ranks
companies' efforts on climate change on an 8-level scale from A to D-. In 2022, more than
18,700 companies were surveyed around the world.

Conventional
steel

Business-academia
joint research

TOUGHFIT TM
12

Toughness index“EcoLeaf” Certification, an Environmental Product Declaration that
Discloses Environmental Information Relating to Special Steel Products
Appearance of a Komatsu-made tunnel boring machine and the cutter ring form

8
Trade-off between hardness
and toughness(The harder, the brittler.)

6
4

Conventional
steel

0
400

A cutter ring for a tunnel boring machine requires high toughness that can withstandbig shocks without sustaining damage, in addition to extremely high hardness andwear resistance, in order to cut through solid rock and large amounts of sand andearth. Recognized for its excellent performance, TOUGHFITTM has been put into
practical use as a cutter ring material for Komatsu’s tunnel boring machines.

500

600

700

800

Hardness (HV)NOVASHAPETM Series – Advanced Metal Powders for Additive Manufacturing

Released a New Metal Powders for Die Casting Molds with Higher Thermal Conductivity

JR-AW-23001E

https://ecoleaf-label.jp/english

Approved for "TPG Certification" as a Supplier of Steel Products for Critical
Components of Wind Power Generator for the First Time Among Japanese Steelmakers
TPG certification is a U.S. certification program that certifies that the TPG requirements
specified for each certification area, such as steel manufacturing, heat treatment, andnondestructive testing, have been met for the manufacture of transportation and power
generation-related products. Some wind turbine generator manufacturers have already
decided to require their suppliers to obtain TPG certification.
In recognition of our highly reliable manufacturing technology and quality control systemthat enable us to stably produce such high-cleanliness special steel and meet the TPG
requirements in the steel manufacturing field, we became the first Japanese steelmaker toreceive TPG certification.
In addition to our continuous casting process, which can produce special steel with highproductivity, we have also been certified for our ingot making method, which can produce
large-diameter steel products used in large bearings for wind turbine generators, etc., making
us the first company in the world to be certified for both processes.

TOUGHFIT TM

2Sanyo Special Steel has released a new metal powder lineup enabling
formation of high-thermal-conductivity die casting molds by additive
manufacturing, thereby reducing the cycle time for die casting andenabling additive manufacturing of large molds.
When these new metal powders are used with 3D printers to produce
die casting molds, effective cooling of the molds during die casting can beachieved. Besides raising productivity by reducing cycle time, use of these
powders can be expected to extend the life of molds.
Moreover, the combination of high thermal conductivity and excellent
moldability makes them suitable for additive manufacturing of large molds.
We will continue to focus our efforts on developing new products in the
NOVASHAPETM Series and new technologies, providing solutions thatutilize materials and technology to improve the competitiveness of ourcustomers.
Technical challenges relating to additive manufacturing of die casting molds
Large-size molding and high thermal conductivity• SKD61* has a tendency to crack during additive manufacturing, making it difficult toachieve large-size molding.
• Maraging steel has low thermal conductivity, leading to insufficient mold cooling.
→ Difficult to overcome both these challenges with conventional materials*EU equivalent X40CrMoV5-1

Heat transfer coefficient W/(m･K)◆ Japan EPD Program by SuMPO

Innovative high-carbon steel which has high hardness
and high toughness at the same time by optimizing
the alloy composition and the heat-treatment condition

10

Cutter ring made of
TOUGHFITTM

Cutter ring

Sanyo Special Steel has obtained “EcoLeaf” certification, an environmental productdeclaration (EPD) that quantitatively discloses environmental information that has beenverified by a third-party organization relating to the special steel products (bearing steel,engineering steel, and tool steel) manufactured and sold by Sanyo Special Steel.
EcoLeaf uses LCA (Life Cycle Assessment) to disclose quantitative environmental
information based on the entire life cycle of a product, from resource gathering,
manufacturing, logistics and use, to disposal and recycling. Through the disclosure of data
verified by a third party to ensure reliability and transparency, customers will be able toassess the quantitative environmental impact of the products they use and incorporate thisinformation in their decision making when selecting environmentally friendly products. With
this EcoLeaf certification, we are now able to present our customers with objective and highly
transparent environmental information related to our products. This is the first time that aJapanese special steel manufacturer has obtained EcoLeaf certification. We will continue
to contribute towards the realization of a sustainable society by supplying high-quality andenvironmentally friendly special steel products.

Trade-off relationship of hardness and toughness is
a serious disadvantage of high-carbon steel

40

Achieves thermal conductivity above
the limit level of conventional
materials along with 3D moldability

NOVASHAPETM

S-MECTM40D

35

NOVASHAPETM

S-MECTM34D

30
25
20
15

Sanyo-developed alloy

SKD61

Limit level ofconventional
hot-work tool steel
Limit level ofconventional
maraging steel

NOVASHAPETM

S-MECTM24M

Sanyo-developed
alloy

Maraging steel

Moldability (large-scale mold possibility)

Features of additive manufacturing
Rapid melting and solidifying in each micro area
• Comprehensive hardening effectiveness• Inhibition of embrittlement by rapid solidifying→ It should be possible to reduce alloy elements compared to conventional
materials

Development concept
The introduction of wind power generation is
expected to expand toward the realization of acarbon neutral society.

Alloy design that utilizes features of additive manufacturing
S-MECTM40D ：Improve thermal conductivity by reducing alloy elements required to ensure hardenability of casted JIS-SKD61
S-MECTM34D ：Improve moldability by modifying alloy design from S-MECTM 40D to control deformation during additive manufacturing
S-MECTM24M ：Improve thermal conductivity by reducing alloy elements required to prevent embrittlement of maraging steel

14

Topics
Dialogue Between External Director and Female Employees

Certified as a Hyogo Women’s Active Promotion Enterprise - "Mimosa Certified Company"

Three round-table talks were held between FUJIWARA Kayo Director, who is afemale independent external director, and female mid-career employees in January
to March 2023. These talks were regarded as opportunities for female employees
to envision attractive career paths by having a dialogue with Fujiwara Director, who
had been involved in overseas procurement and corporate management at energyrelated companies, through which those female employees
got to know Fujiwara’s hands-on experience and received
advice in response to their frank opinions.
In order for many female employees to play activeroles in managerial positions or positions involvedin management in the future, we will continue suchinitiatives, etc. to raise awareness among female
employees and to promote a workplace culture inwhich they feel comfortable to play active roles.

Three round-table talks were held between FUJIWARA Kayo Director, who
is a female independent external director, and female mid-career employees inJanuary to March 2023. These talks were regarded as opportunities for female
employees to envision attractive career paths by having a dialogue with Fujiwara
Director, who had been involved in overseas procurement and corporate
management at energy-related companies, through which those female
employees got to know Fujiwara’s hands-on experience and received advice in
response to their frank opinions.
In order for many female employees to play active roles in managerial
positions or positions involved in management in the future, we will continue suchinitiatives, etc. to raise awareness among female employees and to promote a
workplace culture in which they feel comfortable to play active roles.
The certification of "Mimosa Certified Company" is a system of the Hyogo Prefectural
Government to certify companies, etc. that meet certain standards in the following
certification categories with the aim of promoting the success of women in companies in
the prefecture: company philosophy, career development support, promotion of women,
and promotion of women’s retention.

FUJIWARA Kayo, Independent External Director

Formulation of a General Employer Action Plan Based on the Act on Advancement of
Measures to Support Raising Next-generation Children and the Act on the Promotionof Women’s Active Engagement in Professional Life
Innovation creation is the key in enhancing corporate value over the medium to long term, and co-creation by diverse individuals is the driving
force behind such innovation creation. With the aim of becoming a company that promotes diversity management to enable all employees toenergetically work with high motivation and achieve a good work-life balance, we have established a fulfilling support system and are working on
developing a workplace environment to ensure that employees can continue working with a sense of security even in the face of significant life
events such as childbirth and occasions of being required to provide childcare or nursing care.

General Employer Action Plan Based on the Act on Advancement of Measures to Support Raising Next-Generation Children[7th Term: April 1, 2023 to March 31, 2026]

Introduction of the Support Program for Balancing Career Development and Childcare
A program to support employees taking childcare leave in balancing their careers and childcare was introduced.
Sanyo Special Steel has developed a childcare support system that is superior to the statutorily required level. While the use of this systemenables employees to take long-term leave or work shorter working hours, it is also possible that employees feel anxious about returning towork or their career formation after return or experience difficulty in balancing their work and child-raising. With the support program enabling
employees on long-term childcare leave to take seminars, e-learning courses, etc. useful for balancing work and childcare, we will support
employees facing life events such as childbirth and childcare in their smooth return to work and career formation by allowing childcare leave
periods to be used as opportunities for self-development rather than blank periods.

1 Initiatives primarily for employees engaged in childcare
Target 1

Percentage of employees taking childcare leave<Outline of initiatives>●●

Target 2

Male: 50% or higher Female: 80% or higher

Internal posting of this Action Plan and the childcare leave system
Provision of individual guidance and counseling to eligible individuals

Provision of support to female employees in balancing their work and family lives, raising their motivation, etc.

<Outline of initiatives>●

Effective use of the Support Program for Balancing Career Development and Childcare

Fostering a workplaceculture that enables
employees to work andrest as they wish

2 Initiatives for employees including those not engaged in childcare
Target 3

Percentage of employees taking annual paid leave: 80% or higher by FY2025<Outline of initiatives>●●

Continuing to encourage employees to take annual paid leave in a planned manner and to use the consecutive paid leave system
Labor-management consultation and deliberation on and implementation of effective measures

3 Initiatives that are not limited to the company’s own employees and things outside of improving the employment environment
Target 4

Continuing to accept local elementary school students for factory tours, junior high school students for work experience, and high school students for internships<Outline of initiatives>●●

CAcceptance of factory tours, and work experience, and arrangement of visiting classes
Provision of steel materials for practical training to nearby high schools with the aim of helping students acquire knowledge and improve skills

Contributing
to localcommunities

General Employer Action Plan Based on the Act on the Promotion of Women’s Active Engagement in Professional Life
[3rd Term: April 1, 2023 to March 31, 2026]
Fostering a culture inwhich female employees

Target 1

can play active roles(1) Increase by 1 point in the percentage of female managers (5.3% to 6.3%)(2) Increase by 3 points in the percentage of female employees in unit chief ranks for next-generation managers (16.0% to 19.0%)<Outline of initiatives>

Target 2

Training on gender unconscious bias, and external career development training for female employees● Dialogue between female directors and female employees●

Number of employees using the work-from-home system<Outline of initiatives>●●

50% or higher of all employees in planning positions by FY2025

Promotion of paperless work and development of an environment that enables work-from-home by DX
Improvement of the work management levels of supervisors over employees engaged in work-from-homeCommunicationof the attractive
points in working
at a higher level

Internal disseminationof the work-from-homesystem15

Topics
Recognized as a Certified Health & Productivity Management Outstanding
Organization 2023

Appointment of Female Executive Officer

Based on the recognition that the safety and health of its employees is a prerequisite for its business activities, Sanyo Special Steel has
considered health control from a management perspective and has worked on vitalizing the organization to lift the energy of employees andenhance productivity through health management.
Under the health management system with the Representative Director and President acting as Chief Health Officer, we have established a
PDCA structure based on the monitoring of the implementation status of health management measures, the verification of the effectiveness ofsuch measures, and the implementation of additional measure.
Furthermore, we work together with the health insurance association to promote efforts to improve employees’ lifestyles and prevent mental
health problems by, for example, holding a calisthenics session before the start of work in each workplace, a walking event "Sanyo Walk," exercise
seminars, and lecture presentations on health for the purpose of supporting employees in making physical exercise an established routine. These
efforts led to the acknowledgement of Sanyo Special Steel as a Certified Health & Productivity Management Outstanding Organization (Large
Corporation Category) again, as was the case in 2022. We will continue to further promote corporate health management and create a workplaceenvironment in which all employees can work to the fullest of their abilities every day.

We are therefore promoting the awareness building of female employees themselves and the creation of a workplace culture that encourages
female employees to take an active role in the company through planned recruitment of female employees, expansion of job categories forfemales employees, and external training, etc. As of April 2022, the percentage of female managers increased to 5.6%, and the first female
executive officer was appointed on June 24, 2022.
We will continue to work toward the activation of diversity and inclusion, where diverse human resources come together and interact with eachother in a mutually beneficial manner, through career development support and training, etc., for female employees, in order to ensure diversity inthe appointment of core human resources, etc.
Since joining Sanyo Special Steel in 1990 as the first woman in a management track
position, I have experienced a variety of operations in the fields of information systems,
corporate planning, finance, and general administration. Currently I am engaged in internal
control operations. Looking back, I took on some seemingly foolhardy challenges; for instance,
I was assigned to be in charge of announcement of financial results and IR with no experiencein financial closing work, and my first M&A case was to do with the current subsidiary in India.
However, we have a warm corporate culture where someone will always come to your rescue
if you do not give up and work to the best of your abilities in a positive manner.
The internal control operations for which I am now responsible are very rewarding because
they are important duties that seek to continuously improve our Group’s risk management
system in normal times and, in the event of an incident although such an incident should never
happen, to play a central role in investigating the cause of such incident and preventing its
recurrence. In the course of my work, there are both advantages and disadvantages of being
a woman. However, in general, I feel that my gender is accepted as my own personal quality. I
have been a top runner since I joined the company, and now I feel reassured as the number ofyounger workers is gradually increasing.

Formulation of Multi-Stakeholder Policy
On the basis of the growing importance of value co-creation in corporate management not only with shareholders but also with diverse
stakeholders including employees, business partners, customers, creditors, and local communities, Sanyo Special Steel formulated a multistakeholder policy. We will continue to promote cooperation, coexistence, and co-prosperity through sustainable provision of returns to employees
and formation of partnerships with business partners from the perspective that proper collaboration with various stakeholders and the appropriate
distribution of earnings and results generated through value co-creation and productivity enhancement will help maintain the momentum for wage
increases and lead to sustainable economic development.

SUDA Atsuko, Executive Officer andGeneral Manager of the Internal Control & Audit Department(appointed on June 24, 2022)

Transition to a Company with an Audit & Supervisory Committee

Reflection of ESG Indicators in Executive Compensation

In June 2022, we transitioned to a company with an Audit & Supervisory Committee in order to accelerate management decision-making,enhance discussions of basic management policies at Board of Directors meetings, and strengthen the supervisory function of the Board of
Directors in the management. In addition, we stipulated in the Articles of Incorporation that all or part of the decisions on the execution of importantbusiness operations (excluding matters stipulated in each item of Article 399-13, paragraph (5) of the Companies Act) may be delegated to thedirectors, for the purpose of focusing deliberations at the Board of Directors to enhance discussions on management policy formulation and othermatters. In addition, we strive to speed up the decision-making process by delegating executive authority to the executive officers and below, who
are in charge of business operations in accordance with the prescribed rules for decision-making authority.

Sanyo Special Steel has determined the base amount by position, taking into consideration the required abilities and responsibilities as wellas the content of the duties of each position according to the full-time/part-time status, and has adopted a performance-linked compensation
system for business execution directors, executive officers, and executive councilors, under which the base amount varies within a certain range
according to the consolidated performance, etc. of Sanyo Special Steel, so as to provide incentives for the sustainable growth of the SanyoSpecial Steel Group and the improvement of its corporate value. We will further strengthen our ESG initiatives toward sustainable growth byreflecting, in performance-linked compensation from FY2023, five indicators of the CDP climate change score, health management rating, safetyindex, ratio of female managers, and board effectiveness evaluation by external directors, in addition to the existing numerical indicators.

General Meeting of Shareholders
Election/dismissal

Nomination & Compensation
Advisory Committee

Representative
Director

Independent External
Directors

Discussion of overall officer nomination andcompensation-related matters

Supervisory Committee for
Conflict of Interests (temporary)
Independent External Directors only

Original

Board of Directors
Internal
Directors

Independent External
Directors

Provision of
discussion
details andopinions

Election/dismissal

Audit & Supervisory
Committee

Internal Independent External
Directors
Directors

From July 2023
■ CDP score■ Health management rating■ Safety indicators■ Ratio of female managers■ Board effectiveness appraisal byoutside directors

7 internal directors, 4 independent external directors (including 1 female director)

Election/dismissal, supervision,delegation of authority
Deliberate on the appropriateness of importanttransactions and actions, etc., that may cause
conflicts of interest between the parent company
and our minority shareholders■ Consolidated ordinary income
Short-term performance incentives
Medium-to-long-term performance
incentives■ ROE

Five additional
indicators

Audit/
supervision

Business execution (Representative Director andPresident, Corporate Policy Committee, etc.)16

Important ESG-related Issues
The Sanyo Special Steel Group aims to achieve sustainable growth of the Group and contribute to the realization of a sustainable society by building trust relationships with all stakeholders.
A company is a member of society, and its development would not be possible without the trust of its stakeholders. We will continue to practice our corporate philosophy of "Confidence-based Management" and contribute to the realization of a sustainable society.

Important issueE

Environment

Prevention of climatechangeSocialG

Governance

Aiming to achieve carbon neutrality by 2050

FY2022 results (some are FY2023 results)

Reference
page

FY2030 target: 50% reduction from FY2013

Our CO2 emissions in FY2022: 535,000 tons
36.4% (306,000 tons) reduction compared to FY2013

Contribution to a resource
recycling society

Reduction of by-products, promotion of 3Rs

Achieved 87.3% recycling rate of our by-products

Reduction of environmental
impactCompliance with regulatory standards(Water Pollution Prevention Act, Air Pollution Control Act, etc.)

Complied with regulatory standards for all items (no cases of violation or deviationfrom laws, regulations, and agreements)

P.22~23

Promotion of the reduction of work risks and the creation of a safe workplace by "integrating
top-down and bottom-up approaches" and "implementing both hard and soft measures."
Conducted disaster drills, etc., in preparation for factory fires and wide-area disasters

P.24~25

Safety and disasterprevention

S

Targets and initiatives

Achievement of a total absence of accidents(zero occupational accidents, zero accidents on the way to work)
Enhancement of disaster prevention measures and business
continuity management (BCM)

P.19~21

P.22

Promotion of diversity
management

Promotion of participation of women (increase percentage of
employee and managers) and the elderly, support for participationof persons with disabilities, and promotion of work-life balance

Percentage of female employees 14%(26% in planning position, 7% in technical service position)
Percentage of female managers 6.1% (+2.2% compared to April 2020)
Rate of male employees taking childcare leave: 74%

P.26

Promotion of Corporate
Health Management

Creation of a workplace environment in which each and every
employee can work to the fullest every day

Recognized as a Certified Health & Productivity Management Outstanding
Organization 2023 (Large Corporation Category)

P.27

Human resource
development

Development of human resources who can think and act
autonomously

Initiatives for long-term development of human resources who can think and act
autonomously and of global human resources
Implementation of a self-transformation program based on multifaceted observation

P.28

Respect for Human Rights

Promotion of business activities that respect human rights

Formulation of a human rights policy
Operation of human rights-related education and relief mechanisms (help desks)
Procurement of ferroalloys with respect for human rights

P.28

Quality improvement

Continuous improvement of quality management system, etc.

Maintaining and managing the quality management system
Approved for "TPG Certification" as a supplier of steel products for criticalcomponents of wind power generator

P.29

Further expansion oftechnological superiority

Rapid and continuous creation of highly reliable products and newtechnologies with a view to global business expansion

Expanding development advantageous technology to meet the needs for even higher
reliability in areas of "EV (new drive train mechanisms, etc.)", "wind power generation(high quality materials for large-scale applications, etc.)", "railroad (global high-speed
railroad bearings, etc.)" and "hydrogen society (hydrogen-related equipment, etc.)"
Commercialization of high-carbon steel TOUGHFITTM that can contribute toachieving a carbon-neutral society

P.29

Promote DX

Rapid problem-solving by utilizing digital technology, andstrengthening of competitiveness through creation of new value

Establishment of the DX Promotion Project Team led by the Representative Director
and President

P.30

Realization of sustainableprocurement

Establishment of fair and equitable transactions and partnerships

Promoted stable procurement
Presented supplier awards

P.30

Corporate governance

Enhancement of corporate governanceTransitioned to a Company with an Audit & Supervisory Committee
Continued improvement of operation of the Board of Directors based on
effectiveness evaluation

Promotion of risk management and compliance activities

Continued improvement of autonomous internal control systems
Conducted internal control education and dissemination activities
Appropriate operation of compliance help desk (whistle-blowing system)

Internal control systems

Development of global human resources

Establishment of a stable procurement structure

Related SDGs

P.31~33

17

Environmental Management
Sanyo Special Steel has established an environmental policy that forms the basis of our environmental conservation activities.
Based on this policy, we have formulated an improvement plan for environmental preservation and are working to reduce environmental
risks through the use of an environmental management system, including measures to prevent global warming, recycling of by-products,
and measures to prevent environmental pollution.
In addition, we contribute to the recycling of metal resources by manufacturing products using iron and steel scrap as the main raw
material, and we also promote the manufacturing of products that contribute to the reduction of environmental impact by extending theservice life and reducing the size and weight of parts and dies.

Board of Directors
ReportSupervise

Chair: Chief Officer for Environmental Systems(Executive Officer in charge of environmental divisions)
Members: Department heads of manufacturing and administrative divisions<Philosophy>
We recognize that environmental problems such as global warming, air, water, and soil pollution, and waste problems are important issues
common to all humankind. As a company located in a rich environment with the World Cultural Heritage National Treasure "Himeji Castle" to the northand the Setonaikai National Park to the south, we are committed to contribute to the construction of a recycling society by giving consideration toenvironmental conservation at all stages of our business activities.
<Policy>
Based on the fact that we are a company with plants that manufacture and sell special steel and nonferrous metals, we will implement
environmental management based on the following policies.
1) We will contribute to the recycling of metal resources through the manufacture of steel products made from iron and steel scrap.
2) In addition to complying with environmental laws, regulations, and agreements, we will strive to continuously improve our environmental
management system to enhance our environmental performance, and responsibly manage business activities that may have an adverse impact
on the environment.
3) We will promote resource and energy conservation, recycling of by-products and reduction of waste, and reduction of pollutant and greenhousegas emissions to reduce the environmental impact at all stages of our business activities and contribute to environmental conservation andclimate change mitigation. In addition, we will strive to prevent environmental pollution by developing products that contribute to the reduction ofenvironmental impact.
4) We will focus on raising the environmental awareness of each and every employee in our environmental conservation activities.
5) In order to achieve this environmental policy, we will set environmental targets, review them at least once a year, and revise them as necessary.
6) We will appoint the General Manager of the Environmental Management Department as the Environmental System Manager to ensure that all
employees are thoroughly familiar with this environmental policy through education and training and that the environmental system is operated
and managed properly.

Environmental Management Structure
Carbon Neutrality Promotion Committee/Working-Level Liaison Meeting
The Carbon Neutrality Promotion Committee meets four times a year to deliberate on basic strategies for achieving carbon neutrality by
2050, as well as short- and long-term themes related to its promotion, and reports the main deliberated details to the Board of Directors.
Furthermore, a working-level liaison meeting attended by the general managers of relevant offices and groups within divisions of SanyoSpecial Steel is held monthly from February 2023 to select issues to be addressed and manage the progress of each individual issue,
thereby promoting initiatives toward achieving carbon neutrality on a company-wide scale.

Environmental Conservation Committee

Acquisition of ISO 14001 Certification

In order to promote the strengthening of environmental
management and the reduction of environmental risks, theEnvironmental Conservation Committee meets annually toformulate basic guidelines for environmental conservation anddeliberate on matters related to basic measures.
In FY2022, the Committee deliberated on the FY2021
results and FY2022 plans of the Environmental Conservation
Improvement Plan, including CO2 emission reduction targets, andreported the content of the deliberation to the Board of Directors.

Sanyo Special Steel has acquired ISO 14001 certification, theinternational standard for environmental management systems,
at our head office plant (manufacturing base) and the main
plants of Ovako and SSMI which are special steel manufacturingsubsidiaries, and are working to establish this certification throughannual internal audits and external audits.
We, through internal environmental audits, work on facilitating
the understanding of company-wide environmental management
systems and improving those systems, and periodically confirm
through external audits that the environmental management
systems effectively function.

Supervise

Carbon Neutrality Promotion Committee

Environmental Conservation Committee

Environmental Management Dept.
(Secretariat)■ Environmental Policy

ReportChair: Representative Director and President
Members: Directors, Managing Executive Officers,
relevant Executive Officers, and relevant department heads

Working-Level Liaison Meeting (Heads of Relevant Internal Offices/Groups)
Environmental Management Dept. and Corporate Planning Dept. (Secretariat)

Environmental audits and interviews
Collaboration and implementation of measures

Sanyo Special Steel and its Group companies in Japan and abroad
ISO 14001
certification

Environmental
Liaison Meeting

Environmental
patrols

Response to
the revision of laws

Environmental Liaison Meetings

Conducting Environmental Patrols

Environmental Liaison Meetings are held monthly to share
information on the environment; those attending include the Chief
Officer for Environmental Systems, officers, and department
heads, etc.
At the meeting, information is shared on the following items,
etc., to reduce environmental risks.
(i) Status of responses to items pointed out in environmental
patrols(ii) Legal and regulatory compliance assessment results
We share the results of measurements of air, wastewater, etc.,
as required by laws and agreements.
(iii)Status of industrial waste treatment and results ofinspection of industrial waste disposal facilities
We share the status of industrial waste treatment and theresults of inspections of industrial waste disposal facilities ofcontractors.
(iv)Communication on the environment with government andindustry associations, etc.
(v) Latest revisions to environmental laws

A team consisting of the Chief Officer for Environmental
Systems, officers, department heads, pollution control managers,
etc. conducts a patrol once a month, mainly at manufacturing
sites. We make efforts to reduce environmental risks by taking
action at each manufacturing site in response to points raised
through patrols.
(i) Checks on the status of environmental management
Patrols are conducted at manufacturing sites to check on
the control status of soot, smoke, and wastewater, thewaste separation status, etc., thereby working on improving
environmental management levels and reducing risks.
(ii) Checks on emergency response drills
Emergency response drills are conducted to verify that there
are no problems with emergency operating procedures, andthat there are no defects in equipment and instruments.
(iii)Patrols attended by the President
Once a year, environmental patrols are conducted with theattendance of the President.
During FY2022, the management status of wastewater
treatment facilities was checked.

Responding to Revisions to Environmental Laws
If there is a revision of laws and regulations related to ourbusiness, we revise our internal environmental standards andprovide education, etc., to persons concerned. We also hold"Study Sessions on Environmental Laws and Regulations" todeepen understanding of legal compliance obligations for all
employees of group companies and promote education for
employees at all levels to reduce the risk of legal violations due toinsufficient knowledge.

<Example of response to the revision of laws>• Act on Rationalizing Energy Use and Shifting to Non-fossil
Energy (Act on the Rational Use of Energy)
Revision
details:

The submission of reports on initiatives implemented
for the shifting of fossil energy used in plants to nonfossil energy has become mandatory.
(Enforced in April 2023)

Status of
response:

The Environmental Liaison Meeting was held to informthe entire company of the details of the revised Act. In
addition, the utilization of non-fossil fuels is promoted
on a company-wide scale.

18

Climate Change Prevention Initiatives
Roadmap to Carbon Neutrality by 2050

Examples of CO2 Emission Reduction Initiatives

Recognizing that climate change is an important issue that affects the survival of humankind, Sanyo Special Steel adopted a policy to"aim to achieve carbon neutrality by 2050" at the Board of Directors meeting in April 2021, and formulated and announced a roadmap forachieving this goal in July of the same year. We aim to reduce CO2 emissions not only in our own manufacturing processes, but also at
every stage of society by saving energy and utilizing green energy in our manufacturing processes and contributing with eco-products andeco-solutions.

[Our CO2 emissions]
FY20130.84

FY20302019 2020 2021 2022

Reduction of
50% or more

Eco-process promotion, etc.
(Approx. -15%)

0.71
Green energy utilization, etc.
(Approx. -35%)
0.57
0.54
0.49

FY2050Carbon neutrality(Compared to FY2013)

0.42 Spread of carbon-free electricity and fuels
CCUS utilization, etc.

Contribution to the reduction with
eco-products and eco-solutions

Net zeroContribution to the
reduction equivalent toapprox. 40% (not includedin the above) in FY2030

For electric furnaces, oxygen blowing and auxiliary burners areused as heat sources in addition to electricity. The introduction ofhigh-efficiency air purge burners, which optimize the use method of
LNG and oxygen employed by conventional auxiliary burners andare thereby effective in reducing CO2 emissions, has reduced LNG
consumption by 16% compared to the auxiliary burners used before
the introduction. In addition, the change and optimization of burner
locations and the reduction of burner units have made it possible tosuppress electrode wear.

Air Purge
Preventing clog

BurnerHeating iron scrap
O2

LNG

Coherence
Heating molten steel
O2
LNG

LNG

Air

Air

Schematic diagram of the newly installed burners by operation mode
Preheating of
combustion air

Furnace

Introduction of Regenerative Burner Type Continuous Heating
Furnaces

Eco-process promotion(Million tons)

Introduction of High Efficiency Air Purge Burners toElectric Furnaces

A regenerative burner type heating furnace was introduced for billet heatingin the Small and Medium Bar Rolling Mill. While a pair of two burners equippedwith heat accumulators repeats alternate combustion, the exhaust air from one of
the burners is used to heat the combustion air of the other burner, thereby greatly
improving combustion efficiency and resulting in an energy-efficiency effect of over
10% compared to the heating furnace used before the introduction.

Exhaust heataccumulation

Alternate combustion

Combustion air

Exhaust gas

Schematic diagram of the regenerative burner

Contribution to CO2 Emission Reduction with Eco-Products - Contribution to Stable Operation of Wind Power Generators -Energy-saving heating
furnace with regenerative
burnerDevelopment of bearing
steel for long-life wind
power generation

Eco-processes

Green energy utilization

Promoting company-wide energy conservation
measures, mainly at manufacturing sites, anddevelopment of manufacturing technologies
to improve energy efficiency

Utilizing carbon-free electricity, fossil-freefuels, and renewable energy

Eco-products

Eco-solutions

Promoting development and supply of productsthat contribute to CO2 emission reduction at
the stage of product use and products that
contribute to eco-processes of consumers

Deployment of energy-saving and productivityenhancing technologies that contribute to the
reduction of unit energy consumption to overseas
Group companies, including Ovako and SSMI

*Started partial use of electricity derived fromrenewable energy sources in FY2022

Deployment oftechnologies to overseas
Group companies(Million tons)

0.67
0.54

1.0

0.56

0.84
0.5

Breakdown of CO2 emissions derived
from energy use

0.54

0.71
0.57

Other

CO2 emissions intensity(t-CO2/per crude steel ton)

0.48

16%

Electricity

45%
Natural gas

0.54

0.49

2%
Coal coke

Independent
assured items

37%*1: "Super-TF" is a heat treatment technology to extend the usable life of bearings in special environments and is a registered trademark of NSK Ltd.
*2: K. L. Lee: NSK Technical Journal, No.691, (2019), pp.1927pp.19-27*3: Presented at the 18th Research Presentation Conference of the Institute of Life Cycle Assessment, Japan on March 10, 2023"

SSMI Signs Power Purchase Agreement for Renewable Power
SSMI, our Indian special steel manufacturing affiliate, has signed
a purchase agreement of solar power with the Tata Power Renewable
Energy Limited (TPREL), a subsidiary of Tata Power, one of Indian’s largest
integrated power companies.
SSMI has decided to 61.875 million KWh annually of solar power fromthe TPREL and use it for its own special steel production.
As a result, SSMI is expected to reduce CO2 emissions by ~42,534
tons annually, equivalent to approximately 25% of the CO2 emitted in thecompany's special steel manufacturing process.

Our CO2 Emissions Derived from Energy Use
Trends in CO2 emissions derived
from energy use

The bearing steel manufactured by Sanyo Special Steel for wind power generators can, with
its effect of usable life extension, contribute to reduction of CO 2 emissions through suppressionof downtime caused by the breakdown of wind power generation facilities. In the case of steel
jointly developed with a customer, it has been confirmed that the combination of our steel and thespecial heat treatment of "Super-TF"*1 can achieve a life time four times longer than that of SUJ2,
a conventional bearing steel*2 in the environment where the facilities concerned are expected to be
used. The contribution of the combination to reduction of CO2 emissions calculated on the basis of thevolume of the steel used is approximately 13,000 tons/year*3.

FY2022CO2 emissions

540,000 t-CO2

Trends in CO2 Emissions of Major Subsidiaries (Scope 1 + Scope 2 Emissions)
Ovako

SSMI

(Million tons) 0.3(Million tons) 0.3

0.1
0

2013

2019

2020

2021

2022

(FY)
<Calculation method>
Calculated based on the "Greenhouse Gas Emissions Accounting, Reporting, and Disclosing System" under the Act on Promotion of Global Warming Countermeasures.
The scope of aggregation and converted emission factor are as shown in the preconditions for calculating Scope 1 and 2 emissions on the next page.

0.27 *

0.2

0

0.18

2020

0.2

0.18

2021

2022 (FY)

0.1
0

0.15

0.16

0.14

2020

2021

2022 (FY)* For FY2021, actual emissions during 15 months from January 2021
to March 2022 due to a change to the accounting term

19

Climate Change Prevention Initiatives
CO2 Emissions in the Value Chain
The CO2 emissions derived from energy use in our manufacturing operations (Scope 1 and Scope 2) and the CO2 emissions in our
supply chain (Scope 3) calculated using "Green Value Chain Platform" by the Ministry of the environment and other information are as
follows.
Independent assurance has been received for emissions in FY2022 for Scope 1, Scope 2, and Category (1) of Scope 3 (purchased
goods and services).

CO2 emissions (thousand t-CO2)
FY2020

FY2021

FY2022

Calculation method

Scope1

Direct emissions from fuel usage at theCompany

237

336

286★

Scope2

Indirect emissions from the use of energy
produced by other companies

254

373

249★

Scope1+2

Emissions

491

710

535★

Scope3

Other indirect emissions equivalent to theCompany's supply chain

267

378

350★

Calculated by multiplying the quantity or value of raw
materials purchased by the CO2 emissions intensity(ii) Capital goods

31

18

31

Calculated by multiplying the amount of capital
investment by the CO2 emissions intensity(iii) Fuel- and energy-related activities not included in
Scope 1 and 2

100

134

117

Calculated by multiplying the quantity of electricity
purchased and fuel used by CO2 emissions intensity(iv) Upstream transportation and delivery

19

20

19

Calculated by multiplying the quantity of fuel used
reported under the Act on Rationalizing Energy Useby the CO2 emissions intensity(v) Waste generated from business operations

3

4

4

Calculated by multiplying the volume of waste by theCO2 emissions intensity(vi) Business trips

0

0

0

Calculated by multiplying the number of employeesby the CO2 emissions intensity(vii) Commuting by employees

1

1

1

Calculated by multiplying the number of employeesby the CO2 emissions intensity

(i)

●
●

Products/services purchased

See previous pageCO2 emissions are being calculated for (ix) Downstream transportation and delivery, (x) Processing of sold products, (xi) Use of sold products, and (xii) Disposal of sold products.
(viii) Lease assets (upstream), (xiii) Lease assets (downstream), (xiv) Franchise, and (xv) Investment are not subject to calculation.
★Independent assured items

Preconditions for calculating Scope 1 and 2 emissions

Preconditions for calculating Scope 3 emissions<Scope of aggregation>
Sanyo Special Steel (Head Office/Works, Tokyo Regional Office,Nagoya Branch, Osaka Branch, Hiroshima Branch, and Kyushu
Sales Office)<Scope of aggregation>
Sanyo Special Steel (Head Office/Works, Tokyo Regional Office,Nagoya Branch, Osaka Branch, Hiroshima Branch, and Kyushu
Sales Office)<Converted emission factor>
Source: List of calculation methods and emission factors
posted on the Ministry of the Environment's website"Greenhouse Gas Emissions Accounting, Reporting, andDisclosing System"<Converted emission factor>
Source: "Emission Intensity Database for Calculating Greenhouse
Gas Emissions of an Organization Through the Supply
Chain" posted on the website of the Ministry of theEnvironment/Ministry of Economy, Trade and Industry"Green Value Chain Platform"<Calculation period>
FY2022 (April 1 to March 31)<Calculation period>
FY2022 (April 1 to March 31)

20

Information Disclosure According to TCFD Recommendations
TCFD scenario analysis
Scenario

TCFD is the Task Force on Climate-related Financial Disclosures established by the Financial Stability Board (FSB). The Task Forcereleased its final report (TCFD Recommendations) in June 2017, setting forth a framework for corporate information disclosure of climaterelated risks and opportunities.
Sanyo Special Steel has expressed its endorsement of the TCFD Recommendations in October 2021, in light of the situation ofinternational society that is working to achieve the long-term goals of the Paris Agreement. Based on this, we will disclose information on
the impact of climate change on our business activities, etc.

Major climate-related
eventsOpportunity

Carbon neutral-related
responses in customer
industries, etc.

(Reference) TCFD-recommended disclosure items and where to find in this report
Overview of TCFD-recommended disclosure items(growing need for low-carbon anddecarbonized steel and products/
technologies that reduce environmental
impact, shift to transportation with less
CO2 emissions (railroad), shift to ahydrogen society, etc.)

Page[Governance] The organization's governance around climate-related risks and opportunitiesa) The Board of Directors' oversight of climate-related risks and opportunities

P.18b) Management's role in assessing and managing climate-related risks and opportunities

P.18

Structural changes indemand associated withthe shift to EVs, andgrowing need for smaller
and lighter automotive
parts, etc.

P.21b) The impact of climate-related risks and opportunities on the organization's businesses, strategy, and financial planning

P.21c) The resilience of the organization's strategy, taking into consideration different climate-related scenarios,
including a 2˚C or lower scenario

P.21[Risk Management] How the organization identifies, assesses, and manages climate-related risksa) The organization's processes for identifying and assessing climate-related risks

P.18b) The organization's processes for managing climate-related risks

P.18c) How processes for identifying, assessing, and managing climate-related risks are integrated into
the organization's overall risk management

P.18

1.5°C scenario[Strategy] The actual and potential impacts of climate-related risks and opportunities on the organization’s businesses,
strategy, and financial planning where such information is materiala) The climate-related risks and opportunities the organization has identified over the short, medium, and long term

P.19､ 23b) Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (GHG) emissions and the related risks

P.19､ 20c) The targets used by the organization to manage climate-related risks and opportunities and performance against targets

P.19､ 23

Introduction of carbon
pricing including carbon
tax

Shift of steel production
to electric arc furnaces
and increased use of ironand steel scrap* Net Zero Emissions by 2050: A roadmap scenario modeling what will be needed to put the world on track to net zero CO2 emissions by 2050
* SSP5-8.5: A higher reference scenario without introducing climate policy under fossil fuel dependent development

4°C scenario

TCFD Scenario Analysis
The TCFD Recommendations call for disclosure of strategies and organizational resilience, taking into account climate-related risks andopportunities under multiple climate change scenarios, including the 2°C or lower scenario. In the special steel industry, investors and otherstakeholders are increasingly concerned about the impact of and responses to changes in key customer industries, such as a shift to EVs,
and introduction of carbon pricing for significant reductions in CO2 emissions in the future.
Sanyo Special Steel has conducted a scenario analysis by referring to the International Energy Agency's (IEA) Net Zero Emissions by
2050 (1.5°C scenario) and the Intergovernmental Panel on Climate Change's (IPCC) SSP5-8.5 (4°C scenario) to consider the long-term
impacts on the Group through 2050.2050 (1.5°C scenario) and the Intergovernmental Panel on Climate Change's (IPCC) SSP5-8.5 (4°C
scenario) to consider the long-term impacts on the Group through 2050.

Growth of wind power
market due to expansionof renewable energy

Intensifying competition
for mineral resources due
to increase in demand forelectricity and storage
batteries, etc.

[Metrics and Targets] The metrics and targets used to assess and manage relevant climate-related risks andopportunities where such information is materiala) The metrics used by the organization to assess climate-related risks and opportunities in line with its strategy andrisk management process

Assumed impacts(key risks and opportunities)

Increasing frequency
and severity of weatherrelated disasters
Increase in averagetemperature
Decrease in water
resources and rise in
sea levels due to climatechange• Increase in demand for electricarc furnace steel, which emits
relatively less CO 2, and materials,
technologies, and products that help
customers reduce CO 2 emissions(long-life bearing steel, hydrogenresistant stainless steel, etc.)

High

Sanyo Special Steel's responses and strategies• Promote the development of eco-products that contribute to
CO2 emission reduction in the stage of parts manufacturing at
customers and during end product use(deepen technologies to meet the needs for higher reliability in the fields of "EV,""wind power generation," "railroads," and "hydrogen society," etc., which are
expected to grow globally toward carbon neutrality, and develop and expand
sales of strategic items (metal powders for additive manufacturing, etc.)
Commercialization of high-hardness, high-toughness, and high-carbon steel
TOUGHFITTM that is produced without carburization to contribute to reductionof CO2 emissions (announced in March 2023)• Promote CO2 emission reduction of our Steel Group with ecosolutions such as eco-processes and the use of green energy• Growing need for our highly reliable
special steel products associated withthe shift to EVs• Increase in demand for our special
steel products with properties that
contribute to the size and weight
reduction of parts• Decrease in special steel consumption
per automobile• Increase in demand for our highly
reliable bearing steel, which leads
to reduced maintenance and failure
prevention of wind power generation
facilities

Opportunity
High

Risk

• With our strength in high-cleanliness steel, accurately respondto new customer requirements and environmental issues
arising from changes in social and industrial structures• Strengthen supply chain competitiveness by enhancing
collaboration with customers

MediumOpportunity

High• Elucidate the fatigue mechanism under the unique environmentof wind power generation, and promote development andmarket introduction of bearing steel for wind power generationthat achieves long life and high reliability• Approved for "TPG Certification" as a supplier of criticalcomponents of wind power generators in September 2022

• Increasing need for our hihg
performance materials that do not
rely on rare metals

Opportunity
High• Promote development and supply of scarce resource-saving
high-performance products (ECOMAX series, Co-free maraging
steel powder, etc.)• Instability in procurement of
secondary raw materials due torestrictions on rare metal exports, etc.

Risk

• Secure and expand sources for ferroalloy procurement

Medium• Further enhance procurement supply chain management

Risk• Promote procurement of low-cost carbon-free electricity, etc.

• Increase in costs for electricity, fuel,etc.

• Improve relative advantage of electricarc furnace steels with relatively
low CO 2 emissions and especiallyof Ovako, which is a leader indecarbonization• Intensifying global competition toacquire superior scrap• Damage to production facilities andinundation of business bases andwarehouses in coastal areas due tosevere weather disasters, and disruptions
to the procurement of raw materials,
equipment, and other materials, andproduct supply, etc.
• Increase in risk of heat stroke and other
health hazards and equipment failure• Operational disruptions due to decline inwater supply stability, etc.

High

Opportunity
High

Risk
High

• Request suppliers to reduce CO2 emissions• Promotion of further investment in energy-saving facilities
through the introduction of an internal carbon pricing (ICP)system• Negotiation with customers on price pass-on• Promotion of low-carbon (decarbonized) steel products• Secure and expand sources of iron and steel scrap procurement
and optimize raw material mix• Secure iron sources in collaboration with the NSC Group

Risk• Continuously improve BCM (Business Continuity Management),
including enhancement of disaster prevention management
and natural disaster countermeasures
High• Ensure restoration financing measures by purchasing property
insurance and utilizing the Group's CMS• Enhance procurement supply chain management[Definition of degree of impact]
High: Risks/opportunities that could have a significant impact on business performance, such as increases or decreases in sales, losses, or profits in the order of billions of yen or more.
Medium: Risks/opportunities that may have a certain impact on business performance, such as increases or decreases in sales, losses, or profits in the order of hundreds of millions of yen.

21

Contribution to a Resource-recycling Society

Reduction of Environmental Impact

Special Steel Products Produced from
Recycled Raw Materials

Recycling of Electric Arc Furnace Slag

Efficient Use of Water Resources

Sanyo Special Steel promotes the recycling of electric arc
furnace slag generated as a by-product of the manufacturing
process and continues to achieve a 100% recycling rate bystabilizing the quality of such products and meeting diversifying
needs. Electric furnace slag has attracted attention mainly as a
substitute for natural resources such as stone and sand, and isused for roadbed material and asphalt aggregate applications.
In the future, it is expected to be used as inhibitors to control
foam expansion in steelmaking process, and as an aggregate forrecycled pavement. Our electric arc furnace slag products areprocessed at the highest level in Japan using pressurized steam
aging equipment that is effective in stabilizing expansion.
In addition, we use multi-functional classification equipment
made up of a classifier that can sort electric arc furnace slag
products into six stages simultaneously, from coarse-grained
aggregate to fine powder, and a granulator that chamfers
aggregate particles to adjust grain size and improve wear
resistance. Using these manufacturing processes, we provide
customers with high-quality electric arc furnace slag products. We
will continue to focus on the realization of a sustainable society
by putting in place a management system covering all aspects ofproduction, quality, and sales in compliance with the "Guidelines
for Management of Iron and Steel Slag Products" of the Nippon
Slag Association, and by undergoing reviews by third-party
organizations to strengthen the management system and further
improve its reliability.

Water is essential in the manufacture of our products, forcooling steel and equipment, and as a source of power forequipment. Although our manufacturing base (Himeji City, Hyogo
Prefecture) is not located in an area exposed to high water stressas assessed by the WRI Aqueduct, we reuse more than 90%of the water used in our production processes, based on ourrecognition that water is a limited resource. In addition to watersupply from the industrial water works, we also have our own
source of water (groundwater) . Contaminated water that has
been used in the factory is sent to an on-site treatment facility to
be purified. The purified water is then reused within the factory,
while the remainder undergoes further treatment before being
discharged into public waters. At the drainage outlets to public
waters, a system is in place in which pH levels, turbidity, chemical
oxygen demand (COD), nitrogen, and phosphorus are constantly
monitored by automatic measurement, and if they exceed ourvoluntary internal management standards, which are stricter than
the standards set by prefectural ordinances, an alarm is issued
to enable the staff in charge to respond quickly. In addition,
periodic analysis of hazardous substances, etc., is conducted by
an external organization as part of our efforts to manage water
quality and prevent water pollution.

Sanyo Special Steel manufactures special steel by the electricarc furnace steelmaking method using iron and steel scrap as
the main raw material, contributing to the recycling and effective
use of iron and steel resources. In FY2022, iron and steel scrap
accounts for approximately 75% of the raw materials, and wheninternally recycled materials are included, approximately 94% of
the raw materials were recycled products.

Initiatives to Reduce By-Products
In FY2022, the volume of by-products generated by our
production activities was 224 thousand tons, and the volume
processed, including the volume sold, was 245 thousand tons.
Byproducts include electric arc furnace slag, scale, dust, brickwaste, and sludge.
We promote resource recycling based on the 3R (Reduce,
Reuse, and Recycle) concept, and in FY2022, we reduced
approximately 87% of the processed volume either by recycling or
incineration, and finally disposed of the remaining 13% in landfills.
We will continue to work to expand the use of by-products in new
applications in order to reduce the volume of landfill disposal.

Chemical oxygen demand (COD) in wastewater
Concentration (mg/ℓ)

National standard level

120

Level agreed with Himeji City

16
14
12

Standard level set by Hyogo Prefecture

10
8
6
4

2.5

2.3

2.4

2.4

3.0

2018

2019

2020

2021

2022 (FY)

20

Suspended particulate matter (SS) in wastewater
Concentration (mg/ℓ)

National standard level150
35Standard level set by Hyogo Prefecture30
25

Level agreed with Himeji City

20
15
10
5

Reduce0

Reduce electricity, gas,and other resource
consumption

0.6

0.6

0.8

0.7

0.8

2018

2019

2020

2021

2022 (FY)

Nitrogen concentration in wastewater

Reduce generation ofwaste

Concentration (mg/ℓ)
70

3R
RecycleNational standard level

60
50

Reuse

40
30

Utilize scrap raw materials

Reuse water

Recycle by-products

Reuse by-products

20

Wastewater treatment facility
Electric arc furnace slag

Breakdown of by-productgeneration
0.4%
3%
6%
7%
15%

0

7.5

7.5

7.4

7.7

9.2

2018

2019

2020

2021

2022 (FY)

Breakdown of by-productprocessing
31thousand tons
13%

FY2022

FY2022

thousand tons

thousand tons

224

10

245

68%
Electric arc
furnace slag

Scale

Dust

Brick waste

SludgeOther

Patrol of wastewater treatment facility

214 thousand tons
87%
Recycling, etc.

Landfill disposal

Recycled pavement in Himeji City

22

Reduction of Environmental Impact
Reduction of Air Pollutant Emissions
At facilities that generate soot and smoke, we have achieved
SOx (sulfur oxide) emissions well below the agreement value with
Himeji City by switching the fuel from heavy crude oil with highsulfur content to LNG (city gas) which contains almost no sulfur.
For NOx (nitrogen oxides) emissions, we are employing low
NOx burners and proper combustion controls, etc., to reduce theemissions. We have also installed automatic NOx measurement
equipment in the system to enable constant monitoring of heating
furnaces, which emit large amounts of NOx.
In addition, the April 2018 revision of the Air Pollution Control
Act stipulates that mercury concentrations in the exhaust gas
from electric arc furnaces for steelmaking should be voluntarily
reduced. Sanyo Special Steel regularly measures and records
mercury concentrations in accordance with the voluntarystandards recommended by the Japan Iron and Steel Federation
to confirm that the concentrations meet the voluntary control
standards.
As for dust collection facilities, we are working to increase
equipment capacity, including the installation of additional dust
collectors in buildings of continuous casting factories in FY2018.
We also use traditional methods to help prevent dust
dispersion, including patrols by water sprinkler vehicles and street
sweepers.

Improvement Plans for Environmental Conservation
Our plans to improve environmental conservation and status of initiatives

Sulfur oxide emissions(Thousand m3N)

Level agreed with Himeji City

60

57

40

20

0

1.5

1.1

0.3

2.5

2018

2019

2020

2021

0.5
2022 (FY)

Topic

Target/KPIs

Status of initiatives (FY2022 results, etc.)

Selfassessment*

Energy-saving andglobal warming
prevention

Reduction in CO2 emissions through promotion ofenergy-saving measures, etc.
(FY2030 target: 50% reduction from the FY2013 level)• CO2 emissions in FY2022: 36% reduction from the FY2013 level• Reduction of fuel consumption by introducing air purge burners
to electric arc furnaces• Reduction of fuel consumption by introducing regenerative burnerto continuous heating furnaces○○

Recycling of
byproducts

Reduction in dust and sludge landfill volumes• Outsourcing of dust recycling to contractors○

Improvement of the recycling rate of brick waste• Use of brick waste as a heat-resistant raw material○○

Compliance withlaws and regulations

Compliance with regulatory standards(Water Pollution Prevention Act, Air Pollution Control
Act, etc.)• Attainment of regulatory standards for all items(no cases of violation or deviation from laws, regulations, andagreements)○○○

Education andawareness-raising
activities for
employees

Regular implementation of education and awarenessraising activities for employees
Increase in the number of employees with environment
related public qualifications• Ongoing initiatives to increase the number of employees qualified
as pollution control managers○○

Promotion of
information
disclosure

Periodic publication of environmental reports• Publication of "Sanyo Special Steel Report" and its release on
website○○○Cooperation with local governments and otherenvironmental administrations• Implementation of initiatives for Environment Month events○○○

Nitrogen oxide emissions(Thousand m3N)
300

Level agreed with Himeji City

250
200
150

150.0

132.0

116.5

149.1
108.5

100
50
0

2018

2019

2020

2021

2022 (FY)

Proper Disposal of Waste

Environmental Accounting

In accordance with the PRTR Act*, we monitor emissions andtransfers of chemical substances and report them to the Ministryof Economy, Trade and Industry annually.
We also work on initiatives to suppress the emissions.
In addition, PCB waste is properly stored and managed inaccordance with the Act on Special Measures concerning
Promotion of Proper Treatment of PCB Wastes, and the renewal/
disposal of applicable equipment is carried out systematically inorder to complete disposal within the time limit specified by theAct. As for highly concentrated PCB waste, we conducted final
identification of equipment subject to disposal in accordance witha written notification from the Ministry of Economy, Trade andIndustry, and completed disposal of all the equipment by JESCO
within the time limit. For low-concentration PCB waste, we havelisted the equipment subject to disposal and are proceeding withthe planned renewal/disposal of equipment in order to complete
disposal within the time limit.

Sanyo Special Steel outsources disposal to industrial waste
disposal companies and ensures that they can properly dispose of
our waste by checking their licenses and conducting preliminary
inspections of their disposal facilities. In addition, we confirm that
our wastes are properly disposed of through periodic inspectionsof disposal facilities and by checking the status of industrial
waste disposal using manifests. We have introduced electronic
manifests to ensure proper operation, and we are working tothoroughly separate waste at the sites where waste is generated.

The costs of environmental conservation measures in FY2022
were aggregated in accordance with the guidelines from the
Ministry of the Environment.
Expenses related to environmental conservation, such as
costs for maintenance and management of dust collectors,
water treatment facilities, and other environmental measuresequipment, and for recycling and disposal of by-products, totaled
approximately 3.7 billion yen.
In addition, approximately 200 million yen was invested
in the maintenance of dust collectors, the decommissioning
and replacement of transformers containing PCBs and otherequipment, and the conversion to LED lighting for the purpose ofenergy conservation. We will continue to implement measures toprotect the environment.

* PRTR (Pollutant Release and Transfer Register): Act on the Assessment of Releasesof Specified Chemical Substances in the Environment and the Promotion ofManagement Improvement

Emissions and transfers ofchemical substances

Transfers outside
the business site

Emissions to
the atmosphere

1,128ｔ 233ｔ

Emissions into
public waters

14ｔ

We believe that it is important to raise the environmental
awareness of each and every employee when working on ourenvironmental conservation activities, and we regularly conduct
new employee education and grade-based environmental
training. In addition, we have established an incentive program
to encourage employees to acquire environmental conservation
related qualifications, such as pollution control managers, and wehave also been working to have employees create a household
eco-account book.

• Recording of household eco-account books (approx. 10
participants)○○○* Self assessment: The level of achievement of targets is indicated on a 3-point scale.
○○○ : Plans have been achieved ○○ : Steady progress toward achieving plans ○ : Further initiatives will be undertaken to achieve plans

Proper Management of Chemical Substances

Environmental Awareness Development
Activities• Implementation of community beautification activities (approx.
200 participants)(Millions of yen)Classification

ExpenseInvestment

Cost of environmental measures

1,596

25

Cost of global warming measures

169

64

Resource recycling cost

1,540

125

Administrative activity cost156

0

R&D costs

272

0

Other environmental costs

10

0

Total

3,744

213

Awarded the Hyogo Prefectural Governor’s Commendation
for Meritorious Service in Environmental Conservation
OKADA Kenichi Senior Expert (SE), a member of the Environmental Management
Department of Sanyo Special Steel, was awarded the Governor’s Commendation as aperson who had rendered distinguished service in environmental conservation. Utilizing his
knowledge and experience concerning facilities cultivated through facility maintenance andconstruction work, OKADA SE dedicated himself to reducing CO2 emissions and introducing
energy-saving facilities, contributing to efficient facility operation. Furthermore, his service asa pollution prevention manager for air starting in 2014 and for water quality starting in 2016,
his efforts made in environmental improvement activities, and the activities he participatedin as a member of the Hyogo Prefecture Environmental Conservation Managers Association
were recognized.
OKADA Kenichi, awarded the Governor’s Commendation
for Meritorious Service in Environmental Conservation

23

Creating a Safe Workplace
For a manufacturing company, safety is the basic premise of business activities and should be dealt with on a top-priority basis. The
Sanyo Special Steel Group promotes safety activities for which top-down approaches and bottom-up approaches are integrated, aiming toachieve the total absence of accidents.
There are no shortcuts in safety activities. We continue our daily safety activities and work on ensuring a workplace where all workers
can work with peace in mind in terms of security.

2023 Comprehensive Health and Safety Management Policy■ Basic policy
Creating a safe workplace environment by raising the code of conduct aimed to foster a new safety culture and improving
communication skills■ Slogan
Promoting the best conditions for persons, safety equipment, and hygienic work environments by improving communication skills■ Three safety principle
Stop, step back, check hands & feet – then double-check that it is really safe

Safety Proposal System and Safety Professionals’ Activities■ Goals
Achievement of a total absence of accidents
Occupational accidents “0” Accidents on the way to work “0”A safety proposal system has been put in place since 2019, under which workers in each workplace can propose measures to improve
the safety of their own work and workplace.
Soliciting safety proposals from workers who actually engage in work on-site is not only effective in formulating specific safety measures,
but also raises workers’ safety awareness through the proposal process and leads to a transformation to true bottom-up safety activities
which form the core of our safety activities.
In addition, safety professionals are appointed from among the team leaders at work sites to identify work risks through patrols intheir own workplaces, analysis of near-accidents, etc. and to work on making improvements. Safety professionals who are well-versed
in operations on manufacturing sites are expected to take the initiative in improving the work operations and environments at their own
workplaces, thereby raising safety awareness and creating a synergy with the safety proposal system.

Safety and Health Management
In order to ensure the safety and health of employees in the workplace,the Safety and Health Committee, chaired by the General Safety and
Health Manager, meets monthly to deliberate on basic measures toprevent employee hazards and health problems as well as on the causesof occupational accidents and measures to prevent recurrence, etc. Halfof the members of the Safety and Health Committee are labor union
representatives, in accordance with laws and regulations, to ensure that theopinions of workers are reflected in safety and health measures. We also
promote the reduction of work risks and the creation of a safe workplaceby "integrating top-down and bottom-up approaches" and "implementing
both hard and soft measures" and report the monthly implementation statusof safety activities and the annual summary of safety and health activities
to the Board of Directors, thereby effectively implementing the PDCA
management cycle (planning, implementing, monitoring/supervising, andtaking improvement measures) for constant improvements.
For our overseas subsidiaries, we monitor safety at local plants and use
web conferencing to identify weak points in terms of safety and provide
support and guidance for safety activities by exchanging opinions andsharing information on each company's initiatives, etc., thereby promoting
the safety activities of the entire Group.

Top-down
Safety Philosophy and Policy
Comprehensive Health and Safety
Management PolicyHardmeasures

Safety Promoter ActivitySoftmeasureSafety andhealtheducationsystemExcellent
workplacerecognition
systemSafetyInvestment forsafetyequipment

Bottom-up
Safety professional andsafety proposal system
Safety promoter activity
Various daily safety activities(Number of cases)
15

5.00

13

Number of occupational accidents
requiring time off from work (left axis)
Frequency rate (right axis)

6
5

4.00

9

9

1.77
1.04 3

2.36

6
1.67
1.10

0.54
0

2011

2012

2013

2014

3.00

7
1.26

4

2
0
2015

2016

2017

2018

2019

2020

0.76
2021

2.00

4

4
0.88

0.38
0.00

Sanyo Special Steel has been implementing the "safety promoter activity" since 2016
to develop human resources who can make judgments and act on their own by educating
young and mid-career employees selected from each workplace on correct safetyknowledge and the importance of compliance with rules, with the aim of achieving "truesafety" by integrating top-down safety activities and bottom-up safety activities.
Young and mid-career employees appointed as safety promoters patrol their own
and other workplaces to enhance their perspectives to recognize good and bad points of
their own workplaces and improve their sensitivity to recognize dangerous conditions ashazardous. In addition, they experience risk assessment activities to identify hazardous
operations and assess risks, leading to the improvement of intrinsic safety throughimprovement measures, including equipment measures.

Safety Experience Training Center<Number and frequency rate of occupational accidents by year>

10

Safety Professionals Selected From Each Workplace

0.79 1.00
0.00

2022 (Year)<Reference> Frequency rate: Number of occupational accidents per million hours (Number of occupational accidents / Total number of working hours × 1,000,000)

We have established a Safety Experience Training
Center that enables us to have simulated experience of
hazards.
In 2022, 2,452 employees
received training at the center,and to date the total is 33,689.

Organizing "Sanyo Thorough Thinking Academy"- To Improve the Sanyo 4 (Awareness, Initiative, Independence, and Autonomy The Sanyo Thorough Thinking Academy was opened in FY2023, which is for
new employees who have been assigned to workplaces for some time.
This is a one-month training program designed to educate new employees,
who have experienced their workplace environments and actual work, tounderstand again the importance of fully following rules, acquire knowledge
about safety and health, and put independent safety thinking and acting
into practice. By providing this educational occasion, we will develop safetyconscious employees who will play crucial roles for Sanyo in the future.

Awareness

Initiative

Deeply understanding your own
individuality

Active actions to compensate foryour weakness

Independence
Aiming for further self-growthAutonomy
Realizing your own emotional dependence
and carelessness and correcting yourself

24

Disaster Prevention Initiatives
Risk Management for Emergency Situations
Many employees work at Sanyo Special Steel, which has a variety of equipment and facilities. In addition to establishing a permanent
fire and disaster prevention management system, we are working to prevent accidents from occurring and to prevent the spread of (minimize)
damage in the event of a disaster by developing manuals in preparation of plant accidents such as fires and explosions and natural
disasters such as earthquakes, and conducting regular disaster drills, etc. In FY2022, we set the following five points as priority promotion
items under our basic policy for the year: "All employees in the workplace shall raise their awareness of fire and disaster prevention throughrisk assessment to prevent disasters, and acquire further high level of disaster response capability through education and training."• Enhancement of fire and disaster prevention management• Strengthening of management of facilities and other equipment at high risk of fire, explosion, and oil leakage• Improvement of disaster response capabilities through continued implementation of fire and disaster prevention education and training• Strengthening of disaster prevention measures through the activities of dedicated disaster prevention teams• Acceleration of initial response by reviewing lifesaving equipment and fire-fighting equipment
In addition, fire and disaster prevention risk assessment activities started in FY2020 are reviewed annually, such as the addition of new
check items for storm and flood damage, crisis management, etc. in FY2021. We will strive to raise employees’ awareness of disasterprevention and reduce potential risks by identifying new risks and formulating and implementing countermeasures, both in factories and offices.

Initiatives to Raise Disaster Prevention
Awareness
With the aim of further raising employees’ awareness of disasterprevention, Sanyo Special Steel holds workshops for hazardous
materials safety supervisors and managers and workshops for
managers in charge of fire and disaster prevention every year.
We are working to improve the management level of licensed
hazardous material facilities, small quantity hazardous materials,
and miniscule hazardous materials by providing direct instructions toworkplace managers and those responsible for handling hazardous
materials and high-pressure gases. In FY2022, at the workshops
for hazardous materials safety supervisors and managers held in
August, the participants were again informed of the importanceof security measures by referencing accident cases involving
hazardous material facilities, in addition to the responsibilities
and duties they must fulfill as safety supervisors and managers,
and main points on storage and handling management. At theworkshops for managers in charge of fire and disaster prevention
held in September, the participants received an explanation of thedisaster prevention management rules and fire fighting plans thatworkplace managers should be aware of, and were reminded ofdaily preventive management and the standards of behavior incase of emergencies. They also deepened their understandingof the necessity of chest compressions and AED to save lives
from disasters, accidents, and sudden illnesses. Regarding themanagement of facilities, we worked on 3S activities for licensed
hazardous material facilities and high-pressure gas facilities, with
June and March designated as the months for strengthening
management of licensed hazardous material facilities and Octoberas the month for strengthening management of high-pressure
gas facilities. We will continue to promote further improvement inawareness of disaster prevention through these disaster prevention
education and management enhancement activities. In addition,
since FY2018, we have been holding first aid training sessions
for foremen, where they receive practical training on emergency
medical care (chest compressions and the use of AED), hemostatic
techniques, etc., with help from nurses.

Conducting Disaster Drills
In Sanyo Special Steel, the equipment and hazardous materials
used vary from workplace to workplace. In addition, employees'
awareness of and experience with disaster prevention varies
widely, not to mention new employees participating in disaster
drills for the first time. Furthermore, depending on the scale of thedisaster, cooperation with firefighter may also be required. For thisreason, disaster drills are conducted in a more specific and practicalmanner by identifying appropriate emergency situations.

Disaster drills conductedin FY2022

49

Large-scale earthquake disaster drill
In FY2022, we conducted a large-scale earthquake disaster
drill under the assumption that a huge earthquake with an
epicenter in the Nankai Trough had occurred, shutting down
lifelines such as electricity, water, gas, communications, andtransportation. After confirming information on the earthquake
and tsunami, we set up the Disaster Task Force and collected
information from each department on the safety of employees anddamage to facilities. In response, the Disaster Task Force issued
instructions for initial response to injured people and damaged
facilities, for confirmation of the safety of cooperative companies,
and for prevention of secondary disasters caused by blackouts(loss of power), tsunamis, etc., and each department reported its
activities to the Disaster Task Force. We will continue to work toraise employee awareness and improve their disaster response
capabilities through drills.

Joint factory disaster drill with the Shikama Fire Department
In December 2022, we conducted a joint factory disaster drill with the Shikama Fire Department under the assumption that a fire had
occurred in a scrapyard. During the drill, the Disaster Task Force played a central role and collaborated with the Fire Department members
to conduct initial fire fighting by the fire brigade, fire fighting by private and public fire brigades, and rescue and first-aid activities forthe injured, etc. This year's drill newly included evacuation and support requests to employees not only of the plant where the drill was
conducted, but also of neighboring plants, as well as preparations for the unlikely event of the spread of fire. After the drill, the participants
exchanged opinions and received feedback and guidance on the drill from members of the Shikama Fire Department. We will continue to
conduct drills that will help raise the level of the entire organization.

Preparedness for Large-scale Earthquakes and Other Wide-area Disasters
In the event of a wide-area disaster such as a large-scale earthquake, it would be difficult to confirm the safety of employees andconsolidate such information through ordinary means of communication such as telephone calls.
Sanyo Special Steel has therefore introduced an Internet-based safety confirmation system to quickly gather information on the safetyof employees in the event of an emergency and, based on that information, take measures necessary for business continuity. In addition,
at our head office plant, we have stockpiled emergency food and drinking water necessary for our employees and employees of our
subsidiaries and cooperative companies working on our plant premises to safely return home and stand by. In addition, at sales bases
located in urban areas, we have stockpiled disaster prevention supplies in anticipation that employees would have difficulty returning home
to prepare for the unlikely event of wide-area disasters such as large-scale earthquakes.

25Promotion of Diversity Management
Innovation creation is the key in enhancing corporate value over the medium to long term, and co-creation by diverse individuals is thedriving force behind such innovation creation. The Sanyo Special Steel Group considers it necessary to proactively work on diversity inknowledge and experience, such as expertise, experience, sensibility, and a set of values. In addition, we strive to create a system thatenables employees to achieve a good work-life balance and fully demonstrate their abilities with a sense of fulfillment in their work, andstrive to develop a comfortable workplace environment where employees can continue to work with peace in mind and an environment thatallows for a work style that is not restricted by time or place.

Promotion of Participation by WomenWith the goal of increasing the percentage of female employees to 25%, SanyoSpecial Steel has increased the number of workplaces where female employees
can actively work by systematically hiring female employees and expanding theirwork areas, and has introduced support systems, such as childcare leave andshorter working hours, to reduce their burden during life events and enable them tocontinue working. Furthermore, we are promoting the awareness building of female
employees themselves through external training, etc. and promoting the creation ofan organizational culture that encourages female employees to take an active rolein the company.

OHIRA Akemi, Chemical Analysis Foreperson,
Quality Assurance Department

Childbirth, Childcare,and Nursing Care Support Guidebook

Awareness Reform for Diversity Promotion
In order to promote diversity management and create a workplace in which
each and every employee can demonstrate their abilities and work as effectively as
possible, it is essential to change the understanding and awareness of each andevery employee.
From this perspective, Sanyo Special Steel conducts training programs suchas unconscious bias training, in which organizational leaders learn skills tounderstand and control unconscious biases related to gender and age; the holdingof round-table talks with female directors as opportunities for female employees toenvision attractive managerial positions; and management candidate training, inwhich female employees learn about diverse role models and interact with female
employees of other companies to improve their awareness and motivation to
become managers. In this way, we are working to improve the mindset and career
education of female employees in order to promote their participation.

Percentage of female employees(As of April 2023)

14 %(27% in planning position, 7% in technical service position)

Percentage of female managers(As of April 2020)

3.9 %Pregnancy, childbirth, and childcare system timeline
PregnancyChildbirth

1 year old

2 years old

Females
3 years old

End of FY

4 years old

6.1 %
Males

Third grade

Breaks during pregnancy (extended rest periods in addition to regular breaks; up to 1 hour/day, up to twice a day)Maternity leave (early pregnancy to 8 weeks after childbirth)(As of April 2023)

End of FY

Males andfemales
Sixth grade End of FY

I am in charge of chemical analysis and evaluation of powder products prior to shipment. Since I became a foreperson in
April 2016, I have attended company-wide meetings and training sessions as a supervisor representing my workplace, and myinterdivisional connections have increased dramatically. I have been blessed with opportunities to learn a lot from many persons
including the forepersons of other workplaces, which has greatly broadened my perspective.
In recent years, the pace of technological innovation has been extremely fast, and new products are created all the time. Besides,
analytical technology and measuring instruments also evolve fast, and our work must keep pace with this evolution. I will continue toimprove the level of our analytical work with a focus on sharing information and cooperation in order to meet the needs of customers,
and will also put my energy into passing on the skills and knowledge necessary for my work to younger staff, taking into account thehistory of the company and my experience among other factors, in order to help my colleagues grow by making the most of theirindividuality.

Promotion of Participation by Senior
Generation

Stable Employment of Persons with
Disabilities

Sanyo Special Steel extended the retirement age from 60 to
65 in April 2021. Additionally, it established the "Senior Citizen
Partner Program" as a system for extending the employment of
employees over the age of 65. We work on strengthening ourcompetitiveness by maintaining and improving our manufacturing
capabilities through extension of the employment of those
employees who have reached the age of 65 and who are deemednecessary from the viewpoint of business execution and thetransfer of technology and skills as "senior citizen partners"; andthrough further enhancement of the environment for promoting
the transfer of technology and skills and the development of future
generations.

Sanyo Special Steel and its domestic Group companies
promote the employment of persons with disabilities in orderto realize a society in which everyone can work to the best of
their abilities. In addition to promoting recruitment activities incooperation with Hello Work offices (public employment security
offices) and special support schools, we are also continuously
working to improve the work environment in both hard and soft
aspects with working life counselors for persons with disabilities
in the companies playing a central role. For employees who are
certified as persons with disabilities after joining their companies,
consideration is given to the nature and hours of their work so thatthey can continue to work.

Medical checkup leave for expectant and nursing mothers (special leave)
Protection of expectant and nursing mothers(employment considerations such as reassignment and reduced working hours)
Childbirth leave (special leave)
Childcare leave (until the end of the fiscal year of the child's third birthday)
Childcare time (30 min/time, up to twice a day) Until the child's first birthday
Reduced working hours for childcare (until the end of the fiscal year of the third grade of elementary school)
Exemption/limitation of overtime hours (up to 24 hours/month, up to 150 hours/year)
Until the end of the fiscal year of the third grade of elementary school
Exemption from late-night work Until the end of the fiscal year of the third grade of elementary school
Sick/injured childcare leave (limited to 5 days/year for one child and 10 days/year for two children;
restored paid leave or special leave) Until the end of the fiscal year of the sixth grade of elementary school

Promotion of Work-life Balance
Sanyo Special Steel flexibly responds to the diversificationof work styles through introduction of its flexible working hoursystem, shorter working hour system, and work-from-homesystem, and also works to increase the rate of paid leave taken,
in addition to the implementation of "no overtime day" every
Wednesday and productivity improvements aimed at reducing
overtime hours. Furthermore, we encourage employees to takeconsecutive paid leave and special incentive leave, and haveestablished systems that surpass legal standards, such as leavesystems for maternity, childcare, and nursing care. Also, we
support the realization of a work-life balance for each and every
employee by creating a workplace environment and culture thatmakes it easier for employees to take such leave.

Percentage of employees
taking paid leave(FY2022)83.6 %

Percentage of male employees
taking childcare leave(FY2022)74 %26

Promotion of Corporate Health Management
Based on the recognition that the safety and health of its employees is a prerequisite for its business activities and is thus an importantmanagement issue, Sanyo Special Steel formulated the "Sanyo Special Steel Corporate Health Management Declaration" in August 2021
and established a corporate health management structure with the Representative Director and President as the Chief Corporate Health
Officer. Furthermore, we promoted initiatives to improve employees’ lifestyles and prevent mental health problems, such as walking events
that supported them in making physical exercise an established routine. In March 2023, we were certified as a Certified Health & Productivity
Management Outstanding Organization (Large Corporation Category) under the Certified Health & Productivity Management Outstanding
Organizations Recognition Program jointly implemented by the Ministry of Economy, Trade and Industry and Nippon Kenko Kaigi.
We will continue to further promote corporate health management and create a workplace environment in which all employees can work
to the fullest of their abilities every day.

Sanyo Special Steel Declaration of Corporate Health Management
Based on the recognition that the safety and health of its employees is a prerequisite for its business activities
and an important management issue, Sanyo Special Steel declares that it will work together with the Sanyo Special
Steel Health Insurance Association to comprehensively address health maintenance and promotion, and continue tocreate a workplace environment in which each and every employee can work to the fullest every day.
August 2021
Sanyo Special Steel Co., Ltd.
		MIYAMOTO Katsuhiro,		
Representative Director and President

Corporate health management strategy map

Healthinvestment

Health investment effectIndicators related to the status
of initiatives for healthinvestment measures

Implementation of walking
eventsIncrease in the number ofparticipants in walking
events

Implementation ofcalisthenics sessions

Increase in the number ofparticipants in calisthenics
sessions

Implementation of
employee-participatory
seminars

Increase in the number ofparticipants in
employee-participatory seminars

Implementation of specifichealth guidance

Improvement of the specifichealth guidance
implementation rate

Implementation of smoking
cessation support

Increase in the number of
employees provided withsmoking cessation support

Operation of health app

Increase in the number ofhealth app users

Implementation of mental
health training

Increase in the number ofparticipants in mental healthtraining

Implementation of heat stroke
prevention measures

Decrease in the number ofheat stroke cases

Implementation of infection
prevention measures

Measures and responses inaccordance with the guidelines forprevention of COVID-19 infection

Indicators related to change inawareness and behavior of
employees, etc.

Improvement of enthusiasm
and vitality at work

Increase in the percentageof employees with healthyeating habits

Increase in the percentageof employees with exercise
habitsFinal health-related target
indicators

Management
issues to besolved throughcorporate healthmanagement

Reduction in absenteeism(sick leave)

Reduction in presenteeism(working while ill or injured)

Increase in work
engagement(enthusiasm and vitality at work)

Decrease in the percentage
of smokers

Creation of aworkplaceenvironment inwhich each andevery employee canwork to the fullest
every dayParticipants in the walking event "SANYO WALK"For the Promotion of Corporate Health Management
Poor mental and physical health among employees not only causes a decline in productivity, but may also lead to an outflow of humanresources in some cases due to leave of absence, leaving a job, or other reasons. In addition to providing employees with statutory healthcheckups, medical checkups for metabolic syndrome, and health guidance, Sanyo Special Steel continues to conduct stress checkups,
which were made mandatory in FY2016. We also conduct group analysis based on the results of these checkups and recommend
employees with high stress levels to see an occupational physician. Moreover, we have a mental health help desk in place and provide
smoking cessation support and dietary restriction counseling, etc. In August 2021, we have established a corporate health management
promotion structure with the Representative Director and President as the chief health officer in order to promote further initiatives andcontinuous improvement. We have also established the Corporate Health Management Promotion Council, which includes occupational
physicians, health insurance association, and labor union as its members, as a meeting body for continuous improvement, and appointed
employees in charge of health promotion in each workplace. In addition, we are also promoting initiatives including the establishment of "No
Smoking Day", creation of a comfortable workplace environment by providing air-conditioned uniforms, giving health related lectures, radio
exercises at start of work, and holding walking/health check events to prompt establishment of exercise habits.
as a Certified Health & Productivity
P.15 RecognizedManagement Outstanding Organization 2023

Improvement of job
satisfaction

Establishment of"No Smoking Day"

Holding health check events

Conducting a health seminar

27

Human Resource Development

Respect for Human Rights

Develop Human Resources Who Can “Think and Act Autonomously”

In the "Guidelines for Corporate Behavior," which describe the actions to be taken as a company, the Sanyo Special Steel Group has
stipulated that it shall respect human rights both in Japan and overseas, comply with relevant laws and regulations, international rules, andthe spirit thereof, and fulfill its social responsibilities with high ethical standards to create a sustainable society. Furthermore, we endorse
and respect the "International Bill of Human Rights" and the "Declaration on Fundamental Principles and Rights at Work" and promotebusiness activities that respect human rights with the "Guiding Principles on Business and Human Rights" as our guidelines to follow.

Under our basic policy of "developing employees and make fulluse of their potential," we have developed a meticulous educationand training system. In addition to education through daily work,
we provide grade-based training based on the years of service
and positions and education for promotion of the participation of
women, and reform the awareness of individuals in the company,in order to develop human resources with an independent
mindset and motivation to take on challenges who can "think
and act autonomously," such as those having the ability to set
and solve challenges on their own. Furthermore, for the purposeof broadening the perspective of employees and strengthening
their solidarity, we provide them with opportunities to interact
with outsiders, such as visits to clients’ factories and the dispatchof personnel to various external training sessions, and work onenergizing employees’ mutual communication by, for example,
organizing opinion exchange sessions between employees fromdifferent workplaces and workplace visits among employees.

Development of Global Human Resources
We are accelerating the development of human resources who
can play active roles on a global stage due to our increasingly
globalized business environment and developing a global
mindset through overseas language training for new employees
in management track positions and short-term language study
abroad for selected employees, among other initiatives. We also
promote international exchange and innovation through technicalcollaboration and mutual dispatch of human resources withoverseas Group companies and assign employees to overseas
affiliates based on a human resource development model or to
study abroad.

Human Resource Management System(establishing work tasks and training themes through dialogue)
Under the personnel appraisal system of Sanyo Special Steel, each employee is supported in building up and fully demonstrating theirabilities from when they join the company until they reach the retirement age and in working with pride and a sense of fulfillment. In sodoing, the system rewards individuals who have boldly taken on challenges and produced results, thereby enhancing the comprehensive
strength of the company in terms of human resources. We focus not only on resultant achievements but also on whether employees "sethigh goals and boldly strived to achieve them" or whether they "executed the process to achieve the goals without fail" in their appraisal,
in order to foster employees’ autonomy and motivation to take on challenges. In addition, the items covered in personnel appraisal include"the development and management of subordinates and junior colleagues" and "the creation of a comfortable-to-work workplace," thereby
indicating within the company the importance of human resource development and also striving to enhance employees’ engagement.
Furthermore, we support the self-realization of each and every employee, for example, through dialogue with their superior aimed atclarifying topics and issues in the improvement of their skills and through career consultations with personnel in charge of personnel affairs
from a long-term perspective.

Self-transformation Program Through Multifaceted Observation
We have introduced a self-transformation program through multifaceted observation. The program is designed for officers, department
heads, and other management levels to confirm their evaluations by superiors, colleagues, and subordinates and understand how theiractions are viewed by their subordinates and others around them, thereby providing them with an opportunity to objectively recognize theirown management and behavioral characteristics for self-transformation.

Sanyo Special Steel Group Human Rights Policy (excerption)[Respect for Human Rights]
●

●
●

●

We understand that human rights may be affected through our business activities, such as procuring raw materials, manufacturing,
selling, and distributing products, research and development, and recruitment. We are also aware that our business relationships withother stakeholders may end up impacting human rights.
We will strive to neither violate human rights ourselves nor support any human rights abuse by our stakeholders, including business partners.
Supporting and respecting the "International Bill of Human Rights" and the "Declaration on Fundamental Principles and Rights at Work,"
we will conduct our business activities under the Guiding Principles on Business and Human Rights. We will prohibit discrimination
based on nationality, race, religion, age, gender, physical or mental disorders, gender identification, sexual orientation, and upbringing, ordiscrimination for any other irrational reasons.
We will also strive to prohibit long working hours, harassment, forced labor, and child labor, respect freedom of association and collective
bargaining rights, and ensure safety and health in the workplace. We will comply with the laws and regulations of the countries andregions where we conduct business activities. When there are discrepancies between globally recognized human rights and the laws andregulations of the country or region, we will seek appropriate ways to respect the internationally recognized human rights to the extent
possible while complying with such laws and regulations.

Human Rights-related Education and
Relief Mechanisms

Building and Maintenance of Sound
Labor-management Relations

Through various educational opportunities, such as gradebased training and labor management seminars, we are working
to develop a corporate culture in which each employee's humanrights and diversity are respected.
In addition, we have established a help desk for various
compliance issues, including human rights, and made known to all
employees and other concerned parties the details of the system,
contact information for the service, and the fact that no one would
suffer any disadvantages for consulting or reporting.
This mechanism makes it easier for them to consult and for thecompany to understand and identify human rights violation cases.
In dealing with individual cases received at the help desk, weinvestigate the facts with due care to ensure that those who haveinformed/consulted are protected and that they are not treateddisadvantageously, and, if necessary, obtain advice from lawyers
and external experts to seek appropriate resolution of the case.

We respect the "right to organize" and "right to collective
bargaining" of the labor union in accordance with laws,
regulations, and labor agreements, and strive to build andmaintain sound labor-management relations.
The relationship with the labor union is based on mutual
understanding through bilateral dialogues, and we regularly holddiscussions with the labor union on management conditions,safety and health, various management-related issues, working
conditions such as salaries and bonuses, and work-life balance.
In addition to complying with the minimum wages, etc.,
stipulated by the laws and regulations of each country and region,
we also set salaries and other treatments based on the conditions
agreed upon in sincere negotiations with the labor union. We haveadopted a performance-linked bonus system in which the amountto be paid is determined based on the business performanceof the previous fiscal year after reaching an agreement throughnegotiations with the labor union.

Prevention of Child Labor and Forced Labor
Based on international norms on human rights and the
Guidelines for Corporate Behavior, etc., we ensure compliancewith labor-related laws and regulations in each country andregion, and prevent the occurrence of child labor and forced laborin our business activities.

Initiatives for Human Rights Due Diligence
In order to identify, evaluate, prevent, and mitigate any
adverse impact of Sanyo Special Steel and its Group companies,
suppliers, etc. on human rights, and for the effectivenessevaluation of initiatives, we will construct a mechanism for humanrights due diligence.

Procurement of Ferroalloys with Respectfor Human Rights
In the procurement of ferroalloys needed for special steel
production, we have confirmed through our suppliers that our
procurement is "DRC conflict-free" (free from concerns that our
procurement forms any source of funding for armed groups,
infringes human rights, or foments any conflicts).

28

Quality Improvement Initiatives

Expanding Technological Superiority

Quality assurance is to improve customer satisfaction by accurately identifying customer needs and building up a process that enables astable supply of products that meet those needs, and is directly linked to our corporate philosophy of "Confidence-based Management." The
Sanyo Special Steel Group has established a quality management system based on ISO 9001:2015 and promotes quality control activities
in which the sales, engineering, production, and quality assurance divisions work together to build quality in order to satisfy the productquality required by various product standards such as JIS, overseas standards, and the specifications of each individual customer.
We aim to become a company that continues to grow sustainably by focusing not only on controlling product quality but also on
improving the quality management system, which is a key part of our corporate structure, to make it more efficient and responsive tochanges in the environment, such as globalization and changing customer needs.

The Sanyo Special Steel Group is promoting further expansion of its technological superiority by strengthening its research anddevelopment and quality competitiveness in order to further enhance its corporate value in the global special steel market. To this end, weare clarifying the functions of product development, process development, and basic research, and strengthening the medium- to long-term
research and development planning function to ensure the rapid and continuous creation of highly reliable products and new technologies
with a view to global expansion.

Quality Assurance System

Basic research:
Pursuing principles with an eye toward product characteristics
Basic researchthat optimizes
product performance

The Quality Assurance Department plays a central role inmaintaining and managing the quality management system,
which is the cornerstone of our quality assurance system. The
process of product quality control, in which the sales division
identifies customer needs, the engineering division reflects thoserequirements in process design, and the production division
manufactures products according to that design, is developed
through collaboration among divisions. In addition, the Quality
Assurance Department, an independent division, is responsible
for overall quality assurance operations to provide an effective
check and balance function, thereby ensuring that the quality
assurance function is optimized and enhanced to provide morereliable products. The Quality Assurance Committee, chaired by
the Officer in Charge of Quality Assurance, meets regularly to
discuss basic quality assurance policies and plans for the fiscal
year, and implements improvement activities such as "systematic
improvement of important issues," "prevention of quality
complaints," and "improvement of customer satisfaction."

New productand technology
developmentthat meets society's
needs

All technologies are based on principles. Now more than ever before, it isessential to pursue the principles by strengthening basic research, given today's
demands for ever more advanced product characteristics and mass-production
technology. The Sanyo Special Steel Group is gazing down at the microscopic
level to elucidate various mechanisms while keeping an eye on the performanceof the final product.

New product and technology development:
Responding to needs from a multilateral approach

Evaluation
technologythat is the source oftrust anddevelopment

As the pace of technological progress accelerates, customer needs are
becoming increasingly diverse and sophisticated. The Sanyo Special SteelGroup uses the customer’s perspective to identify the truly key characteristics
and optimizes the composition, structure, and production of steel, thereby
exploring the very limits of steel’s potential to meet society's needs.

Evaluation technology:
Earning trust with advanced evaluation and analysis technologies
For special steels, even slight differences in composition, microstructure, etc.,
can affect their properties. The development of evaluation technology that makes
the invisible visible and the unknown known is a source of new knowledge.
The Sanyo Special Steel Group utilizes cutting-edge evaluation and analysis
technologies as the basis for reliability in product and technology development.

Research and Development Activities
Quality Assurance Initiatives
In response to the ISO 9001 requirement of "addressing risks and opportunities," each organization conducts risk assessments of its
operations.
Based on the issues identified through this process, the PDCA (Plan, Do, Check, Act) cycle is implemented from a medium- to longterm perspective to improve the level of quality assurance. Specifically, we are working to improve our quality management system bycontinuously revising our quality manuals, conducting quality patrols, and promoting information sharing between organizations throughinternal quality audits. Furthermore, we promote awareness-raising activities in this regard, for example through e-learning programs on
quality compliance and quality lectures, to raise employees’ awareness.

Understanding and Reflecting Customer Needs
Once a year, we ask our customers to evaluate our QCDD
(Quality, Cost, Delivery, and Development) and analyze theresults. We then identify and improve the low evaluation items,
leading to further improvement of customer satisfaction. In
addition, in order to understand customer needs in a timely
manner, we hold meetings to exchange technical ideas withcustomers and take part in domestic and international exhibitions.
We introduce products and new technologies developed byus, provide detailed information on our products, and collectinformation on latest customer needs, which is then used todevelop and improve our products.

Research and development activities of the Sanyo Special Steel Group are promoted mainly by the "Research and Development
Center," and the total amount of research and development expenses in FY2022 was 2,019 million yen. With the creation of "ecoprocesses" and "eco-products" toward carbon neutrality in 2050 in mind, we are pursuing the deepening of technologies to meet the needs
for even higher reliability, especially in the fields of EVs, wind power generation, railroads, and hydrogen society, which are expected to
grow globally. Furthermore, we are focusing on the early realization of synergies through collaboration among Group companies.
The status of research and development activities by segment is shown in the table below.
Segment

Research purposes

Steel
Products• Development of high-performance products to be launchedin the fields of wind power generation, automobiles,
railroads, environment and energy, etc., which are
expected to grow
• Strengthening of quality and cost competitiveness throughutilization of DX for the manufacturing processes of coreproducts such as bearing steel, structural steel, stainlesssteel, and tool steel• Development of eco-products that can contribute to carbon
neutrality in customers’ processes

Major issues and results• Commercialization of high-carbon steel TOUGHFITTM that cancontribute to achieving a carbon-neutral societyof High-carbon Steel TOUGHFITTM
P.14 Commercialization
That Can Contribute to Achieving a Carbon-neutral Society

Metal
Powders• Development of new products, mainly information
recording and processing products and powders for 3D
printing, which can be expected to grow in the future• ESuccessful registration of a trademark "NOVASHAPETM" for a
product lineup of various alloy powders suitable for 3D printers• Practical realization of CoCrMoW alloy, which is a material for
artificial teeth and the first domestically-produced powder toreceive marketing approval under the pharmaceutical affairs
law of Japan, as "CCMSTM-W"

Formed andFabricatedMaterials• Development of manufacturing technology for newly ordered
products of the Formed and Fabricated Materials business• Establishment of rapid design technology for optimal molds
and ring rolling analysis technology, and development of
manufacturing technology for saving manpower, with the aimof strengthening cost competitiveness• Establishment of die forged parts manufacturing technology
using CAE analysis technology• Formulation of optimal processing dimensions by applying
CAE analysis technology to forecast the amount of
deformation by heat treatment, and quality improvement ofring rolling products

R&D expenses(FY2022)

1,626
million yen

360
million yen

32
million yen

29Promotion of DX

Realization of Sustainable Procurement

Sanyo Special Steel promotes digital transformation (DX) utilizing digital technology which has made remarkable progress in recent
years.
In January 2023, we set up a DX Promotion Project Team led by the Representative Director and President. In order to be able to deal
with accelerating changes in society and markets and maintain its high level of competitiveness into the future, the Sanyo Special SteelGroup aims to break away from an analog mindset and practice relying on the large-scale mobilization of labor and to accomplish both thetransformation of personnel into digital personnel and the transformation of its Group companies into digital companies.

The Sanyo Special Steel Group ensures compliance with laws, regulations, and social norms in accordance with its Procurement Policy,
conducts fair and equitable transactions with a wide open door policy both in Japan and overseas, and promotes environmentally friendly
procurement activities with its suppliers. In our procurement activities, we confirm the principles of "sustainable procurement," including
accountability, transparency, respect for human rights, and ethical behavior, for the raw materials and services we procure, and reflect
them in our procurement decision-making. We also strive to maintain and improve mutual understanding and trust relationships with our
suppliers, aiming for mutual development as a business partner and are working to realize "sustainable procurement" that contributes to thesustainability of our supplier's business operations through strengthened partnerships.

Implementation Structure of the DX Promotion Project Team

Procurement Policy

Leader:MIYAMOTO President
Sub-leader:Sub-leader:

Secretariat

TAKAHASHI Managing Executive Officer

OI Managing Executive Officer

Head of the Production Planning & Administration
Department
Head of the Computer Systems Planning Office
Full-time position: 2 persons

1. Compliance with laws, regulations, and social norms

System Infrastructure
Reform WG

Business Efficiency
WG

Business Process
Reform WG

Operation Efficiency
WG

Production Process
Reform WG

Group leader:Group leader:Group leader:Group leader:

Head of the Computer Systems
Planning Office

Head of the General
Administration Department

Group leaders:
Head of the Sales Planning & Administration
Department, Head of the Technical Planning& Administration Department, and Head of the
Production Management Office

Head of the Equipment
Department

Head of the Production
Management OfficeBusiness Reform Team

Factory Reform Team

Purposes of the DX Promotion Project:●

To promote the resolution of issues through fault-finding and DX in work/operations●

To construct an integrated database and facilitate the sharing of necessary data between operational systems●●

To utilize the latest digital technology to facilitate the visualization of information, the introduction of real-time information,
the automation and labor-saving of operations, etc.
To sophisticate the business structure through operational transformation based on DX initiatives, and enhance
the corporate value

Concept of DX Promotion

DX Roadmap

In the DX Promotion Project, the construction of a data
infrastructure to share necessary data between operations isunderway. Each WG leads each department in the considerationof how structured data should be utilized and the introduction ofdigital technology and works on the transformation of businessprocesses and business models.

The DX Promotion Project Team strives to establish an
infrastructure that can respond to changes in the businessenvironment and society according to three steps and thereby tomaintain and strengthen the competitiveness of Sanyo Special
Steel.

DX Infrastructure
Construction

Data Application
Utilize data andimplement
businesstransformation

Business Reform

Build and operate DX
infrastructure reflecting
demands of both
utilization andcollection

Implement efficientdatacollection andaccumulate data

System Infrastructure
Reform WG

System Infrastructure
Reform WG

Business Efficiency
WG
Business Process
Reform WG

Application

Collection

Integrated
Database

Factory Reform
Production Process
Reform WG

Data Collection

IT Data(Business system)

Operation Efficiency
WG
Data

Operation Efficiency Claiming
WG

Data Storage

Collection

OT Data(Operating system)

In our procurement activities, we, Sanyo Special Steel, comply with relevant laws and regulations, conduct an open-door
policy across the board both domestically and internationally, conduct fair and equitable transactions, and thereby strive to build
partnerships with our suppliers. We also promote environmentally friendly procurement activities.

[Step 1: Construction of an integrated information infrastructure]
Construct an integrated database to realize the sharing ofdigital data and develop an infrastructure for data utilization,
including data visualization, making real-time data available, anddata analysis.
[Step 2: Expansion of digital technology application]
By streamlining and improving the operations/factories towhich digital technology has been applied, promote the reform ofbusiness processes and facilitate the obtaining of effects from DX.
[Step 3: Transformation into a digital company]
Through realization of DX leading to operational transformation,
sophisticate the business structure and enhance the corporate
value.

We comply with all relevant laws, regulations, and social norms, in good faith, and thoroughly manage information obtained in
the course of business transactions.
In addition, we ensure not to have any relationship with anti-social forces that threaten the order and security of civil society.

2. Fair and equitable transactions
We conduct an open-door policy across the board both domestically and internationally, to provide all our suppliers
opportunities to participate, and conduct transactions based on economic rationality.

3. Partnership building
We conduct transactions with all of our suppliers on an equal and fair basis, strive to maintain and improve mutual
understanding and trust relationships, and aim for mutual development as business partners.

4. Promotion of environmentally friendly procurement activities
In collaboration with our suppliers, we build a system to avoid purchasing raw materials, equipment, and various othermaterials containing hazardous chemicals.

Initiatives to build a stable procurement structure

Declaration of Partnership Building

Sanyo Special Steel factories are normally in production 24
hours a day. Therefore, with the cooperation of our suppliers, we
receive shipments of iron and steel scrap, our main raw material,on a 24-hour basis. We also procure the required quantities offerroalloys and secondary materials, etc., when needed.
In anticipation of risks such as supply disruptions due todisasters, etc., we strive to understand the production status,
production locations, and delivery routes, etc., of our major
procurement items by, for example, visiting the factories of our
suppliers. We have also established a system that enables us tosustain production activities even in the event of an emergency bysharing information on procurement items with our suppliers on adaily basis, promptly securing substitute items in the event of an
emergency, and maintaining an appropriate amount of stock on
our premises.

Sanyo Special Steel has announced its "Declaration ofPartnership Building," which aims to increase added value
throughout the supply chain by promoting cooperation, coexistence, and co-prosperity with our suppliers in the supply
chain. We will continue to strengthen partnerships with our
suppliers and aim for mutual development as business partners
by preventing small- and medium-sized enterprises (SMEs) andsmall businesses from bearing burdens caused by unfair tradeconditions, continuously making subcontracting transactions fairand proper, and working to promote new collaborations such as
initiatives to increase added value throughout the supply chain
and open innovation beyond business scales, groups, borders,etc.

Supplier award system
Sanyo Special Steel values its partnerships with suppliers.
As part of our appreciation, we have established a
supplier award system. Under the supplier award system,
we comprehensively evaluate each supplier’s quality, costcompetitiveness, delivery date management, business status,
environmental responsiveness, service provided, and other factors
in transactions carried out with us over a fixed time period in theareas of raw materials, various other materials, maintenance, andoutsourcing, select those suppliers which have attained outstandingachievements, and present them with awards. In FY2023, six
companies were awarded for their outstanding achievements.

30

Enhancement of Corporate Governance
Based on its corporate philosophy "Confidence-based Management," Sanyo Special Steel aims to earn the confidence of society bycontributing to the realization of an affluent and culturally rich society and fulfilling our responsibilities as a member of society through the"manufacture of high-quality special steel." In addition, we aim to earn the confidence of our customers by rapidly and accurately identifying
their needs and appropriately providing them with high-quality special steel products. We also strive to communicate with all stakeholders
and build confidence among people through autonomous actions in accordance with social norms. We recognize that these are therequirements and mission for the survival of the company.
In order to achieve this, we will strive to strengthen corporate governance by establishing a corporate governance structure suited to theGroup's business in order to improve the efficiency, soundness, transparency, etc., of our management.

Corporate governance structure
June 2015

May 2019

Appointed an independent
external director

September 2015

Started board
effectiveness evaluation

Resolved the basic policy on the conditions oftransactions with controlling shareholders

June 2019

Introduced the executive officer system
Increased the number of independent external
directors to 2 persons
Appointed an independent officer(external Audit & Supervisory Board member)

Corporate Governance Structure

June 2010

General Meeting of Shareholders
Nomination &Compensation
Advisory Committee

Board of Directors
Audit & Supervisory Committee

11 directors,
including 4 independent
external directors

3 directors who are Audit &Supervisory Committee members,
including 2 independent external directors

Basic Policy on
Internal Control Systems(Autonomous Internal Control)<Business Execution>(*3)

Representative Director
and President

Company-wide Committees
and Meetings

Corporate Policy Committee

Risk Management Committee
Rewards and Sanctions Committee

Executive Officers
Business Departments

May 2020

Resolved the basic policy on the conditions oftransactions with controlling shareholders

June 2020

Internal Control &Audit Department(internal audit)

(*2)

(*4)

Subsidiaries/affiliates(*1)(*1) Audits of subsidiaries and affiliates are conducted through audits of consolidated financial statements.
(*2) Supervisory departments are designated for each subsidiary and affiliate.
(*3) Other than the above, committees and meetings include the Carbon Neutral (CN) Promotion Committee and the Safety and Health Committee, etc.
In order to prevent the occurrence or recurrence of any breach of compliance, we have also established a whistle-blowing system "compliance help desk."(*4) Directors who are Audit & Supervisory Committee members investigate the status of operations and assets of subsidiaries as necessary.
(*5) In the event of an important transaction that would cause a conflict of interest between the parent company and minority shareholders, a "Supervisory
Committee for Conflict of Interests" consisting of all independent external directors will be established on a case-by-case basis to deliberate and review
the situation, and the Board of Directors will make a decision based on the results.

July 2023

Addition of ESG indicators to
the performance-linked
compensation system

June 2022

Transitioned to a Company with an Audit & Supervisory Committee
Resolved the operational guidelines for the Supervisory Committee for
Conflict of Interests (temporary)

Introduced the performance-linked compensation
system to business execution directors

Board of Directors

Nomination & Compensation Advisory Committee

In Sanyo Special Steel, the Board of Directors meets once a monthin principle to discuss management policies and important management
matters relating to business execution, the appointment and dismissalof officers, the policy for determining executive compensation, mattersrelating to ensuring the appropriateness of operations, matters relating
to the dividend of surplus, and other relevant matters.
In FY2022, the Board of Directors held a total of 16 meetings anddiscussed the following matters.

In order to ensure the soundness of the procedures for determining
the appointment and compensation of officers, the Board of Directors of
Sanyo Special Steel resolves on the nomination of director candidates,
the selection of representative directors, and the determination of
the compensation of directors (excluding directors who are Audit &Supervisory Committee members) after discussion by, and the hearingof the opinions of, the Nomination & Compensation Advisory Committee
for the sake of enhanced transparency and objectivity.
In FY2022, a total of four meetings of the Nomination & Compensation
Advisory Committee was held in May, June, and December 2022 andFebruary 2023, respectively.

<Main proposals discussed by the Board of Directors
during FY2022>

Accounting Auditor

Representative Director
and President
4 independent external directors

Increased the number of independent
external directors to 3 persons(one-third of the directors)

Appointed a female independent external director

June 2017
June 2016

June 2020• Monthly closing of accounts• Budgeting for the fiscal year and the second half of the year
• Announcement of quarterly and year-end financial results• Proposed changes to the Articles of Incorporation in connection
with the convocation of the General Meeting of Shareholders, thetransition to a Company with an Audit & Supervisory Committee, etc.
• Relocation of the Tokyo Regional Office and Nagoya Branch• Internal control plan and J-SOX audit• Changes to the policy for determining executive compensation,and the compensation and performance targets of officers, etc.
• The situation of shareholders, IR activities, and CG report• Revision of the Basic Policy on Internal Control Systems• Establishment of a special committee to deliberate and review
the status of transactions with controlling shareholders andimportant transactions that conflict with the interests of controllingshareholders and those of minority shareholders• The status of progress of the 2025 Mid-Term Management Plan
• Safety and health activities• Initiatives for environmental protection and carbon neutrality• Establishment of the DX Promotion Project Team• Board effectiveness evaluation• Significance of retention of strategic shareholdings and selling
thereof• Capital policies such as those on financing• Assessment of the management soundness of affiliates• Consolidation/abolition and reorganization of Group companies
to strengthen the Group structure

Risk Management Committee
The "Risk Management Committee" of Sanyo Special Steel, which
consists of all the directors including the independent external directors
and the officers in charge of the functional departments responsible forrisk management in the relevant areas, meets quarterly to discuss, andexchange opinions on, the status of formulation and implementationof an internal control plan, compliance with relevant laws, regulations
and company rules, etc., occupational safety, human rights violations
such as sexual harassment and power harassment, the environment,
disaster prevention, quality, financial reporting, the matters related to risk
management including sustainability risks such as information security, theoperational status of the whistle-blowing system and other relevant matters.

Audit & Supervisory Committee
In accordance with the Standards for Audits, etc. establishedby the Audit & Supervisory Committee, and in close cooperation
with the internal audit division, audits are conducted on the status
of development and operation of internal control systems in light of
the audit policy, the division of duties, and other relevant matters.
Furthermore, the Audit & Supervisory Committee monitors and verifies
the status of performance of duties by business execution directors,
employees, etc. by attending important meetings, such as meetingsof the Board of Directors, the Risk Management Committee, and the
Corporate Policy Committee, by viewing important approval documents
such as approval requests, and by taking other relevant actions. In
addition, by receiving reports from accounting auditor on the status of
performance of their duties and requesting explanations as necessary,
the Committee monitors and verifies that the accounting auditor
maintains an independent position and executes appropriate audits.
During FY2022, two meetings of the Board of Auditors were held byJune 24, 2022 on which Sanyo Special Steel transitioned to a Company
with an Audit & Supervisory Committee, after which eight meetings of the
Audit & Supervisory Committee were held by the end of the fiscal year.

31Enhancement of Corporate GovernanceInternal Control Systems
In Sanyo Special Steel, the Board of Directors has resolved the"Basic Policy on Internal Control Systems," and the Internal Control& Audit Department, which is in charge of internal control planningand internal auditing, and functional departments in charge of risk
management in their respective areas have been established to form
an operational structure for the internal control systems of the SanyoSpecial Steel Group.
In addition, risk management officers are assigned to eachdepartment and Group company to be in charge of planning andpromoting autonomous internal control activities in the department andGroup company.

Compliance and Risk Management Systems
Sanyo Special Steel has established the "Guidelines for Corporate
Behavior" that define the code of conduct we should follow as acorporation, and the "Code of Conduct" as guidance on conduct to beobserved in the course of business activities based on the "Guidelines
for Corporate Behavior." We are working to ensure that all officers andemployees are familiar with these standards. Furthermore, a compliancepromotion structure has been put in place with the establishment of acompliance help desk and the periodic holding of Risk Management
Committee meetings, among other details, prescribed in company rules.
By continuing to periodically provide employees with educationon the need and significance of observing various laws, regulations,and rules associated with corporate management, we will strive tocultivate higher ethical standards. We will also maintain and improve thesoundness of management not only of Sanyo Special Steel but also of
the entire Group, and practice our corporate mission to "make a social
contribution through business" by promoting business activities rooted
in high ethical standards.

Guidelines for Minority Shareholders
Protection Policy in Transactions with
Controlling Shareholders

Strategic Shareholdings

The Board of Directors has resolved that transactions with theparent company's group shall be based on appropriate terms andconditions similar to those generally applicable to transactions withother companies, and confirmed that for transactions required underinternal regulations, the terms and conditions of such transactions shallnot differ significantly from those normally applicable to transactions
with third parties, and that the implementation of such transactions shallcontribute to our business and not be detrimental to our interests.
With respect to important transactions or actions that may cause
conflicts of interest between the parent company and minority
shareholders, the Board of Directors establishes a "Supervisory
Committee for Conflict of Interests" consisting of all independent
external directors to deliberate and examine the appropriateness of thesubject transaction, etc., on a case-by-case basis, and the Board of
Directors makes a decision based on the results.

Officer Training
Sanyo Special Steel provides directors with opportunities toacquire necessary knowledge such as their responsibilities under
the Companies Act and other important laws and regulations, as well
as systems, etc. related to their work. Such opportunities include
training given by outside instructors. In addition, we actively provide
opportunities for external directors to visit our factories and interact with
the Representative Director and President, internal directors, etc. so as
to enable them to deepen their understanding of our Group’s business
operations.

Information provider(No. of stocks)

Listed stocks

Non-listed stocks

40

23

20

19

18

18

13

13

11

11

10

2018

2019

2020

2021

2022 (FY)200

Dialogue with Shareholders and Investors
With a view to achieving sustainable growth and enhancing its
medium- to long-term corporate value, Sanyo Special Steel is taking
various measures to promote constructive dialogue with shareholders
and investors and committed to enriching such measures throughthe cooperation of various divisions in the company with each other,including officers, the Accounting & Finance Department, and theGeneral Administration Department.
During FY2022, we held four briefings*1 on the days of announcementof the quarterly and year-end financial results, 64 individual talks*2 withinvestors, etc., and two factory tours, etc. for institutional investors.

<Main topics of dialogue>• Performance results of Sanyo Special Steel and its consolidated
subsidiaries• Trends in major customer industries• Responses to the soaring prices of raw materials and fuels• Impact of semiconductor shortages and the Russian invasion of Ukraine• Impact of the progress of the shift to EVs, and the transition to acompany with an Audit & Supervisory Committee• Initiatives toward carbon neutrality, etc.

*1: The Representative Director and President attended the briefings for announcement of the second-quarter and year-end financial results. The Japanese version and English
version of explanatory materials were released simultaneously.
*2: Individual talks were conducted to communicate with a total of 108 shareholders and investors, among whom a total of 25 overseas shareholders and investors were included.

Board Effectiveness Evaluation<FY2022 tasks and measures>

Provision

Provision(named or anonymous)

Compliancehelp desk(named or anonymous)

Contact

Compliancehelp desk(Internal contact)(External contact)

Sanyo Special Steel,Head Office

External specialized
agencies, etc.

* No one will be disadvantaged as a result of consultation or reporting.
Secrecy is maintained in strictest confidence.

Survey/response

Officers, employees, temporary employees,
and supplier employees of the Sanyo Special Steel Group,and their family members, etc.

Survey/response

Trends in the number of strategic shareholdings

In order to improve the functions of the Board of Directors, Sanyo Special Steel conducts analysis and evaluation of the effectiveness of the Boardof Directors. Specifically, we conduct, through a third-party organization, a questionnaire survey of the members of the Board of directors on generalmatters related to the Board of Directors, such as its composition and operation method, the status of deliberation, the state of cooperation with external
officers, etc. On the basis of the results of analysis of the survey results, the Board of Directors evaluates its effectiveness.
In FY2022, based on the results of the board effectiveness evaluation for FY2021, we set the following tasks and took measures.

Compliance Help Desk (Whistle-blowing System)
In order to prevent the occurrence and recurrence of incidents or
actions that are or may have been in violation of laws, regulations,social norms, or company rules, etc., we have established a compliancehelp desk as an whistle-blowing and consultation system that also takes
into account the Whistleblower Protection Act revised in June 2022.
This help desk can be used by anyone in the Sanyo Special SteelGroup, including officers, employees, temporary employees, supplieremployees (including those who were either of these within one year
prior to the date of the report or consultation), and their family members,
etc. For those with a problem that is difficult to solve in the workplace
or a concern that you cannot talk to anyone about, the help desk isavailable for consultation so that they do not need to take it all onthemselves. Anonymous consultation and reporting is also possible, andno one will be disadvantaged as a result of consultation or reporting.
In addition to our help desk, the Compliance Consultation Office of ourparent company, NSC, can also be used.
It is our policy to take prompt and appropriate action in the event ofconsultation or reporting. The compliance help desk also has a role inmonitoring the status of internal control activities.

Sanyo Special Steel holds strategic shareholdings (all shares
other than those of our affiliates) for the purpose of enhancing its
medium- to long-term corporate value by, for example, maintaining
and strengthening business and trade relationships, maintaining anddeveloping partnerships, and smoothly promoting its business activities.
With respect to each brand included in the shareholdings, the Board of
Directors annually reviews the rationality of holding the shares in light ofthe purpose of holding them, the situation surrounding relevant business
transactions, etc. For those share brands the holding of which we havefound not to be rational, we are working on reducing the number of theirshares held by us through dialogue and negotiations with the business
partners concerned.

(1) Enhancement of opportunities for officer training
In September 2022, we invited an expert from an external organization to give an explanatory session on the present situation surrounding thedisclosure of information on human capital. In November 2022, TOIDE Director gave a lecture on the theme of "Future Prospects of the Japanese
Automobile Industry"; and in the same month, USUKI Director gave a lecture on the theme of "ESG Investment and Behavioral Economics."(2) Enhancement of opportunities for interaction between internal directors and external directors
An opinion exchange session was held on the day of each meeting of the Board of Directors. In the opinion exchange sessions, opinions wereexpressed and information was exchanged in a free-spirited manner. These sessions served as an opportunity for external directors to deepen theirunderstanding of Sanyo Special Steel, and as an opportunity for internal directors to view the company’s issues from an outside perspective.
(3) Promotion of simplified and paperless board meeting materials
Since April 2022, we have shifted to paperless meetings using a web conferencing function. Following the shift to paperless meetings, we simplified
our materials, such as by not attaching non-explanatory materials (reference materials).
(4) Further enhancement of discussions from a company-wide, medium- to long-term perspective
In the meetings of the Board of Directors held on July 28 and December 27, 2022, we reported on the progress of our mid-term management
plan covering the period from FY2021 to FY2025 (2025 Medium-term Plan). In addition, the effect of the enrichment of prior explanations, theimplementation of opinion exchange sessions, and the transfer of power following the transition to a company with an Audit & Supervisory Committee,
among other factors, has enabled the Board of Directors to focus on broader and more substantive discussions in board meetings. Accordingly, ourevaluation has found that the Board of Directors has been becoming more active.
Based on the results of the evaluation of effectiveness for FY2022, which took into account the above initiatives, we have concluded that the SanyoSpecial Steel’s Board of Directors functions effectively. In FY2023, based on the results of the questionnaire survey conducted, we will continue toenhance officer training and the interaction among the members of the Board of Directors and also to consider making further enhancements in the Boardof Directors and expanding the roles and diversity of external directors.

<Tasks for FY2023>(1) Consideration of the diversity of the members of the Board of Directors(2) Enhancement of the interaction among the members of the Board of Directors(3) Enhancement of opportunities for officer training(4) Further simplification and prioritization of board meeting materials(5) Efficient operation of the provision of explanations prior to meetings of the Board of Directors

32

Officers
Ratio of independent external directors

Number of female directors(4 out of 11 directors are independent external directors)(1 out of 11 directors is female)

36.4 %

Representative Director
and President

Director, Member of the Board,
Managing Executive Officer

Director, Member of the Board,
Managing Executive Officer

Director, Member of the Board,
Managing Executive Officer

Director, Member of the Board,
Managing Executive Officer

MIYAMOTO Katsuhiro

TAKAHASHI Kozo

OI Shigehiro

OMAE Kozo

YANAGIMOTO Katsu

Independent External Director,
Member of the Board

Independent External Director,
Member of the Board

Director, Member of the Board

USUKI Masaharu

FUJIWARA KayoSONODA Hiroto

Director, Member of the Board,andSenior Audit & Supervisory
Committee Member

Independent External Director,
Member of the Board, andAudit & Supervisory Committee
MemberIndependent External Director,
Member of the Board, andAudit & Supervisory Committee
Member

NAGANO Kazuhiko

YOGI Hiroshi

TOIDE Iwao

1

Policies and Procedures for the Appointment and Removal of Executives andNomination of Director Candidates
It is our policy that the Board of Directors determines the appointment of executives based on the experience, knowledge, and expertiseof each individual without distinction as to gender, age, nationality, etc., so as to create an optimal structure in which each person canappropriately fulfill his/her role and responsibilities and the management issues of our Group's businesses can be accurately addressed.
In addition to the above conditions, our policy is to make decisions on the nomination of director candidates by taking into consideration
the overall size of the Board of Directors and Audit & Supervisory Committee as a whole and the balance of the candidates that make up
the Board and the balance among the candidates.
It is our policy that the Board of Directors makes a comprehensive judgment before deciding on the removal of executives in the eventof any irregularity or serious violation of laws, regulations, or the Articles of Incorporation in the execution of their duties, or in the event thatthe person is deemed unable to fulfill his/her roles and responsibilities.
Procedures for the appointment and removal of executives and the nomination of director candidates are to be resolved by the Boardof Directors after deliberations at the "Nomination & Compensation Advisory Committee" consisting of the Representative Director andPresident and independent external directors. Prior consent of the Audit & Supervisory Committee is to be obtained for the nomination ofcandidates for directors who are the Audit & Supervisory Committee members.
In addition, the dismissal of a director is determined after deliberations at the "Nomination & Compensation Advisory Committee"
and a resolution of the Board of Directors, followed by submission of a proposal for dismissal of the director to the general meeting ofshareholders. The dismissal is finalized by the resolution of the said proposal.

Composition of the Board of Directors and Expertise and Experience of Its Members

Policies and Procedures for Determining Directors' Compensation

In order to ensure flexible decision-making in response to changes in the business environment and the development of an effective
corporate governance system, Sanyo Special Steel has set the size of the Board of Directors is appropriate to the Group's business andmanagement issues and ensures that the Board has a well-balanced and diverse mix of members in terms of experience, knowledge,
expertise, and gender, etc.

(i) Policy details

Expertise and experience

Business execution
Non-executive

Director who is an
Audit & Supervisory
Committee member(excluding directors who are Audit &Supervisory Committee members)
Director

Full name

Corporate
management

Manufacturing,
engineering,
research, anddevelopment

Sales

Finance andaccounting

Personnel
and labor
relationsInternational
experience

Legal

ESG

Knowledgeof otherindustries

●

●

●

●

●

●

MIYAMOTO Katsuhiro*

●

●

●

TAKAHASHI Kozo

●

●

●

OI Shigehiro●

OMAE Kozo●

YANAGIMOTO Katsu●

USUKI Masaharu*

Independent

FUJIWARA Kayo*

Independent

External

External

SONODA Hiroto
NAGANO Kazuhiko
YOGI Hiroshi*

Independent

TOIDE Iwao*

Independent

●

●

●
●

●

●

●

●
●

●

●

●

●

●

●
●
●
●

●

●

●

External

External

●

●

●

●

●

●

●

●

●

●

●
●

●
●

●

* MIYAMOTO Katsuhiro, USUKI Masaharu, FUJIWARA Kayo, YOGI Hiroshi, and TOIDE Iwao are members of the "Nomination & Compensation Advisory Committee,"a non-statutory advisory body of Sanyo Special Steel.

Directors (excluding those who are Audit & Supervisory Committee members)
The base amount is determined by position, taking into consideration the required abilities and responsibilities as well as the content of
the duties of each position, depending on whether full-time or part-time. For business execution directors, the total amount of compensationis performance-linked so as to provide incentives for the sustainable growth of the Group and the improvement of corporate value, with thebase amount varying within a certain range according to the consolidated performance of Sanyo Special Steel, and the amount of monthly
compensation for each director is determined within the upper limit approved at the general meeting of shareholders.
For non-executive directors, the total amount of compensation is fixed in consideration of their duties, and the amount of monthly
compensation for each director is determined within the upper limit approved at the general meeting of shareholders.
Directors who are Audit & Supervisory Committee members
The amount of monthly compensation for each director who is an Audit & Supervisory Committee member is determined within the upper
limit approved at the general meeting of shareholders, taking into consideration his/her position and the content of his/her duties of eachposition, depending on whether full-time or part-time.
(Performance-linked compensation)
As indicators for performance-linked compensation, Sanyo Special Steel uses consolidated ordinary income from the perspective of shortterm and medium- to long-term performance incentives (taking into consideration earnings targets in the mid-term management plan, etc.),
the return on equity (ROE) from the perspective of contribution to shareholders, and, from an ESG perspective, the CDP climate change
score, health management rating, safety index, ratio of female managers, and board effectiveness evaluation by external directors.
Sanyo Special Steel’s performance etc. -linked compensation is calculated by multiplying the base amount determined for each position
by a variable rate determined based on the performance of the above indicators.

(ii) Method of determining policy
For directors (excluding those who are Audit & Supervisory Committee members), the policy is determined by a resolution of the Board of
Directors after discussions at the "Nomination & Compensation Advisory Committee" consisting of the Representative Director and President
and independent external directors, and for directors who are Audit & Supervisory Committee members, the policy is determined throughdiscussions at the Audit & Supervisory Committee.

(iii) Procedures for determining the amount of compensation
The specific amount of compensation for each director (excluding a director who is an Audit & Supervisory Committee member) is to be
determined by a resolution of the Board of Directors after discussions at the "Nomination & Compensation Advisory Committee" consisting of
the Representative Director and President and independent outside directors.
The specific amount of compensation for each director who is an Audit & Supervisory Committee member is to be determined throughdiscussions at the Audit & Supervisory Committee.

33

Key Financial Data
FY2013(102nd period)

FY2014(103rd period)

FY2015(104th period)

FY2016(105th period)

FY2017(106th period)

FY2018(107th period)

FY2019(108th period)

FY2020(109th period)

FY2021(110th period)

FY2022(111th period)

Business results
Net sales(Millions of yen)

161,587

171,495

149,148

138,680

157,485

185,818

262,452

210,721363,278

393,843

Operating income(Millions of yen)

6,883

9,169

12,188

11,685

10,96910,123-1,417-5,493

21,41628,492

Ordinary income(Millions of yen)

6,749

9,735

11,54011,736

10,6599,437-1,521-4,762

21,66428,856

Profit attributable to owners of
the parent(Millions of yen)

4,066

6,547

7,416

7,784

7,034

7,721

-3,717-6,87015,267

20,743

Total assets(Millions of yen)

203,522202,243

179,898

183,444

209,146374,246

327,963319,360

377,911401,218

Net assets(Millions of yen)

102,905

113,644

113,140

123,143

128,959

200,200

182,202179,887

198,845

216,024

Interest-bearing debt (net)*2(Billions of yen)

478

332

143

127

284

690

487

469

587

667

Equity ratio

(%)

50.2

55.8

62.4

66.7

61.0

52.3

54.4

55.9

52.1

53.4

D/E ratio (net)(Times)

0.46

0.29

0.13

0.10

0.22

0.34

0.27

0.26

0.30

0.31

Financial conditions

ROS/ROE
ROS

(%)

4.2

5.7

7.7

8.5

6.8

5.1

-0.6

-2.3

6.0

7.3

ROE

(%)

4.1

6.1

6.6

6.6

5.6

4.8

-2.0

-3.9

8.1

10.1

Per share information
Net assets per share*1(Yen)

633.47699.51

696.69759.36

3,960.99

3,480.62

3,273.07

3,273.84

3,615.39

3,934.50

Net income per share*1

(Yen)

25.21

40.60

46.00

48.29

218.34237.75-67.14-126.07280.19380.70

Dividend per share*1

(Yen)

5.00

10.00

12.00

12.50

31.70

69.00

15.50

－

90.00

100.00Capital investment/research and development
Capital expenditures(Millions of yen)

4,629

7,176

9,908

9,795

8,119

10,61827,553

14,446

11,72013,594

Depreciation(Millions of yen)

10,965

9,826

9,343

9,098

9,047

9,338

15,033

14,187

15,903

13,764

Research and development expenses(Millions of yen)

1,388

1,383

1,596

1,608

1,716

1,773

2,475

2,110

2,219

2,019

Cash flows from operating activities(Millions of yen)

9,152

20,69828,77015,090-5,566

10,792

39,42522,313

7,086

12,155

Cash flows from investing activities(Millions of yen)

-4,951-5,873-8,510-11,141-8,354-69,046-12,463-19,412-13,298-12,766

Cash flows from financing activities(Millions of yen)

-5,352-17,426-18,807-10,775

14,70565,929-21,093-5,473

2,286

8,525

Sales volume(Thousand tons)

1,041

1,054

988

1,013

1,069

1,171

1,615

1,367

1,995

1,607

Number of Employees(Persons)

2,775

2,706

2,625

2,598

2,666

6,835

6,726

6,441

6,402

6,285

Cash flows

Other*1: In October 2017, a reverse stock split of 5 shares into 1 share was implemented.
*2: Interest-bearing debt (net) is the balance of interest-bearing debt minus cash and cash equivalents and deposits to affiliates.

34