ESG Update
December 13, 2023

https://www.sanyo-steel.co.jp/

Santo-kun(Our mascot)

ESG Update Agenda
Time

AgendaGreetings
1. Corporate Philosophy andMedium-Term Vision

35 min.

2. Environment

3. Social
4. Governance
25 min.

Q&A session

Speaker
Representative
Director and President

MIYAMOTO KatsuhiroManaging Executive Officer

YATSUNAMI Takashi

Director, Member ofthe Board andManaging Executive Officer

TAKAHASHI Kozo-

© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

2

1. Corporate Philosophy and
Mid-Term Vision
Representative Director and President
MIYAMOTO KatsuhiroCorporate Philosophy "Confidence-based Management”"Confidence-based Management”
Confidence of Society
We aim to earn the confidence of society bycontributing to the realization of a prosperous andculturally enriched society and fulfilling our
responsibilities as a member of society through our"high quality special steel manufacturing."

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

Customers

Supply ofhigh-quality
products

Practice ofcorporate philosophy“ Confidence-based
Management”

Confidence

Confidence among People
We will build confidence among people bydeepening communication with all stakeholders
and acting autonomously in accordance withsocial norms.

Confidence

Rewarding
workplace andworking
conditions

Employees© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

4

Revision of 2025 Mid-Term Management Plan to Further
Increase Corporate Value
Five Core Pillars

Business Environment

1

Further enhance corporate value and global presence

Decoupling of resource priceinflation and supply-demandcycle of steel products

2

Reinforce profitability of all global operations

Carbon Neutrality

3

Strengthen ESG Initiatives

4

Achieve carbon neutrality by 2050

5

Promote DX

Intensifying human resource
constraints

Aim to Realize ROE of 8 % in FY2025 and 1x PBR swiftly
Further enhance corporate value and presencein the global high quality specialty steel market© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

5

Targets of revised 2025 Mid-Term Management Plan
Progress and New Financial Targets(Billion yen)
50.0

40.0

(Billion yen)

Ordinary income
Net sales
393.8

363.3

500.0

420.0
386.0

400.0

280.0

30.0

20.0

10.0

Initiatives to Achieve 1x PBR

TransientTransient 9.6
1.8

19.8

19.3

300.0

200.0

20.0

FY2021 FY2022 FY2023(Forecast)

22.0

FY2025(Revision)• Further strengthening our global business foundation,and simultaneously, explore growth opportunities
globally that will contribute to enhance corporate value
and presence.

Revision of ROE target• ROE target for FY2025 (excluding amortization of
goodwill) revised upward to 8%.

Strengthening of IR Activities
100.0
14.0

0.0

Securing sustainable profit growth while
exploring new growth opportunities

FY2025(Original)• Gaining an appropriate evaluation of our Carbon
Neutral and ESG efforts through continuous dialogue
with investors.

0.0

Planning period

Aiming for further increase profit (22.0 billion yen) compared to
FY2022 ordinary income (excluding impact of OVAKO’s transient
factors) and FY2023 ordinary income forecast

Mutual sale of cross-shareholdings• Tradable share ratio increase.

Revision of Dividend Policy• Consolidated dividend payout ratio (Standard):
approx. 35%© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

6

Important ESG-related Issues and Today’s Explanation Items
Important issueE

Environment

S

Targets and Initiatives

Prevention of climate change

Aiming to achieve carbon neutrality by 2050
FY2030 target: 50% reduction in CO2 emissions from the FY2013 level

Contribution to a resourcerecycling society

Reduction of by-products, promotion of 3Rs

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

Safety and disaster prevention

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)

Promotion of diversity
management

Promotion of participation of women (increase in average length of service and percentage of managers) andthe elderly, support for participation of persons with disabilities, and promotion of work-life balance

Promotion of corporate healthmanagement

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

Human resource development

Development of human resources who can think and act autonomously
Development of global human resources

Respect for Human Rights

Promotion of business activities that respect human rights

Quality improvement

Continuous improvement of quality management system, etc.

Further expansion oftechnological superiority

Rapid and continuous creation of highly reliable products and new technologies with aview to global business expansion

Promote DX

Rapid problem-solving by utilizing digital technology, and strengthening ofcompetitiveness through creation of new value

Realization of sustainableprocurement

Establishment of fair and equitable transactions and partnerships
Establishment of a stable procurement structure

Corporate governance

Enhancement of corporate governanceInternal control systems

Promotion of risk management and compliance activities

Related SDGs

SocialG

Governance© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

7

Reaching our 90th Anniversary with Appreciation andHeading for our 100th Year and Beyond

Specialty steel
manufacturer
contributing to
the realizationof a sustainable
society2033

100th year
since establishment2023

150-ton electric arc furnace(1982)New company building(current head office building)(1964)

90th anniversary
since establishment

2000-

Promoting overseas expansion
aiming to be a global specialty steel manufacturer

1980-

Era of high economic growth19603-ton electric arc furnace
at the time of establishment(1933)

Enjoying rapid growth andwithstanding challenging times

1933-

Acquired
OVAKO Group AB (Sweden)(2019)

Establishment and voyage through turbulent times
Acquired Sanyo Special Steel
Manufacturing India Pvt. Ltd. (India)(2018)© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

8

1. Key Massages; Corporate Philosophy and Mid-Term VisionCorporate Philosophy "Confidence-based Management”• Realization of sustainable growth by practicing "Confidence-based Management" for multistakeholders.

Revision of 2025 Mid-Term Management Plan to Further Increase Corporate Value• Revised mid-term management plan upward in July 2023 (Target for ROE 8% in FY2025).
• Aim for 1x PBR swiftly through measures such as strengthening of ESG Initiatives.

Important ESG-related Issues• E: Prevention of climate change• S: Promotion of diversity and health management, Human resources development, Respect forhuman rights, Realization of sustainable procurement• G: Fortifying Corporate governance

Reaching Our 90th Anniversary with Appreciation and Heading for Our 100th Yearand Beyond• With our deepest appreciation for those who have continuously supported us, we are aiming to
make further developments heading for our 100th year.

© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

92. ENVIRONMENTManaging Executive Officer
YATSUNAMI Takashi

Achieving Carbon Neutrality by 2050 (Sanyo)
Sanyo’s Roadmap to CN

Sanyo’s CO2 Emission Trends (Scope 1 and 2)(Unit: Million tons-CO2)• Set scope 3 reduction target
2024• Commit to Science Based
Targets (SBT)-36%-50% or
more

0.84

-100%
0.54

• Acquire SBT certification

0.42

2025
FY20132030• 50% or more reduction in CO2emissions (vs. FY2013)• Carbon Neutrality

FY2022

FY2030(Target)

FY2050(Target)Breakdown of Sanyo's CO2 emissions
Coking Coal
16%

Others2%

2050
FY2022
0.54
million tons

Electricity
45%

Natural Gas
37%© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

11

Promoting Carbon Neutrality through Four Initiatives
Reduction Initiatives of Sanyo’s
CO2 Emissions

Target for FY2030: -50% or more (vs. FY2013)

Eco-process
Development of manufacturing
technology to improve energy
efficiency
・Introduced internal carbon pricing fromFY2023.

Green energy utilization
Utilization of carbon freeelectricity/fuels and natural energy
・Commenced to utilize renewable energy
sources from FY2022.

Reduction Initiatives of CO2 Emissions
in the Value Chain
Target for FY2030: approx. -40% (vs. FY2013)

Eco-products
Promoting R&D and supply of
specialty steel products that
contribute to reducing CO2
emissions in the supply chain

Eco-solutions
Sharing our energy saving
technologies and productivity
improvements among all SanyoGroup members including OVAKO
and SSMI・Introducing solar power generator insummer 2024 at our Himeji site.

Strengthening groupwide initiatives to encounter all significant carbon neutral issues,
steered by the “Carbon Neutrality Promotion Committee”, chaired by the President.
© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

12

Initiative to Reduce CO2 Emissions (Eco-process)High-efficiency Air Purge Burners
Installed in Sanyo’s Electric Furnace
Air Purge

BurnerCoherence

Preventing clog

Heating iron scrap

Heating molten steel

O2

LNG

LNG
Air

O2

LNG

Installation of Regenerative Burner TypeContinuous Heating Furnace
furnaceAccumulating
exhaust air

alternate combustionAir

combustion air

exhaust air

Installed high-efficiency air purge burners in theelectric furnace, effective in reducing CO2 emissions
through optimized use of LNG and oxygen

LNG
consumption

pre-heating
combustion air－16%

Improved combustion efficiency using a pair of heataccumulator-equipped burners that repeats alternate
combustion, with the exhaust air from one of theburners being used to heat the combustion air of theother burner

Energy-saving
eeffect－10% or more

© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

13

CO2 Emission Reduction Initiatives (Eco-products) (1/2)
Stable and Long Life
Bearing SteelProcess Omitting Steel

Size and weight reduction of products
by improving durability and reliability(High-strength case-hardened steel: ECOMAX® series)

Failure ratio reduction andmaintenance free realization byextending product lifespan (Estimated
CO2 reduction effect:13,000 tons/year*)(High hardness high toughness steel: TOUGHFIT® )Elimination/simplification of theparts manufacturing process

Reduction of CO2 emissions in heathardening process

through original alloy designing and use ofadvanced heat treatment technology

Heat Resistant
Stainless Steel Tube

Heat recovery efficiency
improvement by increasing strength

High corrosion resistance
Enhancing efficiency of power
generation with refuse incineration
by improving corrosion resistance*Presented at the 18th Research Presentation Conference of the Institute of Life Cycle Assessment, Japan (on March 10, 2023)© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

14

CO2 Emission Reduction Initiatives (Eco-products) (2/2)
ECOMAX® series
Features for omitting or simplifying parts manufacturing
processes (customer benefits)
Contributions to the reduction of CO2 emissions by simplifying or omitting parts
processes
・
1 Spheroidizing with short-time heat treatment
・Contribute to simplifying SA (spheroidizing annealing)
・Preventionof cold forging cracks
2・Compatible with near net shaping
3 Excellent grain coarsening resistance・Allow normalizing process to be omitted and enables the application of hightemperature, short-time carburization(ECOMAX® series is expected to be used
for gears and shafts)

3

JIS steel(SCr420, SCM420, etc.)
ECOMAX®
seriesRawmaterials

1

2

Heat treatment(SA)

Cold Forging

shortened

Heat treatment(Normalizing)

Heat treatment(Carburizing andquenching)

Process
omittedFinishingmachining

Products

shortenednear net shaping(contribute to omitting parts processes)© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

15

Achieving Carbon Neutrality by 2050 (SSMI)
SSMI’sRoadmap to CN

2018

2023

2030

• Acquired SBT certification• Signed purchase agreement
for renewable power• 40% reduction in CO2 emissions
intensity(VS. FY2016)

Promote fuel conversion and energy
conservation
・SSMI is replacing traditional fuels with natural gas, acleaner and more efficient energy source and continuallyworking on implementing energy-efficient processes andfacilities.

Signed purchase agreement for renewable
power (August 2023)
・SSMI has signed a purchase agreement of renewableelectricity by solar power with a subsidiary of Tata Power.
Expected to reduce CO2 emissions approx. 25% of theCO₂ emitted in the company’s manufacturing processfrom March 2024.

• Carbon Neutrality
2050© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

16

Achieving Carbon Neutrality by 2050 (OVAKO) (1/2)
OVAKO’sRoadmap to CN

2020

2022

2023

2024

OVAKO's CO2 Emission Trends (Scope1,2)(Unit: Million tons-CO2)• First in the world to heat steel
using hydrogen• Carbon neutral in production• SKF has produced bearings with 90%
less carbon emission than its
standard, using OVAKO’s high quality
bearing steel• Inauguration of Fossil-freehydrogen electrolyzer plant

-58%

-80%

0.49

-90%

0.19
0.10

CY2015

CY20220.05

CY2030(Target)CY2040(Target)Breakdown of OVAKO's CO2 emissions
Other
2%

Electricity 2%• Acquire SBT certification
Process emissions（Coke, etc.）
32%

CY20220.19
million tons

Combustion（LPG, Natural Gas, etc.)64%© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

17

Achieving Carbon Neutrality by 2050 (OVAKO) (2/2)
OVAKO’s Initiatives
Carbon neutral in production(January 2022)• OVAKO shifted to a carbon neutral production through acarbon offset program. Simultaneously, climate surcharge
was introduced for OVAKO’s entire steel product prices topromote further initiatives, to address climate change
issues and investment in new technologies.

Inauguration of the fossil-freehydrogen plant in OVAKO(September 2023)• The new fossil-free hydrogen plant is one of the largest
facilities in Europe and will generate approx. 4,000 cubic
meters of fossil-free hydrogen per hour. By using fossil
free hydrogen produced at this plant as fuel for
production of specialty steel, OVAKO will be able tosignificantly reduce CO2 emissions.

© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

18

2. Key Massages; Environment
Achieving Carbon Neutrality (CN) by 2050 is Top Management Priority• Our CO2 emissions reduction efforts are on track, with emissions in FY2022
standing 36% below the FY2023 level.
• Commit to Science Based Targets (SBT) in FY2024. Aiming for 50% reduction
compared to FY2013 and taking next step toward carbon neutrality in FY2050.

Promoting Carbon Neutrality through Four Initiatives• Accelerate various initiatives that contribute to CO2 emissions reduction in ourcompany and value chain.

Achieving Carbon Neutrality on Global and Consolidated basis• OVAKO and SSMI pursue progressive initiatives to achieve their reduction targets.
(OVAKO has already shifted to carbon neutral in production through a carbon offset
program)• Share knowledge within Sanyo group to realize carbon neutrality as a group.

© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

19

3. SOCIAL
Director, Member of the Board andManaging Executive Officer
TAKAHASHI Kozo

Human Capital Strategy to Realize Corporate Philosophy
Human Resource Development to Achieve “Confidence-Based Management”

Development of
Human Resources
Who Can“Think and Act
Autonomously”• Multilevel training courses depending on lengths ofservice, job positions• Development of global human resources• Human resource management system focused on
cultivating employees’ challenging spirit• Self-transformation program through multifaceted
observation• Enhancement of management capabilities of managers

Improvement ofWork
Environment andEngagement

Co-creation by
DiverseIndividuals• Promotion of corporate health • Promotion of participation by womenmanagement• Promotion of participation by senior generation• Reform work styles and• Stable employment of persons with disabilities
promote work-life balance• Utilization of multinational human resources• Prevention of harassment• Fostering further awareness onhuman rights© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

21

Various Measures Underway Based on Human Capital Strategy
2023

Until now2025

From now on
Main Measures• Formulation of global human resource development policy

Development of • Overseas language training programs for new employees• Training programs for nurturing candidates for future
Human
corporate executives
Resources• Revision of personnel system for management-level workers
Who Canaimed at boosting performance of core human resources,“Think and Act enhancing management abilities
program through multifaceted
Autonomously” • Self-transformation
observation

Improvement of • Surveys on employees’ thoughts• Follow-up HR interview sessions for employeesWorkwith 3 or less years of experience
Environment • Career path interview sessions with superiors
and• Lectures on harassment
Engagement • Encouragement of “No Overtime” on Wednesdays• Events to encourage employees to walk

Promotion of• Offering lectures on specific health issues
Corporate • Designation of non-smoking day
Health• Training programs for protecting mental health of colleagues
Management

Co-creation by
DiverseIndividuals

Main Goals• Overseas dispatch of global human resources(including HR exchanges with OVAKO)• Foreign language training programs for younger employees• Opportunities to interact with people outside Sanyo(ex. Visits to customer plants, outside training programs)• Enhancement of management abilities ofmanagement-level workers• Fostering of mid-level individuals capable of working
globally (such fostering of leadership-level individuals
almost fully completed)• Nurturing of management-level workers capable ofspearheading and invigorating an organization• Further promotion of recruitment of experienced workers• Dialogue between mid-level workers and top management• Effective feedback on performance assessments• Personnel placement respecting employees’ career plans• Improvement of training programs on harassment• Study of suitable ways for engagement level assessments• Measures to increase percentage of employees taking paid
leave (compilation of yearly acquisition plans and followup on acquisition status)• Clarification of issues through analysis of related data(ex. Surveys on health and productivity management levels,
health scoring reports)• Improvement of participation rate of lectures
on specific health issues•Improvement of employees’ performance through active
engagement•Percentage of employees taking paid leave: 80 % or over•Acquisition of certification of the White 500
for great health and productivity management* Other KPIs will be decided at later date

• Continuation of efforts to improve lifestyles• Setting up and announcing of KPIs and target figures• Career development support for female career-track employees • Measures to raise motivation of female employees(ex. Dialogue with external directors)• Promotion of use of leaves for child-rearing, refreshment• Measures to raise acquisition rate of paternity leaves• Extension of retirement age to 65, Introduction of(ex. Information session)
reemployment system for employees past retirement age• Activities to recruit and support steady employment of people • Promotion of efficient work styles suitable for
personal situations such as child-rearing, nursing
with disabilities• Training programs on LGBTQ• Training programs on unconscious bias

• Percentage of female managers: 6.3%
• Percentage of employees taking childcare leave:
Male: 50 % or overFemale: 80 % or over

© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

22

Steady Progress in Promotion of Participation by Women
2007

2016

・Started
activities topromoteparticipation
by women infull swing

・Inaugurationof first female
foreperson

Maternity Uniforms

2020

2021

・Started dialogue
between external
directors and female
employees

2022
・Appointmentof first female
executive
officer・Established "Diversity
Promotion Group"・ Introduced ALL
GENDER RESTROOM
and Multipurpose
Room, etc.

・Introduced "Support
Program for
Balancing Career
Development andChildcare"

Women’s break room

Medium- to Long-term KPIs for Promotion of Participation by Women
Percentage of female managers

3.9

2020/4(Result)

5.6

6.1

6.3

2022/4(Result)

2023/4(Result)

2026/3(Target)approx.

10%2030(Target)Percentage offemale associate managers
19.0
16.0

2023/4(Result)

2026/3(Target)© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

23

Established Human Rights Policy and PDCA Cycle
1. Formulation of
Human Rights Policy

Commitment at the management level(Formulation and publication of human rights policy)

PDCA(i) Identification of risks ofhuman rights violations
and assessment

Identify human rights violations that have occurred/will occur in supply chain
and assess their severity(ii) Prevention andreduction of adverse
impacts

Prevent and resolve human rights violations(iii) EffectivenessEvaluation

Demonstrate and evaluate effectiveness(iv) Explanation andDisclosure

Disclose the progress of our efforts to respect human rights

3. Remedy

Dialogue with Stakeholders

2. Human Rights
Due Diligence

Implement apologies, restitutions, monetary or non-monetary compensation,and recurrence prevention measures for failure to prevent or adequately
resolve human rights violations

Initiatives with Awareness of Respect for Human Rights• Provided compliance education to raise awareness of "respect for human rights “• Established human rights due diligence in the company, group companies, suppliers, etc. (OVAKO initiative was also used as reference)• Regular reporting to the Board of Directors on progress of human rights initiatives© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

24Collaboration within and beyond Sanyo Group to Realize“Sustainable Procurement"
Strengthen Effective Utilization of Generated
Iron Scrap within Group Companies

Strengthening of Partnerships
Supplier awards system(Implemented since May 2018)

Procurement

Procurement

Manufacture

Manufacture

Declaration of partnership building(Announced in September 2020)

Iron scrap
Sales

Sales

Strengths Unique to the NSC Group

Coexistence with suppliers
Aiming for stable procurement of iron scrap,
we will strengthen relationships with suppliers
through investments, etc. Currently,
approximately half of procurement volume issecured from capital-related companies.

© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

25

3. Key Messages; Social
Human Capital Strategy to Realize Corporate Philosophy
Develop human resources to achieve “Confidence-based Management” by implementing following
measures.
• Improvement of work environment where employees can play active roles• Improvement of engagement through “Nurturing of Self-Directed Individuals” and “Co-creation
among Various Individuals”

Various Measures Underway Based on Human Capital Strategy• Steady progress in promotion of participation by female. Accelerate efforts to achieve even higher
goals.

• Set the final year of the current mid-term management plan as a milestone and develop a cocreation system among various individuals.

Establishment of Human Rights Policy, Implementation of PDCA Cycle in the Future• Formulated human rights policy and announced in FY2023. In the future, enhance effectiveness byimplementing PDCA cycle of human rights due diligence.

Collaboration with Group Companies and Externals to Realize“Sustainable Procurement“• Pursue sustainability by building strong relationships with parent company and business partners.

© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

26

4. GOVERNANCE
Director, Member of the Board andManaging Executive Officer
TAKAHASHI Kozo

Further Enrichment and Strengthening of Corporate GovernanceFurther Advancement of GovernanceJuly 2023• Added ESG indicators in performance-linked
compensation system

Toward an Effective
Mechanism

June 2022• Transitioned to a company with an Audit &Supervisory Committee• Adopted operation guidelines of “Supervisory
Committee for Conflict of Interests “June 2020• Increased the number of independent external directors to three (one-third of directors)• Introduced performance-linked compensation system for business execution directors

Strengthening of
the Management
Oversight Function

May 2020• Established “Nomination & Compensation Advisory Committee”
September 2015
• Started effectiveness evaluation of the Board of Director

June 2015• Appointed an independent external director
June 2010• Appointed an independent officer (external auditor)© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

28

Creation of Framework
to Enhance Effectiveness of the Board of Directors
Tasks and Measures in FY2022(i) Expansion of Training Opportunities for Board Members
・Held lecturers by outside experts and Sanyo board directors(ii) Increase of Opportunities for Dialogue among Inhouse, Outside
Directors
・Set up separate meeting to exchange opinions on day of board
meeting

Plan
Do

All Directors

ActionThird-Party
Organization
SurveyCheck(iii) Simplification of Meeting Materials and Promotion of Paperless
・Shifted to paperless way using online platforms in April 2022(iv) Deepening of Discussions from Corporate-Wide, Mid- to LongTerm Perspectives
・Reported progress on mid-term management plan (throughFY2025) twice during FY2022⇒Discussions on revisions to mid-term plan scheduled to be added
in FY2023

Tasks in FY2023(i) Consideration on Diversification of Board Members(ii) Increase in Opportunities for Interactions among Board Members(iii) Expansion of Training Opportunities for Board Members(iv) Further Simplification and Selection of Meeting Materials(v) Improvement of Efficiency of Pre-Board Meeting Briefings© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

29

Ref.) External Directors’ Assessment on Effectivenessof the Board of Directors (FY2022)
External
Directors’
Assessment(Average)

Questions in Third-Party Organization Survey (Excerpt)

Constructive discussions, free and active exchange of opinions

4.5/5.0

Review of management strategy in line with changes in external
environment

4.5/5.0

Supervision of conflicts of interest with executives, controllingshareholders etc…

4.7/5.0

Feedback on status of dialogue with shareholders and investors

4.5/5.0

Diversity of the board members(in terms of knowledge, experience, expertise, job history, age, gender,internationality etc…)

4.2/5.0

Average of all answers

4.5/5.0© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

30

Active Participation of External Directors in Management
Members of
the Board of Directors

Corporate Governance Structure

External directors

General meeting of shareholders
Nomination &Compensation
Advisory Committee

Board of Directors Audit & Supervisory Committee

Representative Director andPresident 4 independent
external directors

36%

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

11 directors,
including 4 independent external
directors(Autonomous internal control)<Business execution>
Representative Director
and President
Corporate Policy Committee

Company-wide committees
and meetings
Risk Management Committee
Carbon Neutrality Promotion Committee

Accounting auditor

Basic Policy on
Internal Control System

Internal directors

Total 11persons

64%

Members of
Risk Management Committee
External directors

Internal directors*

Rewards and Sanctions Committee
Executive officers
Business departments

Internal Control &Audit Department(internal audit)

Subsidiaries/affiliates

29%

Total 14persons
71%*Directors and Executive Officers
31© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

Pursuing Better Governance through Global Dialogue
External Directors of the Company(Interlocutor)

External Director(Independent)

External Director(Independent)

USUKI Masaharu

FUJIWARA Kayo

External Director
Audit and Supervisory
Committee Member(Independent)

TOIDE Iwao

External Directors of OVAKO(Interlocutor)

External Director

External Director

External Director

Martin Ivert

Sakari Tamminen

Jan Pieters(at the time)

AgendaCarbon Neutral• Explore the possibility of green production processes together with OVAKO's hydrogen conversion know-how

D&I• Share examples of improved corporate performance through women's activities in Europe, and recognizing theimportance of diversity (OVAKO’s ratio of women in management positions: approx. 20%)
• Confirm the need to continue to aggressively and persistently strengthen the employment of women© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

32

Deepening of Governance based on Trust
Co-Existence and Co-Prosperity
with Parent Company

Policy on Cross-Shareholdings(# of brand)

Listed4020(1) Maintaining the Sanyo brand
Placing great importance on passing on the Sanyobrand “Steel You Can Count On” to future generations(2) Synergies among Sanyo, Nippon Steel and
OVAKO
Exceeding the original target mainly due to OVAKO's
productivity improvements and sales expansion of
three companies

2019

2020

2021

2022

2023

2024

(3) Thoughts for all stakeholders
All shareholders are equally important, and in order toprotect the interests of minority shareholders, theappropriateness of transactions with the parent
company are reviewed and reported to the Board of
Directors

0

23

20

13
2018

Unlisted

19

18

18

13

11

11

10

2019

2020

2021

2022

(1) Previous Policy
Maintaining and expanding business relationships
through cross-shareholdings(The ratio of specified investment stocks to assets is
low compared to other companies in the same
industry)(2) Future Policy
Aiming to enhance corporate value without relying on
cross-shareholdings© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

33

4. Key Messages; Governance
Enhance and Further Strengthen Corporate Governance• We are working to enhance corporate governance with an emphasis on effectiveness, not formality,
and will continue to strive for further sophistication of management.

Creation of Framework to Enhance Effectiveness of Board Meetings• Continuously improve the functioning of board meetings by implementing PDCA cycle, including
third-party surveys.

Active Participation of External Directors in Management• Continuously strengthen governance through measures such as participation of external directors
in risk management committee.

Pursuing Better Governance through Global Dialogue• Conducted a dialogue between external directors of Sanyo and OVAKO. Continuously deepen
communication between external directors of both companies and make efforts as a consolidated
group to improve governance.

Deepening Governance with Trust as the Starting Point• Continue dealing with multi-stakeholders with sincerity to enhance corporate value.

© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

34

Finally

Sanyo Special Steel Report 2023 (Integrated Report)

https://www.sanyo-steel.co.jp/system/upload/news/20231116_sanyo_report_j.pdf

Reaching Our 90th Anniversary with Appreciation andHeading for Our 100th Year and Beyond© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

35

APPENDIX

1.5°C scenario

Status of Response to TCFD Recommendations
Major climate-related events

Assumed impacts (key risks and opportunities)

Sanyo Special Steel's responses and strategies

Carbon neutral-related responses
in customer industries, etc.

• Increase in demand for electric arc furnace steel, which emits
relatively less CO2, and materials, technologies, and productsthat help customers reduce CO2 emissions• 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• Promote CO2 emission reduction of our Steel Group with eco-solutions such as
eco-processes and the use of green energy

Structural changes in demandassociated with the shift to EVs,
and growing need for smaller andlighter automotive parts, etc.

• Growing need for our highly reliable special steel products
associated with the shift to EVs• Increase in demand for our special steel products withproperties that contribute to the size and weight reduction ofparts• With our strength in high-cleanliness steel, accurately respond to new customer
requirements and environmental issues arising from changes in social andindustrial structures• Strengthen supply chain competitiveness by enhancing collaboration withcustomers

Growth of wind power market due
to expansion of renewable energy•• Increase in demand for our highly reliable bearing steel, whichleads to reduced maintenance and failure prevention of wind
power generation facilities•

Intensifying competition for mineral• Increasing need for our high-performance materials that doresources due to increase in demand for
not rely on rare metals
electricity and storage batteries, etc.

• Promotion of low-carbon (decarbonized) steel products• Increase in costs for electricity, fuel, etc.

• Promote procurement of low-cost carbon-free electricity, etc.
• Request suppliers to reduce CO2 emissions• Promotion of further investment in energy-saving facilities through theintroduction of an internal carbon pricing (ICP) system• Negotiation with customers on price pass-on

Shift of steel production to electricarc furnaces and increased use of• Intensifying global competition to acquire super scrap
iron and steel scrap

4°C scenario• Promote development and supply of scarce resource-saving high-performance
products (ECOMAX series, Co-free maraging steel powder, etc.)• Improve relative advantage of electric arc furnace steels withrelatively low CO2 emissions and especially of OVAKO, which
is a leader in decarbonization
Introduction of carbon pricing
including carbon tax

Increasing frequency and severityof weather-related disaster
Increase in average temperature
Decrease in water resources andrise in sea levels due to climatechangeElucidate the fatigue mechanism under the unique environment of wind power
generation, and promote development and market introduction of bearing steel
for wind power generation that achieves long life and high reliability
Approved for "TPG Certification" as a supplier of critical components of wind
power generators in September 2022

• Secure and expand sources of iron and steel scrap procurement and optimize raw
material mix• Secure iron sources in collaboration with the NSC Group• Damage to production facilities and inundation of business bases and• Continuously improve BCM (Business Continuity Management), including enhancement of
warehouses in coastal areas due to severe weather disasters, anddisaster prevention management and natural disaster countermeasures
disruptions to the procurement of raw materials, equipment, and other• Ensure restoration financing measures by purchasing property insurance and utilizing thematerials, and product supply, etc.
Group's CMS (implemented)• Increase in risk of heat stroke and other health hazards and equipment• Enhance procurement supply chain management• Operational disruptions due to decline in water supply stability, etc.

Opportunity

Risk© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

37

Harima Waterfront Area
Carbon Neutral Port (CNP) Formation PlanWhat
weaim for• A virtuous cycle of industry and economy in
Setouchi and Kansai area, triggered by thedecarbonization of Harima region• Aiming for carbon neutrality of the entire port
in 2050
Basic Concept:
First Mover "Harima" for Setouchi and Kansai

CNP
Formation
Plan

Regional and efficient decarbonization
Formation supply chain hubs of hydrogen,etc. in Setouchi and Kansai

Public administration
Hyogo Pref.; Kinki Regional Development Bureau, Ministryof Land, Infrastructure, Transport and Tourism; Kinki
Bureau of Economy, Trade and Industry, Ministry of
Economy, Trade and Industry; Himeji City; Kakogawa City;
Takasago City; Kobe City

Plan
Promotion
Structure

Companies
Iwatani Corporation; Osaka Gas Co. Ltd.; Obayashi
Corporation; Kaneka Corporation, Takasago Machinery
Works; Kawasaki Heavy Industries, Ltd.; The Kansai ElectricPower Co., Inc.; Kobe Steel, Ltd.; Sanyo Special Steel Co.,
Ltd.; Daicel Corporation; West Japan Railway Company;
Nippon Shokubai Co., Ltd.; Nippon Steel Corporation;
Prime Planet Energy & Solutions, Inc.; Marubeni
Corporation; Mitsubishi Heavy Industries, Ltd.; AGC Inc.;
J-POWER Generation Service Co., Ltd.
In addition to the above, academic experts and relatedorganizations participate.

Sanyo Special Steel Co., Ltd.

Source: Hyogo Pref. website "Harima Waterfront Area Carbon Neutral Port (CNP) Formation Plan: First Mover 'Harima' for Setouchi and Kansai (Draft)" . Sanyo prepared based on it.

© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

38

Sanyo's CO2 Emission Trends (Scope 1, 2, 3)CO2 emissions (thousand tons -CO2)
FY2019FY2020

FY2021

FY2022

Scope1

Direct emissions from fuel usage at theCompany

261

237

336

286★

Scope2

Indirect emissions from the use ofenergy produced by other companies

305

254

373

249★

Scope1+2

Emissions

566

491

710

535★

Scope3

Other indirect emissions equivalent
to the Company's supply chain(i) Products/services purchased

356

267

378

350★

(ii) Capital goods

67

31

18

31

(iii) Fuel- and energy-related activities not included in
Scope 1 and 2

113

100

134

117

(iv) Upstream transportation and delivery

24

19

20

19

(v) Waste generated from business operations

4

3

4

4

(vi) Business trips

0

0

0

0

(vii) Commuting by employees

1

1

1

1

★: Independent assured items© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

39

Electricity Mix as of 2022
100%
Fossil-freeelectricity

80%

60%
Thermalpower
generation,
etc.

40%

20%

0%

SwedenFinlandGermany

UnitedStates

Japan

China

India

Coal

Oil

Natural Gas

Other
Combustibles

Non-Specified

NuclearCombustible
Renewables

Hydro

Wind

Solar

Geothermal

Other Renewables

Source: IEA (International Energy Agency), Monthly Electricity Statistics.

© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

40

Corporate Health Management Strategy Map
Health investment effect
Health investment

Indicators related to the status
of initiatives for healthinvestment measures

Implementation of walking
eventsIncrease in the number ofparticipants in walking
events

Implementation of calisthenics
sessions

Increase in the number ofparticipants in calisthenics sessions

Implementation of employeeparticipatory seminars
Implementation of specifichealth guidance
Implementation of smoking
cessation support

Increase in the number ofparticipants in employeeparticipatory seminars
Improvement of the specifichealth guidance
implementation rate
Increase in the number of
employees provided withsmoking cessation support

Operation of health apps

Increase in the number ofhealth app users

Implementation of mental
health training

Decrease in the number ofheat stroke cases

Implementation of heatstroke 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 percentage of
employees with healthyeating habits
Increase in the percentageof employees with exercise habits
Decrease in the percentage
of smokers

Final health-related target
indicators

Management issues to besolved through corporate
health management

Reduction in absenteeism(sick leave)
Reduction in presenteeism(working while ill or injured)
Increase in work engagement(enthusiasm and vitality at work)

Creation of aworkplaceenvironment inwhich each andevery employee canwork to the fullest
every day

Improvement of job
satisfaction© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

41

Directors' Skill Matrix
Expertise and experience
Full name

Corporate
management

Manufacturing,
engineering,
research, anddevelopment

Sales andmarketing

Finance andaccounting

Personnel
and labor
relationsInternational
experience

Legal

ESG

Knowledgeof otherindustries

MIYAMOTO Katsuhiro *Executive

OI Shigehiro
OMAE Kozo
YANAGIMOTO Katsu
Independent

USUKI Masaharu* External
FUJIWARA Kayo *Non-executive

Director who is an
Audit & Supervisory
Committee member

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

TAKAHASHI Kozo

Independent

External

SONODA Hiroto
NAGANO Kazuhiko
YOGI Hiroshi*
TOIDE Iwao *Independent

External
Independent

External*Members of the "Nomination & Compensation Advisory Committee," a non-statutory advisory body of Sanyo Special Steel.

© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

42

ESG Indicators Progress

Classification

Evaluation items

Overview

FY2022 results

E

CDP Climate
Change Score

Based on answers to more than 150 questions related
climate change, CDP assigns scores from D to A.

“B" Score

Health management
rating

Deviation based on answers to survey on healthmanagement (70-item) conducted by the Ministry of
Economy, Trade and Industry

55.9

Environment

S

Occupational accidents
resulting in fatalities : 0
Occupational accidents
requiring time off from work: 4

Safety Indicators

Indicators of occupational accidents reported
monthly to the Board of Directors (Sanyo)

Percentage offemale managers

Indicators related to diversity and human capital

Effectivenessevaluation of theBoard of Directors
by external directors

Questionnaire survey to directors to evaluate
effectiveness of the Board of Directors

SocialG

Governance

5.3%(as of March 2023)

4.5/5.0© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

43

ESG Topics
ESG Ratings by External Agencies
External Rating Agency

FY2022 Ratings

Climate Change Score "B"

Responded for the first time in
FY2022, ranked 6th out of 11
Japanese steelmakers
A-rated (6.1)
Ranked 3rd out of 10 Japanesecompanies in the Steel sector as ofNovember 18, 2023
2.6
Ranked 5th out of 15 Japanesecompanies in the Iron & Steel sector
as of November 18, 2023
32.9
Ranked 35th out of 156 global
companies in the Steel sector as ofApril 20, 2023

Certified as one of the "Excellent HealthManagement Corporations 2023”• Implement PDCA cycle of measures under the healthmanagement system with the President as the Chief
Corporate Health Officer• Efforts are being made to improve employees' lifestyles
and prevent mental health problems before they occur• Example: Radio calisthenics before work, walking events,
exercise seminars

Certified as a "Hyogo Women's Active
Participation Promotion Company(Mimosa Certified Company)”• Certified as a “Hyogo Women's Active Participation
Promotion Company (Mimosa Company)” for increasing
number of workplaces where women can play an activerole by actively hiring women and expanding job areas,
as well as for introducing support systems for women
employees to continue working, such as childcare leaveand shorter working hours© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

44

Sanyo Special Steel Official AccountYouTubehttps://www.youtube.com/@Sanyo_Special_Steel* Renewed company introduction video is uploadedin November 2023.

*

Ｘ(formerly twitter)
https://twitter.com/Sanyo_SP_SteelInstagram
https://www.instagram.com/sanyo_special_steel/© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

45

(Cautionary Statement)
Business forecasts contained in this document are based on the information available
at the time of the release of this document, and actual results may differ from these
forecasts due to various factors that may occur in the future. The business forecasts
should not be interpreted as any commitment to or guarantee of future performance.

https://www.sanyo-steel.co.jp/