Corporate Governance

Basic Approach

The basic approach to corporate governance of Mitsubishi Materials Corporation is described below.

• We have, based on the Corporate Philosophy of the Group, Our Vision, Our Values, Code of Conduct, Our Commitment and the Basic Policy on Corporate Governance* established by the Board of Directors, developed trust with all stakeholders related to the Company and its subsidiaries, such as shareholders and investors as well as employees, customers, client or supplier companies, creditors and local communities, and also develop our corporate governance.
• Among the governance systems under the Companies Act, we have chosen to be a Company with a Nomination Committee, and by separating supervision and execution, will strengthen the Board of Directors’ management supervisory functions, improve the transparency and fairness of management and accelerate business execution and decision making.
• We acknowledge the enhancement of corporate governance to be one of the most important management issues, and continuously make efforts to improve our corporate governance.

The Group supplies basic materials and components that are essential to society, and is a composite business entity that also operates recycling and renewable energy businesses. Therefore, to ensure flexible and appropriate business execution, we have introduced an in-house company system.

• * We have prepared the “Basic Policy on Corporate Governance”, which is disclosed on the Company’s website, as a compilation of the basic approach to and framework of corporate governance.

Overview of Corporate Governance

Board of Directors

The functions and duties of the Board of Directors shall be as follows:

• Upon delegation by shareholders, the Board of Directors shall indicate the direction of its management and make an effort to enhance the Group’s medium- to long-term corporate value by, for example, engaging in freewheeling and constructive discussion on management policies and management reforms.
• The Board of Directors shall determine matters that may have a serious impact on management, such as management policies and management reforms, in accordance with the provisions of laws, the Articles of Incorporation and the Board of Directors Rules.
• The Board of Directors shall accelerate decision-making in business execution by delegating the authority over business execution to an appropriate extent to Executive Officers in accordance with the provisions of the Board of Directors Rules, etc. so that Executive Officers may assume the responsibility and authority to make decisions and execute business in response to changes in the business environment.
• The state of Group governance and the progress of the execution of duties, including the progress of the management strategy, shall be reported by Executive Officers to and supervised by the Board of Directors on a periodic basis.

Further, Outside Directors play a role in supervising the appropriateness of Directors and Executive Officers in the execution of their duties from an objective standpoint and in providing a diverse range of values regarding the management of the Company based on expert knowledge and through experience that differs from that of officers who advanced internally, so that the Board of Directors' management supervisory functions would be further strengthened. The Board of Directors is comprised of 11 Directors (including 7 Outside Directors), and the Chairperson of the Board of Directors is performed by Akira Takeuchi (Chairman of the Company).

Overview of the Corporate Governance System (Chart as of July 1, 2024)

Nomination Committee

The Nomination Committee determines the policy for nomination of candidates for Director and dismissal of Directors and the content of proposals for the appointment and dismissal of Directors to be submitted to the General Meeting of Shareholders. In addition to this, the Committee deliberates on the appointment and dismissal of Executive Officers, etc. in response to inquiries from the Board of Directors and reports back to the Board of Directors thereof. Furthermore, the Committee deliberates on the candidates for the successor of the Chief Executive Officer with the development plans and exercises supervision to ensure that the development of successor candidates is performed appropriately. The Committee deliberates on candidates for the next Chief Executive Officer in response to the inquiries from the Board of Directors and reports back to the Board.
Majority of the Nomination Committee members shall be Independent Outside Directors, and the Chairperson shall be performed by an Independent Outside Director. The Nomination Committee is comprised of 5 Directors (All are Outside Directors), and the Chairperson is Tatsuo Wakabayashi (Independent Outside Director).

Audit Committee

The Audit Committee audits the legality and validity of duties performed by Directors and Executive Officers, via audits either using internal control systems or directly by the Audit Committee member selected by the Audit Committee. Majority of the Audit Committee members shall be Independent Outside Directors, and the Chairperson shall be performed by an Independent Outside Director. The Audit Committee also elects 1 full time Member of the Audit Committee in order to improve the effectiveness of audits conducted by the Audit Committee. The Audit Committee is comprised of 5 Directors (including 4 Outside Directors), and the Chairperson is Kazuhiko Takeda (Independent Outside Director).

Remuneration Committee

The Remuneration Committee establishes policies for determining individual remuneration for Directors and Executive Officers, and determines the individual remuneration to be received by Directors and Executive Officers based on such policies. Majority of the Remuneration Committee members shall be Independent Outside Directors, and the Chairperson shall be performed by an Independent Outside Director. The Remuneration Committee is comprised of 3 Directors (All are Outside Directors), and the Chairperson is Hikaru Sugi (Independent Outside Director).

Sustainability Committee

The Sustainability Committee shall review policies on sustainability issues and others after being consulted by the Board of Directors, and submit the details to the Board. Majority of the Sustainability Committee members shall be Independent Outside Directors, and the Chairperson shall be performed by an Independent Outside Director. Currently, the Sustainability Committee is comprised of 4 Directors (including 3 Outside Directors), and the Chairperson is Koji Igarashi (Independent Outside Director).

*To enable Directors to perform at a higher level, the Company reviewed the number of committees on which each Director concurrently serves and the appropriate number of members for each committee. The number of members on the Remuneration Committee and the Sustainability Committee were reduced respectively as of June 26, 2024 (members of the Remuneration Committee were reduced from 5 to 3, and those of the Sustainability Committee were reduced from 5 to 4).

Even after the number of committee members is reduced, the committees will allow Outside Directors other than committee members to participate as observers to eliminate information gaps among Outside Directors, and will also allow the CEO and others to attend committee meetings as necessary to hear explanations and opinions.

Executive Officer

Executive Officers execute business in accordance with the prescribed segregation of duties, based on the delegation of authority from the Board of Directors. The Company has 8 Executive Officers, of which the Chief Executive Officer Naoki Ono, and Managing Executive Officer Makoto Shibata, are elected as Representative Executive Officers upon the decision of the Board of Directors.

Strategic Management Committee

Following the delegation of authority from the Board of Directors, the Strategic Management Committee reviews and determines important matters concerning the management of the entire Group. The Strategic Management Committee consists of the Chief Executive Officer and the Executive Officers in charge of each department of the Div. of the Corporate. The Chief Executive Officer serves as the chairperson of the committee.

Sustainability Deliberative Council and Sustainability Reviews

As part of sustainability initiatives, Sustainability Deliberative Council and Reviews are implemented starting in the fiscal year ending March 2025, replacing the previous Governance Review and Meeting for Sharing Governance Information.
Themes to be covered have shifted from governance-related matters (safety, health, human rights, compliance, environment, quality, communication and information security) to sustainability-related matters in response to global environmental issues and human capital management.
Sustainability Deliberative Council is a forum for the head office and business divisions to deliberate and decide on policy and plans related to the above sustainability-related matters prior to the start of the fiscal year (March).
Sustainability Reviews are forums for each business division to report on progress of activities based on policy and plans decided at the Sustainability Deliberative Council at least once per fiscal year.
Meetings are attended by Executive Officers and heads of relevant departments, with a system in place for sharing and following up on information reported at these meetings.

Nomination of Candidates for Director, Dismissal of Directors and the Election and Dismissal of Executive Officers

Policy for Nomination of Candidates for Director and Dismissal of Directors

Our basic approach to the structure of the Board of Directors, which fulfills the roles of determining the direction of management and exercising supervision over the progress of business execution, is to ensure that it comprises a diverse range of human resources with different expert knowledge, experience, and other qualities. In particular, the Nomination Committee will consider candidates for Outside Director to ensure that they comprise individuals who possess experience and knowledge in corporate management (including in businesses similar to and/or different from the Group’s business) and organizational management, and individuals who possess broad and advanced expert knowledge and extensive experience in relation to finance and accounting, legal affairs, production engineering, research and development, sales and marketing, international relations, etc.
In light of the basic policy on the structure mentioned above, the Nomination Committee will nominate and select individuals who satisfy the following requirements as candidates for Director, regardless of individual attributes concerning gender, nationality and race, etc.:

• An individual of exceptional insight and character;
• An individual with a strong sense of ethics and a law-abiding spirit; and
• An individual who can properly fulfill his or her duties concerning the exercise of supervision over the management of the Company and the determination of the direction of management.

Further, with respect to candidates for Independent Outside Director, the Nomination Committee will nominate and select individuals who satisfy the following requirement in addition to the above requirements:

• An individual who has no material interest in the Group and who can remain independent.

The specific selection of talent shall be decided after deliberation by the Nomination Committee.

If any of the following apply to a Director, the Nomination Committee may make a determination on the content of a proposal to be submitted to the General Meeting of Shareholders regarding the dismissal of that Director.

• If a Director has committed a serious violation of a law, regulation or the Articles of Incorporation
• If a Director has committed an act that is significant misconduct regarding performance of duties
• If a Director lacks the judgment required of the position or significantly lacks the ability to discern facts and circumstances
• If a Director is expected to be unable to attend Board of Directors meetings for a significant period of time

The Company considers that an Outside Director is not independent if he or she falls under any of the conditions listed below while meeting the standards for independence established by Tokyo Stock Exchange, Inc.

1. An individual who falls under or has fallen under any of items (1) or (2) below, either presently or in the past:

1. An executive or non-executive Director of the Company (excluding Outside Directors); or
2. An executive or non-executive Director of the Company’s subsidiary.

2.An individual who falls under any of items (1) through (5) below:

1. An executive of a client or supplier company of the Company, whose value of transactions amounted to 2% or more of the consolidated net sales of the Company or the client or supplier company as of the end of the previous fiscal year;
2. A person who received, as a professional or consultant, etc., consideration of not less than ¥10 million from the Company in the previous fiscal year, excluding his/her consideration as a Director;
3. An executive of an organization that received a donation of not less than ¥10 million from the Company in the previous fiscal year;
4. A shareholder who directly or indirectly holds at least 10% of the total number of voting rights of the Company or an executive of such shareholder; or
5. The Company’s Accounting Auditor or its employee, etc.

3.An individual who has fallen under any of items (1) to (5) of 2 above at any time in the past three (3) years:

4.A close relative of any of the persons listed in item (1) or (2) of 1 above, items (1) to (5) of 2 above, or 3 above (excluding unimportant persons); or

5.A person who has served as the Company’s Outside Director for a period of more than eight (8) years.

Policy for Election and Dismissal of Executive Officers

In electing Executive Officers responsible for the execution of business tasks, individuals who satisfy the following requirements will be elected, regardless of individual attributes concerning gender, nationality and race, etc.:

• An individual of exceptional insight and character;
• An individual with a strong sense of ethics and a law-abiding spirit; and
• An individual well-versed in management and the business activities of the Group.

In relation to the election process, the Chief Executive Officer will first draft a proposal for the election of Executive Officers after consulting with relevant officers as necessary. The Chief Executive Officer will then submit a proposal for the election of Executive Officers to the Board of Directors based on the deliberations and responses to inquiries at a Nomination Committee meeting, and Executive Officers will be elected by resolution of the Board of Directors based on a comprehensive review of the candidates’ personal history, achievements, specialist knowledge, and other capabilities.
In addition, if any event occurs that makes an Executive Officer highly ineligible in light of these standards, the Executive Officer shall be dismissed by resolution of the Board of Directors following a review by the Nomination Committee.

Expertise and Experience of the Directors

The main expertise and experience possessed by the Directors are shown in the Skill Matrix in Table 1. In addition, Table 2 shows from what perspectives the Directors contribute and provide knowledge on the Company’s Medium-term Management Strategy working toward achievement in 2030 based on their respective expertise and experience as indicated in the Skill Matrix.

[Table 1] Expertise and Experience of Directors (Skill Matrix)

• ○ indicates expertise and experience possessed (● indicates primary expertise/experience).
• ※ The above Skill Matrix does not cover all the expertise and experience expertise by the Directors.

[Table 2] Contribution and Perspectives of the Directors on Key Themes

• * The items above are focused on those with high contribution by the Directors.

Policy on Determining Remuneration for Officers

With the aim of creating an attractive remuneration system for outstanding management talent that will drive improvements in the Group’s corporate value from a medium- to long-term viewpoint and establishing remuneration governance that will enable the Company to fulfill its accountability to stakeholders, including shareholders, the Company shall establish a policy on determining the remuneration for Directors and Executive Officers (collectively, “Officers”) and a remuneration system as follows:

 Policy on Determining Remuneration for Officers

1. A system shall be created that provides competitive standards for remuneration compared with companies of a business category and size similar to the Group.
2. The performance of the functions and duties assumed by each Officer and contributions to the improvement of medium to long-term corporate value shall be evaluated in a fair and equitable manner, and the evaluation results shall be reflected in remuneration.
3. Regarding Executive Officer remuneration, in order to have remuneration function as a sound incentive to improve the Group’s medium- to long-term corporate value, remuneration shall consist of basic remuneration, an annual bonus based on performance evaluations in each fiscal year, etc. and stock-based compensation, which is a medium- to long-term incentive linked to medium- to long-term performance and corporate value. The remuneration composition ratio shall be determined appropriately in accordance with one’s job position. For Director (excluding those who concurrently hold the posts of Director and Executive Officer) remuneration, in principle, only basic remuneration shall be paid in cash, in light of their function and role of supervising the performance of job duties by the Executive Officers. However, Directors who serve as Chairpersons of the Nomination, Audit, Remuneration and Sustainability Committees will be paid allowances in addition to basic remuneration in consideration of their responsibilities.
4. An annual bonus shall be determined with the emphasis on the performance in each fiscal year, while appropriately evaluating the relative results of Total Shareholder Return (TSR)* and the status of each Executive Officer’s implementation of medium- to long-term management strategies, etc.

1. A medium- to long-term incentive shall be stock-based compensation that enables Executive Officers to share awareness of profits with shareholders in order to enhance corporate value from a medium- to long-term viewpoint.
2. The policies for determining remuneration and the amount of individual remuneration shall be deliberated and determined by the Remuneration Committee composed of a majority of Independent Outside Directors.
3. Necessary information shall be disclosed actively so that stakeholders including shareholders can monitor the relationship between performance, etc. and remuneration.

Remuneration System for Officers

1. Directors (excluding those who concurrently hold the posts of Director and Executive Officer)
   In principle, the remuneration for Directors shall consist of basic remuneration only. However, Directors who serve as Chairpersons of the Nomination, Audit, Remuneration and Sustainability Committees will be paid allowances in addition to basic remuneration in consideration of their responsibilities. The cash amount shall take into consideration an individual Director’s job position, whether he/she is a full-time/part-time Director, etc. and refer to the standards for remuneration of other companies based on the research of outside experts.
2. Executive Officers
   The remuneration payable to Executive Officers shall consist of basic remuneration, which is fixed remuneration, and an annual bonus and stock-based compensation, which are performance-linked remuneration. The remuneration composition ratio shall be in line with "Basic remuneration/Annual bonus/Stock-based compensation = 1.0/0.6/0.4" (In the case where the annual bonus payment rate is 100%) for the Chief Executive Officer, and for other Executive Officers, the ratio of performance-linked remuneration to basic remuneration shall be set lower than that for the Chief Executive Officer.
   Furthermore, the standards for remuneration shall be determined by referring to the standards of peer companies (similar-sized companies determined by the Remuneration Committee) based on the research of outside experts.

＜Basic Remuneration＞

Basic remuneration shall be paid in cash as fixed remuneration in accordance with one's job position.

＜Annual Bonus (Short-term Incentive Remuneration)＞

The annual bonus shall be determined based on the consolidated operating profit, relative comparison of TSR, and status of achievement of the non-financial target set for each Executive Officer, on a single-year basis.

The specific evaluation items shall be as follows:

【Evaluation Items】

1. Consolidated operating profit (or, in the case of an Executive Officer in charge of business activities, operating earnings from the relevant business sector)
   The consolidated operating profit evaluation factor is based on which earning capacity of the Company’s main business is evaluated; to be multiplied by an adjustment factor based on the consolidated operating profit growth rate compared with other companies to enhance consciousness on growth greater than market growth (relative comparison with six nonferrous metal companies and the companies chosen mainly among similar-sized manufacturing companies, all in Japan)
2. Relative comparison of TSR (relative comparison with six nonferrous metal companies and the companies chosen mainly among similar sized manufacturing companies, all in Japan) (Evaluation of relative comparison of TSR)
3. Non-financial evaluation of the status of achievement of the targets set for each Executive Officer at the beginning of the term and other relevant factors with regard to efforts aimed at improving medium- to long-term corporate value, which is less likely to be represented in short-term performance, as well as efforts in line with the Sustainability Policy*

*Sustainability Policy Items

1. Build a Work Environment that puts Safety and Health First
2. Respect for Human Rights
3. Promote Diversity, Equity and Inclusion
4. Cultivate Mutual Prosperity with Stakeholders
5. Strengthen Corporate Governance and Risk Management
6. Engage in Fair Business Transactions and Responsible Sourcing
7. Ensure Stable Provision of Safe, Secure, and High Value Added Products
8. Proactive Engagement for the Global Environment

【Calculation Formula】

By deeming the amount payable for achievement of the target (Base Annual Bonus) as 100%, the amount for each individual shall be calculated by using the following calculation formula:
Annual Bonus = Base Annual Bonus by Job Position × Payment Rate Based on Performance Evaluation*

• * Payment Rate Based on Performance Evaluation shall range from 0% to approx. 200% based on a performance.

【Evaluation Weight】

The annual bonus shall be determined based on the evaluations of each portion of 60%*, 20% and 20% of the base amount, which depends on one’s job position, in terms of consolidated operating profit (or, in the case of an Executive Officer in charge of business activities, operating earnings from the relevant business sector), relative TSR comparison and non-financial factors, respectively.

• * To be adjusted using consolidated operating profit growth rate compared with other companies.

【Target of Consolidated Operating Profit for Annual Bonus】

With regard to the target of consolidated operating profit for annual bonuses, in principle, the consolidated performance forecast for the current period planned in the Medium-term Management Strategy shall be applied. (For operating earnings of the business for which the Executive Officer is responsible, planned consolidated operating earnings from the relevant business sector shall be used.)

＜Stock-based compensation (Medium- to long-term incentive remuneration)*＞

Stock-based compensation shall be a system that utilizes a trust for the purpose of achieving the sharing of a common profit awareness with shareholders. This shall be used as an incentive for improving the medium- to long-term corporate value of the Group and under which the Company’s shares and cash equivalent to the proceeds from the realization of the Company’s shares shall be delivered and paid in accordance with one’s job position, upon retirement from the post of Executive Officer. No performance conditions nor stock price conditions shall be set with respect to the shares to be delivered.

Please note that in the case of a non-resident staying in Japan, different treatment may be applied under laws or for any other relevant circumstances.

• * The Officers’ remuneration system adopts a structure called BIP (Board Incentive Plan) and grants to the Executive Officers the shares of the Company’s common stock, etc. It is an incentive plan to, during the determined period of the trust, accumulate points to be given to Executive Officers, and to grant the shares of the Company’s common stock equivalent to 70% of such accumulated points (shares less than one unit shall be disregarded) and cash equivalent to realized value of the shares of the Company’s common stock equivalent to the remaining accumulated points as compensation to Executive Officers after their retirement. One point is deemed equal to one share of the Company’s common stock, and if a stock split or reverse stock split occurs during the trust period, the number of the Company’s shares per point shall be adjusted according to the stock split ratio or reverse stock split ratio of the Company’s shares. The maximum number of points to be given to Executive Officers during the three consecutive fiscal years including the fiscal year ended March 2024 (FYE March 2024 to FYE March 2026) shall be 140,000 points in total.

＜Claim for return of remuneration, etc. (Malus and Clawback System)＞

• If Executive Officers violate laws and regulations or the duty of care of a good manager, the Company may request disqualification of the entitlement to annual bonus or restitution of bonus upon a resolution of the Remuneration Committee.
• With respect to stock compensation, if the same occurs, the Company may request disqualification of the right to receive delivery of the Company’s shares, etc. or restitution of an amount equivalent to the accumulated number of points upon a resolution of the Remuneration Committee.

Details of non-financial evaluation items for annual bonuses for Executive Officers (excluding CEO) (FYE March 2025)

For non-financial evaluation, each Executive Officer (excluding the CEO) is required to set three target items, one of which is a sustainability issue. Each item is broken down into two or three sub-items. The table below summarizes details of non-financial sub-items set for the fiscal year ending March 2025 in accordance with the Sustainability Policy, etc.
In the fiscal year ending March 2025, we have mandated the promotion of Diversity, Equity & Inclusion and in particular, the setting of targets related to the ratio of female managers. Additionally, many Executive Officers set targets related to proactive efforts to protect the global environment.

Total amount of remuneration, etc. per classification of officers, total amount per type of remuneration, etc., and number of eligible recipients for FYE March 2024

• *1 The total amount of remuneration, etc. paid to Directors who concurrently serve as Executive Officers and applicable employees are shown in the total amount of remuneration for Executive Officers.
• *2 The Company had 11 Directors and 9 Executive Officers as of the end of the fiscal year ended March 2024.
• *3 The Company has introduced stock-based compensation based on a trust scheme, and the above amount of stock-based compensation represents the amount recorded as expenses for the fiscal year ended March 2024.

Executives with Total Compensation of 100 Million Yen or More (FYE March 2024)

• *1 Naoki Ono currently serves as both a Director and an Executive Officer. However, since he is included in the classification “Executive Officer” in Amount of Remuneration, etc. for Directors and Executive Officers. above, he is also classified as an “Executive Officer” in this section.
• *2 The Company has introduced stock-based compensation based on a trust scheme, and the above amount of stock-based compensation represents the amount recorded as expenses for the fiscal year ended March 2024.

Target of performance evaluation indicator for annual bonus

With regard to the consolidated operating profit target for the annual bonus, in principle, the consolidated operating profit plan for the current fiscal year in the Mid-term Management Strategy shall be applied (with regard to the operating profit of the business in charge, the consolidated operating profit plan for the relevant business in charge shall be used).
The following are the target and actual values of performance-linked indicators for bonuses paid in the current fiscal year:

Number of Board of Directors Meetings held, Attendance at the Meetings and the Number of Years Served by Directors

The Board of Directors met 19 times in the fiscal year ended March 2024. To ensure the effectiveness of the Board of Directors, the Company requires each Director to make every effort to attend all meetings, and the attendance rate was 100% in the fiscal year ended March 2024. Approximately 100% attendance rates are also maintained by the Nomination Committee (which met 14 times), Audit Committee (17 times), Remuneration Committee (9 times), and Sustainability Committee (9 times).

Number of Board of Directors Meetings held and Attendance at the Meetings (Fiscal Year Ended March 2024)

The term of a Director in the Company is one year. As of July 2024, the average number of years served by active Directors was 4.6 years while the figure for Directors who have resigned in the past five years was 3.3 years.

Average Number of Years Served by Directors (As of July 2024)

Item	Average term
Average number of years served by active Directors at present	4.6years
Average number of years served by Directors who resigned in the past five years	3.3years

Evaluation of the Effectiveness of the Board of Directors

The Company analyzes and evaluates the effectiveness of the Board of Directors based on the evaluation by each Director on an annual basis. In the fiscal year ended March 2022, the evaluation was conducted using a third-party organization for the first time. In the future, a third-party evaluation shall be conducted once every three years.
In the fiscal year ended March 2024, the Company evaluated the effectiveness of the Board of Directors by way of a questionnaire-based self-evaluation. Starting in the fiscal year ended March 2024, we operate a new initiative in which Directors (excluding those who also serve as Executive Officers) comment on each others’ contributions to the Board of Directors, etc. The evaluation method and a summary of the results are outlined below.

Method of analysis/evaluation

1. Evaluation process
   • Dec. 2023 to Jan. 2024 / Questionnaires were distributed to all 11 Directors and responses were retrieved at the initiative of the Chairman of the Board of Directors.
   • Early Feb. 2024 / Response forms for comments on the contributions of other Directors were distributed to Directors (excluding those who concurrently serve as Executive Officers), and responses were received.
   • Late Feb. 2024 / The Directors discussed the effectiveness of the Board of Directors based on an analysis of the questionnaire results.
   • Mar. 2024 / Following the discussions in February, the Board of Directors passed a resolution on the effectiveness of the Board of Directors for the fiscal year ended March 2024. Response forms collected in early February were provided to Directors in the form of anonymous feedback.
2. Questionnaire items

   The questionnaire uses a four-grade evaluation for the questions below (1. Strongly agree, 2. Agree, 3. Disagree, 4. Totally disagree) and provides a free comment space where needed.

   • Self-evaluation of the role to be performed by the Directors (Board of Directors)
   • Size and composition of the Board of Directors and operation status of the Board of Directors
   • Composition, roles and status of operations of each of the Nomination Committee, Audit Committee, Remuneration Committee, and Sustainability Committee
   • Support system for Outside Directors
   • Relationship with investors and shareholders
   • Other matters concerning the Board of Directors in general, etc.

Evaluation of the status of initiatives concerning the issues for FYE March 2024 based on FYE March 2023 evaluation

There was an evaluation of initiatives concerning the following matters taken for further improvement by the Board of Directors in the fiscal year ended March 2024 based on the results of the evaluation of the effectiveness of the Board of Directors in the fiscal year ended March 2023. It was confirmed that although “improvements have been made” in general, “initiatives were not adequate” for certain matters.

1. Initiatives related to explanations (explanatory materials) to Directors
   • In order to make the explanatory materials for Directors from the executive side simpler and easier to understand with clearer directions, attention was paid to the following points: “The content should focus on important management matters that officers should know and discuss,” “Items that are progressing as scheduled should be described as concisely as possible,” and “The materials should include the background and history of changes in the external environment including the trends of competitors, and the circumstances surrounding the Group.” In addition, efforts were made to keep the explanations from Executive Officers clear and concise, and initiatives were taken to receive questions from Directors on matters to be discussed by the Board of Directors in advance.
   • In addition, efforts were made in terms of explaining information on the Company’s business that is prerequisite for management decisions, and working to eliminate asymmetry of information between the executive side and Outside Directors, through briefings for Directors.
   • In the questionnaire, opinions such as “It is requested that the explanation from the executive side be further elaborated on to focus on more important points” were found, but the initiatives taken were highly evaluated in general.
2. Initiatives related to the Company’s medium- to long-term competitive advantage
   • The Company appealed to the capital market by disseminating its FY2031 Strategy, which was formulated based on the Company’s medium- to long-term competitive advantage, and sending out relevant messages. Specifically, in order to deepen investors’ and analysts’ understanding of the FY2031 Strategy, we held a Business Strategy IR Meeting, etc. and also organized plant tours at domestic bases for securities analysts and institutional investors in order to promote understanding of the Company’s existing businesses and the various initiatives under the FY2031 Strategy.
   • Regarding the above, opinions expressed in questionnaires included, “I believe the Company conveys its philosophy and direction in a timely manner, but results do not back up this assertion,” and, “The Company often ends up taking individual measures to achieve short-term profit, so it is not yet in a position to communicate its medium- to long-term competitive advantage.”
3. Initiatives related to sharing of information between the Nomination Committee and other Directors
   • We deepened discussions on matters requiring resolution by the Board of Directors (mainly information on the appointment of Executive Officers, etc. that is to be reported back to the Board of Directors from the Nomination Committee) and shared information with Directors who are not committee members. Specifically, Outside Directors received an explanation from the Chief Executive Officer regarding the succession plan for Executive Officers and other matters and discussed these matters at the informal meetings of Outside Directors.
   • Further, information was provided by the Chief Executive Officer at the informal meetings of Outside Directors (Outside Directors’ Opinion Exchange Meetings) on the status of examination of the succession plan for the Chief Executive Officer. In addition, the Nomination Committee made progress reports to the Board of Directors on the status of examining candidates for Outside Directors.
   • As a result of the above initiatives taken, the evaluation in the questionnaire improved from the previous fiscal year.
4. Initiatives related to the supervision of human resource strategy by the Board of Directors
   • At the briefings for Directors, explanations were received on the status of diversity promotion (Diversity, Equity & Inclusion (DE&I)) in the organization under the management of each Executive Officer, and discussions were held.
   • In addition, as a non-financial evaluation item for the annual bonuses of Executive Officers, targets related to DE&I were set for all Executive Officers, and progress was regularly reported to the Board of Directors for discussion.
   • As a result of the above initiatives taken, the evaluation in the questionnaire improved from the previous fiscal year.

Summary of Fiscal 2024 evaluation results

As a result of deliberations by the Board of Directors, it was confirmed that the effectiveness of the Board of Directors was secured in the fiscal year ended March 2024. Through the evaluation, it was confirmed that “Efforts will be made to further improve the management of the Board of Directors in order to enhance corporate value, which is one of the most important missions of the Board of Directors, and initiatives will be taken to further improve the following matters in the fiscal year ending March 2025.”
・Development of core management personnel
・Medium- to long-term competitive advantage of the Company
*To the following questions in the questionnaire, 6 of 11 Directors answered “Disagree” and 5 responded “Agree,” with negative responses outnumbering positive responses.
・Do you think that the Board of Directors holds sufficient discussions on the development of core management personnel?
・Do you think that the Company’s medium- to long-term competitive advantage (business strategy, quality of management, governance system, etc.) has been adequately conveyed to the capital market?

A summary of the opinions of the Directors regarding the above is as follows.

1. Development of core management talent
   • This evaluation indicates room for improvement in the following areas with regard to Executive Officer succession plans and the Next-Generation Leadership Talent Development Program
   • Diversification of successor talent pool
   • Increase in the number and ratio of candidates selected for the Next-Generation Leadership Talent Development Program among candidates for Executive Officer successors
   • Strengthening the linkage between the Next-Generation Leadership Talent Development Program and human resource policies such as promotion and selection
   • Early identification and planned stretch assignment of Next-Generation Leadership Talent at the managerial and junior levels
2. Medium- to long-term competitive advantage of the Company
   • For the results of the questionnaire, please refer to 2.2. (2) of "Evaluation of Initiatives for the fiscal year ended March 2023 Based on the fiscal year ended March 2022 Evaluation."
   • During a Board of Directors meeting, it was pointed out that “discussions about competitive advantage and business strategy, as well as the content of external release of information and disclosure, need to be discussed separately, and within the Company, we need to first conduct more in-depth consideration and discussion on the former.”

Initiatives in FYE 2025 to further improve the effectiveness of the Board of Directors

Based on the results of the evaluation of the Board of Directors in the fiscal year ended March 2024, the Company’s Board of Directors will undertake the following measures to increase the effectiveness of the Board of Directors in the fiscal year ending March 2025.

1. Development of core management talent
   • The Company receive explanations from the executive side regarding the Executive Officer Succession plan for Executive Officers and Next-Generation Leadership Talents Development Program in briefings to the Board of Directors and hold discussions primarily for matters stated in 1. "Summary of the fiscal year ended March 2024 evaluation results."
2. Medium- to long-term competitive advantage of the Company
   • Directors will deliberate where the Company’s medium- to long-term competitive advantages lie (where it should be emphasized). A Briefing for Directors is held as appropriate if there are any matters for which the executive side should provide explanation during the discussion among Directors.
   • Content of discussions is conducted looking toward the fiscal year ending March 2026, the final year of Phase 1 of the FY2031 Strategy, leading to review of Phase 2 as needed.

Status of Audits

Status of audits performed by the Audit Committee

The Audit Committee examines the status of the development and operation of the internal control system, risks in implementing the Medium-term Management Strategy and the status of countermeasures, the status of measures related to sustainability issues including occupational safety and compliance with the Antimonopoly Act, the appropriateness of auditing methods and the results of audits by Accounting Auditors, as well as other matters.
To these ends, the Audit Committee has established and operates a framework to audit the execution of duties by Directors and Executive Officers. Specifically, the Committee conducts interviews with Directors, Executive Officers, departments in charge of internal audits, and departments in charge of internal control, etc. to assess their progress in executing their duties. The Committee also reviews approval documentation and other relevant materials. Appointed members of the Committee are assigned to investigate the business and asset conditions at the Company’s headquarters and key business locations, and they conduct on-site audits of subsidiaries and other entities as required, in accordance with the audit standards and audit plan established by the Committee. Additionally, the Audit Committee enhances coordination by regularly holding meetings with Audit & Supervisory Board Members at major Group companies to strengthen the effectiveness of the Group wide audit system. To enhance the overall effectiveness of the three-pillar audit system, the Audit Committee, the Internal Audit Department, and the Accounting Auditor actively engage in discussions and collaborate closely to strengthen coordination.
The full-time member of the Audit Committee also interviews with the CFO regularly and with Executive Officers, to exchange opinions. In addition, he receives reports from the Corporate Division on a regular or timely basis and makes suggestions or recommendations. He also attends important meetings such as the Strategic Management Committee, the Group’s Management Committee, Budget Deliberation, Monozukuri and R&D Strategy Meetings and Sustainability Deliberative Council, as well as conducting on-site audits of locations both inside and outside Japan, including affiliates, and make comments or suggestions on matters of concern.
Kazuhiko Takeda, Chairperson of the Audit Committee, has extensive knowledge of finance and accounting through his experience as the CFO at a major subsidiary of a listed company.
The Audit Committee Office is set up as an organization directly under the supervision of the Committee to assist the Committee in carrying out its duties.

Status of internal audits

As of June 26, 2024, the Audit Department of the Corporate Division and the Audit Department of in-house companies, which are departments in charge of internal audits, consist of 29 persons, including the General Managers of each Audit Department. They are responsible for conducting internal audit work on the instructions of the responsible Executive Officer in cooperation with the Audit Committee to investigate whether internal control systems are developed and applied in an appropriate manner. They also audit the effectiveness and efficiency of company operations across the Group, the credibility of financial reports, the state of asset preservation and use, the risk management status, and the state of compliance with laws and regulations, and internal rules and standards, based on internal audit plans approved by the responsible Executive Officer and the Audit Committee. Additionally, audits are conducted in close coordination with the Accounting Auditor by sharing information.
The Audit Department of the Corporate Division regularly reports the results of Company-wide audits to the Executive Officer in charge and the Audit Committee, and the Executive Officer in charge regularly reports those results to the Board of Directors.

Policy on appointment, dismissal and non-reappointment of Accounting Auditor

The Audit Committee appoints the Accounting Auditor based on the following criteria: (1) expertise, independence, timeliness and appropriateness, quality control and governance systems, (2) ability to respond to the Company's multi-industry and global business developments, (3) efficiency improvement of accounting audit operations, (4) communication with the Audit Committee, management, etc., (5) any applicability to dismissal requirements based on statutory grounds, and (6) continuous audit period. The Audit Committee’s policy is to dismiss or not reappoint if a problem is found in these criteria.
Based on the standards for evaluation and selection of Accounting Auditor established by the Audit Committee, it comprehensively evaluates these criteria of Accounting Auditor after obtaining materials from Executive Officers, related departments in the Company and Accounting Auditor and receiving reports necessary for determination.

Internal Control

Since the establishment of the Internal Control System Management Committee in January 2006, we have taken steps such as developing a set of basic principles for improving the Group’s internal control systems, and ensuring compliance with the requirements to introduce internal control evaluation and disclosure systems in relation to financial reporting, in an effort to ensure compliance with the Companies Act, the Financial Instruments and Exchange Act, and other relevant legislation, and to establish the optimal internal control systems for both Mitsubishi Materials and the Mitsubishi Materials Group companies.
Regarding evaluations conducted during the fiscal year ended March 2024 on our internal control system for financial reporting, an Internal Control Report was submitted in June 2024 for which we received an unqualified opinion of the auditing firm that the content is appropriate.

Status of Strategic Share Holdings

The Company has a policy of not acquiring or holding shares (Strategic Share Holdings) other than purely for investment purposes, except when it is required for the business strategy. With regard to the Shares in the Form of Strategic Share Holdings, the appropriateness of such holdings shall be specifically reviewed and examined at a meeting of the Board of Directors on an annual basis. As a result of such reviews and examinations, the Company will reduce any Shares in the Form of Strategic Share Holdings if it is not deemed to be necessary to hold such shares.

Status of Holdings for FYE 2024

In the fiscal year ended March 2024, out of Strategic Share Holdings (six listed stocks held as of April 1, 2023), we sold all or part of two of the listed stocks and newly acquired one stock, resulting in a total of six listed stocks held as of the end of March 2024.
As of the end of March 2024, the amount of Strategic Share Holdings on the balance sheet was approximately ¥20.1 billion for listed stocks, approximately ¥2.2 billion for unlisted stocks, and approximately ¥8.7 billion for deemed share holdings of equity securities, totaling 4.6% of the Company’s consolidated net assets as of March 31, 2024.

Status of Strategic Share Holdings

Percentage of Strategic Share Holdings in Consolidated Net Assets