Under our management principle and founding spirit, “Spirit of Challenge,” the Kyoei Steel Group aspires to be a company that contributes to building the world’s infrastructure and to the conservation of the planetary environment, a company that contributes to all stakeholders, a company that promotes a safe and comfortable workplace, and a highly trustworthy company that emphasizes compliance and quality. In this, we aim to be an essential company that contributes to social progress and harmony with the global environment. In the recognition that corporate governance is the foundation for systematically ensuring the implementation of this principle and for realizing the Group’s sustainable growth and increasing its corporate value, we will always pursue the best possible system and make continuous efforts toward its enhancement.
In addition, we will disclose information fairly and promptly to our stakeholders, including shareholders, customers, business partners, local communities, and employees, and manage our business with a high degree of transparency.

The Company uses a system with an Audit & Supervisory Board and its members, who work together with the Board of Directors to supervise and audit how board directors are executing their duties. We have established a corporate governance system that is better suited to our unique systems of operation and business structure based on the independent management systems of each division and Group company, and we are continuing to enhance this system.
The following diagram provides an overview of our corporate governance system.

Overview and activities of the Board of Directors and executive system

The Board of Directors is responsible for making management decisions, and consists of a total of 11 individuals (two representative directors and nine board directors). Four of these individuals are outside directors, who are designated as independent executives as defined by the Tokyo Stock Exchange.
The Board of Directors determines business administration in accordance with the Companies Act, and has the authority to supervise how board directors are performing their duties. As stipulated in our articles of incorporation, board directors are selected by a majority decision of shareholders participating in the shareholders’ meeting with at least one-third of shareholders with voting rights present, with selection not determined through cumulative voting. Our articles of incorporation also state that there must be no more than 15 board directors.
Regarding the activities of the Board of Directors, 17 meetings were held in FY2024. The attendance rate of directors (including outside directors) and Audit & Supervisory Board members (including outside Audit & Supervisory Board members) was 99.2%. In principle, the Board of Directors meets once a month, and in addition to individual resolutions, it makes reports and deliberations group companies), progress of annual and medium-term management plans, operation status of internal control systems, response to corporate governance issues, evaluation and response to major group risks, and evaluation of the effectiveness of the Board of Directors and the status of policy investments. The Board engages in vigorous discussions and exchanges of opinions.

In FY2024, we focused our deliberations on the following matters:

• Consideration of the next medium-term business plan, NeXuS II 2026
• Actions to achieve management conscious of capital costs and stock price
• Consideration of capital investment and business strategies for qualitative improvement of the global tripolar structure
• Business support and restructuring of domestic and overseas related companies
• Human capital management
• Sustainability measures (human capital management, TCFD compliance, etc.)
• Dividend policy

Skills matrix for board directors

The following table shows the areas where expectations for board directors are particularly strong with regard to knowledge, experience, and skills, so that our Board of Directors can effectively fulfill its decision-making and supervisory functions.

Overview and activities of the Audit & Supervisory Board and its members

Kyoei Steel is a company with a Board of Auditors, which must consist of no more than five Audit & Supervisory Board members according to our articles of incorporation. It currently consists of one full-time Audit & Supervisory Board member, one Audit & Supervisory Board member, two outside Audit & Supervisory Board members, and one reserve Audit & Supervisory Board member.
Although we do not have an auditing staff organization, we have established a system for supporting the work of our one full-time Audit & Supervisory Board member through the Human Resources & General Affairs Department, Accounting & Financing Department, Internal Auditing Department, and Risk Compliance Management Office. The Audit & Supervisory Board must include at least one individual with appropriate knowledge of finance and accounting, and at least one independent executive without risk of any conflict of interest with general shareholders. The Audit & Supervisory Board held 17 meetings in FY2024. The attendance rate of Audit & Supervisory Board members (including those from outside the Company) was 100%. The Audit & Supervisory Board meets regularly once a month, and as needed.

In FY2024, we focused our deliberations on the following matters:

•  Matters to be resolved and deliberated: 33 Items. Selection ofChairman of the Audit & Supervisory Board, selection of afull-time Audit & Supervisory Board member, partial amendment of the regulations of the Audit & Supervisory Board, etc.
•  Matters to be discussed: 1 item. Discussion of Audit &Supervisory Board member compensation
• Matters to be reported: 56 reports. On the status of execution ofduties by Audit & Supervisory Board members; on the results ofon-site inspections of offices; on the results of investigations ofsubsidiaries, etc.

Overview and activities of Nomination and Remuneration Advisory Committee

The Nomination and Remuneration Advisory Committee consists of at least three members (the majority of whom are independent outside directors) selected by resolution of the Board of Directors from among independent outside directors and representative directors. It is an advisory body established to deliberate mainly on the nomination and compensation of representative directors, board directors, Audit & Supervisory Board members, and executive officers, and to provide advice and recommendations to the Board of Directors. It meets as needed.
The Committee held four meetings in FY2024. The attendance rate of the four outside directors and two representative directors was 100%. In addition to these meetings, the Company strives to enhance deliberations such as by providing a forum for discussion between the representative directors and outside directors on important matters in advance.

In FY2024, the following matters were discussed and considered.

• Executive system for the next year and personnel changes
• Consideration of candidates for outside directors
• Consideration of candidates for executive officers
• Consideration and development plan for future top management candidates
• Status of talent pool and development of future executive candidates
• Consideration of issues and review of executive compensation
• Consideration of compensation levels based on benchmarks in view of surveys by external expert organizations
• Methods and processes for determining individual compensation

Status of accounting audit

The Company’s accounting audit is conducted by KPMG AZSA LLC. The period of continuous audit is 30 years up to the fiscal year ended March 31, 2024. Engagement partners are appropriately rotated, and as a rule, no partner is involved in audit work for more than seven consecutive accounting periods (five consecutive accounting periods for the first engagement partner).
In the evaluation of the auditing firm, we collected information from the Accounting & Financing Department, the Internal Auditing Department, and the accounting auditor regarding the quality control system, independence and expertise, nature and level of audit and non-audit fees, and global audit system, among other factors, of the accounting auditor. With this, the Company evaluates the appropriateness and validity of audit activities with respect to 16 evaluation items based on “Policies for Determination of Dismissal of or Refusal to Reelect Financial Auditor” stipulated in Article 126-4 of the Regulations for Enforcement of the Companies Act and the “standards for the appropriate selection of external auditor candidates and proper evaluation of external auditors” stipulated in Supplementary Principle 3.2.1 of the Corporate Governance Code. Based on the above, we have determined that there are no particular problems with the audit firm’s systems or other areas.
The details of the audit fees are as follows.

(1) Compensation to auditing certified public accountants, etc.

(Previous consolidated fiscal year) Non-audit services for the Company and some of its consolidated subsidiaries included fees for agreed-upon procedures for applications for abatement under Japan’s Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources by Electricity Utilities, fees for prior review in the establishment of a new front-end system, fees for external cybersecurity investigations, etc.

(2) Compensation to the same network (KPMG member firms) as the auditing certified public accountants, etc. (excluding those in (1))

Director compensation, etc.

(1) Policy on the determination of director compensation amounts The Company has adopted a resolution at the Board of Directors meeting held on June 19, 2024 on the policy for determining compensation, etc. for each individual director. The resolution of the Board of Directors meeting is based on the deliberations of the Nomination and Remuneration Advisory Committee, a voluntary advisory body to the Board of Directors, regarding the details of the resolution.The Board of Directors has also confirmed that the method of determining compensation, etc. for individual directors and the details of the determined compensation, etc. are consistent with the said decision-making policy, and that the deliberations of the Nomination and Remuneration Advisory Committee are respected.
We believe that this system is in line with the related policy.

(2) Total amount of compensation, etc. by director classification, total amount of compensation, etc. by type, and number of directors subject to compensation, etc.

(Note) The above table does not include the one Audit & Supervisory Board member who is not compensated for their services.