Management

Corporate Governance

Basic Approach

SMM views corporate governance as a disciplinary framework both for maximizing the corporate value of the SMM Group and for ensuring sound management practices. As such, it is one of the most important management issues.
SMM has established the following SMM Group Corporate Philosophy based on the Sumitomo Business Spirit, and Through striving to enhance our corporate governance, SMM will conduct efficient and sound business activities, make positive contributions to society, and fulfill our responsibilities to our shareholders and all other stakeholders in order to realize the SMM Group Corporate Philosophy.

  1. Sumitomo Metal Mining Co., Ltd. (SMM) in accordance with the Sumitomo Business Spirit, shall, through the performance of sound corporate activities and the promotion of sustainable co-existence with the global environment, seek to make positive contributions to society and to fulfill its responsibilities to its stakeholders, in order to win ever greater trust.
  2. SMM shall, based on respect for all individuals and recognizing each person’s dignity and value, seek to be a forward-minded and vibrant company.

SMM has adopted a Company with Audit & Supervisory Board system and an executive officer system to ensure effective execution, monitoring, and supervisory functions within management.

Formulating Corporate Governance Guidelines

SMM has established Corporate Governance Guidelines which cover our basic philosophy on corporate governance and our corporate governance framework, including our relationship with stakeholders.

Corporate Governance Framework

Under the General Meeting of Shareholders are the Board of Directors and Governance Committee, which are responsible for decision making and supervision, and the Audit & Supervisory Board and Independent Public Accountant, which are responsible for auditing. Under the Board of Directors is a structure responsible for business execution with the President as its head. Under the President are the Executive Officers who are responsible for business activities, a Management Committee, a CSR Committee that is responsible for making sure the company performs its social responsibility, an Internal Control Committee and a Corporate Value Enhancement Committee. And under the Executive Officers is an Operating Department and an Internal Audit Department, while under the CSR Committee are a Risk Management Working Group, a Compliance Working Group, a Quality Assurance Working Group, and seven CSR subcommittees. The seven CSR subcommittees are Efficient Resource Utilization, Environmental Preservation, Corporate Citizenship, Human Resources Development, Human Rights, Occupational Health & Safety, and Communications.

Decision Making and Supervisory System

Directors and the Board of Directors

SMM has three outside directors among our eight directors, and our Audit & Supervisory Board members consist of two standing Audit & Supervisory Board members and two out-side Audit & Supervisory Board members.

What the Board of Directors should ideally be

Positioning Mineral Resources, Smelting & Refining, and Mate-rials as its three core businesses, SMM aims to realize its Long-Term Vision of becoming a “World Leader in the Non-Ferrous Metals Industry.” Since all three businesses are related to non-ferrous metals, they have a mutual organic relationship and their business contents and scale are such that the Board of Directors can make decisions itself regarding diverse management issues. Furthermore, from the viewpoint of the stronger coordination currently being promoted among the three businesses, it will further stimulate the Company’s growth if the Board of Directors itself comprehensively makes decisions rather than giving strong independence to each business segment and permitting them to make their own decisions. To this end, we consider that in principle a management model is appropriate for the Company’s governance, rather than a monitoring model that oversees overall business execution after the fact.

Furthermore, in view of the distinctive characteristics of the SMM Group’s business operations, it is important to strength-en the management infrastructure (particularly regarding compliance, safety, and the environment) and therefore necessary to establish a system whereby Audit & Supervisory Board members can point out issues to directors and executive officers without hesitation. From this viewpoint, we have adopted an organizational structure of a company with an Audit & Supervisory Board in which Audit & Supervisory Board members with guaranteed independent authority can be expected to exercise their auditing functions stably over a period of four years. At present Audit & Supervisory Board members do not have the right of convocation regarding decisions of the Board of Directors or the right to vote on the Board of Directors. The resulting inability of Audit & Supervisory Board members to propose the removal of a director to the Board of Directors is an issue for companies with an Audit & Supervisory Board. We are striving to overcome this issue by appointing multiple outside directors (at least one third of members), have them become members of the Governance Committee, and deal with the appointment and dismissal of directors and executive officers in the Governance Committee.

Governance Committee

The Governance Committee is composed of one member who is the chairman of the Board of Directors, who is not an executive officer, and three independent outside directors and it was established to provide the president with advice from an objective standpoint with regard to particularly important matters relating to corporate governance, including the nomination and remuneration of directors, executive officers, and others.

Kazuhisa Nakano, an outside director, serves as chair of the Governance Committee.

Role and function of outside directors and outside Audit & Supervisory Board members

Outside directors are expected to perform two functions: an advisory function and a monitoring function.

Regarding the advisory function, in order for the SMM Group to achieve sustainable growth and increase its corporate value over the medium to long term, outside directors are expected to enhance the quality of decision-making by the Board of Directors by providing advice and making deci-sion based on their experience and other factors, without being bound by the Company’s conventional way of thinking or frameworks.

Regarding the monitoring function, outside directors are expected to serve a check function on management from an independent and objective standpoint via the Board of Directors, as well as to supervise management on behalf of share-holders and other stakeholders by providing advice during decision-making on director nomination, remuneration, and other relevant matters as members of the Governance Committee.

In order for the Company to achieve sound management and increase its corporate value over the medium to long term, outside Audit & Supervisory Board members are expected to conduct effective audits based on their knowledge and experience in specialized fields including finance, accounting, and legal matters, while maintaining sufficient coordination with standing Audit & Supervisory Board members belonging to the Company.

In addition, as part of the audit process, outside Audit & Supervisory Board members are expected to participate in key meetings, including Board of Directors meetings, and to actively express their forthright opinions from an independent and objective standpoint during the decision-making process, including not only the legality but also the appropriateness of proposals.

All the Company’s outside directors and outside Audit & Supervisory Board members have been declared as independent officers, pledging that there is no conflict of interest with that of shareholders. We also publish our standards governing the independence of outside officers on the following link.

Reason for Appointment Attendance at Meetings
Outside Director
Kazuhisa Nakano
Mr. Nakano has a wealth of knowledge and experience in corporate management and resource-related business. He is expected to contribute to the improvement of quality of the Board decision-making by providing his advice regarding long-term projects, especially in our Mineral Resources Business and Smelting & Refining Business as well as the overall plan, which is aimed toward the sustainable growth and medium- to long-term enhancement of the corporate value of the SMM Group by utilizing his knowledge and experience. He is also expected to perform a check function on management by participating in decision-making at the Board of Directors from an independent and objective standpoint, and to oversee the management on behalf of shareholders and other stakeholders by being involved in decision-making regarding nomination and remuneration of directors and executive officers as the member of the Governance Committee. Mr. Nakano is currently an outside director of the Company and the Chair-man of the Governance Committee and has been appointed as an outside director as he is currently serving the role shown above. In FY2020, the Board of Directors convened 15 times (12 regular meetings and 3 extraordinary sessions). He attended all meetings.
Outside Director
Taeko Ishii
Ms. Ishii has specialist knowledge and abundant experience as a lawyer, especially in the field of labor law. She is expected to contribute to the improvement of quality of the Board deci-sion-making by providing her advice regarding compliance and personnel/labor-related fields, which is aimed toward the sustainable growth and medium- to long-term enhancement of the corporate value of the SMM Group by utilizing her knowledge and experience. She is also expected to perform a check function on management by participating in decision-making at the Board of Directors from an independent and objective standpoint, and to oversee the management on behalf of shareholders and other stakeholders by being involved in decision-making regarding nominations and remuneration of directors and executive officers as a member of the Governance Committee. Ms. Ishii is currently an outside director of the Company and a member of the Governance Committee and has been appointed as an outside director as she is currently serving the role shown above. In FY2020, the Board of Directors convened 15 times (12 regular meetings and 3 extraordinary sessions). She attended all meetings.
Outside Director
Manabu Kinoshita
Mr. Kinoshita has a wealth of knowledge and experience in corporate management and digital business. He is expected to contribute to the improvement of quality of the Board decision-making by providing his advice regarding materials businesses and digital fields where the business environment is changing significantly, which is aimed toward the sustainable growth and medium- to long-term enhancement of the corporate value of the SMM Group by utilizing his knowledge and experience. He is also expected to perform a check function on management by participating in decision-making at the Board of Directors from an independent and objective standpoint, and to oversee the management on behalf of shareholders and other stakeholders by being involved in decision-making regarding nominations and remuneration of directors and executive officers as a member of the Governance Committee. Mr. Kinoshita is currently an outside director of the Company and a member of the Governance Committee and has been appointed as an outside director as he is currently serving the role shown above. In FY2020, the Board of Directors convened 11 times (9 regular meetings and 2 extraordinary sessions) follow-ing the appointment of Mr. Kinoshita as an outside director. He attended all meetings.
Outside Audit & Supervisory Board Member
Wataru Yoshida
Mr. Yoshida has a wealth of financial institutional experience and knowledge of corporate management. He is expected to carry out effective audits, especially regarding finance and overseas projects, based on his own knowledge and experience in order to ensure the soundness of the Group’s management and improve its corporate value over the medium to long term, while fully coordinating with the standing Audit & Supervisory Board members. In addition, as part of the audit process he is expected to participate in important meetings, including Board of Directors meetings, and during the decision-making process to actively express his frank opinions from an independent and objective standpoint, including not only the legality but also the appropriateness of proposals. Mr. Yoshida is currently an outside Audit & Supervisory Board member of the Company, and is performing the role shown above appropriately. In FY2020, the Board of Directors convened 11 times (9 regular meetings and 2 extraordinary sessions), and the Audit & Supervisory Board convened 11 times following the appointment of Mr. Yoshida as an outside Audit & Supervisory Board member. He attended all meetings of both.
Outside Audit & Supervisory Board Member
Shoji Wakamatsu
Mr. Wakamatsu has many years of auditing and management experience at an audit firm and a wealth of knowledge about accounting. He is expected to carry out effective audits, especially regarding accounting, based on his own knowledge and experience in order to ensure the soundness of the Group’s management and improve its corporate value over the medium to long term, while fully coordinating with standing Audit & Supervisory Board members. In addition, as part of the audit process he is expected to participate in important meetings, including Board of Directors meetings, and during the decision-making process to actively express his frank opinions from an independent and objective standpoint, including not only the legality but also the appropriateness of proposals. Although Mr. Wakamatsu has not been involved in corporate management other than as an outside Audit & Supervisory Board member, in addition to the above reasons, he has been involved in the management of an audit firm, and accordingly the Company has appointed him as an outside Audit & Supervisory Board member as it has determined that he is able to properly perform the roles stated above. He was newly appointed as an outside Audit & Supervisory Board member at the Ordinary General Meeting of Shareholders held in June 2021.

Auditing System

Audit & Supervisory Board

The Audit & Supervisory Board has four members (two stand-ing Audit & Supervisory Board members and two outside Audit & Supervisory Board members). Standing Audit & Supervisory Board members belonging to the Company gather in-house information in an accurate and timely manner, and audit operations appropriately based on this information, while independent outside Audit & Supervisory Board members conduct audits in a manner that takes advantage of knowledge of their respective specialist fields and diverse perspectives.

In order to ensure managerial soundness and increase the corporate value of SMM, and in accordance with the audit policies, audit plans, and other such matters prescribed by the Audit & Supervisory Board, each Audit & Supervisory Board member will attend meetings of the Board of Directors, the Management Committee, and other important meetings, receive reports and, when necessary, request explanations from directors, executive officers, and employees regarding the status of the performance of their duties, inspect import-ant approval and other such documents, and examine the status of operations and assets at the head office and other major business sites.

Collaboration between the Internal Audit Department, Independent Public Accountant and Audit & Supervisory Board Members

The Internal Audit Department regularly undertakes internal audits on the status of business execution across the SMM Group.

The Department provides an explanation of its audit plans to Audit & Supervisory Board members while passing on all relevant information. At the same time, Audit & Supervisory Board members provide details of audit plans determined at meetings of the Audit & Supervisory Board to the Internal Audit Department, accompany staff of the Internal Audit Department as required when conducting internal audits, and attend meetings when reports on the results of internal audits are delivered to executive officers and the heads of operational divisions. In FY2020, Audit & Supervisory Board members attended such meetings 14 times. KPMG AZSA LLC, an independent registered public accounting firm, audits the consolidated financial statements and the effectiveness of the internal control over financial reporting. Audit & Supervisory Board members provide details of audit plans to the independent public accountant. Audit & Supervisory Board members in turn receive explanations regarding audit plans and reports on audit results and reports reviewing each quarter from the independent public accountant. In this manner, close collaboration is maintained between the independent public accountant and Audit & Supervisory Board members.

Business Execution Structures and System

Executive Officer System

In accordance with laws and regulations and the Articles of Incorporation, the Board of Directors delegates decision-making regarding business execution to the President and executive officers, and supervises the execution of duties by the President and executive officers.

The executive officers are appointed by the Board of Directors and are entrusted with important positions such as head-ing a business division, or a division or a department at the Company’s head office, and are granted specific authority to perform their duties in each such position.

System of Internal Memorandums for Approval and the Management Committee

The basic method for making decisions on business execution is to examine and approve such matters through the system of internal memorandums. The Management Committee holds meetings for important management matters that require deliberation, thereby conducting careful decision-making and rational business judgment based on diverse perspectives.

The Management Committee is composed of the president, executive officers from the Corporate Planning Department, and other executive officers. The Chairman of the Board as well as the outside directors, and Audit & Supervisory Board members may attend Management Committee meetings. Among matters to be resolved by the Board of Directors and matters to be approved by the president, the Management Committee will deliberate from a broad perspective on matters determined to require deliberation and then will determine whether those matters will be referred to the Board of Directors. The Committee also fulfills the function of supporting approval granted by the president.

When making investments or equity contributions, we use a project risk check sheet for committees, primarily the Management Committee, to carry out deliberations regarding human rights issues such as discrimination, forced labor, and child labor, and also the political system, economy, law and order, locally-specific diseases, labor issues, religious restrictions, and the impact on the local community. In FY2020, two new investment agreements were proposed to the Management Committee, which conducted screening for human rights issues and confirmed the investments to be unproblematic. No projects were withdrawn. We will continue to carry out regular monitoring in the future.

Basic Policy and Procedures for Remuneration of Directors and Procedures for Remuneration of Audit & Supervisory Board Members

1) Basic Policy for Remuneration of Directors

Remuneration for directors of SMM is linked to the business performance of the Company, and designed to motivate directors to achieve medium- to long-term goals, based on the business structure of the Company, so that it functions as a sufficient incentive to contribute to sustainable growth, increase the corporate value of the Group over the medium to long term, and to strengthen and maintain the management base. When determining the remuneration of individual directors, the amount of remuneration is calculated using a predetermined formula in order to ensure fairness, and the Company maintains a basic policy of setting remuneration at an appropriate level based on the responsibilities of each director.

Specifically, the remuneration for directors (excluding out-side directors) shall consist of basic remuneration and bonus-es. Basic remuneration shall consist of fixed remuneration (remuneration which is neither performance-based nor non-monetary) and performance-based remuneration, etc., while bonuses shall be performance-based remuneration, etc. Outside directors shall receive only basic remuneration and no bonuses. Basic remuneration is calculated on an annual basis for each individual and paid each month in monthly installments, while bonuses are paid once annually after approval is obtained at the Ordinary General Meeting of Shareholders.

Please refer to the following link for further details.

2) Details of Procedures for Determining the Amount of Audit & Supervisory Board Member Remuneration

The amount of basic remuneration for each individual Audit & Supervisory Board member will be determined by consultation among the Audit & Supervisory Board members at the Audit & Supervisory Board within the total remuneration amount approved by the General Meeting of Shareholders.

Matters Related to Performance-based Remuneration

The indicators employed by SMM to determine performance-based remuneration include consolidated results (profit attributable to owners of the parent, profit before tax), departmental results (return on assets [ROA], free cash flow, and segment income), the degree of attainment of personal targets under medium- to long-term management strategies, and safety record (number of occupational accidents). With regards to the reasons that these indicators have been select-ed, the Company’s consolidated results (profit attributable to owners of the parent, profit before tax) were chosen as the Company views these indicators as key measures of its corporate management performance, and has set profitability tar-gets that it aims to achieve as part of its long-term vision. Performance indicators for departmental results (return on assets [ROA], free cash flow, and segment income) were selected in order to evaluate the three criteria of asset efficiency, cash flow, and absolute value of profit in a balanced manner. Regarding the degree of attainment of personal targets under medium- to long-term management strategies, we believe that the steady implementation of plans with a medium- to long-term perspective is essential in order to increase our corporate value in a sustainable manner. Finally, regarding the setting of safety record as a performance indicator, we believe that securing a safe workplace is our operating foundation as a company engaged in the mining and manufacturing industries, including the smelting and refining industry.

Method of Determining Amount of Performance-based Remuneration, etc.

The amount of performance-based remuneration, etc. is calculated by adding an amount reflecting individual performance to an amount of position-specific performance-based remuneration, etc.

For details on methods of calculation, please see “Method of Determining Amount of Performance-based Remuneration, etc.” in the Corporate Governance Report.

FY2020 Director and Audit & Supervisory Board Member Remuneration

Officer Classification Total Remuneration Basic remuneration, etc. Number of Officers
Fixed remuneration Performance-based remuneration, etc. Non-monetary remuneration, etc.
Directors (excluding outside directors) ¥315 million ¥197 million ¥118 million 6
Audit & Supervisory Board members (excluding outside udit & Supervisory Board members) ¥64 million ¥64 million - - 2
Outside directors ¥41 million ¥41 million - - 4
Outside Audit & Supervisory Board members ¥23 million ¥23 million - - 3
  • (Note)
    In addition to the above, the Company paid ¥31 million as employee salary to two Directors concurrently serving as employees.

Initiatives to Strengthen Governance

SMM positions corporate governance as one of the most important issues in our management, and is taking steps to strengthen governance.

We continue to constantly review, improve, and deepen the current state of our corporate governance in light of legal revisions and social circumstances in order to achieve even better corporate governance. We are currently considering our response to the revision of Japan’s Corporate Governance Code in June 2021.

Transitions in Governance at SMM

Picture:Transitions in Governance at SMM
June 2001 Introduction of the executive officer system [A]
Introduced the executive officer system with the aim of separating decision-making and supervisory functions in management, and revised the management system with the aim of further enhancing and strengthening the functions of each of these.
February 2007 Introduction of takeover defense measures [B]
Introduced countermeasures to large-scale acquisitions of the Company’s shares (takeover defense measures).
June 2007 Appointment of an outside director [C]
Appointed one outside director in order to strengthen corporate governance through objective management decisions by an independent, external director. Shortened the term of directors from two years to one year to clarify management responsibilities.
June 2015 Board of Directors composition changed to include two outside directors [D]
November 2015 Establishment of a Governance Committee and evaluation of the effectiveness of the Board of Directors [E]
Established a Governance Committee, with regard to particularly important matters relat-ing to governance, including the nomination and remuneration of directors, which is not based on legal direction or necessity, for the purpose of obtaining objective advice from the Chairman of the Board and outside directors, who are not executive officers. Started analyzing and evaluating the effectiveness of the Board of Directors in FY2015.
February 2016 Establishment of Corporate Governance Guidelines [F]
Established the SMM Corporate Governance Guidelines which cover our basic philosophy on corporate governance and our corporate governance framework.
June 2016 Board of Directors composition changed to include three outside directors [G]
Appointed three outside directors in order to have one third or more of the directors in the Board of Directors be outside directors.
August 2016 Outside Directors Council meeting held [H]
Started convening Outside Directors Council meetings as a venue for discussion attended only by outside directors and outside Audit & Supervisory Board members, providing an opportunity for outside directors and outside Audit & Supervisory Board members to exchange information and share understanding.
December 2016 Discussion of what the Board of Directors should ideally be [I]
The Board deliberated what SMM’s Board should ideally be, reaffirming that the Board makes a point of making decisions.
June 2018 Appointment of a female director [J]
Appointed the Company’s first female director (outside).
September 2019 Appointment of the chair of the Governance Committee [K]
Appointed outside director as chair of the Governance Committee
June 2021 Abolition of the executive advisor system [L]

Overview of Evaluation of the Effectiveness of the Board of Directors

Each year, the Board of Directors prepares and conducts a questionnaire for the directors and Audit & Supervisory Board members with the cooperation of a third-party organization. As the FY2020 evaluation of the effectiveness of the Board of Directors was the sixth occasion on which such an evaluation had been conducted, SMM engaged Japan Board Review Co., Ltd, a third-party organization, to support the analysis and evaluation process. In the evaluation, questionnaires and interviews were conducted, and the third-party organization reported to the Board of Directors, including proposals for improving its effectiveness.

Based upon the overall results of the analysis by the third-party organization and the confirmation of what the Board of Directors should ideally be (aim to achieve a Board of Directors focused on decision-making function) conducted in FY2016, the Board of Directors deliberated on its own effectiveness and confirmed its evaluation and response going forward.

Results of the FY2020 Evaluation and Future Initiatives

1) Answers to questionnaires and interview results

Most of the major items related to the effectiveness of the Board of Directors were rated highly in general.

In particular, it was found that (1) with regard to the “role and function of the Board of Directors,” the aim of the Board of Directors to be “a Board of Directors that focuses on decision-making and performs a monitoring function through its decision-making” was sufficiently shared; (2) with regard to the “operation of the Board of Directors,” the decision-making process was appropriate and allowed for sufficient discussion, as decisions were made following discussion at executive meetings (administrative meetings and Management Committee meetings) and ultimately submitted to the Board of Directors for approval; (3) discus-sions conducted by the Board of Directors and the Governance Committee were open and active; (4) with regard to the “size and composition of the Board of Directors,” the size and composition ratio were appropriate from the perspective of business size, active discussion, and decision-making, and that the member composition was appropriate in terms of knowledge and experience.

On the other hand, the analysis found that although deliberations by the Board of Directors regarding human resources (securing appropriate human resources, developing management personnel, advancing women’s careers, etc.) were identified as an area for improvement in the FY2019 effectiveness evaluation, insufficient progress had been made in this area.

2) Issues identified from questionnaires and interview results (proposals for improvement by third-party organization)

(1) The Board of Directors should conduct deeper discus-sion of the medium- and long-term challenges for the Company (medium- to long-term direction and vision for the business, including Vision for 2030, as well as the competitive environment, human resources, and environmental and social initiatives, etc.)

(2) The Company is currently working to increase opportunities for free discussion in order to facilitate deeper deliberation of such issues. Going forward the Company should continue working to conduct discussion in such formats at Board of Directors meetings or other forums.

3) Response to the above issues (deliberations at Board of Directors meetings)

(1) The Board of Directors confirmed that it will deliberate the medium- to long-term direction and vision for the business, including Vision for 2030 and where we want to be in the future, when setting basic policies in preparation for the formulation of business plans. Regarding the competitive environment, it was decided that each business division would report to the Board once per year on the Company’s position from a marketing perspective. Regard-ing human resources, the Board of Directors confirmed that it would use the occasion of the review of the Company’s personnel systems to deliberate on the matter. Regard-ing environmental and social initiatives, the Board of Directors confirmed that it will add important points from deliberations at CSR Committee meetings to the agenda of Board meetings as appropriate.

(2) Regarding the medium- to long-term challenges mentioned above, the Board of Directors confirmed that these matters will, in general, be discussed at Board of Directors meetings. However, depending on the topic, opportunities for free discussion outside of the Board of Directors meetings will also be made available.
Through the discussion and deliberation outlined above, the Board of Directors will further improve its effectiveness in an ongoing manner on the medium- to long-term challenges for the Company (medium- to long-term direction and vision for the business, including Vision for 2030 and future aspirations, as well as the competitive environment, human resources, and environmental and social initiatives, etc.)

Cross-shareholdings

When advancing our business strategy, SMM may engage in strategic shareholdings with business partners or other companies if it is judged that doing so will contribute to strengthening our business base over the medium to long term. With regard to existing cross-shareholdings, every year the Board of Directors verifies aspects such as the objectives of holdings and whether the benefits therefrom cover the Company’s cost of capital. As a result of this verification, with regard to shares whose holding is judged to have little significance, including shares considered no longer worth the cost of capital and shares judged to have become less relevant to our business due to recent business changes, we will proceed with concrete consideration based on the premise of reduction. Furthermore, in cases where a company cross-holding SMM’s shares expresses a desire to sell, we respond in a sincere manner with a view to proceeding with the sale.

With regard to the exercise of voting rights in cross-share-holdings, we determine whether to vote for or against each proposal after giving comprehensive consideration, based on the financial results and other aspects of the financial condition of each of the issuing companies, to matters such as whether each proposal will contribute to increasing the corporate value of that company over the medium to long term, and what impact it will have on the SMM’s corporate value. Decisions on voting are made particularly cautiously in circumstances such as cases of companies affected by major scandals or by losses that continue for a certain period of time.

Takeover Defense Measures

SMM will not unconditionally reject a large-scale acquisition of the shares from the outset if it will contribute to the corporate value of the Company and, in turn, the common interests of its shareholders. Nonetheless, there are some forms of corporate acquisition that deteriorate the corporate value of the target company and the common interests of its shareholders. Further, tender offer regulations under the Financial Instruments and Exchange Act of Japan do not generally apply to on-market trading. Therefore, when any large-scale acquisition of shares is made in the market, sufficient time and information are not necessarily secured for the target company and its shareholders to consider the acquisition. In addition, the regulations do not fully eliminate the threat of abusive acquisitions of shares, such as coercive takeovers, since partial tender offers are permitted. In light of these and other factors, SMM has introduced takeover defense measures in the event that it receives a proposal for a large-scale acquisition of its shares. The aim of these measures is to enable the Board of Directors to present an alternative proposal to the shareholders or ensure necessary time and information for the shareholders to decide whether or not to accept the large-scale acquisition proposal, and to deter large-scale acquisitions that are detrimental to the corporate value of the Company and the common interests of its share-holders or take other actions as necessary.

For further details, please refer to the relevant news releases for February 14 and 15, 2019.