Innovation management (intellectual property activities)

In order to respond to the changes in the macro business environment anticipated in Medium-term Management Plan and to support sustainable management, we will strategically promote the protection and utilization of intellectual assets that we own and acquire. From the perspective of economic security, we must strictly manage the inflow and outflow of highly confidential technical information, while in co-creation with internal and external partners, we need to share high value-added technical information with promising partners to accelerate R&D. Based on this environment, we will develop a two-pronged approach to intellectual property: a "defensive" intellectual property strategy that strengthens intellectual property risk management, and an "offensive" intellectual property strategy that actively utilizes diverse intellectual assets. As a foundation for this, we have positioned "intellectual property" as an element of our company-wide business platform, and have set forth the mission of our intellectual property activities as supporting the maximization of corporate value through the "defense" and "offense" of intellectual assets. We will disclose the status of our efforts in a timely and appropriate manner in accordance with the revised Corporate Governance Code*.
We have also re-examined the scope of intellectual property that we protect and utilize. For us, valuable intellectual assets refer to all intangible assets, including not only intellectual property rights such as patents and trademarks, but also manufacturing know-how, technical data, customer and sales information, contracts, and brands. These are important management Resources, and in order to distinguish them from intellectual property rights and intellectual property in the narrow sense, and intangible assets in the broad sense, we refer to all valuable assets held by the entire company as "intellectual assets."
* Corporate Governance Code

In light of the revised Corporate Governance Code, we believe it is crucial to continuously verify whether our investments in and utilization of intangible assets, including intellectual assets, are aligned with our management strategy and Medium-term Management Plan. Therefore, we will establish a system for managing intellectual assets in conjunction with our business operations, and through deliberation, reporting, and confirmation, we will ensure appropriate governance by management.
Specifically, the intellectual property department implements measures in accordance with each business strategy, and the progress and important matters are discussed and confirmed by Management Committee, chairperson by the President, and Enterprise Risk Management Committee and then submitted to and reported to Board of Directors as necessary. This ensures consistency with company-wide policies from the perspective of Resources allocation and risk management.
In addition, we are developing indicators, including intellectual asset KPIs, that accurately reflect intellectual property activities, so that management can monitor the implementation status of both defensive and offensive intellectual property strategies (and the resulting changes in corporate value).
Under this system, we will enhance the quality and agility of decision-making regarding intellectual assets, and through continuous review and timely revisions by management, we will further improve the effectiveness of governance that connects management and the front lines, leading to more sophisticated decision-making and operations in response to changing circumstances.

● An intellectual property governance system that links business strategy and intellectual property strategy.

Common to "GRIT," "GROWTH," and "CNX" is a defensive intellectual property strategy that forms the foundation of their businesses. They will enhance the effectiveness of company-wide governance by promoting the visualization and unification of intellectual asset management standards, promoting digital transformation, and conducting intellectual property risk assessments and incident response. In each area, they will develop offensive intellectual property strategies tailored to their specific characteristics.
In the GRIT area, we will work to improve the capital efficiency of our existing businesses. By optimizing our patent portfolio and reviewing alliance agreements, we will improve profitability and capital efficiency.
In the GROWTH domain, we will work to create growth businesses through co-creation with internal and external partners. Beyond simply utilizing patents after commercialization, we will leverage the company's entire intellectual assets to promote sharing and co-creation with promising partners from the outset, with a view to building supply chains and ecosystems. Specifically, this will involve partner exploration using IP landscapes, open and closed strategies tailored to business characteristics, and international standardization.
In the CNX domain, we will prioritize stable energy supply and provide for society in conjunction with industry GX initiatives, while carefully balancing industry alliances and profitability. We will develop our own and other companies' intellectual property environments from both institutional and contractual perspectives, and implement a highly capital-efficient intellectual property strategy that is tailored to the timing and means of provide for society for each product.
We will contribute to enhancing corporate value by thoroughly implementing defensive strategies across all our businesses, while simultaneously developing offensive intellectual property strategies tailored to each business strategy.

● Defense: Strengthening intellectual property risk management across all intellectual assets.

● Offensive: Implementing diverse intellectual property strategies that utilize the entire intellectual asset portfolio.

Our company positions diverse intellectual assets, including patents, know-how, technical data, various business information, and brands, as important management Resources, and implements intellectual property strategies tailored to the specific characteristics of each business strategy and new business plan. Until now, we have disclosed the number of patents created as one of our important intellectual assets and as a result of technological development. Going forward, we will also begin monitoring the other intellectual assets mentioned above, verifying their contribution to enhancing corporate value, and disclosing them in a timely and appropriate manner.

Towards a system that evaluates a wide range of inventions early and supports the creation of innovation.

To encourage the creation of inventions that contribute to the profitability of our business, we have established a "Employee Invention Achievement Reward System." In fiscal year 2025, we awarded the Employee Invention Achievement Reward to 12 inventors who contributed to the profitability of Advanced materials & Performance Chemicals business.
Our company's human resource strategy in Medium-term Management Plan is based on the pillars of "Empowering all employees to be key players in transformation" and "More co-creation and innovation." Therefore, going forward, we will be designing a new employee invention system that will reward a wide range of inventions (patents, know-how) that contribute to co-creation and innovation, not necessarily limited to inventions that directly contribute to the immediate profits of a specific business or inventions that lead to patent rights, but rather a system that will be implemented early and linked to external evaluations.

Transforming the foundation of intellectual property organization, operations, and human resources.

To enhance the effectiveness of our intellectual property strategies, both defensive and offensive, we are transforming the foundations of our intellectual property organization, operations, and human resources. Our fundamental concept is to view our entire portfolio of valuable intellectual assets as a management Resources, create an organization that continuously contributes to improving corporate value, and cultivate talent.
In terms of organization, we have consolidated intellectual property (IP) operations that were previously dispersed across various business units, creating an IP platform system. This facilitates flexible resource allocation, talent development, and knowledge consolidation. Meanwhile, we have established IP command centers within specific business units, strengthening practical collaboration with the IP platform to ensure agile implementation tailored to the specific characteristics of each business.
In terms of operations, we are improving efficiency in routine patent work, where expertise has been accumulated internally, by actively utilizing external resources and introducing generation AI. As a result, the human Resources of the intellectual property department will shift to tasks that involve thinking about and implementing both defensive and offensive intellectual property strategies. We will redefine the skills required of such intellectual property specialists as a axis for contributing to management, create an efficient training plan, and connect it to executive personnel development in conjunction with the company-wide human resource strategy.

● Organizational, operational, and human resource transformation through an intellectual property platform