JX Advanced Metals Group Basic Policy on Corporate Governance

JX Advanced Metals Corporation (hereinafter the “Company”) collectively works as a group to enhance its corporate governance. In this way, we increase our management soundness and transparency while also contributing to the enhancement and maintenance of our management foundation in an effort to achieve sustainable growth of the Group and improve our medium- to long-term corporate value, thereby fulfilling our responsibilities to our shareholders and other stakeholders.

The Company takes suitable action to effectively ensure the voting rights and other rights of shareholders, and we also treat shareholders equally according to the number and class of shares they own in terms of shareholders exercising their voting rights at general meetings as well as the payment of dividends from surplus. In addition, we strive to maintain an environment that enables shareholders to exercise their voting rights in an appropriate manner at general meetings.

When the Company or the Group engages in transactions with the Company’s executives or with ENEOS Holdings, Inc., which is a major shareholder of the Company, or its subsidiaries (excluding the Company’s subsidiaries) (hereinafter the “related party transactions”), the Company or the Group will follow our in-house regulations and do so only based on a resolution of the Company’s Board of Directors or after obtaining the prescribed approval. In addition, the Company or the Group will regularly report the results of certain designated related party transactions to the Board of Directors of the Company.

1. AIn general, the Company does not hold listed company shares. However, we do hold, as cross-shareholding, the shares of companies that play an important role in the Group’s business or otherwise when we determine that holding of shares of such companies will contribute to the sustainable growth and improvements in medium- to long-term corporate value of the Group.
2. BRegarding our exceptional holding of shares as cross-shareholdings, the Board of Directors of the Company will regularly verify the suitability of such holding of shares by carefully reviewing whether the objective of holding such shares is suitable as well as whether the risks and benefits associated with such holding are appropriate given the cost of capital and will disclose the results of said verification.

Regarding the exercising of voting rights related to cross-shareholdings, we determine whether to vote for or against each proposal based on whether such voting would contribute to the sustainable growth and improvements in the medium- to long-term corporate value of the Group and the issuing company, considering the significance and objectives of holding of such shares. If the Company considers that an explanation of the agenda proposed by the issuing company is necessary to determine whether to vote for or against the agenda items, we will request one. In addition, we will be especially careful when making such decisions in cases where there are concerns about the issuing company, including a worsening management environment, major scandal, or governance problems.

1. AIf a cross-shareholder holding the Company’s shares (hereinafter “cross-shareholders) expresses its intention to sell these shares, we will not do anything to interfere with the sale, such as suggesting that we will do less business with them.
2. BWhen doing business with cross-shareholders, the Company will sufficiently verify the economic rationality of transactions and will not engage in any transactions that might harm the common interests of the Company and its shareholders.

The officers and employees of the Group are well aware of the fact that the Group’s sustainable growth and medium- to long-term corporate value creation are only possible with the resources and other contributions provided by various stakeholders, including shareholders, customers, business partners, employees, and the local community. We therefore strive to collaborate with such stakeholders appropriately by implementing the JX Advanced Metals Group Code of Conduct.

Based on the JX Advanced Metals Group Code of Conduct, which calls for the preservation of the environment, coexistence and mutual prosperity with society, respect for human rights and other goals, the Group makes selection of its materiality issues (issues requiring prioritized efforts) and takes steps to achieve the JX Advanced Metals Group Long-Term Vision for 2040.

To quickly gain an understanding of and take corrective action in response to violations of the Group’s articles of incorporation and in-house regulations as well as other laws and regulations, the Company will establish an internal reporting system that enables users to directly report to lawyers and external organizations. While running this system, we will protect system users appropriately in line with all relevant laws and regulations as well as in-house regulations.

The Directors ensure appropriate collaboration with our shareholders and other stakeholders while striving to achieve the sustainable growth of the Company and improve its medium- to long-term corporate value to protect the common interests of our shareholders.

The Board of Directors deliberates on items prescribed by laws and regulations and the articles of incorporation as well as other items that are material in terms of management and supervises our business-execution situation.

The Board of Directors maintains sufficient number of members to enable active and constructive discussions and exchange of opinions and consists of a diverse and balanced range of members with knowledge, experience, and abilities necessary to effectively fulfill the roles and responsibilities of the Board of Directors as a whole. In addition, we aim to achieve highly transparent management by appointing at least one third of the Directors as the Independent Outside Directors.

In addition to regular meetings, the Board of Directors holds extraordinary meetings as necessary, thereby achieving a system that enables flexible decision-making.
To ensure necessary and sufficient discussions for making important business execution decisions and for supervising the situation of such execution, we set appropriate agenda items and deliberation time for the Board of Directors and provide the Directors with the agenda and any relevant deliberation materials in advance.

To ensure that the Board of Directors can actively engage in constructive discussions and exchange opinions, the Board of Directors Office provides the Directors and the Board of Directors with sufficient support. In addition, the Directors are allowed to request the Company to provide additional information whenever necessary to fulfill their duties and responsibilities.

Given the increasing demand of the society for enhanced corporate governance and internal control, the Company appoints the Outside Directors to equip the Company with a checking function based on an outside perspective as well as decision-making function based on a new perspective.

To effectively guarantee the independence of the Independent Outside Directors, the Company formulates and discloses the independence criteria for the Independent Outside Directors based on the independence criteria established by the Tokyo Stock Exchange.
<Appendix:Independence Criteria for Independent Outside Directors>

We provide the following support as necessary to ensure that the Outside Directors can effectively fulfill their duties and responsibilities.

1. ATo facilitate comprehensive deliberations by the Board of Directors, we provide the Outside Directors with advance explanations of major agenda items for the meetings of the Board of Directors.
2. BTo deepen the Outside Directors’ understanding of our business, they are given opportunities to visit the Group’s operating sites.
3. CWe hold meetings attended only by the Independent Outside Directors so that they can collect information on the agenda items of the meetings of the Board of Directors and other information related to the Group management and exchange opinions on such information and try to get on the same page.

The Company’s Board of Directors refers to the self-evaluations of each Director and other information to analyze and evaluate the effectiveness of the Board of Directors as a whole and then discloses an overview of the results.

The Audit and Supervisory Committee supervises the situation of business execution of the Company through the exercising of voting rights at the Board of Directors by the Directors who also serve as the Audit and Supervisory Committee Members as well as the exercising of the right to state opinions on personnel matters and compensation by the Directors who are not the Audit and Supervisory Committee Members. In addition, to ensure the soundness of our management and improve the corporate value of the Company, each Audit and Supervisory Committee Member attends meetings of the Board of Directors and other important meetings in line with the auditing policy, auditing plan, and other details established by the Audit and Supervisory Committee. At such meetings, the Directors, Executive Officers, and employees report on the execution of their duties, and the Committee Members may request additional explanations as necessary, view important approval documents, and investigate the situation of businesses and assets at the head office and other major operating sites.

The Audit and Supervisory Committee mainly consists of members with a wealth of knowledge and experience as well as strong independence who also serve as the Outside Directors. The Audit and Supervisory Committee also includes members with knowledge of finance, accounting, and legal affairs.

We have established an organization specialized in assisting the Audit and Supervisory Committee with their duties. The Committee regularly receives reports from the accounting auditors and the Internal Auditing Department on the auditing plan and auditing results, and exchange opinions and information with them for collaboration.

We have established the Nomination and Compensation Advisory Committee as an advisory body to the Board of Directors to enhance the objectivity and transparency of procedures related to nominating, compensating, and otherwise dealing with the Company’s Directors and to flesh out our corporate governance. Based on inquiries from the Board of Directors, the Nomination and Compensation Advisory Committee deliberates on the personnel plan for the Company’s Directors (including appointment and dismissal), the compensation determination policy and compensation system for the Company’s Directors and Executive Officers, the Company’s presidential succession plan, and other details and then reports back to the Board of Directors.

Given that the Nomination and Compensation Advisory Committee serves as an advisory body to the Board of Directors, the majority of the members shall be the Independent Outside Directors, and the Committee shall be chaired by an Independent Outside Director. For avoidance of doubt, we admit a Full-Time Audit and Supervisory Committee Member to attend meetings of the Nomination and Compensation Advisory Committee to ensure that the Audit and Supervisory Committee can exercise its right to state opinions at the general meetings of shareholders on the nomination and compensation of the Directors who are not the Audit and Supervisory Committee Members.

To enable accounting auditors to conduct high-quality audits, the Company ensures they have sufficient time and opportunities for interviews with the management and strives to facilitate cooperation between accounting auditors and the Audit and Supervisory Committee Members, the Internal Auditing Department, and the Outside Directors. We also strive to respond appropriately when the accounting auditor has discovered any irregularities or pointed out any deficiencies or problems.

The Company appoints Executive Officers to function as a body to flexibly execute business based on the decisions of the Board of Directors.

1. (i)The Board of Directors makes decisions on important items that include our management strategy and policy based on laws, the articles of incorporation, and in-house regulations while delegating other decisions on business execution to the President and the Executive Officers. The Board of Directors supervises the execution of duties by the President and the Executive Officers.
2. (ii)The Board of Directors also delegates certain other important business execution decisions to the President in order to flesh out discussions of important items by the Board of Directors and further increase the flexibility and speed of business execution.

We have established the Executive Meeting as an advisory body to the President to discuss important issues related to the Company’s management and report on or communicate regarding the business execution situation.

The Executive Meeting consists of the President and the Executive Officers nominated by the President. In addition, a Full-Time Audit and Supervisory Committee Member may attend meetings of the Executive Meeting and can express opinions in cases where it is deemed necessary.

To achieve the sustainable growth of the Group and improve its medium- to long-term corporate value, we nominate and appoint, as a Director candidate or the management member, a person who is deemed appropriate by comprehensively considering such person’s track record, experience, skills, knowledge, abilities, and other qualities and who is mentally and physically healthy and possesses a high-level integrity. When nominating a Director candidate, we put emphasis on whether the person is capable of supervising our management effectively, and when appointing a management member, we put emphasis on whether the person is capable of making prompt and bold decisions related to the execution of important businesses. In particular, when appointing a management member, we put emphasis on whether the person has a deep understanding of the Group and its business as well as relevant specialized knowledge and experience.
After deliberation by the Nomination and Compensation Advisory Committee, the Director candidates are nominated and the management members are appointed by the resolution of the Board of Directors.
When nominating a Director candidate, we consider the balance of the knowledge, experience, and abilities that the Board of Directors should possess as a whole based on the Company’s skill matrix, and we consider the balance of diversity and sufficient number of members necessary to promote the diverse and candid exchange of opinions and improve the effectiveness of the Board of Directors.

Based on the above policy as well, we nominate the following persons as the Director candidates who also serve as the Audit and Supervisory Committee Members: individuals who possess the track record, experience, skills, knowledge, abilities, and other qualities we consider necessary given their expected role, which is to audit and supervise the execution of duties by the Directors. (In particular, we put emphasis on their knowledge and experience related to finance, accounting, and legal affairs.)
When nominating candidates for the Directors who also serve as the Audit and Supervisory Committee Members, we consider the balance of knowledge, experience, and abilities of the Audit and Supervisory Committee as a whole, making sure to include at least one member of the Committee has sufficient knowledge of finance and accounting.

In addition to the above two policies, we have a policy of nominating, as an Outside Director candidate, a person who possesses the track record, experience, skills, knowledge, abilities, and other qualities we consider necessary given the expected role, which is to supervise management from an independent and objective perspective.
We nominate, as an Outside Director candidate, a person who is determined to have no independence problem based on the Independence Criteria for Independent Outside Directors established by the Tokyo Stock Exchange and the criteria for the independence of Independent Outside Directors formulated by the Company.

If any of the management member is no longer compliant with any of the criteria established by the Company’s appointment policy, violates laws and regulations, the articles of incorporation or similar rules of the Company, or otherwise significant impediments arise in the performance of the member’s duties, the Nomination and Compensation Advisory Committee will deliberate on dismissing the member, and the dismissal of the member will be determined by a resolution of the Board of Directors.

The Company considers it extremely important to appoint as President a person best suitable for achieving the sustainable growth of the Group and improving its corporate value. Therefore, to ensure that a suitable presidential successor can be properly trained to succeed to office in a timely manner, we formulate a presidential succession plan and implement it accordingly after deliberation by the Nomination and Compensation Advisory Committee.
In addition to being involved in the formulation of the presidential succession plan, the Nomination and Compensation Advisory Committee sufficiently supervises the succession by confirming the plan’s operational situation. The Board of Directors then passes a resolution to nominate the President based on a report from the Nomination and Compensation Advisory Committee.

To establish a compensation system that enables us to achieve the sustainable growth of the Group and improve our medium- to long-term corporate value, thereby fulfilling our responsibilities to our shareholders and other stakeholders, the individual compensation for executive Directors who are not Audit and Supervisory Committee Members as well as Executive Officers consists of fixed compensation, short-term performance-based compensation, and long-term performance-based compensation (stock-based compensation), which are intended to increase their incentives to help the Company achieve its management plan and to further enhance value sharing with shareholders. In contrast, the compensation for the non-executive Directors, including the Directors who also serve as the Audit and Supervisory Committee Members, consists only of fixed compensation intended to ensure that they fulfill their duties in terms of supervising and auditing the business execution situation.

In terms of fixed compensation, we determine the annual compensation for each position by comprehensively considering the position, duties, and other details of the Directors and the Executive Officers as well as whether they work full or part-time and then pay this compensation on a monthly basis.

Short-term performance-based compensation is based on the achievement of performance goals set for each individual (according to individual evaluations) as well as performance indicators related to single-year performance, etc. (Company-wide performance) and is paid after the corresponding fiscal year ends. Performance indicators related to Company-wide performance that we use include our consolidated operating profit and net debt/EBITDA ratio. In addition, given that our Representative Director is ultimately responsible for our Company-wide performance, no portion of short-term performance-based compensation of the Representative Director is based on individual evaluations.

Long-term performance-based compensation (stock-based compensation) consists of a fixed portion as well as a portion that is based on the achievement of business performance, etc. during a certain period (the performance-based portion). The fixed portion is paid after the corresponding fiscal year ends, while the performance-based portion is paid after the corresponding period ends. Indicators related to the performance-based portion that we use include our consolidated operating profit, ROE, and total shareholder return (TSR) as well as non-financial indicators (workplace safety, employee engagement, and a comprehensive evaluation of sustainability efforts by external organizations). Note that the paid stock is restricted stock that is not fully transferable for a certain period after payment.

To determine the ratio of each type of compensation for Directors who are not Audit and Supervisory Committee Members (excluding Outside Directors) as well as Executive Officers, our basic policy is to adopt a competitive compensation structure that enables us to secure talented management personnel, while enhancing their incentives for achieving our management plan and further enhancing value sharing with shareholders, and we also consider the position and duties of each Director and Executive Officer as well as the executive compensation structure ratios of other companies and other necessary elements.

Of the short-term performance-based compensation for Directors who are not Audit and Supervisory Committee Members (excluding Outside Directors) as well as Executive Officers, the determination of the portion based on the achievement of performance goals set for each individual (according to individual evaluations) is delegated to the President and Representative Director as we consider it appropriate to delegate the determination to the President and Representative Director, who is familiar with the Group’s management situation as well as the overall business execution situation of each Director and Executive Officer. To ensure the proper execution of the corresponding authority, the President and Representative Director reports the details of the above decisions to the Nomination and Compensation Advisory Committee and respects any opinion of the committee.

Based on reports received from the Nomination and Compensation Advisory Committee, we determine the position-specific details (excluding the portion related to individual evaluations, which is delegated to the President and Representative Director) of individual compensation for Directors who are not Audit and Supervisory Committee Members as well as Executive Officers based on the resolutions passed by the Board of Directors.
In contrast, we determine the individual compensation and other details for the Directors who also serve as the Audit and Supervisory Committee Members based on discussion by such Directors.

The Company provides the Directors with the opportunities to receive the training they need to fulfill their duties and responsibilities. Similarly, upon appointing the Outside Directors, the Company explains basic aspects of its business to them and later provides opportunities for them to deepen their understanding of the Group, including visits to the Group’s operating sites.

The Company discloses both financial and non-financial information appropriately as required by laws and regulations, and also discloses other information in a timely and appropriate manner.

The Company actively engages in dialogues with shareholders with the aim of improving the Group’s medium- to long-term corporate value. We specifically follow the following procedures.

1. (i)The Company’s President oversees overall dialogues with shareholders, and the department in charge of IR coordinates and collaborates with each relevant in-house division to promote dialogues with shareholders.
2. (ii)The Company conducts surveys of beneficial owners, and the Company’s President and other management members visit institutional investors both within and outside of Japan and take other steps to facilitate dialogues with shareholders.
3. (iii)We hold briefing sessions for institutional investors and other similar shareholders on the Company’s financial results and management strategy explained by the President as well as briefing sessions for individual investors on our business. In addition, we have established a contact point to handle inquiries from shareholders on the Company website.
4. (iv)We report the opinions and needs of shareholders gained through dialogues with them to the Board of Directors and to the management members in a timely and appropriate manner, and we make the best use of such information for the management of the Company.
5. (v)When engaging in dialogues with shareholders, we manage insider information in accordance with laws and regulations and our in-house regulations.

The Company determines that any Outside Directors who satisfy the requirements below to be truly independent officers for whom there is no risk of conflicts of interest with general shareholders.

1.Outside Directors must not be any of the people described below.

1. (1) Major business partners^*1 of the Company or individuals who execute their business
2. (2) Business operators^*2 to whom the Company is a major business partner or individuals who execute their business
3. (3) Major lenders^*3 of the Company or individuals who execute their business
4. (4) Legal experts, accounting experts, or consultants^*4 who have received a lot of compensation from the Company other than compensation payable to executives (or any such experts or consultants who belong to corporations, unions, or other organizations that have received such compensation, excluding individuals who are categorized under (5) below)
5. (5) The Company’s accounting auditor or certified public accountants who belong to an auditing firm acting as the accounting auditor
6. (6) Individuals^*5 who have received significant contributions from the Company (or individuals who run the business of corporations, unions, or other organizations that have received such contributions)
7. (7) Major shareholders^*6 of the Company or individuals who execute their business

1. 1Any customer responsible for over 2% of the Company’s consolidated sales during any of the most recent three fiscal years
2. 2Any business operator responsible for over 2% of the Company’s consolidated sales or over 10 million yen in sales, whichever is higher, during any of the most recent three fiscal years
3. 3Any lender responsible for loaning the Company over 2% of its consolidated total assets as of the final day of any of the most recent three fiscal years
4. 4Any individual who has received over 10 million yen in total compensation from the Company during any of the most recent three fiscal years (or any individual who belongs to an organization that has received compensation from the Company that exceeds 2% of that organization’s sales or 10 million yen, whichever is higher, during any of the most recent three fiscal years)
5. 5Any individual who has received over 10 million yen in total contributions from the Company during any of the most recent three fiscal years (or any individual who belongs to an organization that has received total contributions from the Company that exceed 2% of that organization’s total income or 10 million yen, whichever is higher, during any of the most recent three fiscal years)
6. 6Any shareholder who has at least 10% of the Company’s total voting rights

2.Outside Directors must not have a second-degree or closer relative who corresponded to any of the following during any of the most recent three years (excluding unimportant individuals).

1. (1) Any individual who executes business for the Company or one of its subsidiaries
2. (2) Any individual who corresponds to any of 1. (1) to 1. (7) above

3.In addition, the Outside Directors must not pose any risk of creating a conflict of interest with the Company, regardless of sections 1 and 2 above.