ＪＦＥ（5411） – [Delayed] JFE Holdings, Inc. Corporate Governance Report

(Translation for reference only) Corporate Governance Report (English Translation of the Japanese original) arises. This translation has been prepared for reference only. The Japanese language version will prevail if any discrepancy Last Update: December 3, 2021 JFE Holdings, Inc. Koji Kakigi Representative Director, President and CEO Contact: Shareholder Relations Sec., Investor Relations and Corporate Communications Dept. +81-3-3597-4321 Security Code: 5411 https://www.jfe-holdings.co.jp/ The corporate governance of JFE Holdings, Inc. (hereinafter the “Company”) is as follows. I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information 1. Basic Views With the aim of promoting sustainable growth of the Company and the JFE Group (or the “Group”) and medium to long-term corporate value, and achieving and hence further enhancing the best corporate governance to embody the Corporate Vision, the Company has established the “Basic Policy on Corporate Governance,” which is published on the Company’s website. (https://www.jfe-holdings.co.jp/en/company/governance/index.html) (1) The Company continuously aims at achieving the best corporate governance and its further enhancement. (2) From the viewpoint of enhancing sustainable growth and medium to long-term corporate value of the JFE Group, the Company makes effort to pursue thoroughly fair, objective and transparent corporate governance based on the following basic concept. 1) The Company respects the rights of shareholders and makes effort to ensure an environment which allows shareholders to execute their rights appropriately, as well as to secure effective equal treatment of shareholders. In addition to shareholders, the Company gives consideration to the interests of various stakeholders including employees, customers, business partners, creditors, local communities and cooperates with them appropriately. 2) 3) The Company discloses its information appropriately and ensures the transparency of the Company. 4) The Company endeavors to ensure the effectiveness of the supervisory function of the Board of Directors on business execution as a core holding company of the JFE Group. 5) The Company engages in constructive dialogue with shareholders to contribute to the enhancement of sustainable growth and medium to long-term corporate value. (3) The Company establishes and discloses the JFE Group’s “Corporate Vision,” “Corporate Values” and “JFE Group Standards of Business Conduct” which form the framework of basic business principles which are applicable to all business activities shared by all executives and employees of the JFE Group. “Corporate Vision” The JFE Group – contributing to society with the world’s most innovative technology – 1 – (Translation for reference only) “Corporate Values” A Challenging Spirit, Flexibility, Sincerity “JFE Group Standards of Business Conduct” All JFE Group personnel are required to faithfully adhere to the following Standards of Conduct in all corporate activities. These standards embody the JFE Group’s Corporate Vision and go hand-in-hand with its Corporate Values. Senior managers are responsible for communicating these standards to employees of Group companies and their supply chain partners, and in creating effective systems and mechanisms to ensure adherence to ethical standards. Senior managers are also responsible for measures to prevent the recurrence of any violation of these standards. Additionally, they must report violations promptly and accurately to internal and external stakeholders, determine the persons of relevant authority and accountability, and resolve matters rigorously. 1. Provide quality products and services Earn the trust and acclaim of customers by endeavoring to provide safe, high-quality products and services based on superior technologies, and by fully respecting and protecting the privacy of personal and customer information. Also, leverage our superior technologies for the sustainable growth of our Group and society. 2. Be open to society Disclose corporate information actively and engage in constructive dialogues with diverse stakeholders to enhance our corporate value. 3. Work with communities Actively contribute to host communities as a good corporate citizen by emphasizing harmony and cooperation. 4. Globalize Endeavor perspective and with respect to international norms, and also local cultures and customs. to achieve understanding with people around the world, working from a global 5. Exist harmoniously with the global environment Actively work to exist harmoniously with the global environment, as well as to raise living standards and advance societies. 6. Maintain proper relations with governments and political authorities Endeavor to build and maintain sound and proper relationships with governments and political authorities. 7. Maintain crisis readiness Firmly resist all elements and organizations that threaten social order and stability, and refuse all illegal or improper demands. Also, contribute to order and safety in society by thoroughly and methodically preparing for crises such as terrorism, cyber-attacks, natural disasters and others, including by ensuring the stable availability of products and services. 8. Respect human rights Respect all employees and members of the general public as individuals and refrain from any discrimination in corporate activities. – 2 – (Translation for reference only) 9. Provide challenging work environments Provide employees with attractive, safe, healthy and challenging work environments. 10. Comply with laws and ordinances Comply with all applicable laws and ordinances, endeavor to compete fairly and freely, refrain from illegal business activities, promote sound business practices, and be faithful and sincere in all activities and dealings. [Reasons for Non-compliance with the Principles of the Corporate Governance Code] [Relevant Code] Descriptions are based on the Code as revised in June 2021. The Company complies with and practices all the Principles of the Corporate Governance Code (including the principles relating to the Prime Market that apply from April 2022). [Disclosure Based on the Principles of the Corporate Governance Code] [Principle 1.4 Strategic-Shareholdings] (1) Policy on strategic holdings of listed stocks 1) The Company’s operating companies, namely JFE Steel Corporation, JFE Engineering Corporation and JFE Shoji Corporation (hereinafter the “Operating Companies”), do not hold listed stocks as strategic holdings, in principle, provided, however, that stocks of a company deemed necessary for maintaining and growing the Group’s businesses are exceptionally held as strategic shareholdings. (Basic Policy on Corporate Governance 2-1.(5) 1)) 2) The Board of Directors meetings regularly confirm the significance of the strategic shareholdings and whether the benefits and risks of such holdings are commensurate with their capital cost, and sell strategic shareholdings if there is no significance of such shareholdings or there is a risk of damage to shareholders’ interest. In April 2016, the Company decided to reduce its strategic shareholdings by approximately 100 billion yen and sold its strategic shareholdings in the amount of approximately 140 billion yen (on a market value basis) by FY2018. In November 2019, the Company decided on a policy to further sell its strategic shareholdings in the amount of 100 billion yen and sold all or part of 143 stocks from FY2019 through FY2020. (Total sales amount: approximately 145.9 billion yen (on a market value basis)) Furthermore, in FY2020, the Board of Directors, at a meeting held in December 2020, examined the significance of its strategic holdings and the return on investment from the above perspective. (Basic Policy on Corporate Governance 2-1.(5) 2)) (2) Standards on the exercise of voting rights of strategic holdings The exercise of voting rights of strategic shareholdings is decided upon reviews by Operating Companies on content of the proposal and is appropriately implemented in consideration of shareholder interest. To be specific, the content of the proposal is to be checked by the investment application department and the investment control department, and approval will be given to proposals which are considered to pose no threat to the maximization of interest of these Operating Companies as shareholders. (Basic Policy on Corporate Governance 2-1.(5) 3)) [Principle 1.7 Related Party Transactions] (1) Competing transactions and conflict of interest transactions between the Company and Directors or Corporate Officers are to be specified as approval matters in the Board of Directors meeting in accordance with the regulations of the Board of Directors. If such transactions are to be initiated, the transactions have to be discussed and approved in the Board of Directors meeting with regard to the rationality, validity, etc. to ensure that the transactions shall not damage the interest of the Company and its shareholders. – 3 – (Translation for reference only) (2) The Company discloses material facts concerning the transactions stated in the preceding paragraph in an appropriate manner in accordance with laws and regulations. (3) In order to prevent related parties of the Company from carrying out any insider trading, the Company stipulates regulations concerning the handling of undisclosed material facts and applies them strictly. (Basic Policy on Corporate Governance 2-1.(7)) [Supplementary Principle 2.4.1 Ensuring Diversity in the Appointment, etc. of Core Human Resources] Detailed information on the ensuring of diversity in the appointment, etc. of core human resources is stated in “Other” in “3. Measures to Ensure Due Respect for Stakeholders” in “III. Implementation of Measures for Shareholders and Other Stakeholders” (P37) of this report. [Principle 2.6 Roles of Corporate Pension Funds as Asset Owners] In 2011, JFE Steel Corporation and JFE Engineering Corporation transitioned from a defined benefit pension plan to a defined contribution pension plan, and the employees eligible for the corporate pension personally manage their pension assets. However, the part of the pension attributable to the pension recipients and the qualified recipients at the time of the transition is being managed at and paid out from a general account of a major life insurance company. JFE Shoji Corporation has a defined benefit pension plan. The company avoids conflicts of interests between pension fund beneficiaries and the company by entrusting the management of the defined benefit pension plan to an asset manager who has declared its acceptance of the Stewardship Code, and each asset manager makes investment decisions and exercises voting rights at its discretion. Each company has assigned a person in charge of pension management to its finance division, and conducts regular monitoring of the asset managers, while making efforts to foster human resources to engage in the management of pension assets. [Principle 3.1 Full Disclosure] (1) The Group has established and discloses its “Corporate Vision,” “Corporate Values” and “JFE Group Standards of Business Conduct.” Please refer to “I.1. Basic Views” of this report. (Basic Policy on Corporate Governance 1-2.(3)) The Group also formulated and discloses its Medium-Term Business Plan. Detailed information is available on the Company’s website. (https://www.jfe-holdings.co.jp/en/investor/management/plan/index.html) (2) “Basic Policy on Corporate Governance” which stipulates the basic concept, framework and operation policy concerning corporate governance of the Group has been established and is disclosed on the Company’s website. (https://www.jfe-holdings.co.jp/en/company/governance/index.html) (Basic Policy on Corporate Governance 1-2., 4-1.) (3) Policies and procedures in determining the remuneration of senior management and Directors by the Board of Directors Policy and procedures in determining the remuneration of Directors, etc. are stated in “II.1.(6) Director Remuneration” of this report. In October 2015, the Company established the Remuneration Committee which comprises of a majority of Outside Directors/Audit & Supervisory Board Members and acts as an advisory body of the Board of Directors to ensure fair, objective and transparent remuneration of Directors. The Remuneration Committee deliberates matters pertaining to the basic policy on the remuneration of Directors, etc. of the Company and the Operating Companies, and reports to the Board of Directors. (Basic Policy on Corporate Governance 4-6.(4)) (4) Policies and procedures in appointing and dismissing senior management and nominating candidates for Directors and Audit & Supervisory Board Members by the Board of Directors Based on the following views, the Board of Directors decides the candidates for Directors with the involvement and advice of Outside Directors, and election will be carried out at the General Meeting of Shareholders. 1) The Company’s Board of Directors comprises of members who possess diversified – 4 – (Translation for reference only) knowledge, experiences and abilities. The number of the Directors shall not exceed 12. 2) With regard to inside Directors, persons with appropriate insight to bear decision-making of management of the whole Group and supervision of business execution will be elected from those who possess profound understanding and knowledge on the business by way of processes such as engagement in management of the Company or each Operating Company. 3) The Company elects several Independent Outside Directors with composing one-third or more of the Directors by Independent Outside Directors. Independent Outside Directors will be elected from persons who are appropriate to bear the responsibility of strengthening governance such as those who possess abundant experience as management in global enterprises or experts who possess profound knowledge, and satisfy the Company’s Independence Standards. Based on the following views, the Board of Directors decides the candidates for Audit & Supervisory Board Members with the consent of the Audit & Supervisory Board as well as the involvement and advice of Outside Directors, and election will be carried out at the General Meeting of Shareholders. 1) The Audit & Supervisory Board comprises of members who possess sufficient knowledge concerning finance and accounting. The number of Audit & Supervisory Board Members shall not exceed 6, among which half or more shall be Outside Audit & Supervisory Board Members. 2) With regard to inside Audit & Supervisory Board Members, persons with knowledge and experience enabling the auditing of execution of duties by Directors in an accurate and fair manner, who delivers an insight appropriate to bear the supervision function will be elected from those who possess profound understanding and knowledge on the business by way of processes such as engagement in management or auditing of the Company or each Operating Company. 3) The Company elects several Independent Outside Audit & Supervisory Board Members. Independent Outside Audit & Supervisory Board Members will be elected from persons who are appropriate to bear the role of enhancing auditing function such as those who possess abundant experience as management in global enterprises or experts who possess profound knowledge, and satisfy the Company’s Independence Standards. In October 2015, the Company established the Nomination Committee which comprises of a majority of Outside Directors/Audit & Supervisory Board Members, and acts as an advisory body of the Board of Directors. The Nomination Committee deliberates and reports to the Board of Directors on matters pertaining to the basic policy on the election and dismissal of the President of the Company, proposals for the election of candidates for the President of the Company, succession plans of the President of the Company, and the nomination of candidates for Outside Directors and Outside Audit & Supervisory Board Members. Furthermore, in the case where any circumstances requiring the dismissal of the President of the Company occur, the Nomination Committee deliberates and reports to the Board of Directors in a timely manner. The Board of Directors deliberates these matters based on the report from the Nomination Committee. (Basic Policy on Corporate Governance 4-2.(2) and (5), 4-3.(2) and (4), 4-6.(3)) (5) Explanation on each individual election, dismissal and nomination in electing and dismissing the senior management and nominating candidates for Directors and Audit & Supervisory Board Members With regard to the reasons for election of candidates for Outside Directors/Audit & Supervisory Board Members, “Reasons for Election” are stated in “II.1. (2) Directors and (3) Audit & Supervisory Board Members” of this report. Reasons for election of inside Directors/inside Audit & Supervisory Board Members are as follows: – 5 – (Translation for reference only) [Inside Directors] Koji Kakigi Mr. Kakigi has abundant experience and knowledge required in management of the Group, which he has accumulated through his experience in operations in human resource and labor relations departments, and execution of duties as Corporate Officer in management divisions such as general administration, legal, accounting, finance, and procurement departments in JFE Steel Corporation, the Group’s core company. He also has abundant experience and knowledge as a corporate manager, which was nurtured through his experience as Representative Director, President and CEO of JFE Steel Corporation. Currently, as Representative Director, President and CEO of the Company, he is striving to sustain the growth and enhance the corporate value of the Group. For these reasons, the Company has judged Mr. Kakigi to be suitable as a Director of the Company. Yoshihisa Kitano Mr. Kitano has abundant experience and knowledge required in management of the Group, which he has accumulated through his experience in operations in steel making technology and production control departments, and execution of duties as Corporate Officer such as supervision of steel works and overseas business, corporate planning, and IT in JFE Steel Corporation, the Group’s core company. Currently, as Representative Director, President, and CEO of JFE Steel Corporation, he is making aggressive efforts such as implementing structural reforms, and strengthening the revenue base and promoting the growth strategy with leading-edge technologies. Also, as Representative Director of the Company, he is striving to sustain the growth and enhance the corporate value of the Group. For these reasons, the Company has judged Mr. Kitano to be suitable as a Director of the Company. Masashi Terahata Mr. Terahata has abundant experience and knowledge required in management of the Group, which he has accumulated through his experience in operations such as general administration and legal departments in the Company as well as operations in human resources and labor relations departments, and execution of duties as Corporate Officer in management divisions such as accounting, finance and procurement departments in JFE Steel Corporation, the Group’s core company. He also has abundant experience and knowledge as a corporate manager through his experience as Representative Director and Executive Vice President of JFE Steel Corporation, and currently, as Representative Director and Executive Vice President of the Company, he is engaged in management control of the Group and implementation of financial and capital policies, while implementing management control of JFE Steel Corporation, the Group’s core company, as its part-time Director. For these reasons, the Company has judged Mr. Terahata to be suitable as a Director of the Company. Toshinori Kobayashi Mr. Kobayashi has abundant experience and knowledge required in management of the Group, which he has accumulated through his experience in operations related to sales of automobile steel, and execution of duties as Corporate Officer such as supervision of sales divisions in JFE Steel Corporation, the Group’s core company. In addition, Mr. Kobayashi has abundant experience and knowledge as a corporate manager, which was nurtured through his experience as Representative Director and Executive Vice President of JFE Steel Corporation. Currently, as Representative Director, President and CEO of JFE Shoji Corporation, the Group’s core company, he is making aggressive efforts such as reinforcing the domestic earnings base, and expanding overseas business. For these reasons, the Company has judged Mr. Kobayashi to be suitable as a Director of the Company. Hajime Oshita Mr. Oshita has abundant experience and knowledge required in management of the Group, which he has accumulated through his experience in corporate planning, accounting and finance, and execution of a wide range of duties as Corporate Officer such as supervision of domestic and overseas business in JFE Engineering Corporation, the Group’s core company. In addition, Mr. Oshita has abundant experience and knowledge as a corporate manager, which was nurtured – 6 – (Translation for reference only) through his experience as Representative Director and Senior Vice President of JFE Engineering Corporation. Currently, as Representative Director, President and CEO of JFE Engineering Corporation, he is making aggressive efforts such as reinforcing the domestic earnings base, and expanding overseas business. For these reasons, the Company has judged Mr. Oshita to be suitable as a Director of the Company. [Inside Audit & Supervisory Board Members] Nobuya Hara Mr. Hara has abundant experience and knowledge of finance and accounting, which he has accumulated through work in corporate planning, accounting and finance at JFE Steel Corporation, the Group’s core company, and through accounting work at the Company. He also has abundant experience and knowledge acquired through work in management of group companies at JFE Steel Corporation and while serving as an Audit & Supervisory Board Member of JFE Steel Corporation. Based on such experience and knowledge, as well as his performance as an Audit & Supervisory Board Member of the Company since he assumed office as such, the Company has judged Mr. Hara to continue to execute appropriately his duties as an Audit & Supervisory Board Member. Kumiko Baba Ms. Baba had engaged in operations such as contract negotiation with overseas parties and business alliances and launches of new business in Toshiba Corporation. Since joining JFE Engineering Corporation, the Group’s core company, she executed duties as Corporate Officer in the company in addition to supervision of overseas businesses and accounting and finance related operations and thus she has abundant experience and knowledge about finance and accounting. Given her experience and knowledge, the Company believes that Ms. Baba is capable of implementing audits of execution of duties of Directors appropriately and fairly, and has judged Ms. Baba to be suitable as an Audit & Supervisory Board Member of the Company. [Supplementary Principle 3.1.3 Sustainability Initiatives, etc.] With regard to the JFE Group’s sustainability initiatives, the Company has prepared and published the “JFE GROUP REPORT (Integrated Report)” summarizing the Company’s value creation initiatives, as well as the “JFE Group CSR Report” describing the Company’s CSR activities from the managerial, environmental, and social aspects. In May 2019, the Company announced that it endorsed the final report of the Task Force on Climate-related Financial Disclosures (TCFD) released in June 2017. In the “JFE GROUP REPORT” and the “JFE Group CSR Report,” the Company has proclaimed that it views the response to climate change as a critical management issue, and that the Group is committed to taking proactive actions to address risks and opportunities in order to support the sustainable growth of the Group. These include improving and expanding information disclosure in line with TCFD recommendations, such as communicating a long-term vision and messages and engaging in scenario analyses. As an investment in its human capital, the JFE Group engages in human resource development, emphasizing the enhancement of each employee’s capabilities and the fostering of global human resources suited to the expansion of overseas business. Positioning the promotion of human resource development as an important management issue, the Company has established hours of training per person as a specific KPI and, through various training systems at each Operating Company, the Company strives to develop and enhance employee capabilities Group-wide. Furthermore, as means of fostering global human resources, in addition to hiring and fostering general position employees of foreign nationality and staff based overseas, the Company has strengthened its human resource development through practical experience via overseas study and training for Japanese employees and overseas dispatch assignments for younger employees. The Company has published these initiatives in the “JFE GROUP REPORT (Integrated Report)” and the “JFE Group CSR Report.” Furthermore, as an investment in intellectual property, the JFE Group conducts highly creative R&D – 7 – (Translation for reference only) regarding intellectual property at each Operating Company. The formulation of Group-wide R&D strategy and the selection and promotion of important, cross-functional issues is discussed at meetings of the Group Management Strategy Committee chaired by the President of the Company, and these are engaged in by all Operating Companies working together as one. Key R&D initiatives, the current state of R&D, and R&D results at each Operating Company, in addition to R&D expenses for the entire Group for the fiscal year, are published in the Annual Securities Report. Furthermore, as an R&D result, the Group’s number of domestic registered patents is published in the JFE GROUP REPORT. During the seventh Medium-Term Business Plan period (2021 to 2024), the Company plans to invest 340 billion yen and 120 billion yen, respectively, in GX*1 and DX*2 including R&D. *1 Green transformation *2 Digital transformation https://www.jfe-holdings.co.jp/en/investor/library/group-report/index.html https://www.jfe-holdings.co.jp/en/csr/ [Supplementary Principle 4.1.1 Summary of Scope of Delegation from the Board of Directors to Management] (1) Based on the fiduciary duty to shareholders, the Board of Directors takes the responsibility to ensure sustainable growth of the Company and the enhancement of medium to long-term corporate value. In accordance with laws and regulations, the Articles of Incorporation and related regulations of the Company such as the regulations of the Board of Directors, the Board of Directors makes material decisions on management including formulation of management plans of the Group and basic policies on management. Further, the Board of Directors supervises the overall management including business execution by the executive person. (2) According to the internal rules of the Company, the Company establishes clear standards which clarify the authority of decision-making and the decision-making procedures concerning the matters pertaining to the Company and each company within the Group, and significant matters are subject to deliberation at the Company’s JFE Group Management Strategy Committee or Management Committee and resolution of the Company’s Board of Directors. (3) For the purpose of facilitating prompt decision-making related to business execution, the authority of making decisions other than those related to significant business execution set forth in the regulations of the Board of Directors, in principal, is given to Corporate Officers in charge of the corresponding business. (Basic Policy on Corporate Governance 4-2.(1)) [Principle 4.9 Independence Standards for Independent Directors] The Company has established a set of Standards for Independence of Outside Directors/Audit & Supervisory Board Members, the outline of which is stated in “II.1.(4) Independent Directors/Audit & Supervisory Board Members” of this report and disclosed on the Company’s website. (https://www.jfe-holdings.co.jp/en/company/info/pdf/independence.pdf) (Basic Policy on Corporate Governance, Appendix, 4-2.(2) and (5)) [Supplementary Principle 4.10.1 Appropriate Involvement and Advice of Independent Outside Directors through the Establishment of an Independent Nomination Committee and Remuneration Committee] Detail information on the appropriate involvement and advice of Independent Outside Directors through the establishment of an independent Nomination Committee and Remuneration Committee is stated in “Supplementary Explanation” in “1. Organizational Composition and Operation” in “II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management” (P18) of this report [Supplementary Principle 4.11.1 View on Appropriate Balance between Knowledge, Experience and Skills of the Board of Directors as a Whole, and on Diversity and Size of the Board] (1) The Company’s Board of Directors comprises of members who possess diversified knowledge, experiences and abilities. The number of the Directors shall not exceed 12. – 8 – (Translation for reference only) (2) With regard to inside Directors, persons with appropriate insight to bear decision-making of management of the whole Group and supervision of business execution will be elected from those who possess profound understanding and knowledge on the business by way of processes such as engagement in management of the Company or each Operating Company. (3) The Company elects several Independent Outside Directors with composing one-third or more of the Directors by Independent Outside Directors. Independent Outside Directors will be elected from persons who are appropriate to bear the responsibility of strengthening governance such as those who possess abundant experience as management in global enterprises or experts who possess profound knowledge, and satisfy the Company’s Independence Standards. (Basic Policy on Corporate Governance 4-2.(2)) (4) The Board of Directors identifies the skills needed for Company management and, per the Appendix, prepares a summary matrix of the main skills, etc. which each Director and Audit & Supervisory Board Member possesses. The Board of Directors will continue to review the skills, etc. needed by the Company and disclose these in a timely manner. One of the eight Directors and one of the five Audit & Supervisory Board Members are female. In addition, in terms of internationality as well, the Company has elected Directors and Audit & Supervisory Board Members who have abundant knowledge, experience and ability as corporate managers of global enterprises. The Company will continue to strive to ensure diversity of the Board composition not only in terms of knowledge and experience in various fields but also in terms of gender and internationality. [Supplementary Principle 4.11.2 Concurrent Posts Assumed by Directors and Audit & Supervisory Board Members] The Company discloses significant concurrent positions of Directors and Audit & Supervisory Board Members as well as candidates thereof in the Notice of the Ordinary General Meeting of Shareholders of the Company each year. The significant concurrent positions of Outside Directors and Outside Audit & Supervisory Board Members as of the date of the update of this report are also shown in “II.1.(2) Directors and (3) Audit & Supervisory Board Members” of this report. (Basic Policy on Corporate Governance 4-2.(4) 2), 4-3.(3) 2)) [Supplementary Principle 4.11.3 Analysis and Evaluation of the Effectiveness of the Board of Directors] In line with the Basic Policy on Corporate Governance, the Board of Directors of the Company has been evaluating the overall effectiveness of the Board of Directors since FY2015 and has been conducting analysis and evaluation by using a third-party organization to incorporate an objective standpoint independent from the Company since FY2018. In FY2020, Based on the “Practical Guidelines for Independent Directors,” the Company revised the content, including addition of some items and conducted a survey aimed at all the Directors and Audit & Supervisory Board Members concerning the following items in FY2020. In addition, the results of the initiatives taken in FY2020, based on opinions and recommendation obtained from the analysis and evaluation conducted in FY2019, were also examined. [Main content of survey] I. Operational framework for the Board of Directors (Composition and operations of the Board of Directors, support and cooperation framework of the Secretariat, and culture) II. Supervision function of the Board of Directors and functions of the advisory committees (Supervision function and status of discussions at the Board of Directors, status of discussions at the advisory committees, etc.) III. Relationships with shareholders and stakeholders As a result of discussions at the Board of Directors based on the survey results and evaluation by the third-party organization, the Board of Directors determined that its overall effectiveness was ensured through robust discussions at its meetings, as comments were proactively expressed, with the help of substantial preliminary briefing sessions at meetings of Outside Directors and Outside Audit & Supervisory Board Members and appropriate proceedings by the chairperson. – 9 – (Translation for reference only) Initiatives in FY2020 based on the evaluation results of the Board of Directors’ effectiveness up to last year are as follows: – The Board of Directors had fruitful discussions when implementing emergency measures against the spread of COVID-19 and developing the Medium-Term Business Plan in response to rapid changes in the business environment as companies are increasingly requested to stem the spread of COVID-19 and address climate change and other issues. – To the Board of Directors that conventionally consisted of corporate managers and experts in law and business administration, the Company added a female Director who is an expert in labor administration, further diversifying the composition of Outside Directors and Outside Audit & Supervisory Board Members, which resulted in more fruitful discussions at the Board meetings. – The Company worked to expand discussions on specific sustainability initiatives, by adding carbon neutrality initiatives of the entire Group to the conventional topics for reporting, including safety activities, the results of the employee awareness survey, and the operational status of the corporate ethics whistleblowing system. – At a meeting of the JFE Group CSR Council, chaired by the CEO, the Company established a system for conducting integrated risk management of the entire Group in April 2021. Under the system, the Board of Directors receives reports on all important matters and gives directions and supervises the matters. Based on discussions at the Board of Directors, the Company will continue to improve the risk management of the entire Group. The accurate and fair auditing of Directors’ execution of their duties by Audit & Supervisory Board Members and their proactive voicing of opinions and questions regarding the management decision-making and reporting at the Board of Directors meetings have vitalized deliberations at the Board meetings. It was thus determined that the Company is functioning effectively as a company with an Audit & Supervisory Board. Furthermore, the following main issues were extracted from this survey for further improvement of effectiveness. – Should further enhance the Board of Director’s supervision function over risk management of the Group and sustainability measures – Should increase opportunities for exchanging opinions only among Outside Directors and Outside Audit & Supervisory Board Members by holding meetings of Outside Directors and Outside Audit & Supervisory Board Members and other measures The Board of Directors has postponed inspection visits to the operating companies due to the spread of COVID-19. In FY2021, it will consider resuming site visits as long as the situation permits with the aim of increasing opportunities for exchanging opinions with top executives of the operating companies. Bearing the above points in mind, initiatives will be proactively undertaken to further increase the effectiveness of the Board of Directors and enhance the corporate value of the Group. (Basic Policy on Corporate Governance 4-2.(7)) [Supplementary Principle 4.14.2 Training Policy for Directors and Audit & Supervisory Board Members] With regard to matters concerning laws and regulations, corporate governance and risk management, etc. necessary for appropriate accomplishment of the roles and duties of Directors and Audit & Supervisory Board Members, the Company provides training opportunities and funding support appropriate for each Director and Audit & Supervisory Board Member at the time they assume office and continuously thereafter. In addition, especially for Outside Directors and Outside Audit & Supervisory Board Members, information is provided such as briefings on the Company’s business content, performance, finance and management issues and site visits of major business bases. (Basic Policy on Corporate Governance 4-5.) [Principle 5.1 Policies concerning Improvement of Systems and Measures for Promoting Constructive Dialogue with Shareholders] (1) The Company makes effort to contribute to the enhancement of sustainable growth of corporate value through dialogue with shareholders and investors, and establishes the Investor Relations and Corporate Communications Dept. responsible for promoting constructive dialogue. – 10 – (Translation for reference only) (2) In addition to the appointment of Directors/Corporate Officers who supervise and are in charge of the Investor Relations and Corporate Communications Dept. as the persons responsible for promoting constructive dialogue with shareholders and investors, the Investor Relations and Corporate Communications Dept. acts as the core and ensures close collaboration including appropriate exchange of information with related departments providing assistance to facilitate dialogue. (3) In order to promote active dialogue with institutional investors, a Representative Director offers various briefings concerning Medium-Term Business Plan and results announcements, etc., and domestic and international investors’ interviews, etc. With regard to individual shareholders and investors, corporate briefings and plant tours are organized. (4) The Company collects opinions and questions from the dialogue regularly, reports and shares information with Directors, Audit & Supervisory Board Members and Corporate Officers. (5) The Company establishes the disclosure policy and endeavors to prevent leakage of insider information and provide fair disclosure. (Basic Policy on Corporate Governance 2-1.(3)) 2. Capital Structure (1) Foreign Shareholding Ratio (2) Status of Major Shareholders Name / Company Name From 20% to less than 30% Number of Shares Owned (Shares) Shareholding Ratio (%) The Master Trust Bank of Japan, Ltd. (trust account) Custody Bank of Japan, Ltd. (trust account) Nippon Life Insurance Company The Dai-ichi Life Insurance Company, Limited Mizuho Bank, Ltd. JFE Employees Stock Ownership Plan STATE STREET BANK WEST CLIENT – TREATY 505234 JFE Business Partners Stock Ownership Plan Tokio Marine & Nichido Fire Insurance Co., Ltd. Custody Bank of Japan, Ltd. (trust account 7) 81,366,200 31,945,000 20,821,161 13,127,425 12,138,680 10,323,196 9,029,090 8,225,373 7,827,987 5,728,200 (3) Controlling Shareholder (except for Parent Company) (4) Parent Company ― None (5) Supplementary Explanation ･The status of the above is as of September 30, 2021. 14.11 5.54 3.61 2.28 2.11 1.79 1.57 1.43 1.36 0.99 1) Sumitomo Mitsui Trust Bank, Ltd. submitted the Report of Possession of Large Volume (Change Report), available for public inspection as of May 20, 2021 (date on which reporting obligation arose: May 14, 2021), which states that three companies jointly own the following shares. However, as of September 30, 2021, the Company could not confirm the number of beneficially owned shares and thus did not include them in the Status of Major Shareholders, as stated above. The shareholding status of the report is as follows. Name / Company Name Sumitomo Mitsui Trust Bank, Ltd. Sumitomo Mitsui Trust Asset Management Co., Ltd. Nikko Asset Management Co., Ltd. Total Number of share certificates owned (thousand shares) Holding ratio of share certificates, etc. (%) 1,500 20,232 9,534 31,266 0.24 3.29 1.55 5.09 2) Mizuho Bank, Ltd. submitted the Report of Possession of Large Volume (Change Report), available for public inspection as of July 26, 2021 (date on which reporting obligation arose: July 15, 2021), which states that four companies jointly own the following shares. However, as of September 30, 2021, the Company could not confirm the number of beneficially owned shares and thus did not include them in the Status of Major Shareholders, as stated above. The shareholding status of the report is as follows. – 11 – (Translation for reference only) Name / Company Name Mizuho Bank, Ltd. Mizuho Securities Co., Ltd. Mizuho Trust & Banking Co., Ltd. Asset Management One Co., Ltd. Total Number of share certificates owned (thousand shares) Holding ratio of share certificates, etc. (%) 12,138 3,273 709 18,405 34,527 1.98 0.53 0.12 3.00 5.62 3. Corporate Attributes (1) Listed Stock Market and Market Section (2) Fiscal Year-End (3) Type of Business (4) Number of Employees (consolidated) as of the End of the Previous Fiscal Year (5) Sales (consolidated) as of the End of the Previous Fiscal Year Tokyo Stock Exchange, First Section Nagoya Stock Exchanges, First Section March Iron & Steel 1,000 or more 1 trillion yen or more (6) Number of Consolidated Subsidiaries as of the End of the Previous Fiscal Year 300 or more 4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder ― 5. Other Special Circumstances which may have Material Impact on Corporate Governance To put into practice its Corporate Vision of “contributing to society with the world’s most innovative technology” and to realize sustainable growth and enhancement of medium- to long-term corporate value, the Company forms a corporate group comprising companies with high expertise, divides business functions within the Group and conducts businesses development outside of the Group. Among the Group companies, the Company owns three listed subsidiaries below: [Gecoss Corporation] Gecoss Corporation is mainly engaged in the rental and sales of temporary construction materials, as well as in design and construction of temporary works, etc. Gecoss Corporation provides products and services that meet customer needs primarily in the civil engineering and construction industries by partnering with JFE Steel Corporation and Group companies. The Company believes that managing Gecoss Corporation as a subsidiary will help to maximize the value of Gecoss Corporation and the JFE Group through various collaborative initiatives with JFE Steel Corporation in areas such as personnel exchange and R&D. Gecoss Corporation maintains its listed status as a means to enhance its competitiveness from the perspectives of its specialized business areas as well as to secure market recognition and credibility in funding, sales and marketing, and hiring. [JFE Container Co., Ltd.] JFE Container is mainly engaged in the manufacture and sale of steel drums and high pressure gas containers. JFE Container provides products that meet customer needs primarily in the chemical, petroleum, automobile, and gas industries by partnering with JFE Steel Corporation and Group companies. The Company believes that managing JFE Container as a subsidiary will help to maximize the value of JFE Container and the JFE Group through various collaborative initiatives with JFE Steel Corporation in areas such as personnel exchange and R&D. JFE Container maintains its listed status as a means to enhance its competitiveness from the perspectives of its specialized business areas as well as to secure market recognition and credibility in funding, sales and marketing, and hiring. – 12 – (Translation for reference only) [JFE Systems, Inc.] JFE Systems is mainly engaged in systems integration and solutions for the planning, design, development, operation, and maintenance of information systems, as well as in building systems using its products and IT infrastructure solutions that support business systems. Computer systems in the steel business support overall business activities, such as receiving orders, manufacturing, shipping products, and controlling quality, and are an important base for using diverse data. In addition, as digital transformation (DX) progresses, ensuring the accumulation of know-how and the continuity of personnel exchange will be essential for maintaining the competitiveness of JFE Steel Corporation. JFE Systems maintains its listed status as a means to enhance its competitiveness from the perspectives of its specialized business areas as well as to secure market recognition and credibility in funding, sales and marketing, and hiring. The aforementioned 3 companies are subject to rules different from those applicable to other consolidated subsidiaries, and other measures are also taken so as to ensure that each of the companies conducts autonomous corporate activities exercising autonomy and flexibility, secure management independence as listed companies, and make sure that the interest of the said subsidiaries’ shareholders other than the said subsidiaries and the Company will not be unfairly impaired. In addition, with respect to matters necessary for the Group’s risk management, prior consultation and reporting are required from the 3 companies while securing their independent decision making, so as to implement risk management as a member of the Group companies. Furthermore, the Company shall regularly verify the significance of maintaining the listing of the listed subsidiaries and take necessary measures upon confirmation at its Board of Directors. The content herein was verified and discussed at a Board of Directors meeting held in May 2021. – 13 – (Translation for reference only) II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management 1. Organizational Composition and Operation (1) Organization Form Company with Audit & Supervisory Board (2) Directors 1) Maximum Number of Directors Stipulated in Articles of Incorporation 2) Term of Office Stipulated in Articles of Incorporation 3) Chairperson of the Board 4) Number of Directors 5) Appointment of Outside Directors a) Number of Outside Directors b) Number of Independent Directors 12 1 year President Appointed 8 3 3 c) Outside Directors’ Relationship with the Company (1) Name Attribute Relationship with the Company* a b c d e f g h i j k Masami Yamamoto From another company From another company Others Nobumasa Kemori Yoshiko Ando △ △ * “○” when the director presently falls or has recently fallen under the category; * ” when the director fell under the category in the past ““●” when a close relative of the director presently falls or has recently fallen under the category; △“▲” when a close relative of the director fell under the category in the past * Categories for “Relationship with the Company” a. Executive of the Company or its subsidiaries b. Non-executive director or executive of a parent company of the Company c. Executive of a fellow subsidiary company of the Company d. A party whose major client or supplier is the Company or an executive thereof e. Major client or supplier of the listed company or an executive thereof f. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as a director/audit & supervisory board member g. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a legal entity) h. Executive of a client or supplier company of the Company (which does not correspond to any of d, e, or f) (the director himself/herself only) i. Executive of a company, between which and the Company outside directors/audit & supervisory board member are mutually appointed (the director himself/herself only) j. Executive of a company or organization that receives a donation from the Company (the director himself/herself only) k. Others – 14 – (Translation for reference only) d) Outside Directors’ Relationship with the Company (2) Name Masami Yamamoto Designation as Independent Director ○ Supplementary Explanation of the Relationship Reasons of Appointment in reforming Mr. Yamamoto has been successful in managing Fujitsu Limited for many years, a company that engages in the total solutions business globally in ICT fields, and he has extensive experience corporate and knowledge management, which he acquired conventional through business structures and processes in the rapidly changing ICT industry. Based on such in-depth knowledge and his outstanding insight, as well as his performance as an Outside Director of the Company since he assumed office as such, the Company has judged it to be suitable to reappoint him as an Outside Director of the Company, a reinforcing post corporate governance. responsible for the In addition, Mr. Yamamoto satisfies the standards for independence stipulated in the “Securities Listing Regulations” and Independence Standards established by the Company, and would have no conflict of interests with general the Company designated Mr. Yamamoto as Independent Director, based on that Mr. Yamamoto is capable of adequately bearing the supervision function from a the independent standpoint management of the Company. shareholders. Hence, judgment from has the (Significant concurrent posts) Director and Senior Advisor of Fujitsu Limited Outside Member of the Board of Directors of Mizuho Financial Group, Inc. (Attributes of Outside Director) and June (see * In FY2020, transactions between Fujitsu Limited, where Mr. Yamamoto served as an executive the 2017, until Company’s operating companies (JFE Steel Corporation, JFE Engineering Corporation and JFE Shoji Corporation) did not exceed 1% of annual consolidated net sales (revenue) of either the Company or Fujitsu Limited. Accordingly, Fujitsu Limited falls under neither the person for whom the Company or its operating is a major business company “II. 1. in partner [Independent Directors/Audit & Supervisory Board Members]” of this report) nor the person who is a major business partner of the Company operating company. As of March 31, 2021, neither the Company nor any of its operating companies owned any shares of Fujitsu Limited. The Company established the Standards for Independence of Outside & Supervisory Board Members as described in “II. 1. (4) Independent Directors/Audit & Supervisory Board Members” of this report. An Outside Director or Outside Audit & Supervisory Board Member is deemed not to have independence from the Company in the event that he/she falls under any of the items stipulated in the standards. Directors/Audit its or – 15 – (Translation for reference only) Nobumasa Kemori ○ (Significant concurrent posts) Honorary Advisor of Sumitomo Metal Mining Co., Ltd. Outside Director of NAGASE & CO., LTD. Outside Director of Sumitomo Realty & Development Co., Ltd. (Attributes of Outside Director) In FY2020, transactions between Sumitomo Metal Mining Co., Ltd., where Mr. Kemori served as an executive until June 2016, and the Company’s operating companies JFE (JFE Steel Corporation, Engineering Corporation and JFE Shoji Corporation) did not exceed 1% of annual consolidated net the (revenue) of either sales Company or Sumitomo Metal Mining Co., Ltd. Accordingly, Sumitomo Metal falls under Mining Co., Ltd. neither the person for whom the Company or its operating company is a major business partner (see * in [Independent “II. Directors/Audit & Supervisory Board Members]” of this report) nor the person who is a major business partner of the Company or its operating company. As of March 31, 2021, neither the Company nor any of its operating companies owned any shares of Sumitomo Metal Mining Co., Ltd. 1. in to addition Mr. Kemori has been successful in managing Sumitomo Metal Mining Co., Ltd., which engages in a broad range of businesses in non-ferrous metal resource development, smelting, materials production, etc., for many years, and has in metallic remarkable knowledge materials, broad experience in corporate management, including leading the construction of an overseas plant for nickel smelting, a mainstay business of Sumitomo Metal Mining Co., Ltd., and a development project for a large copper mine. Based on such in- depth knowledge and his outstanding insight, as well as his performance as an Outside Director of the Company since he assumed office as such, the Company has judged it to be suitable to reappoint him as an Outside Director of the Company, a post responsible for reinforcing corporate governance. In addition, Mr. Kemori satisfies the standards for independence stipulated in the “Securities Listing Regulations” and the Independence Standards established by the Company, and would have no conflict of interests with general shareholders. Hence, the Company has designated Mr. Kemori as Independent Director, based on the judgment that Mr. Kemori is capable of adequately bearing a the the standpoint management of the Company. independent supervision function from from 1. in “II. The Company established the Standards for Independence of Directors/Audit & Outside Supervisory Board Members as described (4) Independent Directors/Audit & Supervisory Board Members” of this report. An Outside Director or Outside Audit & Supervisory Board Member is deemed not to have independence from the Company in the event that he/she falls under any of the items stipulated in the standards. – 16 – (Translation for reference only) Yoshiko Ando ○ (Significant concurrent posts) Audit & Supervisory Board Member of Kirin Holdings Company, Limited Outside Director of Sansei Technologies, Inc. Ms. Ando has been engaged in policy making in labor administration as an administrative official for many years, and has professional expertise, abundant experience and knowledge in a wide range of fields of employment and labor, including woman’s active participation in the workforce and human resource development. Although she has no experience of participating in corporate management other than as an outside director or outside audit & supervisory board member, based on such in-depth knowledge and outstanding insight as well as her performance as an Outside Director of the Company since she assumed office as such, the Company has judged Ms. Ando to be suitable as an Outside Director of the Company. In addition, Ms. Ando satisfies the standards for independence stipulated in the “Securities Listing Regulations” and the Independence Standards established by the Company, and would have no conflict of interests with general shareholders. Hence, the Company has designated Ms. Ando as Independent Director, based on the judgment that Ms. Ando is capable of adequately bearing from a the the standpoint management of the Company. independent supervision function from 6) Voluntary Establishment of Committee(s) Corresponding to Nomination Committee or Remuneration Committee Established Committee’s Name, Composition, and Attributes of Chairperson Committee Corresponding to Nomination Committee Nomination Committee Committee’s Name Committee Corresponding to Remuneration Committee Remuneration Committee All Committee Members Full-time Members Inside Directors Outside Directors Outside Experts Other Chairperson 6 0 2 2 0 2 6 0 2 2 0 2 – 17 – Outside Director Outside Director (Translation for reference only) Supplementary Explanation In October 2015, the Company established the Nomination Committee and Remuneration Committee which act as an advisory body of the Board of Directors to ensure fair, objective and transparent personnel affairs and remuneration of the Board of Directors. The Nomination Committee deliberates and reports to the Board of Directors on matters pertaining to the basic policy on the election and dismissal of the President of the Company, proposals for the election of candidates for the President of the Company, succession plans of the President of the Company, and the nomination of candidates for Outside Directors and Outside Audit & Supervisory Board Members. The Nomination Committee comprises of 6 members including 2 Inside Directors, 2 Outside Directors and 2 Outside Audit & Supervisory Board Members. The Remuneration Committee deliberates matters pertaining to the basic policy on the remuneration of Directors, etc. of the Company and each Operating Company and reports to the Board of Directors. The Remuneration Committee comprises of 6 members including 2 Inside Directors, 2 Outside Directors and 2 Outside Audit & Supervisory Board Members. For both the Nomination Committee and Remuneration Committee, of the six members, four are Outside Directors/Audit & Supervisory Board Members possessing independence and, as these Outside Directors/Audit & Supervisory Board Members comprise a majority, the committees possess sufficient independence and objectivity. In addition, the chairpersons of both committees are determined by an internal vote of the Outside Directors/Audit & Supervisory Board Members. Currently, as an Independent Outside Director has been selected as the chairperson for both committees, the Company considers this to ensure even greater independence and objectivity. In FY2020, the Nomination Committee was convened four times, and the members attended all the meetings. In addition, the Remuneration Committee was convened five times, and the members attended all the meetings. (3) Audit & Supervisory Board Members 1) Establishment of Audit & Supervisory Board 2) Maximum Number of Audit & Supervisory Board Members Established stipulated in the Articles of Incorporation 3) Number of Audit & Supervisory Board Members 6 5 4) Cooperation among Audit & Supervisory Board Members, Accounting Auditor and Internal Audit Departments Audit & Supervisory Board Members closely cooperate with Ernst & Young ShinNihon LLC, the Accounting Auditor, by holding meetings (seven times in FY2020) periodically or whenever necessary, where Audit & Supervisory Board Members receive detailed reports on audit plans, status of audit implementation and audit results, and detailed explanation on the quality control system of the accounting auditor, and provide explanation on audit plan, etc. and opinions are exchanged. The Audit & Supervisory Board Members also closely cooperate with the internal auditing department by holding meetings (six times in FY2020) periodically or whenever necessary, where the Audit & Supervisory Board Members receive detailed reports on internal audit plans, status of internal audit implementation and results of internal audit, and opinions are exchanged. 5) Appointment of Outside Audit & Supervisory Board Members Appointed a) Number of Outside Audit & Supervisory Board Members b) Number of Independent Outside Audit & Supervisory Board Members 3 3 c) Outside Audit & Supervisory Board Members’ Relationship with the Company (1) Name Attribute Relationship with the Company* a b c d e f g h i j k l m From another company Shigeo Ohyagi Isao Saiki Lawyer Tsuyoshi Numagami Scholar △ – 18 – (Translation for reference only) * “○” when the director presently falls or has recently fallen under the category; * ” when the director fell under the category in the past ““●” when a close relative of the director presently falls or has recently fallen under the category; △“▲” when a close relative of the director fell under the category in the past * Categories for “Relationship with the Company” a. Executive of the Company or its subsidiary b. Non-exe