Inpex : Corporate Governance Report

[Translation for Reference and Convenience Purposes Only]

INPEX CORPORTION Last Update: March 27, 2024

INPEX CORPORATION

Takayuki Ueda

Representative Director, President & CEO

Contact: Corporate Communications Unit, Investor Relations Group +81-3-5572-0750

Securities Code: 1605https://www.inpex.co.jp/english/

The corporate governance of INPEX CORPORATION (hereinafter "INPEX" or the "Company") is described below.

Basic Views on Corporate Governance, and Basic Information on Capital Structure, Corporate Attributes, and

I

Other Matters

1. Basic Views

The mission of the Company is to contribute to the creation of a brighter future for society through our efforts to develop, produce and deliver energy in a sustainable way. Based on this mission, in order to achieve sustainable growth and increase corporate value over the medium- to long-term, the Company fulfills its social responsibilities in cooperation with its shareholders and other stakeholders, and works to enhance its corporate governance for the purpose of conducting transparent, fair, timely, and decisive decision-making.

The Company formulated the "Corporate Governance Guidelines" (hereinafter the "Guidelines") regarding the basic views and principles on corporate governance of the INPEX Group, as disclosed on the Company's website.https://www.sustainability-report.inpex.co.jp/fy2022/en/_assets/downloads/e-guidelines.pdf

Reasons for Non-compliance with the Principles of the Corporate Governance Code

The Company complies with all the principles of the Corporate Governance Code.

Disclosure Based on the Principles of the Corporate Governance Code Updated

[Principle 1-4: Cross-Shareholdings]

See Article 7 ("Policy Concerning Cross-Shareholdings") of the Guidelines of the Company. Fiscal year 2023's situation is as follows.

The Company assessed whether or not to hold each individual cross-shareholding by comprehensively examining the purpose of the cross-shareholding, dividend income, current transactions with the company, medium-to long-term opportunities for expanding transactions, business synergies and risks, etc., while considering the Company's cost of capital. The Company confirmed that it will consider selling shares for which the Company assessed the necessity to hold has decreased.

[Principle 1-7: Related Party Transactions]

See Article 9 ("Related Party Transactions and Submission of Pledges"), Paragraphs 1 and 2 of the Guidelines of the Company.

[Principle 2-4-1: Ensuring Diversity in the Promotion to Core Human Resources]

See "3. Measures to Ensure Due Respect for Stakeholders" of this report.

[Principle 2-6: Roles of Corporate Pension Funds as Asset Owners]

The Company entrusts the management and administration of its trust-type defined benefit corporate pension plans to financial institutions which have accepted the Stewardship Code.

For the purpose of maintaining appropriate management of the Company's pension funds, the Company established the Pension Committee which consists of board members in charge of Human Resources and Finance & Accounting and representatives from the labor union. Matters of financial administration, including formulation and revision of investment basic policy, investment management and political asset mix shall be discussed in the Pension Committee and minutes of the Pension Committee's meetings are disclosed to the beneficiaries.

An internal department monitors and manages conflicts of interest for fund investment. Members of the Pension Committee also are encouraged to participate in various training courses for strengthening their professional expertise.

[Principle 3-1: Full Disclosure]

• (i) Company objectives (e.g., business principles), management strategies and management plans

  See "Long-term Strategy and Medium-term Business Plan (INPEX Vision @2022)"as disclosed on the Company's website.

  https://www.inpex.co.jp/english/company/midterm.html

• (ii) Basic views and principles on corporate governance

  See the "1. Basic Views" of the "Basic Views on Corporate Governance, and Basic Information on Capital Structure, Corporate Attributes, and Other Matters" of this report.

• (iii) Board policies and procedures in determining the compensation of the senior management and Directors See Article 27 ("Compensation for Directors, etc.") of the Guidelines.

• (iv) Board policies and procedures in the appointment and dismissal of the senior management and the nomination of candidates for Directors and Audit & Supervisory Board Members

  See Article 25 ("Directors, etc.") and Article 28 ("Audit & Supervisory Board Members") of the Guidelines.

(v)Explanations with respect to the individual appointments, dismissals and nominations based on the above (iv)

For the reasons for nominating the candidates for Directors and Audit & Supervisory Board Members, see Notice and Material of Ordinary General Meeting of Shareholders

For the reasons for nominating Outside Directors/Audit & Supervisory Board Members, see "Directors" and "Audit & Supervisory Board Members" of "1. Organizational Composition and Operation" of "II Business Management Organization and Other Corporate Governance Systems Regarding Decision-making, Execution of Business, and Supervision of Management" of this report.

https://www.inpex.co.jp/english/ir/shareholder/meeting.html

[Principle 3-1-3: Sustainability measures ]

See "Implementation of Environmental Activities and CSR Activities, etc." of this report.

Investment in Human Capital

To realize our group's management philosophy, we believe that we need an organization and human resources that can further enhance our strengths in fieldwork, technology, and internationalism, and respond flexibly even in a rapidly changing business environment. We aim to build an organizational culture in which people can freely and openly express their opinions without being bound by preconceived notions, continue to try new things and innovate. We also seek human resources that create business value based on acceptance of diversity, willingness to grow and autonomous behavior. To achieve this, we are working on various key measures based on the Basic Policy on INPEX Human Resources Strategy.

[Basic Policy on INPEX Human Resources Strategy]

Realizing the "Most Rewarding Company to Work for" and "Employer of Choice" by creating an organization, workplace, and culture that nurture a spirit of challenge and autonomous behavior among employees.

• ⚫ Cultivating a culture that supports innovation by embracing unprecedented ideas and change

• ⚫ Building a culture that supports the achievement of goals through individual performance and collaboration with a "safety always comes first (anzen daiichi)" mindset

Placing the right people in the right places and realizing appropriate evaluation and treatment for diverse human resources

• ⚫ Realizing value creation through "training and placement of leaders" at the "global level" adapted to the speed of business and the integration of human resources with diverse backgrounds

• ⚫ Increasing motivation through transparent evaluation and competitive treatment based on such evaluation

Securing and developing human resources that can continuously realize value creation in a changing business environment and improving engagement.

• ⚫ Establishing recruitment branding for understanding and empathizing with our company business

• ⚫ Providing "practical growth opportunities" in Japan and overseas to improve our fieldwork and technical capabilities

The Company strive to enhance the world's energy supply as a widely respected business organization.

The Company aim to do this in a way that counteracts climate change and creates a future with net zero carbon emissions. Based on our long-term strategy (INPEX Vision@2022) and our dedication as a major energy supplier to contributing to the energy transition, we have developed INPEX Technical Strategies. These describe our future vision, the technological advancements the we aim to make that will be essential to our present and future, and the initiatives we intend to take.

Details regarding Technical Strategies are outlined on the corporate website.https://www.inpex.co.jp/english/business/technology/

[Supplementary Principle 4-1-1: Scope and Content of the Matters Delegated to the Management]

See Article 14 ("Roles and Responsibilities of the Board of Directors"), Paragraph 3 of the Guidelines of the Company.

[Principle 4-1-3: Succession Plan]

See Article 32 ("Succession Plan") of the Guidelines of the Company.

[Principle 4-9: Independence Standards and Qualification for Independent Directors]

See Article 29 ("Independence Standards") and Exhibit 2 ("Independence Standards for Outside Directors and Outside Audit & Supervisory Board Members") of the Guidelines of the Company.

[Principle 4-10-1: The Mandates and Rolls as well as the Policy regarding the Independence of the Composition of each Committee]

See Article 13 ("Organizational Structure") Paragraph 3, Article 25("Directors, etc.") Paragraphs 2 and 3, Article 27("Compensation for Directors, etc.") Paragraph 1 and Article 32("Succession plan") of the Guidelines of the Company.

[Supplementary Principle 4-11-1: View on the Balance of Knowledge, etc. as well as Diversity and Size of the Board of Directors as a Whole]

See Article 16 ("Composition of the Board of Directors"), Paragraphs 1 and 3 of the Guidelines of the Company.

See skills matrix of the Board of Directors as disclosed on Notice and Material of Ordinary General Meeting of Shareholders.

https://www.inpex.co.jp/english/ir/shareholder/meeting.html

[Supplementary Principle 4-11-2: Status of Concurrent Posts Held by Directors and Audit & Supervisory Board Members as Officers at Listed Companies]

Concurrent posts as officers at other listed companies held by the Company's Directors and Audit & Supervisory Board Members are disclosed in "Reference Documents for the General Meeting of Shareholders", "Business Report", "Annual Securities Report", etc.

https://www.inpex.co.jp/english/ir/shareholder/meeting.htmlhttps://www.inpex.co.jp/ir/library/securities.html

[Supplementary Principle 4-11-3: Analysis and Evaluation of the Effectiveness of the Board of Directors as a Whole]

With the aims of regularly verifying that the Board of Directors is functioning appropriately and identifying issues to resolve for continuing improvement, the Company undertakes an evaluation of the effectiveness of the Board of Directors each year, and discloses the summary of the evaluation results. Based on this policy, the ninth evaluation was conducted in FY2023. The evaluation method and summary of the results are as follows.

[Evaluation method]

An interim review of the status of initiatives to address action plans identified in the previous effectiveness evaluation was undertaken at the meeting with Outside Directors and Audit & Supervisory Board Members, and the implementation method of effectiveness evaluation for FY2023 was also discussed, including the involvement of a third-party evaluation organization.

As a result, it was decided to appoint a major outside law firm to review the content and composition of the questionnaire, the methods of consolidation and analysis by the Board of Directors secretariat and the appropriateness of the proposed improvements. Subsequently, FY2023's implementation policy and evaluation items were deliberated at the meeting of the Board of Directors meeting held in November 2023, including the content and composition of the questionnaire prepared by the Board of Directors secretariat based on review by the third-party evaluation organization.

Based on the content of this deliberation, a completely anonymous questionnaire survey (on the Web) of all Directors and Audit & Supervisory Board Members was performed with the evaluation items as follows. After the secretariat conducted consolidation and analysis of results of respondents to the survey, and received review and indications by a third-party evaluation organization on the methods of the consolidation and analysis, and the appropriation of the proposed action plans, results of the consolidation and analysis, and future challenges and initiatives were discussed at the meeting among Outside Directors and Audit & Supervisory Board Members, and Representative Directors in January 2024, and the evaluation results were confirmed at the Board of Directors meeting in February.

[Evaluation items]

The survey items for FY2023 are as follows. Each question was rated to one of four levels, with many questions having a free-response field in order to capture specific opinions.

Chapter 1: Self-evaluation

Chapter 2: Composition of the Board of Directors Chapter 3: Operation of the Board of Directors Chapter 4: Support System for the Board of Directors 3

Chapter 5: Roles and Responsibilities of the Board of Directors Chapter 6: The Nomination and Compensation Advisory Committee Chapter 7: Actions on the Previously Prepared Action Plan

Chapter 8: Comments

[FY2023 initiatives based on the results of the previous year's effectiveness evaluation]

The following is the status of FY2023 initiatives that were prepared based on the results of the Board of Directors' FY2022 effectiveness evaluation.

• 1. Enhance discussions regarding strategies ➢ Regularly reported on the progress of INPEX Vision @2022 to the Board of Directors ➢ For matters that would have a particularly large impact on achieving the plan, set up individual deliberation items and held multiple discussions

• 2. Further stimulate discussion at Board of Directors meetings

  • ➢ Provided a fuller introduction to the issues discussed at Executive Committee meetings and earlier in the Company

  • ➢ In the process of reaching a resolution on new matters, clarified the background circumstances of the matters and held multiple deliberations as needed

  • ➢ Held lectures by outside experts and exchanges of opinions with the Board of Directors on timely topics such as the situation in the Middle East. Secured opportunities for exchange such as social gatherings for officers and organized tours of major operation sites in Japan and overseas for Outside Directors and Outside Audit & Supervisory Board Members.

  • ➢ Continued to provide materials and briefings in advance and implemented new initiatives such as the presentation of matters for intensive deliberation for ensuring that the meeting was conducted in a smooth and effective manner even within the limited time available

• 3. Deeper discussions regarding the desired state of the Board of Directors ➢ More in-depth discussions were held by the Nomination and Compensation Advisory Committee on further expanding the diversity of Board of Directors members and the appropriate size and composition of the Board of Directors, and the content of these discussions were provided as feedback to the Board of Directors

• 4. Ongoing reinforcement of portfolio management ➢ Discussed the concept of fund allocation and other topics based on the status of each business in the 5 net zero fields.

  ➢ Organized information on NPV (net present value) and risks by core area and reported to the Board of Directors on an ongoing basis.

[Summary of FY2023 evaluation results]

As a result of meetings between Outside Directors and Audit & Supervisory Board Members, as well as deliberations at the Executive Committee and Board of Directors meetings, the following evaluation results were confirmed regarding the effectiveness of the Board of Directors in FY2023.

• ・ Regarding the composition of the Board of Directors, the knowledge and experience of its members are sufficiently diverse. Although generally there is no problem with the size of the Board of Directors and the ratio of Outside Directors under the current circumstances, going forward, discussions regarding the desired state of the Board of Directors, including ensuring further diversity, should be deepened.

• ・ Initiatives to stimulate discussion at Board of Directors meetings, such as holding pre-meeting briefings, sharing discussions at Executive Committee meetings, etc., and explaining and annotating technical terms, are all effective and should be continued.

• ・ The holding of lectures by outside experts, tours of operation sites in Japan and overseas, and other measures adequately ensured that non-Executive Officers were provided with opportunities to improve their knowledge and understanding, and these efforts should be continued.

• ・ The Nomination and Compensation Advisory Committee has played a necessary role in deliberations in the fields of both nomination and compensation, etc. Going forward, the independence of the Nomination and Compensation Advisory Committee should be further enhanced, and the efforts to strengthen cooperation with the Board of Directors should also be continued and deepened.

As a result of the summary of the individual evaluation results including the above, the Board of Directors as a whole was evaluated as being sufficiently effective overall in FY2023 as in the previous fiscal year.

[Initiatives for further improvement of effectiveness]

The following action plans have been established to further ensure the effectiveness of the Board of Directors going forward.

1.

Enhance discussions regarding strategies

➢

Set up several deliberation items for preparing the next medium-term business plan to ensure sufficient opportunity and time for discussion.

• 2. Stimulate discussion at Board of Directors meetings

  • ➢ Further clarify the process of submitting proposals to the Board of Directors by introducing issues and points raised at the Executive Committee meetings and in preliminary discussions, and by providing thorough explanations and annotations on technical terms in materials and pre-meeting briefings, etc.

  • ➢ Provide opportunities for appropriate interaction and exchange of opinions, including with non-members of the Board of Directors. Also, site tours will be conducted in Japan and overseas as necessary.

  • ➢ Study and implement methods such as lectures by outside experts to further enhance the knowledge of Board of Directors members on corporate management, sustainability, trends in environmental policies and regulations in major operating countries, technology trends, and more.

  • ➢ Further enhance the quality of deliberations on important items by continuing to conduct smooth and effective management through the presentation of matters for intensive deliberations, etc.

• 3. Enhancement of the function of the Nomination and Compensation Advisory Committee

  • ➢ Hold deeper discussions on a succession plan for Representative Director, President & CEO at future meetings of the Nomination and Compensation Advisory Committee, and report the results of these discussions to the Board of Directors.

  • ➢ In order to strengthen the independence of the Committee, consider the possibility of appointing an Outside Director as the Chairperson of the Nomination and Compensation Advisory Committee.

  • ➢ Further enhance reporting of the deliberations of the Nomination and Compensation Advisory Committee to the Board of Directors by the Committee Chairperson and others.

• 4. Deeper discussions regarding the desired state of the Board of Directors

➢

Continue to hold more in-depth discussions at the Nomination and Compensation Advisory Committee regarding the appropriate size and composition of the Board of Directors and wider diversity of Board of Directors members (e.g., including increasing the number of female members, and participation by those with management experience in different industries and non-Japanese members).

The third-party evaluation organization has concluded that the Board of Directors secretariat has appropriately consolidated and analyzed the results of the evaluation, and that the action plans presented above, drawn from these results and analysis, have been suitably established.

Based on these evaluation results, the Company will continue striving to improve the effectiveness of the Board of Directors.

[Supplementary Principle 4-14-2: Training Policy for Directors and Audit & Supervisory Board Members]

See Article 33 ("Training Policy") of the Guidelines of the Company.

[Principle 5-1: Policy for Constructive Dialogue with Shareholders]

See Article 34 ("Constructive Dialogue with Shareholders") and Exhibit 3 ("Policy concerning the Development of a System and Initiatives for Promoting Constructive Dialogue with Shareholders") of the Guidelines of the Company.

[Action to Implement Management that is Conscious of Cost of Capital and Stock Price]

The Company will work to continuously increase corporate value by improving capital efficiency and gaining the market's confidence in the Company's future business growth.

Please refer to pages 11 to 16 of the "Financial Results for the six months ended June 30, 2023" presentation posted on the IR section of the company's website.https://www.inpex.co.jp/english/ir/library/pdf/presentation/e-Presentation20230810-a.pdf

[Implementation of Dialogue with Shareholders, etc.]

To contribute to sustainable growth and increase corporate value over the medium- to long-term, the company is committed to communicating closely with shareholders and investors. Opinions raised by shareholders and investors are relayed to management and the Board of Directors.

Please refer to the "Information Disclosure and Activities for Shareholders and Investors" section of our Integrated Report below for more information.https://www.inpex.co.jp/english/ir/library/pdf/integrated_report/inpex_integratedreport202212_en.pdf

2. Capital Structure 5

[Status of Major Shareholders] Updated

• 1. Number of shares owned by Minister of Economy, Trade and Industry includes one Class A stock.

• 2. The status of major shareholders above is based on the shareholders' register as of December 31, 2023.

• 3. In a Report on Major Shareholders provided for public viewing on March 22, 2023, indicated that BlackRock Japan

  Co., Ltd., and its seven joint shareholders owned the following shares as of March 15, 2022. The content of the Report on Major Shareholders is as follows.

  The Company, however, has not been able to confirm the actual holding of shares as of the end of June 2023, and they are not included in the status of major shareholders above.

  Name or Company Name: BlackRock Japan Co., Ltd. and its seven joint shareholders Number of Shares Owned: 69,831,037

  Percentage of Number of Shares Owned by Total Number of Issued Shares: 5.04％

• 4. In a Report on Major Shareholders provided for public viewing on September 22, 2023, indicated that Sumitomo Mitsui Trust Asset Management Co., LTD, and its joint shareholder Nikko Asset Management Co., Ltd. Owned the following shares as of September 15, 2023. The content of the Report on Major Shareholders is as follows.

  The Company, however, has not been able to confirm the actual holding of shares as of the end of December 2023, and they are not included in the status of major shareholders above.

  Name or Company Name: Sumitomo Mitsui Trust Asset Management Co., Ltd. Number of Shares Owned: 38,195,500

  Percentage of Number of Shares Owned by Total Number of Issued Shares: 2.75% Name or Company Name: Nikko Asset Management Co., Ltd.

  Number of Shares Owned: 26,202,700

  Percentage of Number of Shares Owned by Total Number of Issued Shares: 1.89 %

• 5. In a Report on Major Shareholders (Change Report) provided for public viewing on September 22, 2023, indicated that Orbis Investment Management Limited owned the following shares as of September 15, 2023. The content of the Report on Major Shareholders (Change Report) is as follows.

  The Company, however, has not been able to confirm the actual holding of shares as of the end of June 2023, and it is not included in the status of major shareholders above.

  Name or Company Name: Orbis Investment Management Limited Number of Shares Owned: 61,280,262

  Percentage of Number of Shares Owned by Total Number of Issued Shares: 4.42%

3.Corporate Attributes

• 4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholders -

• 5. Other Special Circumstances Which May Have Material Impact on Corporate Governance Updated

The Company's Articles of Incorporation prescribe that decisions on certain important matters related to management require the resolution of a general meeting of Class A stock shareholders (hereinafter the "Class A stock shareholders' meeting"), in addition to the resolution of the general meeting of shareholders or that of the Board of Directors. The Class A stock has been issued to the Minister of Economy, Trade and Industry, and does not have voting rights at general meetings of shareholders of the Company (unless otherwise specified by laws and regulations).

The certain important matters related to management refer to the "appointment or removal of Directors," "disposition of all or a portion of material assets," "amendments to the Articles of Incorporation," "business integration," "capital reduction," and "company dissolution." The "appointment or removal of Directors" and "business integration" require the resolution of the Class A stock shareholders' meeting, if at least 20% of the total voting rights of the shareholders relating to common shares of the Company are held by a single shareholder other than a public entity, or by such single shareholder and its co-holders. With respect to the exercise of the veto rights by means of the Class A stock (resolution on the disapproval at the Class A shareholders' meeting), the Minister of Economy, Trade and Industry sets forth the guidelines for the exercise of voting rights of the Class A stock, in the Public Notice of the Ministry of Economy, Trade and Industry (No. 74, April 3, 2006). Under the guidelines, the Minister of Economy, Trade and Industry is entitled to exercise veto rights for each of the above important matters, "when it is judged there is a high probability that the Company will be managed inconsistent with its role to providea stable supply of energy to Japan in an efficient manner as a core company," or "when it is judged there is a high probability that it may adversely affect the Company's role to provide a stable supply of energy to Japan in an efficient manner as a core company," or "when there is a possibility that it may have an effect on the exercise of voting rights of the Class A stock." The aforementioned guidelines were re-announced in the Public Notice of the Ministry of Economy, Trade and Industry (No. 54, March 24, 2022), due to partial changes in contents associated with the change of the Company's trade name.

We believe the holding of the Class A stock with the aforementioned function by the Minister of Economy, Trade and Industry is an effective countermeasure to eliminate the possibility of speculative takeovers or management control by a foreign capital, resulting in inappropriate management inconsistent with the Company's role to provide a stable supply of energy to Japan in an efficient manner as a core company or causing any other adverse effects. Furthermore, we expect positive results in terms of external negotiation and credits as a national flagship company efficiently contributing to the stable supply of energy in Japan. Those are the reasons for issuing the Class A stock. The Board of Directors of the Company does not have any power over the exercise of veto rights through the exercise of voting rights of the Class A stock by Class A stock shareholders. Therefore, the Class A stock does not have the purpose of maintaining the position of the executive officers of the Company. In addition, given the limited scope of the veto rights of the Class A stock, and because the guidelines has been set forth for the exercise of veto rights, the Company believes that this measure is designed to be highly transparent to avoid unreasonable impeding the efficiency and flexibility of the Company's management and to minimize the impact thereof.

For further details on the Class A stock, please see "IV. Information on the Company, 1. Information on the Company's Stock, etc." in the Securities Report dated March 27, 2024.

Business Management Organization and Other Corporate Governance Systems Regarding Decision-making, Execution of Business, and Supervision of Management

1. Organizational Composition and Operation

[Directors]

Relationship with the Company (1)

• * Categories for "Relationship with the Company"

• * "" When the person currently falls or has recently fallen under the category "" When the person fell under the category in the past

• * "" When a close relative of the person currently falls or has recently fallen under the category "" When a close relative of the person fell under the category in the past

• 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 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

• g. Major shareholder of the Company (or an executive of 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 the Company's Outside Directors/Audit & Supervisory Board Members 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

Relationship with the Company (2) Updated

Attachments

• Original Link
• Original Document
• Permalink

Disclaimer

Inpex Corporation published this content on 27 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 March 2024 00:04:03 UTC.