JFE : Corporate Governance Report

(Translation for reference only)

Corporate Governance Report

(English Translation of the Japanese original)

This translation has been prepared for reference only. The Japanese language version will prevail if any discrepancy arises.

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. [phone] Security Code: 5411

https://www.jfe-holdings.co.jp/

The corporate governance of JFE Holdings, Inc. (hereinafter the "Company") is as follows.

1. 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.
3. 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.
   2. 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.
   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.
4. 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
5. • 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.

1. Be open to society
   Disclose corporate information actively and engage in constructive dialogues with diverse stakeholders to enhance our corporate value.
2. Work with communities
   Actively contribute to host communities as a good corporate citizen by emphasizing harmony and cooperation.
3. Globalize
   Endeavor to achieve understanding with people around the world, working from a global perspective and with respect to international norms, and also local cultures and customs.
4. 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.
5. Maintain proper relations with governments and political authorities
   Endeavor to build and maintain sound and proper relationships with governments and political authorities.
6. 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)

1. Provide challenging work environments
   Provide employees with attractive, safe, healthy and challenging work environments.
2. 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-compliancewith 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
2. 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))
3. 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.
2. • 3 -

(Translation for reference only)

1. The Company discloses material facts concerning the transactions stated in the preceding paragraph in an appropriate manner in accordance with laws and regulations.
2. 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
5. • 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
     2. • 4 -

(Translation for reference only)

knowledge, experiences and abilities. The number of the Directors shall not exceed 12.

• 1. 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.
  2. 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))

1. 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:
2. • 5 -