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About INPEX

Corporate Governance

Basic Policy on Corporate Governance

In order to achieve sustainable growth and increase corporate value over the medium- to long-term, INPEX 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.

Corporate Governance Report

INPEX has presented and disclosed the Corporate Governance Report describing basic views on our corporate governance and others in accordance with the regulations for the stock exchange.

Structure for Corporate Governance

1. Management System

INPEX has adopted an Audit & Supervisory Board Member organizational structure, under which Audit & Supervisory Board members audit the execution of operations, which are in turn carried out by directors well versed in their field. In addition, the Company has introduced an Executive Officer System to pursue the management with agility and efficiency. INPEX frequently engages in negotiations with the governments of oil-producing countries and overseas oil companies. This necessarily requires internal directors and executive officers who have knowledge, expertise and international experience relating to the Company’s business and both a sound knowledge of the Company and their particular field of expertise. Internal directors in principle hold the concurrent position of executive officers. By adopting this concurrent organizational structure, the Company’s Board of Directors is better placed to execute operations in an efficient manner. At the same time, this structure helps to ensure effective operating oversight.
In addition to enhancing the transparency of management and bolstering the ability of the Board of Directors to carry out its supervisory function, INPEX has appointed five of its 14-member Board of Directors from outside the Company. Through this initiative, steps have been taken to ensure that management issues are considered and deliberated with a greater degree of objectivity from an independent standpoint. Moreover, four of the Company’s five Audit & Supervisory Board members are also appointed from external sources. In addition to putting in place an Audit & Supervisory Board, INPEX has set up the Audit & Supervisory Board Members’Office and deployed dedicated staff and is reinforcing collaboration between Audit & Supervisory Board members and the Audit Unit, as well as independent auditors.

Corporate Governance Framework

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Overview of the Corporate Governance Structure
■ Organizational structure Company with Audit & Supervisory Board Member
■ Directors Number of directors as stipulated by
the Articles of Incorporation
up to 16
  Number of directors (number of outside directors) 14 (5)
  Term of office 1 year
■ Audit & Supervisory Board Members Number of Audit & Supervisory Board members
as stipulated by the Articles of Incorporation
up to 5
  Number of Audit & Supervisory Board members (number of outside Audit & Supervisory Board members) 5(4)
  Term of office 4 years
■ Number of independent directors and auditors 9
(5 outside directors, 4 outside Audit & Supervisory Board Members)
■ Rights plan and other measures to protect against a takeover None
■ Other Issuance of a Class A Stock to the Minister of Economy, Trade and Industry
[1] Directors and Board of Directors

The responsibilities of the Board of Directors shall be to fully exercise its supervisory function, secure fairness and transparency in management, and ensure sustainable growth and increase corporate value over the mid- to long term through implementation of effective corporate governance, with recognition of its fiduciary responsibility to shareholders.
The Company’s Board of Directors comprises 14 members, five of whom are outside directors. In addition to a monthly meeting, the Board of Directors meets as necessary in order to discuss and determine matters concerning management strategy, important business execution, and also supervises the execution of duties by directors. In addition, the term of office for directors was set at one year from June 2012. This initiative helps to enhance the ability of directors to respond to changes in the Company’s operating environment in a timely manner and to further clarify management responsibilities.

[2] Executive Committee and Executive Officer System

From the perspective of increasing the speed of decision making related to the execution of business, we have established an Executive Committee. The meetings are held weekly and as necessary. At the Executive Committee, flexible decision making is conducted for resolutions not affiliated with the Board of Directors, and deliberation is held to contribute to decision making by the Board of Directors.
We implemented an Executive Officer System in order to respond accurately and quickly to a rapidly changing management environment and the expansion of our business activities. The term of office for executive officers is set to one year, the same as for directors.

[3] Audit & Supervisory Board and Audit & Supervisory Board Members

INPEX has adopted an Audit & Supervisory Board Members system. The Audit & Supervisory Board is composed of five Audit & Supervisory Board members, four of which come from outside.
In addition to attending meetings of the Board of Directors and the Executive Committee, the Audit & Supervisory Board members review the execution of business duties by directors and executive officers through reports given by and hearings for related departments. Furthermore, the Audit & Supervisory Board members meet on regular and as needed bases with the Independent Auditors, and receive reports from the Independent Auditors regarding audits. They also conduct regular meetings with the internal audit department (Audit Unit) to receive reports regarding internal audits and the evaluation of internal controls.
To strengthen the auditing function and ensure viable corporate governance, steps have been taken to set up the Audit & Supervisory Board Members’ Office and to deploy dedicated staff. In this manner, efforts are being made to promote collaboration along the aforementioned terms between Audit & Supervisory Board members, the Audit Unit and Independent Auditors. Moreover, we have constructed a system to strengthen the monitoring function through periodic meetings with representative directors and directors.

[4] Accounting Audit and Auditor Compensation

In accordance with the Companies Act and the Financial Instruments and Exchange Act, we accept accounting audits from Ernst & Young ShinNihon LLC. The amount of auditor compensation is determined in total based on the audit plan and the number of auditing dates, after obtaining approval from the Audit & Supervisory Board.

Compensation Paid to the CPAs and Related Parties (Year ended March 31, 2016)
Name of the CPA firm Ernst & Young ShinNihon LLC
Names of the CPAs Kazuhiko Umemura, Toru Kimura
Accounting audit members 20 CPAs and 26 others
Compensation for auditing services \257 million
(INPEX: \165 million; Consolidated subsidiaries: \92 million)
Compensation for non-auditing services \15 million
(INPEX: \4 million; Consolidated subsidiaries: \11 million)
[5] Internal Committees
The Advisory Committee deliberating on
an important matter.

To further enhance the efficacy of the corporate governance function, INPEX has set up 1. the Advisory Committee, 2. the Compliance Committee and 3. the CSR Committee. In addition, the Company maintains 4. the Corporate HSE Committee, 5. the Information Security Committee and 6. the INPEX Value Assurance System Committee to appropriately manage risks associated with business operations.

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1. Advisory Committee

The Advisory Committee was established in October 2012 with the aim of enhancing corporate value and the corporate governance function. Comprised of external experts in a broad spectrum of fields, the committee provides the Board of Directors with multifaceted and objective advice and recommendations across a wide range of areas. Areas of discussion and advice include international political and economic conditions, an outlook of energy conditions and ways in which to bolster corporate governance.

2. Compliance Committee

The Compliance Committee was established in April 2006 with the aim of promoting compliance initiatives across the entire Group. The committee formulates fundamental compliance policies applicable to the Group, deliberates on important matters and manages the manner in which compliance is practiced.

3. CSR Committee

In April 2012, INPEX Group established the CSR Committee with the aims of better fulfilling its corporate social responsibility and promoting activities that contribute to the sustainable development of society. The committee puts in place fundamental policies and formulates important measures designed to promote CSR.

4. Compliance Committee

In accordance with the HSE Management System, the Corporate HSE Committee was established in October 2007 to promote health, safety and environment initiatives. In addition to formulating corporate HSE policies and priority targets for each period, the committee advances HSE activities across the organization.

5. Information Security Committee

The Information Security Committee was established in November 2007 to consider and determine all appropriate measures necessary to maintain, manage and strengthen information security. The committee also takes steps to address any incident relating to information security and to put in place preventive measures.

6. INPEX Value Assurance System Committee

The INPEX Value Assurance System Committee was established in May 2014 to contribute to the Company’s decision-making process with respect to confirmation of the status of preparations in connection with important milestones of those oil and natural gas upstream business projects in which INPEX participates, and the improvement and promotion of project value.

2. Monitoring of Management by Outside Directors and Audit & Supervisory Board Members

[1] Outside Directors

Regarding the appointment of outside directors, we believe that it is important to comprehensively consider a variety of factors. These factors include the validity of business decisions and consideration of their efficacy, professionalism and objectiveness in the oversight function in addition to the perspective of independence.
As corporate managers, academics or other specialists, our Company’s five outside directors possess broad knowledge and many years of experience as managers in such fields as the resource/energy industry, finance and legal matters. Also, four of the outside directors are shareholders of the Company and serve as advisors of companies that conduct business in the same field. Therefore, we recognize the importance of paying special attention to the possibility of competition and other conflicts of interest. In response, we collect written pledges from outside directors in order to ensure conformance with the Companies Act when taking a proper response toward noncompetition, the prevention of information leakage and the implementation of appropriate measures toward transactions with a conflict of interest. These written pledges are the same as those submitted by internal appointees.

[2] Outside Audit & Supervisory Board Members

When appointing outside Audit & Supervisory Board members, we believe that it is important to comprehensively consider factors such as independence, efficacy in the oversight function and professionalism.
Four of the five Audit & Supervisory Board members are outside Audit & Supervisory Board members who possess rich knowledge and experience in our Company’s business, as well as in fields such as finance and accounting, and utilize these qualities when performing auditing activities for our Company. One of the outside Audit & Supervisory Board members also holds the position of executive officer at Japan Petroleum Exploration Co., Ltd. (JAPEX), a company that engages in the same type of business as the Company.

[3] Independence of Outside Directors and Audit & Supervisory Board Members

The Company has reported all outside directors and outside Audit & Supervisory Board members as independent directors as defined by Tokyo Stock Exchange, Inc.
As a part of efforts to comply with the Corporate Governance Code, INPEX has formulated independence standards for outside directors and outside Audit & Supervisory Board members taking into consideration the independence standards and qualification for independent directors issued by the Tokyo Stock Exchange. The Company determines the independence of outside directors, including major shareholders and business partners that do not fall within the scope of these standards.

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Outside Directors/Outside Audit & Supervisory Board Members: Concurrently Held Positions and Reason for Appointment
Name Inde-
pendent
director/
auditors
Significant concurrently held positions Reason for appointment Attendance at board meetings for
the year ended March 31, 2016
Outside Directors Hiroshi Sato Advisor of JAPEX, a shareholder in our company To utilize in our company’s management his rich experience and broad knowledge in the oil and gas development industry Board of Directors meetings 13/13
Yoshiyuki Kagawa Senior Advisor of Mitsui Oil Exploration Co., Ltd., a shareholder in our company To utilize in our company’s management his rich experience and broad knowledge as a business executive Board of Directors meetings 16/16
Jun Yanai Advisor of Mitsubishi Corporation, a shareholder in our company To utilize in our company’s management his rich experience and broad knowledge in the resources/energy industry -
Isao Matsushita Senior Executive Advisor of JX Holdings, Inc., a shareholder in our company To utilize in our company’s management his rich experience and broad knowledge as a business executive -
Yasuhiko Okada Partner of Kitahama Partners Possesses extensive experience and knowledge in finance, as well as professional knowledge and experience as an attorney, in addition to management experience in financial institutions Board of Directors meetings 16/16
Outside Audit & Supervisory Board Members Hideyuki Toyama - Possesses extensive experience and knowledge in finance, as well as professional knowledge and experience as an attorney Board of Directors meetings 13/13 Audit & Supervisory Board meetings 14/14
Koji Sumiya - Possesses extensive experience and knowledge in financial matters Board of Directors meetings 16/16 Audit & Supervisory Board meetings 18/18
Michiro Yamashita Managing Executive Officer in charge of Finance & Accounting Department, Vice President of Asia & Oceania Division of JAPEX, a shareholder in our company To utilize in our company’s auditing procedures his rich experience in the oil and gas development industry, as well as his knowledge in financial and accounting matters, in addition to accounting experience Board of Directors meetings 11/13 Audit & Supervisory Board meetings 12/14
Masaru Funai - To utilize in our company’s auditing procedures his rich experience in the energy industry, as well as his knowledge in financial and accounting matters, in addition to accounting experience Board of Directors meetings 16/16 Audit & Supervisory Board meetings 18/18

3. Director Compensation

In the business of developing oil and natural gas, a considerable amount of time is required between the launch of a business venture and any investment recovery. Accordingly, INPEX does not consider it appropriate to reflect short-term performance in directors’ compensation. Compensation for directors consists of monthly compensation (basic compensation), which is paid based on the duties of each director, and a bonus based on the Company’s performance. Compensation is determined by the Board of Directors. Compensation paid to Audit & Supervisory Board members consists solely of a fixed monthly compensation, which is determined through consultation between the Audit & Supervisory Board members.
The table below shows the amount of compensation paid to directors and Audit & Supervisory Board members for the year ended March 31, 2016. From the year ended March 31, 2014, the bonus component paid to outside directors and Audit & Supervisory Board members has been abolished. Outside directors and Audit & Supervisory Board members are now paid a consolidated fixed compensation amount only. This takes into account efforts to further bolster corporate governance.

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Compensation Paid to Directors and Audit & Supervisory Board Members (Year ended March 31, 2016)
Director classification Total
amount of
compensation paid
(\ million)
Total amount of compensation
paid by type of compensation
(\ million)
Number of directors and Audit & Supervisory Board members eligible for basic compensation (persons)
Basic
compensation
Bonus
Directors
(excluding outside directors)
413 357 55 11
Audit & Supervisory Board members
(excluding outside Audit & Supervisory Board members)
27 27 ? 2
Outside Directors and Outside Audit & Supervisory Board members 96 96 ? 13
Notes: 1. The Company does not adopt a stock option plan. 2. The Company does not maintain an accrued retirement benefits plan. 3. The total amount of compensation paid includes a provision to accrued bonuses to directors for the year ended March 31, 2016.

4. Internal Control Systems

[Resolutions of the Company regarding the Development of the Systems for Ensuring Proper Operations (Internal Control Systems)]

The following is a summary of the resolutions of the Company, regarding the “Development of the Systems for Ensuring the Proper Operations as a Stock Company (Internal Control Systems).”

Systems to Ensure that Directors and Employees of the Company Execute their Duties in Compliance with Laws and Regulations and the Articles of Incorporation

To ensure that Directors and employees of the Company execute their duties in compliance with applicable laws and regulations and the Articles of Incorporation, the Company shall develop a Corporate Social Responsibility Policy and Business Principles and establish a system to ensure complete compliance.
The Company shall establish a Compliance Committee consisting of full-time Directors and Executive Officers, etc., to deliberate basic policies or other important matters related to compliance. By monitoring the implementation of such policies, the Company ensures that its Directors and employees comply with laws and regulations and the Articles of Incorporation in the execution of their duties. Furthermore, the Company shall establish an internal notification system with related departments and an external expert (lawyer) as providers of consultation services.
In order to ensure effective compliance systems and relevant internal rules, the Company shall also verify and evaluate such systems and make the necessary improvements through audits, etc., carried out by the internal audit department which reports directly to the President & CEO and other related in-house departments or an external expert.
Furthermore, the Company shall develop a system to ensure the accuracy and reliability of financial reporting, and employ such system properly while evaluating its effectiveness.

Systems for the Storage and Management of Information Related to the Execution of Duties by Directors of the Company

In accordance with applicable laws and regulations, the Articles of Incorporation and internal rules, among others, the Directors shall develop a system for information security administration, and appropriately store and manage documents and other information related to the execution of their duties.

Rules and Other Systems for Risk Management of the Company

To manage diverse risks related to the INPEX Group’s business activities, Directors shall cooperate closely with the related departments to identify, analyze and evaluate such risks, and manage them in accordance with internal rules and guidelines, etc.
Furthermore, the functioning and other aspects of the risk management related to daily operations shall be verified and evaluated through audits, etc., carried out by the internal audit department under the direct control of the President & CEO of the Company and other related in-house departments or an external expert, and continually reviewed in response to changes in the business environment.

Systems to Ensure the Efficient Execution of Duties by Directors of the Company

In order to ensure that the systems to execute Directors’ duties efficiently are in place, the Directors shall manage business operations with particular attention to the following:

  1. With regard to certain major corporate decisions, an Executive Committee meeting attended by full-time Directors and Managing Executive Officers shall be held weekly and as necessary to ensure that the duties are executed promptly and properly.
  2. With regard to the execution of daily duties, the authority of the President & CEO shall be delegated in accordance with internal rules regarding job demarcation and administrative authority, among others, and the person in charge at each level shall execute their duties promptly.
Systems to Ensure the Proper Operations of the INPEX Group
  1. Systems for Reporting the Company Matters Related to the Execution of Duties by Directors or Other Equivalent Managerial Staff (hereinafter “Directors, etc.,”) of the Company’s Subsidiaries
    In accordance with the internal rules on group management, the Company shall enter into group management?related contracts with its subsidiaries, under which the Company requires that important matters of each subsidiary shall be reported to and approved by the Company.
  2. Rules and Other Systems for Risk Management of the Company’s Subsidiaries
    For risk and compliance management of the subsidiaries of the Company, in accordance with the internal rules on group management, the Company shall conduct group-wide risk management via mutual cooperation with each subsidiary.
    Furthermore, the Company shall require its subsidiaries to cooperate in audits, etc., carried out by the internal audit department under the direct control of the President & CEO of the Company and other related in-house departments or an external expert to verify and evaluate the management of risks related to the daily operations of the subsidiaries. Based on the results of such verification and evaluation, the Company shall have its subsidiaries conduct continuous review of their risk management in response to changes in the business environment.
  3. Systems to Ensure the Efficient Execution of Duties by Directors, etc., of the Company’s Subsidiaries
    To ensure the efficient execution of duties by Directors, etc., of the Company’s subsidiaries, the Company’s medium- to long-term vision shall be shared among all the INPEX Group companies. Under the vision, the Company shall have its subsidiaries manage human resources and monetary resources efficiently and manage business operations in accordance with the Company’s internal rules, etc., with particular attention to the following:
    1. Important matters of a subsidiary of the Company shall be determined by resolution of the Board of Directors meetings of the subsidiary or by consultation among the Directors of the subsidiary.
    2. Authority for the execution of daily duties by the Company’s subsidiaries shall be delegated in accordance with the internal rules of the Company, etc., regarding administrative authority, and the persons in charge at each level shall execute their duties promptly.
  4. Systems to Ensure that Directors, etc., and Employees of the Company’s Subsidiaries Execute their Duties in Compliance with Laws and Regulations and the Articles of Incorporation
    The Company shall establish a compliance system (including an internal notification system) that is applied to the entire Group, and this system shall be widely deployed and disseminated to all directors, auditors and other equivalent managerial staff, as well as to employees of the Company’s subsidiaries.
    In cooperation with its subsidiaries, the Company shall conduct audits, etc., of the subsidiaries, carried out by the internal audit department under the direct control of the President & CEO of the Company and other related in-house departments or an external expert.
    In accordance with the internal rules on group management, the Company shall enter into group management?related contracts with its subsidiaries, under which the Company shall strive to have its subsidiaries implement the above and establish a system to ensure that Directors, etc., and employees of the subsidiaries execute their duties in compliance with laws and regulations and the Articles of Incorporation.
Matters Regarding Employees Who Assist the Audit & Supervisory Board Members of the Company with Auditing Duties in Cases Where the Audit & Supervisory Board Member of the Company Requests the Assignment of Such Employees, Matters Regarding the Independence of Such Employees from Directors of the Company and Matters Related to Ensure the Effectiveness of Instructions Given to Such Employees

The Company shall deploy dedicated employees to assist the Audit & Supervisory Board Members with auditing duties in its Secretariat of Audit & Supervisory Board Member. The employees who assist the Audit & Supervisory Board Members’ duties shall follow instructions from the Audit & Supervisory Board Members. Performance appraisals, personnel changes and disciplinary action against such employees assisting the Audit & Supervisory Board Members shall require approval of the Audit & Supervisory Board Members beforehand.

Systems for Reporting to the Audit & Supervisory Board Members of the Company

The Directors and employees of the Company, directors, auditors or other equivalent managerial staff, as well as employees of the Company’s subsidiaries, or persons who receive a report from them, shall report and provide information to the Audit & Supervisory Board Members of the Company as to the matters provided by laws and regulations, matters that might have a significant impact on the Company and its Group companies, and other matters that an Audit & Supervisory Board Member of the Company has determined to be reported to execute his/her duties.
Also, the Audit & Supervisory Board Members of the Company shall always be able to obtain business information whenever needed by attending the Board of Directors’ meetings and other important internal meetings, as well as receiving internal approval documents, etc.
Regarding the internal notification system of the INPEX Group, the responsible section of each Group company shall report to the Company’s Audit & Supervisory Board Members on a regular basis as to the content internally reported by directors, auditors, other equivalent managerial staff and employees of the Group companies.

Systems to Ensure that Reporters in the Preceding Section Will Not Receive Detrimental Treatment because of the Reporting

The Company shall prohibit detrimental treatment against directors, auditors, or other equivalent managerial staff, and employees of the Group companies who reported to the Company’s Audit & Supervisory Board Members. And this position shall be disseminated throughout the INPEX Group.
Regarding the internal notification system of the INPEX Group, in case detrimental treatment against a reporter is recognized, a disciplinary action may be taken against the person who treated the reporter in such a way and against the General Manager, etc., of the department to which the person belongs pursuant to employment rules, etc.

Matters Related to Policies Concerning the Treatment of Expenses or Liabilities Incurred by the Execution of Duties by the Company’s Audit & Supervisory Board Members such as Procedures for Prepayments or the Redemption of Such Expenses

In case the Company’s Audit & Supervisory Board Members request prepayment or redemption of expenses for their execution of duties, etc., based on Article 388 of the Companies Act, the Company shall quickly process such expenses or liabilities except in the case such expenses or liabilities are determined to be unnecessary for the execution of duties by such Auditors.

Other Systems to Ensure Effective Audits by the Audit & Supervisory Board Members of the Company

The Representative Directors of the Company shall meet regularly with the Audit & Supervisory Board Members of the Company, provide information as necessary and strive to communicate with them.
The Company shall also improve the effectiveness of audits by establishing a system, etc., whereby the Audit & Supervisory Board Members can cooperate with the internal audit department and receive reports regularly.
Furthermore, to conduct audits by the Audit & Supervisory Board Members, the Company shall ensure close cooperation between the Audit & Supervisory Board Members and external experts such as lawyers, certified public accountants and certified tax accountants, among others.

[Outline of the Status of Operations of the Systems for Ensuring the Proper Operations of the Company (Internal Control System)]

While the Company is operating its internal control system effectively based on the contents decided on the “Development of the Systems for Ensuring the Proper Operations as a Stock Company (Internal Control Systems),” the following are the outline of its major operations of such systems during the current fiscal year:

<Compliance system>
The Company has established a Code of Conduct with which all officers and employees shall comply. This obliges them to respect social norms and act with high ethical standards, not to mention comply with laws and regulations. Also, the Company has held its Compliance Committee periodically and when necessary to confirm the status of implementation of the compliance and hence report to the Board of Directors.
Based on the activity plans resolved by the Compliance Committee, the Company has also carried out compliance training seminars and has been issuing “Compliance News” once every month. Further, the Company has made October the Month of Compliance when the Compliance Committee Chairperson issues messages which aim at sharing and raising compliance awareness among all personnel. As a major activity of the current fiscal year and as part of establishing the systems of anti-bribery and corruption within the INPEX Group, the Company is positively involving itself in the implementation of risk assessment for the head office and its overseas locations and enhancement of related internal rules.
The Company has its whistle-blowing system streamlined with the internal department in charge and an outside expert (lawyer) as contact points. There were however no whistle blowing cases related to material breach of laws and regulations, etc. during this fiscal year.

<Risk management system>
To cope with various risks related to business projects, first, the New Ventures Division carry out a centralized analysis/examination on whether to adopt or reject a new project, and operate the “INPEX Value Assurance System” as a structure for conducting cross-sectoral technical evaluation at each phase of exploration, evaluation, development, etc.
Also, in order to cope with country risks in countries/territories where projects are planned, the Company has set guidelines which include the establishment of a maximum target amount for accumulated investment balance for high-risk countries.
Further, the Company has been conducting financial risk control by identifying risks of fluctuation of currency exchange rates, interest rates, crude oil/natural gas prices and securities prices, and establishing corresponding managing/hedging methods.
Also, with regard to HSE risks, the Company has established its Corporate HSE Committee in order to promote continuous improvement activities of industrial health and safety and environments associated with the development of crude oil and natural gas. Based on the Risk Management Procedures established under the HSE Management System, each business location identifies, analyzes and evaluates HSE risks, and establishes and practices risk countermeasures. Such risk management situation is to be reported to the head office for its monitoring and grasping HSE risks. Further, with regard to health-related risks and security risks as well, the Company is promoting a company-wide management based on procedures and guidelines.
On the other hand, the Company has established an emergency/crisis response plan in order to enhance capabilities to cope with emergencies such as large-scaled accidents, disasters, etc. and is positively promoting risk management which includes conducting emergency response training regularly even in times of safety. Furthermore, the Company has drawn up a business continuity plan in order to keep important operations from being stopped.
With regard to climate change issues over which international concern is rising, the Company issued and published a position paper in December 2015 which summarized the INPEX Group’s basic views and actual efforts, and is carrying out continual studies about the issues to be discussed in the future. Besides this, the Company has held the Information Security Committee every quarter to reinforce organizational/systematic measures against information security, and also implements education/training on matters including the prevention of information leakage.

<Corporate management of group companies>
Based on the Group’s corporate management rule and the Group’s agreements with regard to corporate management, we urge reporting to or approval by the Company about important matters. Also, the Company’s internal audit department Audit Unit conducts audits of subsidiaries based on the annual auditing plan.
With regard to the operation of the group companies, we have adopted a concurrent management system particularly with subsidiaries involved in overseas projects. For financials, we have also introduced the Cash Management System which allows the Company to conduct efficient business operations by enhancing financial efficiency for the entire group through a unified management system.
The Company’s whistle-blowing system is designed to be applied to all Group companies. The Company provides thorough instructions, through the Company’s and each subsidiary’s seminars and notification activities, to prohibit unfavorable treatment of whistle-blowers.

<Auditing system for Ensuring Effectiveness of Auditing by Audit & Supervisory Board Members>
The audit & supervisory board members have been obtaining required information as well as exchanging opinions, for the purpose of improving effectiveness of their auditing, by holding meetings with the directors including the representative directors in addition to attendance at important meetings such as Board of Directors meetings and other management meetings as well as conducting hearings from each business division.
Also, the audit & supervisory board members have been receiving reports regularly from Auditing Unit concerning the internal auditing situation for various divisions and also receiving necessary reports including reviews of quarterly financial results from the accounting auditors, thus keeping close contact with its internal auditing organization and the accounting auditors.
The Unit in charge of the whistle-blowing system reports to the audit & supervisory board members about the content and handling of whistle-blowing based on the related system.
The Company established “Audit & Supervisory Board Members’ Office” in May 2015 to assist operations by the audit & supervisory board members as an organization having an employee dedicated to such work, independent of the Company’s executive team.
In accordance with the internal control reporting system enacted in September 2007 based on the Financial Instruments and Exchange Act, the Company has conducted assessment on the development and operation of its internal control systems in all areas (company-wide internal controls, process-level internal controls and overall IT-related internal controls), and enforced improvement on any deficiencies detected in the process. As a result of the assessment, the Company concluded that its internal control systems over financial reporting were effectively functioning as of March 31, 2016, and submitted to the Kanto Local Finance Bureau an internal control report prepared based on these findings. Furthermore, the Company received an unqualified clean opinion from the accounting firm with respect to the internal control report. We will remain committed to making every effort to ensure reliability of our financial reporting through the process to adequately assess the development and operation of our internal control systems.

5. Class A Stock

According to the stipulations of the Articles of Incorporation, INPEX issues a Class A Stock to the Minister of Economy, Trade and Industry. The Class A Stock does not possess voting rights at shareholders’ meetings. However, it is possible for the holder of the Class A Stock to exercise veto rights for certain major corporate decisions. We think the holding of Class A Stock by the Minister of Economy, Trade and Industry is an effective countermeasure to prevent a speculative acquisition or an attempt at management controlled by foreign capital, while not unreasonably impeding the efficiency of management for the stable supply of energy as a core company for Japan’s oil & gas E&P. 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.

Stock Data (As of March 31, 2016)
Authorized Shares:  
  3,600,000,000 shares
  1 Class A Stock
Total Number of Shareholders and Issued Shares
Common shares: 48,427 shareholders / 1,462,323,600 shares
Special-class share: 1 shareholder (Minister of Economy, Trade and Industry) / 1 share

6. Compliance

INPEX is systematically developing a compliance system, an indispensable requirement for the sustained development of a company, and strives to ensure compliance with laws and regulations and adherence to corporate ethics. Specifically, we have instituted the Compliance Committee which deliberates basic policies, plans, and significant matters pertaining to compliance, and manages the status of compliance practice to promote unified compliance initiatives throughout the Group. In addition, in accordance with the Corporate Social Responsibility Principles, we have instituted the Code of Conduct, which prescribes matters to be observed to realize compliance, in order to increase compliance awareness among executives and employees in an effort to put the Business Principles into practice.
INPEX has established a system by which the Compliance Committee promptly considers and implements countermeasures if a serious compliance related incident occurs. The director in charge of compliance issues and the Compliance Committee cooperate with the Audit & Supervisory Board and its members, independent auditors, the Audit Unit ? internal audit division, as well as equivalent bodies or departments in our subsidiaries in (1) developing and implementing compliance measures, (2) monitoring their implementation, (3) raising compliance awareness, (4) receiving reports on and investigating cases of violations, (5) issuing warnings and taking measures against violations, and (6) instituting measures to prevent the recurrence of violations.
With regard to compliance training, INPEX distribute copies of the Code of Conduct and Code of Conduct Guidance*1 to each employee and periodically conducts training to ensure that all employees engage in compliance activities. Major overseas offices are instituting and implementing their own Codes of Conduct, taking into account the laws, regulations and cultures of host countries. In this way, we are strengthening our global compliance systems.
Moreover, we instituted a Help-Line that uses a Whistle-Blower System that complies with the Whistleblower Protection Act. The Help-Line is accessible to our executives and employees. Contact points are offered both inside and outside the company (a law firm), reports can be submitted anonymously, and rigorous measures have been taken to protect individuals who submit reports from any negative consequences. In fiscal 2014, we revised the INPEX Help-Line Procedures to ensure that the Whistle-Blower System functions more effectively by strengthening cooperation with the Audit & Supervisory Board members. We promptly report the content of reports from whistle-blowers and the results of investigations and responses to the Audit & Supervisory Board members. One report to the internal Help-Line and four to the external Help-Line were submitted during fiscal 2015. The Compliance Committee responded to each report by taking appropriate actions in accordance with the Help-Line Procedures, taking into consideration the advice of attorneys and other experts.
In fiscal 2015, we engaged in concrete initiatives to strengthen implementation of the Anti-Bribery and Anti-Corruption (ABC) Guidelines, mainly the conduct of risk assessment at the headquarters and three overseas offices, and the institution of internal regulations that support the Guidelines. To ensure familiarization with the Guidelines, we continuously conduct compliance training for new graduates and mid-career hires and have recently added training at overseas offices. Training is also conducted in Australia for local employees and Japanese expatriates. In addition, we periodically share information and exchange views on compliance activities with the Perth and Jakarta Office to develop global compliance systems. There was no major compliance violation related to bribery and corruption in fiscal 2015.

Compliance Framework
(Internal notification system)

7. Disclosure

To improve the transparency of management and the accountability of managers, we conduct timely, appropriate and fair disclosure of information through our Web site, public relations activities and IR activities toward shareholders and investors.

1. To invigorate the general meeting of shareholders and promote effective voting
Supplementary explanation
Early delivery of convocation notices for the general meeting of shareholders We undertake the early delivery of convocation notices for our general meeting of shareholders in an effort to ensure that shareholders have sufficient time to consider agenda items tabled for resolution at each Ordinary General Meeting of Shareholders. The convening notice for the 10th Ordinary General Meeting of Shareholders held on June 28, 2016 was dispatched three weeks prior to the meeting on June 6, 2016. In addition, the notice was posted on the Company’s website on May 27, 2016 prior to the dispatch.
Use of voting rights through the Internet We implemented the use of voting rights via the Internet. We also adopted a platform for the electronic use of voting rights.
Other The convocation notice and other related documentation are available in both Japanese and English on our company’s Web site and TDnet. On the day of the shareholders’ meeting, we used videos and a slide show to explain our business before opening the meeting.
2. Enhancing IR Activities
Supplementary explanation Explanation by representative: Yes / No
Regular IR presentations for individual investors We participate in events such as IR fairs for individual investors and meetings in a variety of venues including the branch offices of securities firms. More than 10 information meetings for individual investors are generally held each year. Yes
Regular IR presentations for analysts and institutional investors We hold biannual meetings on financial results for analysts and institutional investors. The President & CEO and the director in charge of finance and accounting explain our financial details and business forecast to approximately 200 analysts and institutional investors. Video archives of these financial results presentations are provided on our Web site (IR section) together with a simultaneous interpretation in English. Yes

Regular IR presentations for foreign institutional investors

In general, we undertake overseas IR road shows covering such regions as Europe, North America and Asia, while participating in conferences and engaging in one-on-one meetings as necessary. Yes
IR materials available on Web site Our Web site (IR section) features a host of IR tools including financial reports, financial results presentations and annual reports. Together with recent news releases, every effort is made to disclose pertinent information on our performance and financial position, as well as trends in crude oil prices, foreign currency exchange rates, our share price and stock information. Yes

Internal System for Timely Disclosure

Disclosure Policies

To achieve the appropriate disclosure of information, we have established internal regulations for corporate information disclosure and defined the process for collecting, managing, transmitting and disclosing information throughout our company. A summary of disclosure and other policies based on the aforementioned regulations is listed. Please refer to Disclosure Policy for further details.

(The information above is current as of July 1st, 2016, unless otherwise stated.)

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