Annual Report Aim High 2016€¦ · and strategic collaboration agreement with ... integration with...

Annual Report

2016Year Ended March 31, 2016

Aim HighA

nnual Report 2016

Energy BusinessPetroleum is the foundation of economic activities, and we have

a major share in petroleum refining and marketing. Moving

forward, we are working to establish an even-stronger business

foundation by reinforcing our competitiveness. Also, as an

Energy Conversion Company, we are pushing forward with ini-

tiatives targeting the stable and efficient conversion of primary

energy, such as crude oil, natural gas, coal, and sunlight, into

optimal energy for consumers.

JX Holdings, Inc. Annual Report 20166 JX Holdings, Inc. Annual Report 2016

JX Holdings, Inc. Annual Report 2016 3

No. 1 in Asia

Domestic fuel oil sales

64 million kiloliters per year

Share 36%

* Fiscal 2015, based on the government’s petroleum statistics

Electricity: Electric power generating capacity

1.63million kW

* As of the end of March 2016

Coal supply volume

10.2 million tons

* Fiscal 2015

Paraxylene supply capacity

3.12 million tons per year


Domestic natural gas / LNG sales volume

790thousand tons

* Fiscal 2015

Refining capacity

1.43 million barrels per day


No. 1 in Japan

No. 1 in Japan


JX Holdings, Inc. Annual Report 20162

Crude oil and natural gas production volume

120

* Fiscal 2015

thousand barrels per day (crude oil equivalent)

Major operational bases

. Malaysia

. Indonesia

. Papua New Guinea

. U.K. North Sea

. Canada

. UAE

. Myanmar

. Vietnam

Proven / probable reserves

669million barrels (crude oil equivalent)

* As of the end of December 2015

Operational bases

in14 countries




Oil and Natural Gas E&P

BusinessWe are striving to increase our reserves and production over the long term by enhancing our

competitiveness through preferential distribution of our management resources to countries

and technologies in which we are focusing our efforts.



Metals BusinessWe have stakes in the world’s leading copper mines and have

commenced production at a copper mine that we have

developed independently. With operations in copper smelting

and refining, electronic materials, and recycling and environ-

mental services, we have built fully integrated systems that

extend from upstream to downstream, and our operations are

world class in quantity and in quality.


Refined copper production capacity

920 thousand tons per year


Equity-entitled copper mine production (copper content)

170 thousand tons per year

* Fiscal 2015

Gold production through recycling

6 tons per year

* Fiscal 2015

Electronic materials

Product lines with No. 1shares in global markets

2013

Nov. E&P Extended production-sharing contract term of Block 15-2 offshore Rang Dong oil field, Vietnam.

Nov. Metals Completed construction of Longtan Works in Taiwan to manufacture sputtering targets for flat panel displays and semiconductors.

Dec. E&P Entered into production-sharing contract for exploration of Deepwater Block 3F offshore Sarawak, Malaysia.

Dec. Metals Completed construction of copper concentrate and sulfuric acid multiple carrier, Koryu.

2014

Jan. Metals Toho Titanium Co., Ltd., signed basic agreement on joint venture to produce titanium sponge in Saudi Arabia.

Feb. Energy Decided to commence importing and marketing of fuel oil in Indonesia.

Feb. Energy Concluded MOU to establish lubricants joint venture company in India.

Mar. Energy Concluded LNG business contract with Malaysia LNG Sdn. Bhd.

Mar. Metals JX NIPPON TOMAKOMAI CHEMICAL CO., LTD., acquired Minister of the Environment authorization to conduct detoxification processing of low-concentration PCB waste.

2013

Apr. Metals Commenced operation at Kakegawa Works, new base for production of precision components and connectors.

May E&P Commenced production at Finucane South oil field, Australia.

Jul. E&P Discovered gas in Carnarvon Basin, Australia.

Aug. E&P Acquired participating interests in two exploration permits in Australia.

Sep. E&P Entered into production-sharing contract for exploration of Deepwater Block 2F offshore Sarawak, Malaysia.

Oct. Energy Concluded business collaboration agreement with LIXIL Corporation.

JX in Action

2013 2014

2014

May E&P Decided to develop Layang oil and gas field offshore Sarawak, Malaysia.

May E&P Commenced shipment of LNG from Papua New Guinea LNG Project.

May Metals Commenced copper concentrate production at Caserones Copper Mine in Chile.

Jun. Energy Commenced commercial production of paraxylene at facilities of Ulsan Aromatics Co., Ltd., of South Korea.

Jul. Energy Decided to install petroleum coke power generation equipment at Mizushima Refinery.

Jul. Energy Decided to establish ENEOS Hydrogen Supply & Service Co., Ltd., hydrogen business operating company.

Jul. E&P Decided to start enhanced oil recovery (EOR) project, using exhaust gas from coal-fired thermal power plants, in the United States.


2015

Mar. E&P Discovered crude oil in 22/16, 17b block in U.K. North Sea.

Apr. Energy Commenced commercial operation at Hachinohe and Kushiro LNG terminals.

Apr. E&P Discovered crude oil in Deepwater Block R offshore Malaysia.

2016

Jan. Energy Concluded business cooperation contract with KDDI centering on electric power business.

Apr. Energy Start of electric power liberalization, commenced sales.

Apr. Energy Concluded share subscription agreement and strategic collaboration agreement with Petrolimex in Vietnam.

May E&P Sold portion of interests in Culzean gas field in U.K. North Sea.

Jun. Energy Decided to implement capital participation in PETRONAS LNG 9 Sdn Bhd in Malaysia.

Jun. E&P Sold interests in Utgard gas and condensate field in U.K. North Sea.

Jul. E&P Made final decision to proceed with invest-ment for Tangguh LNG expansion project in Indonesia.

2015

Jun. Energy Kawasaki Natural Gas Power Generation Co., Ltd., filed environmental impact statement and commenced full-scale investigations into expansion of facilities.

Aug. E&P Acquired participating interest in Brazil.

Aug. E&P Field development plan approved for Culzean gas field in U.K. North Sea.

Nov. JX Holdings Formulated “Basic Policy on Corporate Governance of JX Group.”

Dec. JX Holdings Concluded MOU regarding business integration with TonenGeneral Sekiyu K.K.

Dec. Energy Commenced commercial operation of solvent de-asphalting (SDA) facility and power generation facility at Kashima Refinery.

2015 2016

2014

Aug. E&P Discovered crude oil in North West Shelf offshore Australia (block WA-435-P).

Aug. E&P Discovered gas and condensate offshore southern Vietnam (blocks 05-1b and 05-1c).

Aug. Metals Decided to commence commercial application of biomining technology.

Dec. Energy Opened first commercial hydrogen station and decided sales price of hydrogen.

Dec. E&P Acquired new exploration block in U.K. North Sea.

Dec. E&P Commenced production at Kinnoull oil field in U.K. North Sea.



Performance Highlights

Our Message

12 ........ Management Message

14 ........ To All of Our Stakeholders

Review and Strategies by Core Business

20 ........ Energy Business

25 ........ Oil and Natural Gas Exploration

and Production (E&P) Business

30 ........ Metals Business

For readers who wish to

deepen their understanding

of the petroleum and

non-ferrous metals

industries, the JX Group

recommends beginning with

the introductory volume.

Editorial PolicyTo foster a deeper understanding of the JX Group among a wider range of stakeholders, Annual Report 2016 has been prepared in two volumes. The main volume provides information about management strategies, growth strategies for each business, and statements from management leaders. The introductory volume provides basic information for those readers who are not well-versed in the petroleum and non-ferrous metals industries. The JX Group, which aims to “start a leap forward” to become an Asia-leading integrated energy, resources, and materials business group, hopes that these materials will prove useful to many readers. More comprehensive and detailed information is available on the Company’s website. Please use that information in conjunction with Annual Report 2016. This report has been edited with reference to version 1.0 of the International Integrated Re porting Framework, which the International Integrated Reporting Council issued in December 2013.

10Page

12Page

19Page

Contents


Our M

essageReview

and Strategies by Core BusinessM

issions of the JX Group:

More than Just G

rowth

Managem

ent SystemFinancial Inform

ationCautionary Statement regarding Forward-Looking Statements

This annual report contains certain forward-looking statements; however, actual results may differ materially from those reflected

in any forward-looking statement, due to various factors, including but not limited to the following:

(1) macroeconomic conditions and changes in the competitive environment in the energy, resources, and materials industries;

(2) changes in laws and regulations; and

(3) risks related to litigation and other legal proceedings.

Missions of the JX Group: More than Just Growth

36 ........ Basic Approach to CSR

37 ........ Human Resources Development Initiatives

38 ........ Aiming for Sustainable Economic and Social Growth

44 ........ Dialogue with Our Stakeholders

Management System

46 ........ Board of Directors and Board of Corporate Auditors

48 ........ Independent Directors and Corporate Auditors

50 ........ Corporate Governance

56 ........ Message from an Outside Director

Financial Information

58 ........ Review and Analysis of Fiscal 2015 Results

63 ........ Business and Other Risks

68 ........ Consolidated Financial Statements and Notes

103 ........ Independent Auditor’s Report

104 ........ Principal Group Companies

106 ........ Investor Information

107 ........ IR Website Guide

45Page

57Page

35Page


Performance HighlightsJX Holdings, Inc. and Consolidated Subsidiaries

Millions of U.S. dollars Billions of yen

(Years ended March 31) 2016 2016 2015 2014 2013 2012

Operating Results (For the Year)

Net sales $77,545 ¥8,737.8 ¥10,882.5 ¥12,412.0 ¥11,219.5 ¥10,723.9

Operating income (loss) (552) (62.2) (218.9) 213.7 251.5 327.9

Ordinary income (loss) (76) (8.6) (150.1) 302.3 328.3 407.8

Ordinary income excluding inventory valuation factors 2,315 260.9 255.2 183.0 271.0 291.3

Profit (loss) attributable to owners of parent (2,472) (278.5) (277.2) 107.0 159.5 170.6

Financial Position (At Year-End)

Total assets $59,679 ¥6,724.6 ¥ 7,423.4 ¥ 7,781.8 ¥ 7,274.9 ¥ 6,690.4

Net assets 17,114 1,928.4 2,429.8 2,626.3 2,327.4 2,044.8

Interest-bearing debt 22,909 2,581.4 2,620.3 2,801.7 2,549.3 2,282.6

Net interest-bearing debt 18,537 2,088.7 2,291.0 2,520.0 2,299.2 2,040.6

Cash Flows (For the Year)

Cash flows from operating activities $ 4,925 ¥ 555.0 ¥ 737.2 ¥ 305.2 ¥ 265.6 ¥ 246.6

Cash flows from investing activities (2,731) (307.7) (377.8) (479.8) (426.1) (198.6)

Cash flows from financing activities (781) (88.0) (326.3) 180.1 154.1 (37.3)

U.S. dollars Yen

2016 2016 2015 2014 2013 2012

Per Share

Profit (loss) attributable to owners of parent $ (0.99) ¥(112.01) ¥ (111.49) ¥ 43.05 ¥ 64.13 ¥ 68.60

Net assets 5.35 602.86 778.93 858.66 781.30 701.31

Cash dividends 0.14 16.00 16.00 16.00 16.00 16.00

Payout ratio — — 37.2% 24.9% 23.3%

2016 2015 2014 2013 2012

Ratios

ROE (16.2)% (13.6)% 5.2% 8.7% 10.1%

Shareholders’ equity ratio 22.3% 26.1% 27.4% 26.7% 26.1%

Net D/E (debt-to-equity) ratio 1.39 times 1.18 times 1.18 times 1.18 times 1.17 times

Market Data

Exchange rate (¥/$) ¥120 ¥110 ¥100 ¥ 83 ¥ 79

Crude oil price (Dubai spot price) ($/bbl) $ 46 $ 83 $105 $107 $110

Copper price (LME) (¢/lb) ¢237 ¢297 ¢322 ¢356 ¢385

Note: U.S. dollar amounts have been converted at the rate prevailing on March 31, 2016.


Billions of yen

2016 2015 2014 2013 2012

Energy Business ¥ (97.1) ¥(334.6) ¥108.2 ¥161.6 ¥232.5

Petroleum products 89.1 57.1 (77.5) 56.1 74.6

Petrochemicals 77.6 15.1 69.6 46.7 38.2

Inventory valuation (263.8) (406.8) 116.1 58.8 119.7

Oil and Natural Gas E&P Business ¥ 28.2 ¥ 84.9 ¥105.5 ¥ 93.6 ¥ 97.5

Metals Business ¥ 13.3 ¥ 56.6 ¥ 47.4 ¥ 44.0 ¥ 60.0

Resources development (24.2) 18.1 22.5 26.6 36.6

Smelting and refining 13.3 16.8 12.5 11.1 15.5

Electronic materials 21.9 16.6 9.0 6.3 5.4

Recycling and environmental services 5.0 6.7 5.6 2.5 5.7

Titanium 3.0 (3.1) (5.4) (1.0) —

Inventory valuation (5.7) 1.5 3.2 (1.5) (3.2)

Others ¥ 47.0 ¥ 43.0 ¥ 41.2 ¥ 29.1 ¥ 17.8From the fiscal year ended March 31, 2013, profit and loss of Toho Titanium is included in the Metals business.

Exchange Rate

(¥/$)

2012April

2013April

2014April

2015April

2016April

60

80

100

120

140

Profit (Loss) Attributable to Owners of Parent and ROE(Billions of yen) (%)

170.6

10.1

159.5

107.0

–277.2 –278.5

8.7

5.2

–13.6 –16.2

2012 2015 201620142013

–300

–150

0

150

300

–30

–15

0

15

30

(Years ended March 31)

Profit (loss) attributable to owners of parent (left scale)

ROE (right scale)

Dubai Crude Oil Price

($/bbl)

0

30

60

90

120

2012April

2013April

2014April

2015April

2016April

LME Copper Price and Inventory Level

(Thousands of tons) (¢/lb)

0

200

400

600

800

1,000

1,200

0

100

200

300

400

500

2012April

2013April

2014April

2015April

2016April

LME inventory level (left scale)

LME copper price (right scale)

Ordinary Income (Loss)

(Billions of yen)

407.8

328.3302.3291.3 271.0

183.0

255.2 260.9

–200

0

200

400

600

2012 2015 201620142013

–150.1

–8.6

(Years ended March 31)

Ordinary income (loss)

Ordinary income excluding inventory valuation factors

Shareholders’ Equity, Net Debt, and Net D/E Ratio(Billions of yen) (Times)

2012 2015 201620142013

0

600

1,200

1,800

2,400

3,000

0

1.1

1.2

1.3

1.4

1.5

1,744.2

1,942.72,135.1

1,936.8

1,498.9

2,040.6

2,299.22,520.0

2,291.02,088.7

1.17 1.18 1.181.18

1.39

(As of March 31)

Shareholders’ equity (left scale)

Net debt (left scale)

Net D/E ratio (right scale)

Management Message

Yasushi KimuraRepresentative Director,

Chairman of the Board

Yukio UchidaRepresentative Director, President


The JX Group engages in the integrated development, production, and sale of resources that are essential components

of the foundation of industry, such as petroleum, natural gas, and non-ferrous metals. For Japan, which lacks these

resources, the JX Group plays an indispensable role in supporting economic activities and people’s daily lives.

To fulfill this role in an appropriate manner, we formulated the “Basic Policy on Corporate Governance of JX Group”

in November 2015. Under this policy, the JX Group considers corporate value to mean overall value, including

appraisals by all of the Group’s stakeholders, such as shareholders, customers, business partners, employees, and local

communities. To increase its corporate value, the JX Group is working to establish and operate corporate governance

properly, as described below.

Under the Group’s business structure, JX Holdings functions as a holding company to maximize the corporate

value of the Group. To that end, JX Holdings focuses on the formulation of medium-to-long-term Group strategies and

on the achievement of those strategies through the strategic allocation of management resources and the business

administration of the core operating subsidiaries. In turn, the core operating subsidiaries in the fields of energy, oil

and natural gas development, and metals are responsible for business execution. The presidents of the JX Group’s

core operating subsidiaries also serve as part-time directors of JX Holdings. At meetings of the Board of Directors,

important matters regarding business execution for JX Holdings and the core operating subsidiaries are discussed in

a Groupwide manner. In this way, the Group is working to implement decision making in a rapid, flexible manner.

In addition, JX Holdings has appointed four outside directors, who provide a range of opinions and advice about

management from independent viewpoints on the basis of their deep insight and extensive experience. Also,

JX Holdings adopts the Board of Corporate Auditors governance model. With appropriate cooperation among three

outside corporate auditors, who have a wealth of knowledge and a high degree of independence, and two full-time

corporate auditors, we are working to increase the soundness and transparency of management.

Looking at the JX Group’s business environment, the prices of crude oil and copper declined substantially from

the second half of fiscal 2014 due to such factors as global oversupply and sluggish economic growth in China. As a

result, the earnings of our upstream businesses worsened, and in fiscal 2015 we did not reach the profit targets in the

Second Medium-Term Management Plan. In response, we are taking steps to build a business foundation that will

enable us to steadily secure profits, even in business environments in which resource prices remain at low levels.

In December 2015, we concluded a Memorandum of Understanding regarding a business integration with

TonenGeneral Sekiyu K.K. The two corporate groups agreed to work toward a business integration, with a target of

April 2017, and preparations are currently under way. Moving forward, the JX Group will strive to further increase

corporate value by making progress as “one of the most prominent and internationally-competitive comprehensive

energy, natural resource and materials company groups in Asia.”

July 2016

We will work to implement rapid, flexible decision making; to increase the soundness and transparency of management; and to maximize the corporate value of the JX Group.

Yasushi KimuraRepresentative Director, Chairman of the Board



Our M

essageReview



More than Just G

rowth

Managem


ation


To All of Our Stakeholders

Looking Back at the Past Year

Since I became president in 2015, the JX Group has imple-

mented a range of initiatives to complete the final year of the

Second Medium-Term Management Plan. In the Energy busi-

ness, we worked to strengthen the competitiveness of the

entire supply chain and to reduce costs and raise efficiency. We

also took steps to meet demand for petroleum products in Asia,

where economic growth is anticipated. In the Oil and Natural

Gas E&P business, in response to the rapid decline in the crude

oil price, we accelerated the reevaluation of our portfolio and

made decisions on business restructuring measures, such as

withdrawal from low-profitability projects. In addition, we rigor-

ously reduced costs at existing oil and gas fields. In the Metals

business, we made progress with countermeasures to address

equipment problems at the Caserones Copper Mine in Chile,

and we introduced an improvement program with the support

of a consulting firm. In these ways, we took decisive steps to

support ongoing, stable operations.

Moreover, we have decided to implement a business inte-

gration with TonenGeneral Sekiyu K.K., and we are now moving

forward with preparations for a new business structure to be

launched in April 2017. The business environment in the oil

industry is extremely challenging, with a structural decline in

domestic demand for petroleum products and significant fluc-

tuations in crude oil prices. The JX Group has the important

responsibility of providing a stable supply of energy, and to ful-

fill that responsibility the Group must further strengthen its

earnings capacity and financial position. In this situation, follow-

ing a series of discussions between the JX Group and the

TonenGeneral Sekiyu Group, we decided that the best course of

action would be to concentrate our management resources

and work toward the establishment of a strong corporate group.

JX and TonenGeneral Sekiyu will aim to achieve an annual

improvement in profits of more than ¥100.0 billion for five fiscal

years after the business integration and to develop into “one of

the most prominent and internationally-competitive compre-

hensive energy, natural resource and materials company

groups in Asia.” In addition, we will strive to contribute to the

development of a sustainable and vigorous economy and soci-

ety through the provision of a stable supply of energy.


Overview of the Second Medium-Term Management Plan

Under the Second Medium-Term Management Plan, the Group

gave priority in the allocation of management resources to

upstream businesses, which were positioned as high-profitability,

high-growth businesses. Efforts to prioritize upstream businesses

were supported by our midstream/downstream businesses,

where we worked to ensure stable earnings through the

achievement of overwhelming competitiveness. In these ways,

we aimed to maximize the Group’s corporate value.

Since the second half of 2014, the external environment has

changed significantly. The assumptions in our medium-term

management plan included a crude oil price of $110 per barrel

and a copper price of 360 cents per pound, while the actual

figures for fiscal 2015 were substantially lower, with a crude oil

price of $47 per barrel and a copper price of 237 cents per

pound. Consequently, after the exclusion of inventory valuation

factors, ordinary income in fiscal 2015 was ¥260.9 billion, com-

pared with the target of ¥420.0 billion. By business, ordinary

income in upstream businesses was ¥4.0 billion, which was less

than the target. This result was attributable to the decline in

resource prices and to the delay in the start-up of stable opera-

tions at Caserones. On the other hand, in midstream/

downstream businesses, the Group advanced its structural

reforms, and contributions were also made by the depreciation

of the yen and the lower cost of fuel resulting from the decline

in the crude oil price. Consequently, ordinary income excluding

inventory valuation factors in midstream/downstream busi-

nesses exceeded the target and reached ¥256.9 billion in fiscal

2015. In this way, the Group’s challenges and results differed by

business field.

In regard to capital investment, the depreciation of the yen

had the effect of increasing capital investment by ¥100.0 billion.

However, in consideration of our results we took steps to reduce

investment, and consequently capital investment was ¥1,240.0

billion, within the limits of the initial planned amount of ¥1,300.0

billion. There were delays in the start-up of production in certain

areas, but we launched large-scale projects that are expected to

contribute to earnings over the medium to long term.

Looking at cash flows, although we did not reach our profit

target, working capital declined due to the fall in oil prices, and

investing cash flows improved due to reduced investment and

asset disposal. As a result, free cash flow was ¥432.1 billion, which

exceeded the planned level by about ¥250.0 billion.

Under the medium-term management plan, we intended

to improve our financial position by adding the return from

strategic investments to the stable earnings from existing busi-

nesses. However, due in part to the recording of inventory

valuation losses and impairment losses as a result of the fall in

resource prices, the net D/E ratio was 1.39 times, substantially

worse than our target, which was under 0.9 times.

The Second Medium-Term Management Plan ended in

March 2016, and we had intended to launch the Third Medium-

Term Management Plan from April. However, with the business

integration approaching in one year, we delayed the formula-

tion and announcement of that plan. The medium-term

management plan for the new company will be announced

after the conclusion of the business integration.

Upstream*1 128.0 103.0 4.0 177.0 Midstream/downstream*2 55.0 152.2 256.9 243.0

Total 183.0 255.2 260.9 420.0

*1 Oil and Natural Gas E&P, Metals*2 Energy, Metals, Others

Cash Flow Generation(Cumulative Total for Second Medium-Term Management Plan)

(Billions of yen)

FY2013 – 15 (Result)

FY2013 – 15 (Plan)

Cash flows from operating activities 1,597.4 1,420.0

(Working capital) (1,079.3) (–60.0)Cash flows from investing activities –1,165.3 –1,240.0

Free cash flow 432.1 180.0

200

0

–100

100

300

400

500

FY2013 FY2014 FY2015 SecondMedium-Term

Management PlanFY2015

183.0

255.2 260.9

420.0

Ordinary Income Excluding Inventory Valuation Factors (Second Medium-Term Management Plan)(Billions of yen)

Energy Oil and Natural Gas E&P Metals Others


Our M

essageReview



More than Just G

rowth

Managem


ation

External Environment and Results Forecast for Fiscal 2016

In regard to crude oil market conditions, we expect to see

strong growth in demand while supply is limited to a slight

increase, with demand and supply basically in balance in the

second half of fiscal 2016. Looking at copper prices, with China

recording sluggish economic growth and copper prices weak,

we expect the trend toward reduced production to accelerate

in 2016, and there are no major new mine development projects

planned for 2017, 2018, or thereafter. Accordingly, copper

demand and supply conditions are likely to tighten. Nonetheless,

the assumptions in our results forecast for fiscal 2016 do not

incorporate a recovery in resource prices. We are forecasting a

crude oil price of $40 per barrel, a copper price of 230 cents per

pound, and an exchange rate of ¥110 per U.S. dollar.

The JX Group handles energy, resources, and materials.

To have a foundation that can withstand market volatility, we

must further strengthen our financial position as well as

enhance our cost competitiveness in our upstream businesses

and build an overwhelming presence, in terms of both quantity

and quality, in each market served by our midstream/down-

stream businesses. Moving forward, we will need to take a

rigorous approach to these structural reforms. Looking at our

basic policy in each business, in the upstream Oil and Natural

Gas E&P business, we will continue to rigorously reduce costs,

and we will build a strong structure that can withstand low oil

prices. In addition, we will implement thorough restructuring

measures, including focusing our management resources on

regions in which we can leverage our strengths, such as

Southeast Asia and the Middle East. In the development of

copper resources, we will work to maintain stable production at

the Caserones Copper Mine and to increase the mine’s profit-

ability. In midstream/downstream businesses, we will continue

working to increase supply chain efficiency and reduce costs,

and we will strengthen the earnings capacity of existing busi-

nesses. Furthermore, in preparation for future growth, we will work

to develop and strengthen fields in which we have strengths,

such as lubricants, specialty and performance chemical prod-

ucts, and electronic materials.

In accordance with these policies, for fiscal 2016, we are

forecasting ordinary income excluding inventory valuation fac-

tors of ¥220.0 billion, a decline of ¥40.9 billion year on year.

In upstream businesses, there will be a loss. However, in mid-

stream/downstream businesses, despite the fact that the

appreciation of the yen will have the effect of reducing profits,

measures to raise efficiency and reduce costs will increase earn-

ings. Consequently, we are forecasting profits for midstream/

downstream businesses of ¥260.0 billion, which will be the

highest level of profits since the establishment of JX Holdings,

exceeding the level of ¥256.9 billion recorded in fiscal 2015.

Key Factors

FY2015 (Result) FY2016 (Forecast)

Dubai crude oil price ($/bbl)* 47 40

Copper price (LME)(¢/lb) 237 230

Foreign exchange rate (¥/$) 120 110

* Average from March to February (nearly equal to arrived crude cost)

Key Indicators

(Billions of yen) FY2015 (Result) FY2016 (Forecast)

Ordinary income (loss) –8.6 260.0

(Inventory valuation) (–269.5) (40.0)Ordinary income excluding inventory valuation factors 260.9 220.0 Profit (loss) attributable to owners of parent –278.5 125.0 ROE –16% 8%

Net D/E ratio 1.39 times 1.37 times

Upstream 4.0 –40.0

Midstream/downstream 256.9 260.0

Total 260.9 220.0

–50

0

50

100

150

200

250

300

FY2015 FY2016(Forecast)

260.9220.0

Ordinary Income (Loss) Excluding Inventory Valuation Factors by Segment(Billions of yen) Energy Oil and Natural Gas E&P Metals Others


Future Investment Policies and Balance Sheet Improvement

Under the Second Medium-Term Management Plan, we imple-

mented aggressive investment totaling more than ¥1,200.0

billion, centered on large-scale projects. However, in consider-

ation of such factors as the significant decline in resource prices

and the Group’s financial position, we will revise our capital

investment policy.

At first, we will control capital investment. Over the next

three years, we will limit the amount of capital investment, after

the deduction of asset sales, to within the amount of deprecia-

tion and amortization.

As we control investment, we will revise the investment

allocation for each business and shift the weight from upstream

to midstream/downstream. Under the first and second

medium-term management plans, we invested aggressively in

upstream businesses, and for the time being we have com-

pleted the necessary investments in these businesses. Moving

forward, we will control investment and do our utmost to cap-

ture cash flow and recover investment. On the other hand, in

midstream/downstream businesses, we will leverage our tech-

nical strengths in such fields as lubricants and specialty and

performance chemical products. We will strive to develop

businesses based on technology and to nurture their growth

into stable sources of earnings, even on a small scale.

By shifting investment allocation to midstream/down-

stream businesses, we will disperse investment risk. In addition,

we will equalize cash-outs in each fiscal year and combine proj-

ects with long investment recovery periods and projects with

short investment recovery periods. In these ways, we will work

to disperse risk. By refocusing our investment on midstream/

downstream businesses and taking action now to develop new

sources of earnings, we will strive to build a strong financial

position that can withstand fluctuations in resource prices. In

the future, when resource prices recover, the return from

upstream businesses will be added to the earnings from mid-

stream/downstream businesses.

In addition, we will aim to improve and streamline our bal-

ance sheet by controlling capital investment and accelerating

asset sales. We are forecasting a net D/E ratio of 1.37 times at the

end of March 2017, but over the medium term we will aim for

the level of 0.9 times, which was set under the Second Medium-

Term Management Plan.

Increasing Management Transparency

Our basic policy on corporate governance is to strive to realize

the JX Group Mission Statement, achieve sustainable growth,

and increase our corporate value over the medium to long term

by establishing and operating a structure for transparent, fair,

timely, and decisive decision making.

From the four outside directors, we receive opinions based

on their deep insight and extensive experience, and we reflect

those opinions in management. In determining personnel

affairs and remuneration for the Board of Directors, we ensure

the transparency of the decision-making process by consulting

with advisory committees, half of whose members are outside

directors.

In addition, as a new initiative from this fiscal year, we have

established a full-time organizational unit to provide informa-

tion to the outside directors and to plan and implement

support measures for them. In this way, we have strengthened

the system for supporting the activities of the outside directors.

Furthermore, with the objective of fostering the exchange of

opinions and the sharing of awareness among the outside offi-

cers, we hold meetings of the outside officers.


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Basic Approach to Shareholder Return

There has been no change to our basic policy for shareholder

return, under which we redistribute profits by reflecting con-

solidated business results while striving to maintain stable

dividends. In fiscal 2015, we recorded a loss, but as a result of

comprehensive consideration of such factors as dividend

resources and cash flows, we decided to pay annual dividends

of ¥16 per share, in line with our initial forecasts. We also plan to

pay dividends of ¥16 per share for fiscal 2016.

ROE was negative in fiscal 2015, but we are forecasting ROE

of 8% in fiscal 2016, and we will strive to achieve a level of more

than 10% as rapidly as possible.

In Closing

Domestic demand for petroleum products is in a trend of struc-

tural decline, but from a global viewpoint, the domestic market

is larger than that of the United Kingdom and France combined.

Accordingly, I believe that there are still many things that the JX

Group can do, and there is room for growth. In line with the

trend toward energy liberalization, I think that the borders

between different industries in Japan, such as oil, electricity,

and gas, will gradually disappear in the future. For the JX Group,

which handles a wide range of energy and resources, it is clear

that this trend presents significant business opportunities.

Resource prices remain weak, and we are in a difficult business

environment. Moving forward, we will strive to build a strong

business foundation that can steadily secure profits even when

market conditions fluctuate. The entire Group will work together

to implement the priority initiatives that I have explained. I

would like to ask for your continued support and encourage-

ment of the JX Group in the years ahead.


中中中中中中中中中

Review and Strategies by Core Business 20 ..... Energy Business

25 ..... Oil and Natural Gas Exploration and Production (E&P) Business

30 ..... Metals Business


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Energy Business

JX Nippon Oil & Energy (NOE)

20 JX Holdings, Inc. Annual Report 2016

Overview of Fiscal 2015

In fiscal 2015, ordinary income excluding inventory valuation factors

rose ¥94.5 billion year on year, to ¥166.7 billion. It was difficult to

increase earnings when crude oil prices were falling, and we faced

challenges in managing our businesses. However, we took steps to

raise efficiency and reduce costs, and positive contributions were

made by a number of factors. These factors included a decline in

the cost of fuel consumed at refineries in the petroleum refining

business, which was due to lower crude oil prices, as well as solid

market conditions for paraxylene, a principal product in the chemi-

cal products business. We did not meet the three-year cumulative

total profit targets in the Second Medium-Term Management Plan.

Nevertheless, we did achieve a certain level of results, as we cleared

the target for ordinary income excluding inventory valuation fac-

tors for fiscal 2015 on a single-year basis.


Petroleum Refining and Marketing—Results and Remaining Issues

To address change in the demand for petroleum products, at the end

of fiscal 2013 we ceased oil refining at the Muroran Refinery and began

construction to convert it into a petrochemical plant. In addition,

during fiscal 2015 we commenced operation of a solvent de-asphalting

(SDA) facility at the Kashima Refinery. We have established a system

for increased production of high-profitability petrochemical products

and diesel raw materials by cracking heavy oil.

We took steps to strengthen the competitiveness of the entire

supply chain. In production, we increased the throughput of heavy

crude oil, which can be procured at low cost, and we worked to

raise efficiency and reduce costs at each refinery and plant, with an

ongoing focus on safety and stable operations. In sales, we worked

to secure further profits. In cooperation with agents and dealer-

ships nationwide, we rolled out measures to promote sales, such as

card campaigns. Moreover, we implemented flexible exports of

products to overseas markets. I believe that these initiatives were

successful in the achievement of significant results in fiscal 2015.

We will strive to grow stronger through rigorous initiatives to raise supply chain efficiency and reduce costs, and we will implement flexi-ble measures to balance demand and supply. In such ways, we aim to achieve overwhelming competitive strength.

Tsutomu SugimoriRepresentative Director and PresidentJX Nippon Oil & Energy Corporation (NOE)

Review of Financial Results(FY) 2015 2014 Change

Net sales (Billions of yen) 7,122.4 9,124.8 –2,002.4

Operating loss (Billions of yen) (141.4) (365.3) +223.9

Ordinary loss (Billions of yen) (97.1) (334.6) +237.5

Ordinary income excluding inventory valuation factors (Billions of yen) 166.7 72.2 +94.5

Domestic fuel oil sales volume (Millions of KL) 64 64 0

Dubai crude oil price* ($/bbl) 47 88 –41

Paraxylene price in Asia ($/ton) 813 1,105 –292

Foreign exchange rate (¥/$) 120 110 +10

* Average from March to February of the next year (nearly equal to arrived crude cost)


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Review and Strategies by Core Business: Energy Business

We also strengthened our business foundation as a compre-

hensive energy company. For example, we entered the electric

power retail business and we moved forward with the opening of

hydrogen stations. In addition, we reevaluated our business struc-

ture for the fuel cell business.

The paraxylene business in South Korea, which commenced

production in fiscal 2014, enjoyed a firm market and made a major

contribution to the expansion of earnings in the chemical products

business in fiscal 2015.

On the other hand, we face the issue of thoroughly resolving

problems that occur at refineries. Our refineries have all been in

operation for more than 40 years. Accordingly, under the Second

Medium-Term Management Plan, we incurred large-scale repair

expenses, and as a result we significantly reduced problems with

these facilities. However, in recent years there has been an increase

in operational problems stemming from human error. We need to

implement thorough safety training and improve the technical

skills of our younger employees. Our workforce includes many vet-

erans and newer employees, but few middle-level employees. We

have positioned the smooth transmission of technical skills as a

critical issue, and moving forward we will implement initiatives in

the area of human resources development.

Further Reinforcing Our Foundation as an Energy Conversion Company

We have expanded our business in new fields in accordance with

our social mission of converting primary energy, such as crude oil,

natural gas, and coal, into various forms of final energy for delivery

in line with the needs of customers.

Under the Second Medium-Term Management Plan, we made

especially strong advances in the electricity business. Using the

brand name ENEOS Denki, we have entered the household-use

electric power retail business, which was fully liberalized in April

2016. We have made favorable progress, with more than 100,000

contracts as of May. Our starting point in this business was the

supply of electricity for industrial and commercial use, where

demand peaks during the day. However, demand for household-

use electric power peaks in the morning and evening, and

accordingly we think that we can supply electricity in a more stable

and efficient manner.

To expand in-house electric power generation, we began com-

mercial operation of a 100,000 kW power generation facility that

uses residue obtained from the SDA facility at the Kashima Refinery,

mentioned earlier, as fuel. In addition, at the Mizushima Refinery,

we decided to construct boiler power generation equipment that

will utilize petroleum coke as fuel. Moreover, we are focusing on

renovating and expanding existing facilities in conjunction with

initiatives to bolster sales. For example, we will consider expanding

the facilities at Kawasaki Natural Gas Power Generation Co., Ltd., a

Group company.

We consider the electric power retail business and the expan-

sion of power generation to be a set, and we are seeing results from

our initiatives in both areas. Currently, we are developing the

household-use electric power retail business only in the area served

by Tokyo Electric Power Company, Inc., but we are focusing on

opportunities and considering expansion into other regions.

Review of the Second Medium-Term Management Plan

Basic Strategies Major Initiatives

Strengthening profitability

Transformed the Muroran Refinery into a petrochemical plant.

Installed solvent de-asphalting (SDA) equipment in the Kashima Refinery.

Improved the supply chain (saving energy, refining low-priced crude oil, etc.) and reduced fixed costs.

Enhancing business as an Energy Conversion CompanyExpanded projects in new fields (began electricity retail sales for homes and opened hydrogen supply stations).

Stopped technology development and production in the fuel cell business.

Progressing growth strategies

Basic Chemical Products: Commenced commercial production of paraxylene at Ulsan Aromatics in South Korea.

Lubricants: Strengthened production and sales abroad.

Challenges

Strengthening earnings capacity and developing businesses that can be primary sourcesof revenue in the future, as domestic petroleum demand continues to decline.


In addition, in the natural gas business, we commenced com-

mercial operation of LNG terminals in Hachinohe and Kushiro in

April 2015. Moreover, we expect the use of fuel cell automobiles to

increase in the future, and we have opened hydrogen stations in

the four major metropolitan areas of Tokyo, Aichi, Kansai, and

Kitakyushu. Our network of stations has expanded, reaching 37

locations. In fiscal 2016, we plan to open three more stations, for a

total of 40 locations in operation.

Progress with Overseas Growth Strategies

Aiming to establish a presence in overseas markets, we have

aggressively advanced business development initiatives, centered

on Asia, where demand is expected to increase accompanying

economic growth.

One major success was the conclusion of strategic cooperation

agreements with Vietnam National Petroleum Group (Petrolimex),

which has the largest share of sales in Vietnam’s petroleum prod-

ucts market.

With a population of 90 million, Vietnam is a demographically

young country with an average age of 28 years. With a recent eco-

nomic growth rate of 6.7%, Vietnam is expected to record stable

economic development, even in comparison with other Asian

countries. Combined with progress in motorization, there is no

question that energy demand will increase. In this setting, our alli-

ance with Petrolimex, which has a share of more than 50% of

domestic fuel oil sales in Vietnam, is highly significant. Accordingly,

we moved ahead with consideration of an investment in Petrolimex,

and in April 2016 we concluded a share subscription agreement and

a strategic collaboration agreement.

In addition, Vietnam faces the issue of a supply capacity that is

insufficient for demand, and there are also latent needs for refinery

construction. Consequently, we are moving ahead with consider-

ation of joint initiatives in refinery construction. We are also

considering collaboration in a variety of other fields, such as the

electric power business. By leveraging the knowledge, technolo-

gies, and know-how of the JX Group, I believe that we can make

contributions to increasing the corporate value of Petrolimex and

to the economic development of Vietnam.

In chemical products, in June 2014 we began commercial pro-

duction at a paraxylene plant that we are operating through a joint

venture with SK Global Chemical Co., Ltd., of South Korea. In this

way, we have established the largest-scale paraxylene plant in Asia,

with an annual production capacity of 3.12 million tons. Demand for

paraxylene is expected to increase, and we will take further steps to

expand sales in developed countries in Europe, North America, and

elsewhere, including consideration for alliances with new partners.

In the lubricants business, overseas we have established 28

sales and marketing bases and 48 manufacturing bases, and we

worked to meet demand through these bases. We have expanded

our network to a considerable extent, and moving forward we will

further leverage the ENEOS brand. We will focus on efficient sales

and take steps to increase sales volume and expand earnings.

Fiscal 2016 Business Policies

Business Integration with TonenGeneral Sekiyu K.K.

Our operating environment is undergoing dramatic change, and

we face structural problems, such as declining domestic oil

demand. On the other hand, oil will continue to play a major role

and is expected to have a share of 30% to 40% of primary energy in

2030. Accordingly, we will continue to have the important duty of

providing a stable supply of petroleum products.

However, for a continued stable supply, more than imports, we

need to have strong cost competitiveness. Of course, stable supply

will be adversely affected if the domestic oil industry is entirely

replaced by imports. As one part of measures to strengthen cost

competitiveness, it is necessary to pursue a production system that

is in line with demand. Accordingly, a combination of two

companies will have more options and greater effectiveness and

synergies than a single company working by itself. As a result, the

allocation of management resources to growth fields should be

more substantial, and the resulting successes should be more

significant.

The business integration with Tonen General Sekiyu will

strengthen the international competitiveness not only of the two

corporate groups but also of Japan’s entire oil industry. It will also

contribute to the development of the energy industry, and it will be

extremely significant for society as well. We are well aware of the

importance of this business integration, and we will work to steadily

make it a success.


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Business Policies

While maintaining our dedication to safe and stable operations, we

will continue to strengthen our earnings capacity through rigorous

initiatives to raise supply chain efficiency and reduce costs, and we

will implement flexible measures to balance demand and supply. In

such ways, we aim to achieve overwhelming competitive strength.

In addition, we need to rapidly nurture and strengthen the

businesses that will become our operational pillars in the future.

The focus of these efforts will be the electricity business and over-

seas initiatives, principally in Southeast Asia.

The development of businesses based on technology will also

be a key initiative. In these businesses, we will leverage our techni-

cal strengths to develop, produce, and sell high-value-added

products. In this way, we will build an earnings structure that is less

susceptible to declines in demand or oil prices. We aim to further

strengthen our management foundation by accumulating earn-

ings, even if the scale of each individual business is small. Specifically,

we will advance these initiatives in the fields of lubricants and spe-

cialty and performance chemical products.

In the lubricants business, as I mentioned, we will work to

increase sales volume and earnings by taking steps to leverage the

ENEOS brand, both domestically and overseas. To that end, we will

need to develop products that are in line with each country’s con-

ditions and standard of quality. I believe that this is certainly an

environment that is suitable for businesses based on technology.

In specialty and performance chemical products, there are ini-

tiatives that we consider to be promising, and we are working in

development, production, and sales. These initiatives include busi-

nesses for which earnings of ¥1.0 billion to ¥2.0 billion can be

expected from a single business. For example, the cell incubation

business, which is recording substantial gains in demand in such

fields as medicine, has grown to the point where a certain level of

earnings can be generated. Aiming for further growth, we have

taken steps to acquire new sales channels through M&A initiatives.

Moving forward, we will leverage a wide range of options, includ-

ing M&As, while applying the principles of selection and

concentration. In this way, we will strive to nurture each individual

business so that it can steadily generate earnings.

Strengthening Our Organization

In line with changes in the operating environment, we must also

change our organization. As I have said since I became president,

we need to become a more flexible and dynamic company, even as

we continue to pass down our traditions.

In fiscal 2016, we will implement three initiatives. The first is the

development of global human resources. Currently, we have dis-

patched more than 300 employees from Japan to overseas

locations, and we have an overseas workforce of 1,500 people,

including national staff employed at overseas offices. In our efforts

to open up overseas markets with a limited number of employees,

we will rely on the capabilities of these national staff members, and

accordingly we must bolster our training of overseas human

resources. Therefore, in addition to language training, from the

current fiscal year overseas training that involves practical experi-

ence has been made mandatory.

The second initiative is the establishment of an environment

that facilitates diverse working styles. In particular, we will focus on

establishing a framework to promote career opportunities for

women. We will strive to rapidly build an environment in which

large numbers of employees can generate results, without regard

to whether they are male or female and without relying on long

work hours.

The third initiative is a reevaluation of job rotation. The oil busi-

ness has traditional business practices and working styles, and as a

result up to this point it has been common for employees to remain

within their departments. However, in today’s environment, an

imbalance in human resources capabilities has developed, and this

system has become inflexible. The people who will become the

leaders of tomorrow will need to have a wider range of experience

and knowledge, and accordingly we will activate job rotations

between departments at the manager and general manager levels.

I believe that the business integration with TonenGeneral

Sekiyu will offer not only quantitative integration effects but also

opportunities for the JX Group to significantly change itself. I also

have high expectations for the organizational synergy effects that

will be generated from the business integration.

Review and Strategies by Core Business: Energy Business


Oil and Natural Gas Exploration and Production (E&P) BusinessJX Nippon Oil & Gas Exploration (NOEX)

25JX Holdings, Inc. Annual Report 2016

Review and Strategies by Core Business: Oil and Natural Gas Exploration and Production (E&P) Business

Overview of Fiscal 2015

Due to the influence of weak oil prices, in fiscal 2015 NOEX recorded

ordinary income of ¥28.2 billion, only about 30% of the planned

level of ¥110.0 billion that was included in the Second Medium-Term

Management Plan. Our results in the final year of the management

plan were clearly unsatisfactory, including the recording of impair-

ment losses of ¥177.5 billion and restructuring costs of ¥79.5 billion

due to the low oil prices.

Of the total impairment losses of ¥177.5 billion, about 70% was

due to U.K. operations. We had a number of projects that had high

break-even points even though they were in the period of declin-

ing production, and accordingly the scale of the impairment losses

was large. The restructuring costs were principally the result of ini-

tiatives to sell or withdraw from certain assets following the

reevaluation of our business scale and portfolio. The majority of

these costs were also for U.K. businesses, and they included valua-

tion losses on assets that we plan to sell, in addition to the Culzean

gas field, for which the decision has already been made.

These projects principally arose from large-scale investments

implemented around 2012, and, in consideration of the business

environment at that time, I believe that there was sufficient

foundation for the investment decisions. Nevertheless, we need to

reconsider the manner in which we concentrated our investment

in a specific region. Moreover, asset replacement and portfolio

reevaluation are always required in the development business, and

we had previously planned to implement these initiatives. However,

we encountered changes in the business environment that

exceeded our expectations and our response was somewhat slow.

The sale and withdrawal initiatives did not proceed as we expected

and, unfortunately, coincided with the timing of the weak oil prices.

The streamlining of our operations so that their scale is appropriate

for our strength is an urgent task, and we must speed up our deci-

sion making and optimize the scale of our operations.

On the other hand, one major success was the fact that

production volume, which had previously been declining, finally

turned upward in fiscal 2015. A contribution to this success was

made by favorable growth in production from the Papua New

Guinea LNG Project and the Kinnoull oil field in the U.K. North Sea,

for which development was concluded during the Second

Medium-Term Management Plan and commercial production

commenced.

NOEX will continue working to accumulate strength as it targets a leap forward. As we move ahead, we will take steps to enhance our global presence as an E&P company with distinctive strengths, such as No. 1 in CO2-EOR (Enhance Oil Recovery) technical capabilities in Asia.

Shunsaku MiyakeRepresentative Director and PresidentJX Nippon Oil & Gas Exploration Corporation (NOEX)


Net sales (Billions of yen) 175.8 226.4 –50.6

Operating income (Billions of yen) 21.6 75.4 –53.8

Ordinary income (Billions of yen) 28.2 84.9 –56.7

Crude oil equivalent sales volume (Thousands of BD) 121 115 +6

Brent crude oil price (Jan.–Dec.) ($/bbl) 53 99 – 46

Dubai crude oil price (Jan.–Dec.) ($/bbl) 51 97 – 46

Foreign exchange rate (Jan.–Dec.) (¥/$) 121 106 +15



In regard to exploration, we had a certain degree of success in

large-scale exploration initiatives for which we are acting as opera-

tor, such as the discovery of crude oil and natural gas in Malaysia

and Qatar. Also, at the Mariner oil field in the U.K. North Sea and the

Layang oil and gas field in Malaysia, exploration has made favorable

progress, and we moved to the development stage during the

Second Medium-Term Management Plan. In addition, we are near-

ing the point of moving to the development stage at the Hail oil

field in Abu Dhabi and the Tangguh LNG Project 3rd Train in

Indonesia. However, other than those projects just described, we

have not made progress in line with expectations at large explora-

tion projects—namely, the Sado island south west offshore Japan

and the SK-333 block, Deepwater Block 2F offshore Sarawak—and

at small and medium-sized projects. Moving forward, we will need

to increase the accuracy of our exploration evaluations and narrow

down our target regions.

Looking at development projects, we have completed devel-

opment at the Finucane South oil field in Australia as well as at the

above-mentioned Papua New Guinea LNG Project and Kinnoull oil

field in the U.K. North Sea. These projects are now making substan-

tial contributions to earnings. In addition, our CO2-EOR project in

the United States is making favorable progress in development,

and we are nearing the start-up of production. On the other hand,

at large-scale development projects, such as the Mariner oil field in

the U.K. North Sea and the Layang gas field in Malaysia, we have

had operational delays and cost increases. We are already formulat-

ing countermeasures with our partners and related parties. Our

challenge is to reduce costs, which significantly exceeded expecta-

tions in the period of rising oil prices.

In regard to production, as I mentioned, the production

volume, which had been declining for some time, finally stopped

declining and began to increase in 2015. However, the decline in

production volume at certain assets has exceeded expectations,

and we now face the issue of the appropriate operation and main-

tenance of the assets that we hold. Furthermore, we are aware that

in the future another issue will be the implementation of environ-

mentally friendly, safe decommissioning work for assets where

production has ceased. In addition, we are moving ahead with the

establishment of production systems in challenging environments,

such as deepwater oil and gas fields, and accordingly production

costs will be higher in general. Consequently, we are expecting oil

prices to rise above current levels, but it will be possible to reduce

average production costs over the long term. We will not give up

on deepwater oil and gas fields due to their high cost. However,

I believe that we must absolutely avoid small-scale projects with

high costs.



Expanding reserves and production volume mainly through exploration

Commenced commercial production of the Papua New Guinea LNG Project. (Apr. 2014)

Commenced commercial production at the Kinnoull oil field. (Dec. 2014)

Extended the contract terms of Rang Dong oil field in Vietnam and Block SK10 in Malaysia.

Moved to develop of the Mariner oil field in the U.K. North Sea and the Layang oil and gas field in Malaysia.

Production volume, which had been declining up to 2013, stopped declining and began to increase.

Establishing superiority by focusing on core business areas and technologies

Explored deepwater oil and gas fields (drilled well in Deepwater Block R in Malaysia, etc.).

Joined CO2-EOR project.

Restructuring the business portfolio to respond to change in the business environment

Sold certain assets in the U.K. North Sea.

Reduced businesses in the U.K. North Sea, taking partial withdrawal into account.

Challenges

Restructuring and improving earnings capacity in a low oil price environment.


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Review and Strategies by Core Business: Oil and Natural Gas Exploration and Production (E&P) Business

CO2-EOR

In the CO2-EOR business, which is under development in the United

States, we are aiming to begin enhanced recovery in the fourth

quarter of 2016. This business, which increases crude oil recovery

from depleted oil fields and simultaneously reduces CO2 emissions,

is extremely promising and has strong potential. This project is also

superior in terms of its contribution to the natural environment

through the reduction of emissions of CO2, a greenhouse gas.

Generally, at conventional oil fields production volume is only

5% to 25% of reserves, and increases of only a few percentage

points in the recovery rate generate a considerable volume. There

are a number of technologies to increase the recovery rate, but we

have accumulated research into an enhanced recovery method

that uses CO2. Currently, we are advancing the CO2-EOR business

through a joint venture with NRG, a major electric power company

in the United States. The plan calls for enhanced crude oil recovery

to be implemented by recovering CO2 from the coal incinerator

exhaust gas at a thermal power plant on the outskirts of Houston,

Texas, and then injecting that CO2 into the West Ranch oil field on

the coast of the Gulf of Mexico. This oil field is aged and the

production volume has declined, but by injecting CO2 under-

ground, we believe it will be possible to increase the production

volume from about 500 barrels a day to about 20 times that level.

We began construction work on the CO2 recovery plant in

September 2014, and construction work is making favorable prog-

ress, aiming for the start-up of CO2 injection at the West Ranch oil

field in the fourth quarter of 2016. In the future, we will consider

moving ahead with other similar projects in the United States.

Elsewhere, we are considering the implementation of busi-

nesses that utilize CO2 from gas fields with high CO2 content in

Southeast Asia.

Currently, there is a growing awareness of environmental

issues, including a global consensus regarding initiatives targeting

CO2 reductions. If the trend toward recovery and storage of green-

house gases accelerates, the JX Group, which is a leader in CO2-EOR

technologies, is expecting further growth in business opportuni-

ties. However, in consideration of the current weakness in oil prices,

future business expansion will be considered carefully in conjunc-

tion with our partners.

Outlook for the Business Environment

With investment restrained and U.S. shale-related projects halted,

production is sluggish, and as a result the demand-supply balance

appears to be improving. Furthermore, the entire upstream devel-

opment industry is implementing rigorous cost reevaluations, and

accordingly a wide range of costs, such as equipment and labor

costs, are declining. Currently, the price of oil is in the range of $40

to $50 per barrel, and we believe that it will not return to the previ-

ous level of $100 per barrel in the short term. For NOEX, we are

approaching this situation as an opportunity to streamline our

operations from the scale reached during the period of $100 oil and

to bolster our tolerance for low oil prices. In addition, upstream

development companies are moving to sell assets, and there are

opportunities to acquire excellent assets at low cost. In particular, in

Southeast Asia, where NOEX has a strong business foundation, this

is a good opportunity to aim for business expansion.

To leverage this opportunity and link it to the next growth

stage, I believe that we must strengthen our human resources and

other technical capabilities as well as our financial resources. We

could leverage the financial strength of the JX Group to acquire

high-quality assets, but, in consideration of the financial foundation

of the entire Group, I believe that NOEX should use its own strengths

to develop the earnings capacity to fund investment, rather than

simply relying on the Group.


Oil/Gas Field Schedule

Mubarraz oil field (Abu Dhabi, UAE)

Helang gas field (Block SK10, Malaysia)

Jintan gas field (Block SK8, Malaysia)

Tangguh LNG project (Indonesia)

Kutubu oil field (Papua New Guinea)

Rang Dong oil field (Block 15-2, Vietnam)

LNG project (Papua New Guinea)

Mariner oil field (U.K. North Sea)

CO2-EOR project (U.S.)


In fiscal 2016, based on the assumption that oil prices will remain

low, we will do our utmost to enhance our ability to respond to low

oil prices and to improve our profitability. To that end, we will

steadily advance existing projects and implement rigorous cost

and schedule management. From the viewpoint of strengthening

our financial foundation, our policy will be to reduce investment as

much as possible by putting off new projects and postponing

investments that are not critical. In addition, to optimize our portfo-

lio, we will rapidly sell or withdraw from assets that we have

determined to be inappropriate for holding.

In business operations, our policy will be to bolster our busi-

nesses in Southeast Asia, where we can leverage our strengths.

Based on the assumption of a rigorous commitment to safety and

stable operations, we have determined that the best way to gener-

ate profits while maintaining current production volume (120,000 to

140,000 BOED) in a low oil price environment will be to refocus our

management resources on Southeast Asia. While it may appear

that we have only small and medium-sized projects left, we will aim

for low-cost development and production while effectively utiliz-

ing our existing facilities. We will strive to generate a variety of

business opportunities while leveraging high levels of trust from

local governments and our partners. In human resources develop-

ment, we have reevaluated our programs with consideration for

feedback from younger employees. Our policy will be to accelerate

the implementation of overseas study initiatives and the active

dispatch of employees to overseas locations.

For the time being, we will continue working to accumulate

strength as we target a leap forward, with our focus on Southeast

Asia. However, when our cash flow generating ability improves and

our financial foundation becomes stronger, we will also aim to roll

out initiatives in other regions, such as South America and the

Middle East. Then, we will take steps to enhance our global pres-

ence as an E&P company with distinctive strengths, such as No. 1 in

CO2-EOR technical capabilities in Asia.

1990 Successful test drilling 2017 Scheduled start-up of production at Layang gas field

2011 Commencement of production at Cili Padi gas field

1992 Successful test drilling

1997 Successful test drilling 2016 Final decision on investment for expansion project

2020 Scheduled start-up of production at expansion project

2012 Asset acquired

2018 Scheduled start-up of production

2013 Final decision on investment

2014 Participation in project2016 Scheduled start-up

of production

2011 Signed new concession agreement

1973 Commencement of production

1989 Commencement of produc-tion at Umm Al-Anbar oil field

1995 Commencement of production at Neewat Al-Ghalan oil field

2017 Scheduled start-up of production at Hail oil field

2007 Commencement of project

2014 Commencement of production

2009 Final decision on investment

2013 Decided on extension of PSC term

1994 Successful test drilling 2015 Started HCG-EOR

Exploration stage Development stage Production stage

1980 2000 20101990

Exploration and Development Schedule for Principal Oil and Gas Fields

1990 Asset acquired

2012 New concession agreement takes effect

2008 Commencement of production at Saderi gas field


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Metals Business

JX Nippon Mining & Metals (NMM)



Looking back at the Second Medium-Term Management Plan, we

recorded continued growth in profits in fiscal 2013 and 2014, but this

changed in fiscal 2015, when the rapid decline in copper prices led

to a significant decrease in our earnings, due principally to mine

investments. The start-up of the Caserones Copper Mine, which

was positioned as our most important challenge in the Second

Medium-Term Management Plan, has not proceeded according to

plan. Currently, we are concentrating our financial resources on

initiatives to stabilize operations. In the copper smelting and refin-

ing business, despite the favorable effect of the depreciation of the

yen and improvement in TC/RC, we faced significant negative fac-

tors. Such factors included reduced production due to a fire at a

domestic refinery and impairment loss and back taxes at LS-Nikko

Copper Inc., in South Korea. In the electronic materials business,

despite the challenging business environment, solid sales growth

was recorded by value-added products, such as semiconductor

targets, treated rolled copper foil, and compound semiconductor

materials, and these products contributed to earnings growth.

In the recycling and environmental services business, the busi-

ness environment remained difficult due to such factors as lower

margins resulting from intensified competition in the procurement

of recycled materials. In this setting, we expanded our collection

network by acquiring shares of Takasho Co., Ltd., and overseas

we established a base in North America in 2014. In these ways,

we have achieved results that will support our business in the

future. In addition, we have commenced detoxification processing

of low-concentration PCB waste, which has shown the potential to

become a new business pillar.

On the other hand, in the titanium business, which had contin-

ued to record losses, our structural reforms, such as measures to

raise production system efficiency and reduce costs, have finally

produced results. Consequently, the titanium business was able to

return to profitability.

We will concentrate our resources on midstream/downstream businesses and work to build a balanced earnings platform.

Shigeru OiRepresentative Director and PresidentJX Nippon Mining & Metals Corporation (NMM)


Net sales (Billions of yen) 1,049.7 1,156.0 –106.3

Operating income (Billions of yen) 14.7 33.2 –18.5

Ordinary income (Billions of yen) 13.3 56.6 –43.3

Ordinary income excluding inventory valuation factors (Billions of yen) 19.0 55.1 –36.1

(Resources development) Equity-entitled copper mine production (Thousands of tons/year) 172 148 +24

(Smelting and refining) PPC refined copper sales volume (Thousands of tons/year) 595 623 –28

(Electronic materials) Treated rolled copper foil sales volume (Thousands of km/month) 4.9 4.1 +0.8

Precision rolled products sales volume (Thousands of tons/month) 3.7 3.8 –0.1

(Recycling and environmental services) Gold recovery volume (tons/year) 6.4 5.9 +0.5

LME copper price (¢/lb) 237 311 –74

Foreign exchange rate (¥/$) 120 106 +14


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Review and Strategies by Core Business: Metals Business

Operational Status of the Caserones Copper Mine

As a result of the reassessment of future recoverability with consid-

eration for the most recent copper prices, in fiscal 2015 we recorded

an ¥80 billion impairment loss. At this point, the largest issue is the

stabilization of operations. The reason is that when operations sta-

bilize, it will be easier to implement measures to raise efficiency,

leading to cost reductions. Up to this point, we have not been able

to establish a stable production system at the Caserones Copper

Mine. However, the fact that substantial improvements are within

sight bodes well for fiscal 2016 and thereafter. Due to the difficult

external environment, we did not record favorable results, but the

issues that we must address have been clarified. We will move rap-

idly to increase our cost competitiveness and build a foundation

that can steadily generate cash, even when copper prices are low.

Specifically, from January 2016 we dispatched an equipment

engineering team from headquarters, and the team is focusing its

efforts on achieving stable operations. Those efforts have produced

results, and the number of production stoppages due to equip-

ment problems has steadily declined. By the end of fiscal 2015, the

mine’s crude ore processing volume reached about 80% of total

capacity.

In addition, with the support of a consulting firm, we have

introduced an improvement program, and moving forward we will

work to strengthen competitiveness through such initiatives as

further reducing costs and increasing productivity. By the end of

the first half of fiscal 2016, we will formulate our action plan and

strive to link it to results realized within fiscal 2016. We will do our

utmost to achieve further increases in competitiveness by incorpo-

rating and aggressively utilizing other capabilities and viewpoints.

Outlook for the Business Environment

At current copper prices, many copper mines cannot cover total

costs, including investment costs. Accordingly, within several years

copper prices are likely to recover to a level at which sufficient earn-

ings can be generated by each mine. Looking at supply and

demand, due to the weak copper price, production has been

reduced and new mine development has been delayed. On the

other hand, public investment in China and other Asian countries is

expected to generate demand, and we think that there will be a

transition from a demand-supply balance to a supply shortage.

However, we also recognize that geopolitical activities and

economic trends, such as more-active speculative participation on

copper exchanges and a slowdown in China’s economic growth,

will have an influence on the price of copper. Accordingly, we must

move quickly to build a business foundation that is less susceptible

to the outside environment.

In the electronic materials business, the rate of growth in the

smartphone market is likely to decline, while server-related demand

is expected to increase due to big data collection and processing as


Resources developmentEstablishing a highly profitable structure by enhancing copper mine interests

Stable operation of Caserones delayed, and income declined due to the falling copper price.

Copper smelting and refiningEstablishing a business structure that has top-class cost competitiveness

Maintained income by improving the smelting margin and smelting processes.

Electronic materialsSecuring and increasing world’s top share in each product market

Expanded earnings capacity of existing products, such as sputtering targets for LSIs and copper foil, by capturing increased demand.

Failed to achieve the profit target of a new cathode materials project. Carried out restructuring of the project and the unprofitable electro-deposited copper foil business.

Recycling and environmental services

Building an international resource recycling business with an environmentally friendly zero emission system

Increased the overseas collection rate of materials for recycling.

Titanium Carrying out restructuring Moved into the black as a result of restructuring.


Challenges

Establishing stable operation of Caserones early and strengthening earnings capacity of midstream/downstream businesses.


a result of continuing advances in the Internet of Things (IoT). Also,

the trend toward automation utilizing robots is accelerating in a

variety of fields, such as automated driving, remote medicine, and

intelligent buildings. Copper is expected to be an indispensable

material in these new fields. To anticipate these trends and capture

demand, we will consider M&As and business alliances.

In addition, we will take aggressive steps to introduce automa-

tion, such as through the utilization of the IoT and robots, in order

to improve and reform management efficiency and productivity.

In the recycling and environmental services business, there are

concerns about a decline in industrial waste due to the hollowing

out of domestic industry and about a decrease in the quality of

valuable materials in recycled materials. To address these issues, we

will strengthen our collection network in Japan and overseas,

secure recycled materials with higher margins, and focus on the

industrial waste treatment business, for which social needs are

high, including the treatment of low-concentration PCB waste and

asbestos.


Moving forward, our highest priorities will be “safety and stable

operations” and “rigorous compliance.” With consideration for the

business environment outlook, in the copper smelting and refining

business and the recycling and environmental services business,

we will work to strengthen our earnings platforms by boosting our

cost competitiveness and raising our operational efficiency. In the

electronic materials business, where new demand is anticipated,

we will work to start-up new businesses through M&As and busi-

ness alliances. We will reevaluate our marketing techniques and

formulate measures to promote recognition of the high quality and

broad scope of our high-value-added materials. Internally, we have

established an organization that proposes solutions based on a

wide-ranging view of our high-value-added products, and we have

gradually started to earn high evaluations from customers.

In addition, we established the Technology Headquarters in

April 2016, and we are advancing initiatives to integrate equipment

technologies with the process technologies that we have pursued

to this point. This headquarters, which has been merged with the

Information Systems Division, is working to enhance the level of

administration and business management, to optimize SCM, and to

utilize the IoT. Moving forward, we will strengthen our technical

development capabilities and take steps to promote the develop-

ment and rotation of our technical employees. In this way, we will

strive to activate our organization.

Furthermore, in regard to the activation of human resources

and organizations, we will take initiatives from two perspectives:

“strengthening human resources management and human

resources development” and “establishing an environment in which

diverse human resources can work with enthusiasm.” On that basis,

we plan to implement changes to the personnel system, such as

examining and introducing work systems that reflect consideration

for work-life balance.

Outline of Resources Development and Copper Smelting and Refining Businesses

*1. Indirect ownership of JX Nippon Mining & Metals (As of March 31, 2016)

*2. PPC’s offtake of 290 thousand ton production capacity

67.8% 39.9%*1

Smelting and Refining AlliancesOverseas Mines

Los Pelambres Copper Mine (Chile)

15.0%*1

Caserones Copper Mine (Chile)

52.5%*1

Escondida Copper Mine (Chile)

3.0%*1

Collahuasi Copper Mine (Chile)

3.6%*1

LS-Nikko Copper

270 thousand tons/year (South Korea)

Onsan Smelting PlantSaganoseki Smelter & Refinery, Hitachi Refinery

450 thousand tons/year

Tamano Smelter, Hibi Kyodo Smelting Co., Ltd.

200 thousand tons/year*2

Pan Pacific Copper (PPC)

650 thousand tons/year (Japan)

JX Nippon Mining & Metals

Mitsui Mining & Smelting Co., Ltd.

32.2% 5.0%

100%

Investment return

Stable procurement

of copper concentrate

Investment

JX Holdings


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Review and Strategies by Core Business: Metals Business

Bolstering Our Financial Position

Along with strengthening our earnings capacity, another impor-

tant issue is bolstering our financial position. We will focus on the

recovery and reinforcement of our financial position, which has

been adversely influenced by impairment losses and lower invest-

ment returns. In the short term, while taking a careful approach to

expanding our existing businesses, we will give priority to bolster-

ing our financial position.

Moreover, in regard to risk management, to avoid latent risks

and minimize lost profits in administration, business management,

capital investment, and other business activities, we will build a

framework to understand risks; confirm, evaluate, and verify coun-

termeasures to those risks; and implement all possible measures,

including BCP measures for disasters and information security mea-

sures. By strengthening risk management, we will strive to establish

an environment in which business can be conducted in a more-

focused manner.

Medium-to-Long-Term Business Policies

With a history of more than 110 years, NMM has expanded from its

start at the Hitachi Mine to the copper smelting and refining busi-

ness, the electronic materials business, and the recycling and

environmental services business. In expanding into new businesses,

we have a history of developing as a company and displaying an

ability to respond to the needs of the age while passing down the

elements that comprise our corporate DNA—“coexisting and pros-

pering along with local communities” and “practicing environmental

conservation.” Rather than letting this DNA fade away, I am repeat-

edly making the point within NMM that we should aim to be a

company that continues to develop for the next 100 years. This

applies not only to employees but also to the people who could

become NMM’s driving force in the future. Accordingly, we have

created many opportunities to communicate to elementary and

junior high school students the usefulness and future potential of

non-ferrous metals. In addition, when we have the opportunity we

are working to provide messages directly to students who partici-

pate in NMM presentations.

NMM has established a non-ferrous metals supply chain.

Accordingly, we do not depend too heavily on a specific business. I

believe that in the end this approach will lead to increases in corpo-

rate value. In the future, it could be the case that we will need to

focus on upstream businesses, but for the time being we will con-

centrate our resources on midstream/downstream businesses and

aim to build a balanced earnings platform.


Missions of the JX Group: More than Just Growth 36 ..... Basic Approach to CSR

37 ..... Human Resources Development Initiatives

38 ..... Aiming for Sustainable Economic and Social Growth

44 ..... Dialogue with Our Stakeholders


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Basic Approach

The Board of Directors formulated the JX Group Mission

Statement when JX Holdings was established in April 2010. The

Executive Council convened on the same day and determined

the JX Group’s basic policy for CSR, priority fields, and the struc-

ture for promoting CSR across the JX Group. The Executive

Council is a body that assists decision making by the president.

As a company involved in the energy, resources, and mate-

rials fields, which are vital for people’s lives and economic

activity, we aim to establish a corporate group worthy of the

trust of stakeholders, including shareholders and other inves-

tors, customers, and employees.

Priority Fields and Promotion Structure

We established the JX Group CSR Council, which is chaired by

the president of JX Holdings, to formulate and promote the

JX Group’s basic policy for CSR and to manage and coordinate

CSR activities across the JX Group. We have specified three

priority areas for CSR: (1) compliance (including information

security and human rights), (2) social contribution, and (3) the

environment and safety. JX Group CSR committees have been

established for each priority area, and these committees act as

advisory bodies to the chairman of the JX Group CSR Council.

Each committee deliberates and reports on actual business

operations and shares information. This promotional structure

leverages the different business characteristics of each com-

pany in the JX Group while ensuring the CSR activity PDCA

cycle functions in the whole Group.

The office responsible for the council and these committees

in JX Holdings serves as the Administration Office.

Group CSR Promotion Managers

Each workplace leads the way in putting the JX Group Mission

Statement into practice. Given that the main players are the

individuals who work there, Group CSR promotion managers

have been assigned to each workplace in the JX Group. The

Group CSR promotion managers cooperate with the department

responsible for CSR in each company, working at the front line

of CSR promotion to manage CSR in the workplace. Group CSR

promotion managers gather once a year for a conference at

which they learn about the direction and vision of the Group’s

CSR activities and share opinions.

JX Group’s Basic Approach to CSRWe will steadily fulfill our responsibility to society through faithful implementation of the JX Group Mission Statement by every officer and employee in order to establish a corporate group worthy of the trust of our stakeholders.

JX Group Mission Statement and CSR

JX Group Mission Statement JX Group Slogan (essence of JX Group mission) JX Group Mission Statement (JX Group’s raison d’être) JX Group Values (values for corporate officers and employees)

JX Group Long-Term Vision and Medium-Term Management Plan

Putting the Mission Statement into practice in business operations = CSR

JX Group CSR Promotion Structure

Administration OfficeJX Holdings General Administration

Department

JX Four-Company Corporate Social Responsibility Contact Meeting

CSR promotion managers in each department

CSR promotion managers in each affiliated company

JX HoldingsGeneral Administration Department



JX Nippon Oil & EnergyGeneral Administration Department



JX Nippon Oil & Gas ExplorationCorporate Social Responsibility Department



JX Nippon Mining & MetalsPublic Relations & CSR Department

The JX Group has clearly stated that the Group’s social responsibilities include the implementation of the Mission Statement by every employee in the course of executing business operations.

JX Group CSR Council

Chaired by President of JX Holdings

JX Group’s Three CSR Committees

JX Group Compliance Committee

JX Group Corporate Citizenship Committee

JX Group Environment & Safety Committee

Basic Approach to CSR

Please refer to JX Report for a Sustainable Future 2016 (scheduled to be published in October 2016).

(http://www.hd.jx-group.co.jp/english/csr/)

JX Group

Human Resources Development Initiatives

Issues Faced by the JX Group

1. Developing human resources with the specialized knowledge, energy, and strength of mind needed for overseas business expansion

2. Handing down technical skills from veteran employees to young employees at operating worksites

3. Taking steps to develop diverse human resources, including promoting career opportunities for female employees

Initiatives of Group Companies

Development of the Group’s senior managers Candidates for future senior management positions are trained to handle management issues faced by the Group.

Safety training at the JX Safety Education CenterEmployee risk awareness is strengthened through the use of this center to simulate accidents that could occur at worksites.

Training by gradeTraining by grade and training to develop core human resources are implemented.

Dispatch of young employees overseas

Four to five years after graduating from college, employees, including all office employees, are dispatched overseas for about one month. Training includes market research in accor-dance with language skills.

National staff trainingGroup training is implemented for overseas national staff employees at the manager and team leader levels.

Promotion of career opportunities for female employees

Seminars and round-table discussions are held with the purpose of raising awareness toward the issues facing female employees.


Overseas training for young employees

To enhance their capabilities through practical, comprehensive training, young employees with a few years of experience at the company are dispatched for a certain period of time to overseas offices and sites where the company plays a lead role in advancing operations.

International staff systemNational staff employed at overseas offices are provided opportunities to work at head-quarters or other overseas offices for the purpose of promoting the development of their capabilities as well as making good use of and transferring their skills and know-how.


Training system by type of jobTraining and job rotation plans are formulated and implemented by type of job with the objective of strengthening specialist capabili-ties appropriate for business professionals.

Overseas language trainingAll management-track employees in their second year at the company as well as other employees in need of language training are sent abroad to study English or other foreign languages for one to three months.

Activation of people and organizations

We are strengthening human resources man-agement and human resources development as well as establishing an environment in which diverse human resources can work with enthusiasm.

One of the key issues faced by the JX Group, which is pursuing a wide range of business opportunities in Japan and overseas, is securing the human resources that support its operations. Accordingly, the core operating companies are advancing initiatives to develop and leverage the human resources needed in their fields of business. As the JX Group rapidly expands its overseas business, it is paying particular attention to stepping up the development of the human resources that will support globalization.

JX Safety Education Center

JX Nippon Oil & Energy JX Nippon Oil & Gas Exploration JX Nippon Mining & Metals


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Securing Resources and Ensuring a Stable Supply

Enhancement of Oil and Gas Development

Intense competition for natural resources has been continuing

due to expected firm growth in oil and gas demand over the

medium to long term. Moreover, in recent years, with the

increasing percentage of oil and gas discoveries in challenging

environments, such as deepwater, sophisticated technologies

and considerable financial capacity are imperative. In this tough

business climate, JX Nippon Oil & Gas Exploration is working to

increase reserves and production, mainly through exploration

activities. We will capitalize on the knowledge we have obtained

thus far and on our favorable relationships with state-owned oil

companies as well as oil-producing countries and regions,

while prioritizing the allocation of management resources by

focusing on core regions and technologies, and establish our

advantage by accumulating technologies, primarily through

our activities as an operator.

E&P activities progress in four stages: exploration, develop-

ment, production, and abandonment. Each stage involves risks

of injuries and illness, accidents, and impacts on the environ-

ment. Giving top priority to managing risks related to health,

safety, and environment (HSE) in carrying out its business

activities, JX Nippon Oil & Gas Exploration has established and is

implementing systematic approaches to manage those risks

(HSE management system or HSE-MS). As part of the HSE-MS,

we have established a corporate emergency response plan and

structure based on emergency situations and an oil spill

response plan for each specific site. We also continually confirm

the effectiveness of the system by conducting emergency

response drills on a regular basis and discussing any necessary

improvements.

Establishment of Business Continuity Plans (BCPs) and Training toward Stable Supply of Petroleum Products

The Great East Japan Earthquake in March 2011 reconfirmed in

Japan the importance of oil and its strength as an independent

energy source. National and local governments have therefore

been working to develop laws and strengthen systems to

ensure energy supplies in the event of disasters. To fulfill its role

as an energy supplier supporting the social infrastructure under

these circumstances, JX Nippon Oil & Energy established its

Crisis Management Department in October 2014 for the purpose

of strengthening the functions, authority, and scale of the Crisis

Management Group in the General Administration Department.

It also established the BCP Group tasked with the office proce-

dures of establishing and reviewing BCPs for use in the event of

a severe earthquake or other disaster.

At the time of the Great East Japan Earthquake, JX Nippon

Oil & Energy’s three refineries in Tohoku and Kanto stopped

operations and approximately 40% of service stations in the

Tohoku and Kanto areas were forced to suspend trade. In this

dire circumstance, employees and other people concerned

worked together to recover and return the energy supply to

normal as quickly as possible in disaster-affected and other

areas. This was a valuable experience that we must never forget.

With this experience also in mind, we established BCPs, which

we revised in January 2015 to enhance their effectiveness,

for use in the event of a severe earthquake.

For BCPs, it is important to continually work on improving

their effectiveness and strengthening related systems to cope

in the event of a severe earthquake or other natural disaster.

That is why we are working to establish systems for continuity

and prompt recovery of key operations by defining supply

recovery targets for petroleum products in the event of specific

severe earthquake scenarios—for example, along the Nankai

Trough and in Tokyo.

In addition, we are also continually conducting training to

improve the effectiveness of the plans by identifying issues and

promoting solutions.

In response to the Kumamoto Earthquake that occurred in

April 2016, we utilized these systems and training. Oil companies

worked together, and as a result the supply of oil to the disaster-

stricken region was maintained, including responses to

emergency supply requests, without significant disorder.

As an energy supplier that supports our social infrastruc-

ture, we will continue to conduct ongoing training and review

our BCPs in order to increase their effectiveness, ensure stable

supplies of petroleum products, prevent disasters, and reduce

the impact of natural disasters.

LNG operations site in Papua New Guinea

Aiming for Sustainable Economic and Social Growth


Securing Resources and Ensuring a Stable Supply

Commencement of Production at the Caserones Copper Mine

The Caserones Copper Mine in Chile is the first copper mine development project in which the entire investment was made by

Japanese companies. The mine commenced the production of copper concentrate in May 2014.

Going forward, this mine will contribute to ensuring the stability of copper resources for Japan.

Development and Supply of Cutting-Edge Electronic Materials That Support Our Society

High quality and high functionality are essential for electronic

materials in order to realize a more enriched society and

improve the performance of products that support the lifestyles

of modern society, such as smartphones, tablets, personal com-

puters, digital consumer electronics, and automobiles.

The electronic materials business of JX Nippon Mining &

Metals has been utilizing its non-ferrous metal processing tech-

nologies and know-how, built up over many years, for the

timely development of cutting-edge electronic materials that

meet the needs of society and for the stable supply of those

materials. With the popularity of these products, we currently

boast the top global market share for many of them.

With a 60% global market share, our sputtering targets for

semiconductors are used for such applications as forming the

fine elements and wiring in integrated circuits (ICs). As

smartphones and other end-use products become smaller and

more functional, there is also a need for the conflicting specifi-

cations of miniaturization and high functionality to form even

more elements and wiring in the development of next-genera-

tion integrated circuits used as parts for these products. JX

Nippon Mining & Metals’ semiconductor sputtering targets

enable formation of even finer elements and wiring through

the pursuit of such characteristics as high purity, high density,

uniformity, and surface smoothness. We maintain close com-

munications with our IC manufacturer customers to ascertain

their needs as quickly as possible and continue to develop and

supply new materials in a timely manner.

Going forward, we will continue to contribute to the

development of society through similar initiatives for all

our products.

Main Products of the Electronic Materials Business

Main electronic materialsGlobal

market share (As of 2015)

Primary applications

End use

Personal computers

Mobile phones and smartphones

Digital appliances and audiovisual

Communications infrastructure and

data centersAutomobiles

Treated rolled copper foil 70 % No.1 Flexible printed circuit boards

Sputtering targets for semiconductors 60 % No.1 CPUs, memory chips, etc.

ITO targets for LCDs 30 % No.1 Transparent conductive films

Sputtering targets for magnetic materials 60 % No.1 Hard disks, etc.

Phosphor bronze 20 % No.1Connectors, springs for electronic parts

Corson alloy (C7025) 45 % No.1 Lead frames, connectors

Titanium copper 70 % No.1 High grade connectors, etc.

In-P compound semiconductors 50 % No.1

Optical communication devices, ultrafast ICs


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Responding to Diverse Energy Demands

Facilities of Kawasaki Natural Gas Power Generation

Hiroshima mega solar power plant

Working toward the Realization of a Low-Carbon Society

Expansion of the Mega Solar Power Generation BusinessSince February 2013, JX Nippon Oil & Energy has been promot-

ing its mega solar power generation business, which uses the

JX Group’s idle land, with the aim of expanding renewable

energy application.

In fiscal 2015, mega solar facilities installed at the former site

of the Hiroshima Depot (Hiroshima Prefecture), the Funakawa

Office (Akita Prefecture), the former site of the Hitachi Depot

(Ibaraki Prefecture), and the former site of the Asaka Depot

(Saitama Prefecture) came on line. All combined, we have a

total of 14 mega solar power generation facilities with output of

about 35 megawatts.

Moving forward, we aim to expand the supply of renewable

energy by efficiently converting power into optimal energy to

suit customer needs. Further Reduction of Household Environmental ImpactAs we aim to realize a low-carbon society, the reduction of

energy consumption in the home is a major challenge. “Dr.

Ouchino Energy,” a household energy consulting service for

reducing household energy consumption, is free of charge. An

ENEOS-certificated household energy consultant visits and

proposes optimal plans for energy usage to those residences

wanting inspections to diagnose the way energy is being used

by their household. Energy conservation performance of

energy equipment, household appliances, and the home is

assessed using around 60 diagnostic categories and interviews.

Tips on daily actions and home appliance use are provided for

improvements in energy conservation.

Entering the Electric Power Retail Business

The Amended Electricity Business Act in Japan was passed as

part of a review of the country’s energy policies, and the elec-

tricity retail business for households and other users was fully

deregulated April 2016. Based on this background, JX Nippon

Oil & Energy decided to enter the household-use electric power

retail business and began sales as ENEOS Denki. We aim to fur-

ther expand this business together with the commercial

electricity retail business we have been operating since July

2003. We already have power plants around Japan, from

Hokkaido to Kyushu. Targeting business expansion, we have

also commenced full-scale investigations into enlarging facili-

ties at Kawasaki Natural Gas Power Generation Co., Ltd.*

Also, in addition to being a participant in the Organization

for Cross-Regional Coordination of Transmission Operators,

Japan, which was established in April 2015, we are promoting

such initiatives as the establishment of a sales scheme that

includes alliances and the in-house development of a customer

information management system for the development of our

household electricity retail business. In these ways, we have

established a system able to provide detailed support for the

diverse needs of our customers. * Kawasaki Natural Gas Power Generation Co., Ltd., is jointly owned with Tokyo Gas Co., Ltd.


Oga

Hiroshima

Takamatsu

Akita

Oita

Masaki

Kudamatsu

Kudamatus No. 2

Sendai

Uruma

Iwaki

Hitachi

Kasumigaura

Asaka

Mega Solar Power Generation Business Expanding Nationwide (in operation)


Responding to Diverse Energy Demands

Hachinohe LNG Import Terminal

Expanding Our Natural Gas Business

There is a wealth of natural gas reserves located around the

world in comparison with reserves of crude oil. Further, natural

gas is gaining attention as a form of clean energy that enables

stable supply and emits lower levels of CO2 and SOX when com-

busted. To respond to rising demand for natural gas, in addition

to engaging in the exploration of gas fields overseas, the JX

Group is working to secure LNG through long-term contracts

with U.S. and European majors as well as Malaysian LNG suppli-

ers, and it is in talks with several potential suppliers, including

companies producing LNG from shale gas.

Meanwhile, we are building and reinforcing our supply

system in Japan via coastal tankers, tank trucks, and pipeline at

our own LNG terminals at Mizushima* in Okayama Prefecture

and Hachinohe in Aomori Prefecture.

At Hachinohe, we commenced operations of the Hachinohe

LNG Satellite Terminal for coastal tankers in March 2007, but in

order to meet further increases in demand, we subsequently

commenced operations of the Hachinohe LNG Import Terminal

in April 2015 to enhance our gas and LNG supply systems in

Tohoku. We also began coastal tanker shipments to the Kushiro

LNG Satellite Terminal, which was opened in April 2015, and

developed our supply systems in the eastern Hokkaido region. * The Mizushima LNG Terminal is a joint investment with The Chugoku Electric Power

Co., Inc.

Hydrogen station

Advancing Hydrogen as a New Form of Energy

Hydrogen is a clean energy that does not emit CO2 during use.

It is also a highly significant energy from the perspective of

energy security because it can be manufactured by a number

of methods from a diverse range of primary energy sources. In

particular, when it is used in fuel cells, the energy can be utilized

with high efficiency because there is no heat loss during

combustion. There are high expectations for hydrogen as a new

form of energy.

Fuel cell vehicles were launched on the market in December

2014, but the development of a hydrogen station network is

essential for widespread use. As a company that has long been

a supplier of energy for cars, our role has been to work mainly

on developing hydrogen supply systems for fuel cell cars, and

we have taken steps to establish the station technologies and

know-how that will be needed for the adoption of fuel cell cars.

Since 2013, we have been demonstrating integrated stations

that combine conventional service stations that can refill

gasoline and hydrogen stations. In December 2014, the first

commercial hydrogen station was opened at the Dr. Drive self-

service Ebina Chuo Branch, and, by the end of fiscal 2015, we

had opened hydrogen stations in 37 locations.

Moving forward, we will work to leverage this infrastructure

and know-how and to contribute to the realization of a

hydrogen society.


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Hitachi Metal Recycling Complex (HMC) Department of Hitachi Works

Achievement of a Recycling-Oriented Society through Our Recycling and Environmental Services Business

The JX Nippon Mining & Metals Group engages in an integrated

range of businesses related to non-ferrous metals, centering on

copper, which encompass resource development, metals

smelting and refining, electronic materials, and recycling and

environmental services. The recycling and environmental ser-

vices business, which is the “vein” of this value chain, consists of

environmental services for detoxifying industrial waste and the

recycling of materials containing non-ferrous metals into refined

metals. The group contributes significantly to the development

of a sustainable, recycling-oriented society by utilizing the key

features and strengths of this business—zero emissions, propri-

etary treatment processes based on smelting and refining

technologies, and a global collection network.

Key Features and Strengths of the Recycling and Environmental Services Business

(1) Zero EmissionsIn the processes for detoxification of industrial waste and con-

version of recycled materials into reusable resources as refined

metals, we are pursuing zero emissions, where no secondary

waste which would require landfill disposal is produced. All iron,

excluding non-ferrous metals, is recovered as slag and used for

such purposes as cement material. By preventing the genera-

tion of secondary waste, we are reducing the environmental

impact for our next generation.

(2) Proprietary Treatment Processes Based on Smelting and Refining Technologies

The recycling of non-ferrous metals in the business is carried

out using uniquely developed efficient and reliable treatment

processes, which are based on the technologies we have fos-

tered over many years through operations at mines, smelters,

and refineries. In particular, at the Saganoseki Smelter & Refinery

of Pan Pacific Copper Co., Ltd.—owned by JX Nippon Mining &

Metals and boasting Asia’s largest treatment capacity for recy-

cled materials—energy conservation is achieved by using the

excess heat generated from copper concentrate smelting for

melting recycled materials.

(3) Global Collection NetworkAt Tomakomai (Hokkaido), Hitachi (Ibaraki Prefecture), Mikkaichi

(Toyama Prefecture), Tsuruga (Fukui Prefecture), and Saganoseki

(Oita Prefecture), we are recycling and detoxifying the recycled

materials and industrial waste collected through the nation-

wide collection network we have built. Also, with reduced

generation of scrap in Japan, we are enhancing our collection

operations overseas and have established a collection and pre-

treatment site in Taichung, in Taiwan, and an operating site in

Arizona, in the United States.

Resource Recycling Initiatives to Pursue Zero Emissions

Development of Technologies for Effective Resource Utilization and Reduction of Environmental Impact

Consumers

Used products Products

Parts

Materials

Refined metals

Recycled materials

Collecting system Distributors

Manufacturers

Parts and materials

manufacturers

PartnersDismantling /

separation Concentration

JX Nippon Mining & Metals Recycling &

Environment Services Group

Smelting and refining

JX Metals Trading and

5 environmental subsidiaries

Collection and pretreatment

JX Nippon Mining & Metals Electronic

Materials GroupParts and materials

Resource recycling circle

Processing facilities for recycled materials and industrial waste

JX Nippon Mining & Metals Group

Material flow Scrap generated through fabricating processes

Used products


Development of Technologies for Effective Resource Utilization and Reduction of Environmental Impact

Rendering of W.A. Parish power plant after completion of CO2 recovery equipment

Implementation of a Project to Increase Oil Production while Reducing CO2

In July 2014, JX Nippon Oil & Gas Exploration announced the

launch in the United States of a project in which a plant would

be constructed to capture CO2 in the processed flue gas from a

coal-fired power generation plant and the captured CO2 would

be injected into an oil field to increase oil production. It is an

epoch-making project that will increase oil production while

concurrently reducing CO2 emitted into the atmosphere from a

coal-fired power generation plant.

The project is a joint venture with NRG Energy Inc. (NRG), a

major independent power producer in the United States. The

world’s largest plant to capture CO2 from processed flue gas will

be built at the W.A. Parish coal-fired power generation plant of

NRG in Texas, and, in order to increase oil production, captured

CO2 will be injected into the West Ranch oil field*, also located

in Texas, in which JX Nippon Oil & Gas Exploration holds an

interest. Meanwhile, this scheme has an annual capture capac-

ity of 1.6 million tons of CO2 emitted into the atmosphere from

the power plant.

We will start commercial operation of the CO2 capture plant

and begin the CO2 injection into the West Ranch oil field in the

fourth quarter of 2016. Oil production at the field is expected to

be boosted from about 500 barrels per day to approximately 12

thousand barrels per day (the average output during the proj-

ect), and the oil field is estimated to hold approximately 60

million barrels of the cumulative production increase. Of the

CO2-EOR (Enhanced Oil Recovery) initiatives that aim to increase

oil production by injecting CO2 into an oil field, the method to

be used in this project is innovative because it will utilize CO2

emitted from a coal-fired power plant. CO2-EOR stores CO2, a

cause of global warming, in underground reservoirs. At the

same time, it also facilitates an increase in oil recovery.

JX Nippon Oil & Gas Exploration has been focusing on

enhanced oil recovery as a core technology. One such project

was the CO2-EOR pilot test at the Rang Dong oil field offshore

Vietnam in 2011, conducted together with Japan Oil, Gas and

Metals National Corporation (JOGMEC) and PetroVietnam, the

state oil company of Vietnam. We will continue to develop our

business in harmony with the environment together with

advanced ideas. * JX Nippon Oil & Gas Exploration holds a 25% interest in the West Ranch oil field

through a 50:50 joint venture with NRG.


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Project Concept

Dialogue with Our Stakeholders


Relationship with Stakeholders

Basic Approach

The JX Group conducts business activities while maintaining relationships with a variety of stakeholders, among them shareholders, investors,

customers, business partners, and employees. By accurately assessing the demands of these many stakeholders, and sincerely responding to

them, we seek to earn society’s trust.

Shareholders and Investors

JX Holdings is committed to the swift, proper, and fair disclosure of information to shareholders and investors in accor-dance with its disclosure policy.

Main means of communication

General meetings of shareholders, presentation meetings on financial results, and individual investors’ meetings

Disclosure of information in annual reports, in shareholder reports, and on websites

NPOs / NGOs

The JX Group builds cooperative relation-ships with NPOs and NGOs and actively undertakes environmental preservation and social contribution activities.


Financial support for gorilla preserva-tion program through the Click Donation Program (JX Nippon Oil & Energy)

Collection of stamps, unusable postcards, and prepaid cards

Cooperation with volunteer programs

Local Communities / Global Society

The JX Group strives to engage in responsible corporate activities by responding to the needs and expectations of communities in the areas where it conducts business as well as international society and by engaging in active communications.


Active participation in local events

Volunteer programs

Donations, such as to community services and events

Employees

The JX Group positions employees as critical stakeholders in its operations and has established various systems to ensure that each employee can work with peace of mind and exhibit his or her full capabilities.


Periodic communications between labor unions and management

Publication of Group newsletters and information dissemination through intranet

Customers

The JX Group is committed to developing and delivering products and services that fulfill customer needs, expectations, trust, and satisfaction.


Communications through marketing activities

Provision of safe, secure, and valuable products and services

Disclosure of information on websites

Inquiry channels through phone and websites

Business Partners

JX Nippon Procurement Corporation handles purchasing operations for JX Group companies. JX Nippon Procurement makes purchasing infor-mation available to business partners on its website, actively provides business opportunities to them, and strives to ensure fair trading opportunities.


Communications through procure-ment activities

Use of websites

Implementation of surveys of busi-ness partners

Management System 46 ........Board of Directors and Board of Corporate Auditors

48 ........Independent Directors and Corporate Auditors

50 ........Corporate Governance

56 ........Message from an Outside Director


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Board of Directors and Board of Corporate Auditors(As of June 28, 2016)

Yasushi KimuraRepresentative Director, Chairman of the Board

Kunimitsu ObaDirector, Senior Vice PresidentResponsible for Internal Audit Department and Finance & Investors Relations Department

1970 Joined Nippon Oil Co., Ltd.2002 Director of Nippon Oil Corporation2004 Executive Officer of Nippon Oil Corporation2005 Director (Executive Officer) of Nippon Oil

Corporation2007 Director and Senior Vice President (Executive

Officer) of Nippon Oil Corporation2008 Director (Senior Vice President and Executive

Officer) of Nippon Oil Corporation2010 Director (Part-Time) of the Company2010 Representative Director and President

of JX Nippon Oil & Energy Corporation2012 Representative Director and Chairman of the

Board of the Company (to present); and Representative Director and Chairman of the Board of JX Nippon Oil & Energy Corporation

1980 Joined Nippon Mining Co., Ltd.2011 Executive Officer of JX Nippon Oil

& Gas Exploration Corporation2015 Director and Senior Vice President of the

Company (responsible for Internal Audit Department and Finance & Investors Relations Department) (to present)


Katsuyuki OtaDirector, Executive OfficerResponsible for Controller Department

1973 Joined Nippon Mining Co., Ltd.2002 Senior Officer of Nippon Mining Holdings, Inc.2003 Executive Officer of Japan Energy Corporation2004 Senior Vice President and Executive Officer

of Japan Energy Corporation2004 Director of Nippon Mining Holdings, Inc.2005 Director (Senior Vice President and Executive

Officer) of Japan Energy Corporation2007 Senior Vice President and Executive Officer

of Japan Energy Corporation2008 Senior Executive Officer of Japan Energy

Corporation2010 Director and Senior Vice President of

JX Nippon Oil & Energy Corporation2012 Director (Part-Time) of the Company; and

Director and Executive Vice President of JX Nippon Oil & Energy Corporation

2014 Director and Executive Vice President of the Company (responsible for Finance & Investor Relations Department)

2015 Representative Director and President of the Company (to present)

1982 Joined Nippon Oil Co., Ltd.2010 General Manager of Controller Department

of the Company2014 Executive Officer, General Manager of

Controller Department of the Company2015 Director and Executive Officer of the

Company (responsible for Controller Department) (to present)

Junichi KawadaDirector, Executive Vice PresidentResponsible for Secretariat, General Administration Department, and Legal & Corporate Affairs Department

1978 Joined Nippon Oil Co., Ltd.2007 Executive Officer of Nippon Oil Corporation2010 Director and Senior Vice President of the

Company (responsible for Corporate Social Responsibility Department and Legal & Corporate Affairs Department, General Manager of Legal & Corporate Affairs Department)

2012 Director and Senior Vice President of the Company (responsible for General Administration Department and Legal & Corporate Affairs Department)

2014 Director and Senior Vice President of the Company (responsible for Secretariat, General Administration Department, and Legal & Corporate Affairs Department)

2015 Director and Executive Vice President of the Company (responsible for Secretariat, General Administration Department, and Legal & Corporate Affairs Department) (to present)

Hiroji AdachiDirector, Senior Vice PresidentResponsible for Corporate Planning Department I and II

1982 Joined Nippon Oil Co., Ltd.2008 Executive Officer of Nippon Oil Corporation2010 Executive Officer of

JX Nippon Oil & Energy Corporation2012 Senior Vice President of

JX Nippon Oil & Energy Corporation2014 Senior Vice President of the Company

(General Manager of Corporate Planning Department I)

2015 Director and Senior Vice President of the Company (responsible for Corporate Planning Department I and II) (to present)


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Tsutomu SugimoriDirector (Part-Time)Representative Director, President, JX Nippon Oil & Energy Corporation

Tadashi OhmuraFull-Time Corporate Auditor

1979 Joined Nippon Oil Co., Ltd.2008 Executive Officer of Nippon Oil Corporation2010 Director and Senior Vice President of

JX Nippon Oil & Energy Corporation2014 Director (Part-Time) of the Company

(to present); and Representative Director and President of JX Nippon Oil & Energy Corporation (to present)

1978 Joined Nippon Oil Co., Ltd.2008 Executive Officer of Nippon Oil Exploration

Limited2010 Executive Officer of JX Nippon Oil & Gas

Exploration Corporation2012 Corporate Auditor (Full-Time) of

JX Nippon Oil & Energy Corporation2013 Full-Time Corporate Auditor of the Company

(to present)

Takashi SetogawaFull-Time Corporate Auditor

1978 Joined Nippon Mining Co., Ltd.2008 Senior Officer of Nippon Mining Holdings, Inc.2010 Executive Officer of the Company

(General Manager of Finance & Investor Relations Department)

2012 Senior Vice President of JX Nippon Oil & Energy Corporation

2014 Full-Time Corporate Auditor of the Company (to present)

Shunsaku MiyakeDirector (Part-Time)Representative Director, President and CEO JX Nippon Oil & Gas Exploration Corporation

1975 Joined Nippon Oil Co., Ltd.2006 Executive Officer of Nippon Oil Corporation2010 Director and Senior Vice President of

JX Nippon Oil & Energy Corporation2014 Director (Part-Time) of the Company

(to present); and Representative Director, President and CEO of JX Nippon Oil & Gas Exploration Corporation (to present)

Shigeru OiDirector (Part-Time)President & Representative Director, Chief Executive Officer JX Nippon Mining & Metals Corporation

1978 Joined Nippon Mining Co., Ltd.2008 Executive Officer of Nippon Mining & Metals

Corporation2010 Executive Officer of JX Nippon Mining &

Metals Corporation2012 Senior Executive Officer of JX Nippon

Mining & Metals Corporation2013 Director and Senior Executive Officer of

JX Nippon Mining & Metals Corporation 2014 Director (Part-Time) of the Company

(to present); and President & Representative Director, Chief Executive Officer of JX Nippon Mining & Metals Corporation (to present)

Takeshi KurosakiDirector (Part-Time)Director, Executive Vice President of JX Nippon Oil & Energy Corporation

1977 Joined Nippon Mining Co., Ltd.2007 Executive Officer of Japan Energy Corporation2009 Senior Vice President and Executive Officer

of Japan Energy Corporation2010 Director, Senior Vice President of

JX Nippon Oil & Energy Corporation2012 Director, Executive Vice President of

JX Nippon Oil & Energy Corporation (to present)

2016 Director (Part-Time) of the Company (to present)

Hiroshi KomiyamaOutside Director

1972 Research Associate at the Department of Chemical Engineering, the Faculty of Engineering of the University of Tokyo

1988 Professor at the Department of Chemical System Engineering, the Faculty of Engineering of the University of Tokyo

2000 Dean of the Graduate School of Engineering and Dean of the Faculty of Engineering of the University of Tokyo

2003 Vice President of the University of Tokyo2005 President of the University of Tokyo2009 Chairman of Mitsubishi Research Institute,

Inc. (to present)2009 Outside Director of Nippon Oil Corporation2010 Outside Director of the Company (to present)

Hiroko OtaOutside Director

Seiichiro NishiokaOutside Corporate Auditor

1981 Research Fellow at the Japan Institute of Life Insurance

1993 Associate Professor at the School of Economics of Osaka University

1996 Associate Professor at Saitama University1997 Associate Professor at the National Graduate

Institute for Policy Studies2001 Professor at the National Graduate Institute

for Policy Studies2002 Director of Policy Analysis in Cabinet Office2003 Deputy Director General for Economic

Research in Cabinet Office2004 Director General for Economic Research

in Cabinet Office2005 Professor at the National Graduate Institute

for Policy Studies2006 Minister of State for Economic and

Fiscal Policy2008 Professor at the National Graduate Institute

for Policy Studies (to present)2012 Outside Director of the Company (to present)

1975 Assistant Judge2007 Chief Judge of the Utsunomiya District Court2010 Presiding Judge of the Tokyo High Court2011 President of the Tokyo Family Court2013 President of the Hiroshima High Court2014 Retired from office of the President of the

Hiroshima High Court2015 Registered as an Attorney-at-Law

(to present); Of-Counsel, Asahi Law Offices (to present)

2016 Outside Corporate Auditor of the Company (to present)

Mutsutake OtsukaOutside Director

1965 Joined Japanese National Railways1987 Joined East Japan Railway Company;

General Manager, Finance Department of East Japan Railway Company

1990 Director and General Manager of Personnel Department of East Japan Railway Company

1992 Executive Director and General Manager of Personnel Department of East Japan Railway Company

1994 Executive Director of East Japan Railway Company

1996 Executive Director and Deputy Director General of Corporate Planning Headquarters of East Japan Railway Company

1997 Executive Vice President and Representative Director and Director General of Corporate Planning Headquarters of East Japan Railway Company

2000 President and Representative Director of East Japan Railway Company

2006 Chairman and Director of East Japan Railway Company

2012 Advisor of East Japan Railway Company (to present)

2013 Outside Director of the Company (to present)

Seiichi KondoOutside Director

1972 Joined the Ministry of Foreign Affairs of Japan1996 Minister, Embassy of Japan in the United States1998 Assistant Vice-Minister, Minister’s Secretariat,

and Economic Affairs Bureau of the Ministry of Foreign Affairs of Japan

1999 Deputy Secretary-General of the Organization for Economic Co-operation and Development (OECD)

2003 Director-General, Cultural Affairs Department, Minister’s Secretariat of the Ministry of Foreign Affairs of Japan

2005 Assistant Vice-Minister, Minister’s Secretariat, and Deputy Director-General (Ambassador), Economic Affairs Bureau of the Ministry of Foreign Affairs of Japan

2006 Ambassador Extraordinary and Plenipotentiary, Permanent Delegate of Japan to the United Nations Educational, Scientific and Cultural Organization (UNESCO)

2008 Ambassador Extraordinary and Plenipotentiary to the Kingdom of Denmark

2010 Commissioner for Cultural Affairs of Japan2014 Outside Director of the Company (to present)

Independent Directors and Corporate Auditors(As of June 28, 2016)

Toshinori KanemotoOutside Corporate Auditor

1968 Joined the National Police Agency1992 Chief of Kumamoto Prefectural Police

Headquarters1995 Director General of the International Affairs

Department of the National Police Agency1996 President of International Criminal Police

Organization (ICPO)2000 President of the National Police Academy2001 Director of Cabinet Intelligence

of Cabinet Secretariat2007 Registered as an Attorney-at-Law

(to present); Of-Counsel, City-Yuwa Partners (to present)

2008 Outside Corporate Auditor of Nippon Mining Holdings, Inc.

2010 Outside Corporate Auditor of JX Nippon Oil & Energy Corporation


Naomi UshioOutside Corporate Auditor

1983 Joined Fuji Television Network, Inc.1998 Senior Assistant Professor at Meiji University2003 Assistant Professor at Meiji University2007 Associate Professor at Meiji University2009 Professor at The School of Information

and Communication of Meiji University (to present)

Expert Member of the Liaison Conference for the Promotion of Gender Equality of the Gender Equality Bureau of the Cabinet Office of Japan


2016 Vice President of Meiji University (to present)


Information regarding Outside Directors

Name Position and important concurrent office

Reasons for election as outside directors and reasons for designating as independent directors

Attendance at meetings of the Board of Directors

Hiroshi Komiyama

Independent Director

Chairman, Mitsubishi Research Institute, Inc.

Mr. Hiroshi Komiyama specializes in the fields of chemical systems engineering, functional materials chemistry, and global environmental engineering. He held the position of professor and conducted research for many years at the Univer-sity of Tokyo and later served as president of that institution. He was elected as an outside director because, based on his extensive specialized knowledge and experience in the management of a major university, he is able to provide proper guidance and advice and supervise the management of the Company from his outside perspective.

14/14

Hiroko Ota


Professor, National Graduate Institute for Policy Studies

Ms. Hiroko Ota specializes in public economics and economic policies and has long been engaged in education and research at the National Graduate Insti-tute for Policy Studies. In addition, she has held such positions as Director General for Economic Research in Cabinet Office and Minister of State for Eco-nomic and Fiscal Policy. She was elected as an outside director because, based on her extensive experience in economics and finance, she is able to provide proper guidance and advice and supervise the management of the Company from her outside perspective.

13/14

Mutsutake Otsuka


Advisor, East Japan Railway Company

Mr. Mutsutake Otsuka has long been engaged in the management of East Ja-pan Railway Company. He was elected as an outside director because, based on his deep insight, abundant experience, and solid accomplishments in com-pany management, he is able to provide proper guidance and advice and su-pervise the management of the Company from his outside perspective.

13/14

Seiichi Kondo


Director, Kondo Institute for Culture & Diplomacy

Mr. Seiichi Kondo long worked for the Ministry of Foreign Affairs of Japan, serv-ing in such positions as Ambassador Extraordinary and Plenipotentiary, and he later served as Commissioner for Cultural Affairs of Japan and was also sec-onded to the Agency for Natural Resources and Energy of Japan and Interna-tional Energy Agency (IEA). He was elected as an outside director because, based on his extensive experience in energy and international relations, he is able to provide proper guidance and advice and supervise the management of the Company from his outside perspective.

13/14

Information regarding Outside Corporate Auditors

Name Position and important concurrent office

Reasons for election as outside corporate auditors and reasons for designating as independent auditors

Attendance at meetings of the Board of Directors and the Board of Corporate Auditors

Toshinori Kanemoto

Independent Corporate Auditor

Attorney-at-Law Of-Counsel, City-Yuwa Partners

Mr. Toshinori Kanemoto worked for the National Police Agency for many years, serving in such important positions as President of International Criminal Police Organization (ICPO) and Director of Cabinet Intelligence of Cabinet Secretariat, and later he served as the compliance committee chair of a major company in the capacity of an attorney. Therefore, he has abundant expertise and experi-ence regarding corporate legal affairs and compliance. He was elected as an outside corporate auditor because, from his objective, outside, and fair per-spective, he is able to audit the directors in the conduct of their duties.

At meetings of the Board of Directors: 14/14

At meetings of the Board of Corporate Auditors: 15/15

Naomi Ushio


Vice President, Meiji University, Professor at The School of Information and Communication of Meiji University

Ms. Naomi Ushio specializes in business administration studies and human resource management theory and has long been engaged at Meiji University in education and research of patterns for utilizing female workers’ abilities. In addition, she served as an Expert Member of the Liaison Conference for the Promotion of Gender Equality of the Gender Equality Bureau of the Cabinet Office of Japan. Therefore, she has abundant expertise and experience regarding the utilization of a variety of human resources by corporations. She was elected as an outside corporate auditor because, from her objective, outside, and fair perspective, she is able to audit the directors in the conduct of their duties.

At meetings of the Board of Directors: 13/14

At meetings of the Board of Corporate Auditors: 14/15

Seiichiro Nishioka


Attorney-at-Law, Of-Counsel, Asahi Law Offices

Mr. Seiichiro Nishioka held important posts, such as the Chief Judge of the Utsunomiya District Court, the President of the Tokyo Family Court, and the President of the Hiroshima High Court. Subsequently, he has been active as an attorney. Further, he has taught students as a Visiting Professor at Keio University Law School to hand his knowledge down to the next generation. Therefore, he has abundant professional knowledge and experience regarding the administration of justice. He was elected as an outside corporate auditor be-cause, from his objective, outside, and fair perspective, he is able to audit the directors in the conduct of their duties.

(Appointed in June 2016)


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Corporate Governance

Basic Policy on Corporate Governance of JX Group

In November 2015, in order to achieve sustainable growth and increase its corporate value over the medium to long term, the Company established the “Basic Policy on Corporate Governance of JX Group” with the objective of establishing and operating a corporate governance framework for the conduct

of transparent, fair, timely, and decisive decision making in its business operations. We have disclosed this Basic Policy on the Company website.

Basic Approach to Corporate Governance

By appropriately establishing and operating corporate gover-nance, the JX Group works to realize the JX Group Mission Statement, to achieve sustained growth, and to increase corpo-rate value over the medium to long term. Based on this recognition, the Company establishes and operates the corpo-rate governance of the JX Group in accordance with the following policy:

Policy on Establishment and Operation of Corporate Governance1. The JX Group is a group of companies whose core business

consists of three business fields: the Energy business, the Oil and Natural Gas E&P business and the Metals business. In view of the fact that these three businesses are so distinct, the JX Group has established a structure under which the Company

http://www.hd.jx-group.co.jp/english/company/system/governance.html


Group Companies

Compensation Advisory

Committee(Chaired by

Outside Director)

Executive Council (Chaired by Representa-tive Director, President)

Full-Time Directors, Presidents

of Core Operating Companies, and Others

Internal Control Council

(Chaired by Representative Director, President)Full-Time Directors,

Presidents of Core Operating

Companies, and Others

JX Holdings Election and removal of directors

Recommen-dations Submission of

agenda items

Approval Monitoring Approval

Election and removal of executive officers

Supervision

Audits

Internal audits

Audits

Collaboration

Collaboration

Collaboration

Consultation

Election and removal of corporate auditors

Election and removal of the independent

auditors (Audit Firm)

Financial audits

Nomination Advisory

Committee (Chaired by

Outside Director)

Recommen-dations

Consultation

Report on results of monitoring

Core Operating Companies

JX Nippon Oil & Energy JX Nippon Oil & Gas Exploration JX Nippon Mining & Metals Other Group Companies

Executive Officers

Business Operation

Management supervision + Internal control of corporate group

General Meeting of Shareholders

Board of Directors (Chaired by Representative Director, Chairman)

14 directors, including 4 outside directors

Board of Corporate Auditors

5 corporate auditors, including 3 outside corporate auditors

Internal Audit Department

(Internal Audit Division)

Independent Auditors

JX Group Corporate Governance System

serves as a holding company and three Core Operating Companies, which promote each core business, are placed thereunder. Under this structure, in light of optimizing the value of the JX Group as a whole the Company takes charge of formulating the Medium-Term Management Plan, allocating management resources, and overseeing the management of each Core Operating Company. On the other hand, each Core Operating Company shall agilely execute the business activi-ties in accordance with the Medium-Term Management Plan.

2. The Board of Directors of the Company consists of the Chairman, the President, more than one full-time director, and part-time directors concurrently serving as the chief executive officer of each Core Operating Company and out-side directors, as well as full-time corporate auditors and outside corporate auditors. With such composition, the Board of Directors of the Company shall ensure consistency of the business operations of each Core Operating Company with the Medium-Term Management Plan of the whole JX Group, and shall appropriately control the business risks. With respect to decision making regarding the execution of material operations of each Core Operating Company, the decision is required to be made by or reported to the Board of Directors of the Company. With respect to other operations of each Core Operating Company, the Company shall delegate such operations to the relevant Core Operating Company pursuant to the Medium-Term Management Plan utilizing the management resources, as are allocated to such Core Operating Company by the Company. The Company shall oversee operations by receiving reports on the status of busi-ness operations from the president of each Core Operating Company.

3. To take advantage of a wealth of knowledge and experience of outside directors and to ensure transparency and objectiv-ity in decision making, the Company shall take the following measures:

(1) In determining the Medium-Term Management Plan at the Board of Directors of the Company, request outside directors to be involved, from the stage of consideration, and to fully discuss it from multiple points of view; and in decision making on the execution of material operations, fully verify consistency with the Medium-Term Manage-ment Plan, taking opinions of outside directors into account; and

(2) In determining personnel affairs and remuneration of directors at the Board of Directors of the Company, ensure transparency of the decision-making process by consulting with the advisory committee for nominations and the advisory committee for remunerations, half of whose members are outside directors.

4. The Company is a company with a board of auditors as defined in the Companies Act of Japan. The full-time corpo-rate auditors, who are given the strong power to gather information under the Companies Act of Japan, and outside corporate auditors, who have a high degree of indepen-dence, in addition to a wealth of knowledge and experience, shall cooperate with each other appropriately and carry out audits with a high degree of effectiveness and objectivity. Each auditor shall conduct audits in an organized and sys-tematic fashion, through the Board of Corporate Auditors.

5. Each Core Operating Company has a Board of Directors to enable directors to oversee each other’s performance of duties. Each Core Operating Company shall fully analyze the risk of the business and verify the conformity of the execution of operations performance to the Medium-Term Management Plan. The Company shall also dispatch its full-time corporate auditors to each Core Operating Company as its part-time corporate auditor, and have such auditor audit the execution of duties by the directors of the Core Operating Company.

Policy on Dealing with the Corporate Governance CodeThe Company adopts accepting all of the principles of the Corporate Governance Code established by the Tokyo Stock Exchange as basic policy, since the Company considers it effective in order to establish and operate the corporate governance framework. The Company implements the Code on a Groupwide basis.

Standards for Consideration of Independence of Independent Directors and Corporate AuditorsJX Holdings considers outside officers (outside directors and outside corporate auditors) who meet the following require-ments to be independent officers (independent outside directors and independent outside corporate auditors) who are not likely to have any conflicts of interest with the general shareholders.

1. The outside officers do not presently fall, nor have they during the past three years fallen, into the following categories:

(1) A main customer*1 of the Company or any person who exe-cutes the business of such a customer (“business executor”);

(2) A business operator of which the Company is a main cus-tomer*2 or a business executor of such a business operator;

(3) A main lender to the Company*3 or a business executor of such a lender;

(4) A legal expert, a certified public accountant, or a consultant, who receives from the Company a large amount of fees, other than remuneration for officers*4 (where the person who receives such fees is a corporation, an association, or any other body, then a legal expert, a certified public accountant, or a consultant who belongs thereto);


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(5) The Company’s accounting auditor or a certified public accountant who belongs to an auditing firm that is the Company’s accounting auditor;

(6) A person who receives a large donation from the Company*5 (where the person who receives such a donation is a corpo-ration, an association, or any other body, then a person who runs the business thereof ); or

(7) One of the Company’s major shareholders*6 or a business executor of such a shareholder.

2. None of the relatives within the second degree of kinship of an outside officer presently falls, nor have any of them during the past three years fallen, into the following categories (excluding those who are not material):

(1) A business executor of the Company or a subsidiary of the Company; or

(2) A person who falls into the categories of 1. (1) through 1. (7) above.

*1. A customer to which the Company and its Core Operating Companies’ total amount of net sales in any of the latest three business years has exceeded 2% of the Company’s consolidated net sales.

*2. A business operator whose total amount of net sales to the Company and its Core Operating Companies in any of the latest three business years has exceeded 2% of the business operator’s consolidated net sales.

*3. A lender to which the amount of the Company’s loans payable on a consoli-dated basis as of the last day of any of the latest three business years has exceeded 2% of the consolidated total assets of the Company.

*4. A person who receives fees from the Company and its Core Operating Companies, the total amount of which has exceeded ¥10 million in any of the latest three business years.

*5. A beneficiary who receives a donation from the Company and its Core Operating Companies, the total amount of which has exceeded 2% of the total revenue of the beneficiary in any of the latest three business years.

*6. A person who holds 10% or more of the total votes of the Company.

Support System for Independent OfficersEach of the four outside directors and the three outside corpo-rate auditors meet the independence standards based on the rules of the Tokyo and Nagoya stock exchanges on which the Company is listed and the Company’s Standards for Consideration of Independence. The Company sends materials regarding the agenda of meetings of the Board of Directors to the outside directors and outside corporate auditors, in principle by three days before the meeting, and the Company ensures that there are opportunities

to provide explanations to the outside directors and outside corporate auditors about important agenda items before the meeting. Furthermore, to enhance the auditing function by all cor-porate auditors, including outside corporate auditors, the Company has established the Auditors Affairs Office, which is clearly independent from the chain of command for divisions responsible for business execution (including personnel evalu-ations). Full-time staff members have been assigned to the office to assist with the duties of the corporate auditors. Moreover, to support the outside directors in business exe-cution, on April 1, 2016, the Board Members’ Support Office was established and full-time staff members were assigned.

Executive OfficersExecutive officers are appointed and are responsible for opera-tional execution, based on the authority of the Board of Directors.

Executive CouncilMatters to be decided by the Board of Directors must, in prin-ciple, be approved by the President in advance. The Executive Council has been formed to discuss matters related to opera-tional execution that require the approval of the President. This council is composed of full-time directors, the presidents of the Core Operating Companies, and other executive officers, and it is convened periodically and at other times when deemed necessary. Thus, at the Executive Council, through careful deliberation by executive members of the Company and the Core Operating Companies, appropriate and efficient decisions by the President are secured.

Internal Control CouncilOur internal control system works to ensure appropriate opera-tional execution. In regard to the operation of this system, the Internal Control Council has been established to provide advice to the President to implement the system on a Groupwide basis. This council, which is composed of the same members as the Executive Council, confirms and reviews the monitoring of the operational status and maintenance of the autonomous self-control systems.

Amount of Compensation Paid to Directors and Auditors (Fiscal 2015)Total amount of compensation

(Millions of yen)

Total amount of compensation by type (Millions of yen) Number of grantees

(persons)Grantee Fixed compensation Bonus

Directors (excluding outside directors) 249 249 — 13

Corporate auditors (excluding outside corporate auditors) 72 72 — 2

Outside directors and corporate auditors 83 83 — 7


Compensation Advisory CommitteeTo ensure the transparency and objectivity of the process of determining the compensation and other benefits for directors and executive officers, the Compensation Advisory Committee has been formed to provide advice to the Board of Directors. The Compensation Advisory Committee comprises two out-side directors and two representative directors, and one of the outside directors on the committee acts as chairperson. The Compensation Advisory Committee is responsible for deliberat-ing the policies for deciding the compensation and other benefits of directors and executive officers as well as other related matters. The results of the committee’s deliberations are reported to the Board of Directors.

Nomination Advisory CommitteeTo ensure the transparency of the process of determining direc-tor candidates and corporate auditor candidates, on April 1, 2016, the Nomination Advisory Committee was formed to pro-vide advice to the Board of Directors. The Nomination Advisory Committee consists of two outside directors, the Chairman, and the President, and one of the outside directors on the commit-tee acts as chairperson. At meetings of the Nomination Advisory Committee, deliberations are held on the Company’s director candidates and corporate auditor candidates, and reports are made to the Board of Directors on the results of those delibera-tions. In addition, opinions are exchanged on the issue of succession planning for the Company’s Chairman and President and for the presidents of the Core Operating Companies. Advice is received from the outside directors.

Executive CompensationThe limit of compensation to be paid to directors and corporate auditors was decided at the 1st Ordinary General Meeting of Shareholders held on June 27, 2011.(1) The amount of compensation for all directors: Equal to or less

than ¥1,100 million (inclusive of compensation to outside directors equal to or less than ¥200 million) in one fiscal year. If directors also hold positions as employees, the salary and bonuses to be paid in compensation for these services are not included.

(2) The amount of compensation for all corporate auditors: Equal to or less than ¥200 million in one fiscal year.

Compensation paid to directors is divided into two compo-nents. The first component is fixed compensation, which is

determined in consideration of the roles undertaken by indi-vidual directors and paid in fixed amounts each month. The second component is in the form of a bonus, which varies according to the level of consolidated ordinary income, and, therefore, reflects performance during the relevant fiscal year. The policy for the determination of this compensation is for the decision to be made by resolution of the Board of Directors after deliberations and reporting by the Compensation Advisory Committee. Compensation paid to corporate auditors is fixed in consideration of the independence of their duties. Based on the deliberations of the corporate auditors, this compensation is paid within the aforementioned limits.

Internal AuditsFor the conduct of internal audits, the Company has formed its Internal Audit Department, which is in overall charge of internal auditing and the internal control system that is necessary for ensuring the accuracy of financial reporting. Internal audits are for the entire JX Group, and the Internal Audit Department, by collaborating and sharing tasks with the Core Operating Companies and the listed subsidiaries of the JX Group, con-ducts standard audits under the internal audit program and audits on a special mission from the President. The results of the internal audits are reported periodically at the meetings of the Executive Council and the Board of Directors.

Accounting AuditsThe Company has appointed Ernst & Young ShinNihon LLC as its independent auditor, and this firm conducts the accounting audits.

Amount of Remunerations (Fiscal 2015)(i) Amount of remunerations as an accounting auditor

of the Company

¥177 million

(ii) Total amount of monies and other property benefits to be paid by the Company and its subsidiaries

¥952 million

Notes:1. The audit agreement between the Company and the accounting auditor does

not, and is practically unable to, distinguish between the amounts of audit remuneration for the audit based on the Companies Act of Japan and the audit based on the Japanese Financial Instruments and Exchange Act. Therefore, the amount stated in (i) above includes the amount of audit remuneration for the audit based on the Financial Instruments and Exchange Act.

2. The Company paid Ernst & Young ShinNihon LLC consideration for the services relating to the “JX Group IT security guideline revision support,” which is not included in the services set forth in Article 2, Paragraph 1, of the Certified Public Accountants Act.

Internal Control System

The Mission Statement of the JX Group is “The JX Group will contribute to the development of a sustainable economy and society through innovation in the areas of energy, resources and materials.” The JX Group Values are “Our actions will respect

the EARTH: Ethics, Advanced ideas, Relationship with society, Trustworthy products/services, and Harmony with the environ-ment.” To provide a policy framework for management to supervise the conduct of business, the Company has prepared


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Risk Management

In the JX Group, each company has prepared risk management systems appropriate for its respective lines of business and implements measures in consideration of such individual risk related to compliance and occupational safety, environment, and other matters.

Crisis ManagementWhen crises or emergency situations arise that may significantly affect the management of the JX Group, the Company exer-cises overall control and has prepared its Rules for Responding to Crises and Emergency Situations, which specifies measures to be taken to minimize the damage that may occur. The General Administration Department of the Company functions as the standing organizational unit in charge of crisis response and management. The general manager of this department acts as head of this crisis response unit, and, when such situations arise, operating procedures require that the

situation and measures to be taken be reported immediately to the head of the crisis response unit. Also, depending on the magnitude of the crisis, at its discretion, the Company may form a crisis response head-quarters or a joint crisis response headquarters with JX Group companies to respond quickly and appropriately to the crisis and, thereby, fulfill the social mission of the JX Group.

Information Security ManagementBased on its Basic Rules for Information Security, the JX Group works to prevent the improper usage or disclosure, including leakage, of company information, which is a corporate asset. The JX Group also strives to maintain the accuracy and reliabil-ity of its corporate information as well as prevent falsification or erroneous handling while making it possible for authorized users of information to have constant access to information when they need it.

Compliance

The JX Group has adopted “Ethics” in its JX Group Values, and thorough measures are taken to ensure directors and employ-ees remain in compliance with laws and regulations. To conduct fair corporate activities and increase social trust in the JX Group, the JX Group has a policy of abiding by all relevant laws, the Articles of Incorporation, and other rules and regulations in all its work activities and has prepared rules to maintain high stan-dards of compliance at each company of the JX Group. To set directions for compliance activities of the JX Group and consider matters the JX Group as a whole must address, the JX Group Compliance Committee has been formed. Its

responsibilities are to adopt policies for action related to com-pliance matters that must be addressed by the JX Group as a whole and make reports on the results of these activities. Also, to discover a violation of laws at an early stage and take prompt corrective action as well as give protection to per-sons who provide information on legal violations, principal JX Group companies have a whistle-blowing system (compliance hotline), and, in addition to each company’s section in charge of the system, attorneys-at-law accept information from whistle-blowers.

its Basic Policy for the Establishment and Operation of Internal Control System, which covers such matters as corporate gover-nance, risk management, compliance, information disclosure, and internal audits. Under this policy framework, the JX Group has established and continues to operate its internal control system for assuring the proper conduct of its business activities. In the operation of our internal control system, the JX Group Internal Control Council has been established to provide advice to the President to implement the system in a Groupwide and an effective manner. This council, which is composed of the same members of the Executive Council, confirms and reviews the monitoring of the operational status and maintenance of the autonomous self-control systems.

Furthermore, as a sub-body of the Group Internal Control Council, the JX Group Internal Control Committee has been established to provide advice and practical assistance to the Group Internal Control Council. This committee is overseen by the director responsible for the Legal & Corporate Affairs Department and is composed of general managers in the areas related to internal control activities. In regard to internal control activities related to each organizational area, the committee deliberates on such matters as the status of the accomplish-ment of basic policy, instructions or advice in the event that there is a deficiency discovered in monitoring results, and the reevaluation of basic policy. The results of those deliberations are reported to the Group Internal Control Council.



Disclosure Policy

The Company is fully aware that the timely and proper disclo-sure of corporate information is a core issue of healthy capital markets and, to promote transparency in management, works to provide prompt, appropriate, and fair disclosure of informa-tion to shareholders and other investors. Systems have been prepared to obtain, manage, and dis-close information on the Company as well as information on JX Group companies quickly and accurately. Information that is subject to Timely Disclosure Rules is made public through the timely disclosure system (TDnet) provided by the Tokyo Stock Exchange and others, and the same information is made avail-able on the Company’s website. Information that is not subject to Timely Disclosure Rules is disclosed proactively based on basic policies and disclosure standards. The Company has prepared its Regulations for Prevention of Insider Trading, and systems that have been created abide by regulations regarding insider trading throughout the JX Group.

Investor Relations (IR) Activities

To improve understanding of the business activities of the JX Group, the Company proactively disseminates information on management policies, performance, and other matters. For analysts and institutional investors in Japan, the Company holds presentation meetings on financial results that are attended by management on a quarterly basis. The presen-tation materials, videos, and other information presented at the meetings can be accessed on the Company’s website. Also, through visits to investors, participation in investment confer-ences, and other IR activities, the Chairman, the President, the director responsible for IR, and others hold one-on-one meet-ings on a regular basis, and visits to the JX Group’s refineries, smelters, and other facilities are arranged once or twice each year. For overseas investors, the Chairman, the President, the director responsible for IR, and others have one-on-one meet-ings by making periodic visits to investors and participating in investment conferences. For individual investors, the Company holds periodic presentations in major cities in Japan, and the President, the director responsible for IR, and others provide explanations on the overview of the Group’s business situation.

In fiscal 2015, these presentations were held 32 times and were attended by approximately 1,700 individual investors. The “Investor Relations” section of the Company’s website contains useful materials for investors, such as annual reports, financial results, and presentation materials used at the afore-mentioned meetings.

In fiscal 2015, the JX Group received a number of awards for its IR activities:

• Nikko Investor Relations: Best Company Surveyed Award (in Nikko Investor Relations’ ranking of the websites of listed companies in fiscal 2015)

• Daiwa Investor Relations Co., Ltd.: 2015 Internet IR Commendation Award

• Morningstar: Gomez Investor Relations Site Ranking 2015, Silver Prize


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Director Responsible

Information Disclosure Officer (General manager of Finance & Investor Relations Department)

Securities Exchanges

*1. Disclosure of information regarding events that require urgent disclosure may be made on the authority of a representative director without being reported to the Board of Directors.

*2. Whether timely disclosure is required is determined through consultation among the director responsible, the general managers of the General Administration, Legal & Corporate Affairs, and Controller departments, the information disclosure officer (general manager of the Finance & Investor Relations Department), and the general managers of any other concerned departments or offices.

Individual units of the Company/Group companies

Report

Discussion/Report*2

Disclosure directive

Disclosure execution

Decisions Events Information on Financial Results

(Followed promptly by disclosure on the Company’s website)

Overview of Timely Disclosure System

Board of Directors

Representative Director*1

What I Expect from the JX Group

The role of a corporation is to fulfill the mission associated with its

social presence and contribute to society. The trust and high regard

of society are earned through contributions to society, and in turn

they lead to the creation of future profits. The JX Group plays an

essential role in supporting people’s lifestyles. The Group’s leaders

and employees need to always keep in mind contributions to soci-

ety, be aware of the Group’s role as an industry leader, and be

strongly conscious of the Group’s position and presence in the

business community overall. In addition, the JX Group conducts

business on a global basis, and business activities that entail risk

should be approached in a manner that is careful yet bold.

In regard to the business integration with TonenGeneral Sekiyu

K.K., it is important that the two companies do more than simply

become a single entity. They must make the most of each other’s

strengths and leverage the effects of the integration so that the

whole ends up being greater than the sum of the parts. I look for-

ward to a business integration that adds strength such that the JX

Group, operating under the new system, can compete in global

markets, drive the activation of the industry, and play a major role in

supporting the Japanese economy.

Performance and Future Policies

In fiscal 2015, the Company recorded a loss attributable to owners of

parent of ¥278.5 billion. When a company records a loss, it means that

the company is not contributing to society. That must be recognized.

On the other hand, a company must not focus excessively on profits

and postpone measures to address future issues. I believe that in

some cases it is necessary to permit a loss, such as when the loss is an

essential part of a company’s next step toward realizing an objective.

The JX Group’s results are significantly affected by the external

environment, such as fluctuations in resource prices. To a certain

extent, there is nothing that can be done about that, but nonethe-

less a decline in results should not be blamed on the external

environment. It is these types of challenging circumstances in

which it is necessary to ensure that the company has established a

corporate constitution that is not overly susceptible to the influ-

ence of the external environment and to implement initiatives to

heighten the company’s capacity to deal with changes in the oper-

ating environment. I would like the JX Group to dispose of assets

that have suffered declines in profitability and to continue working

to improve its financial position.

The Group’s basic policy for fiscal 2016 is to control investment.

Investment that will lead to future growth must be continued, but I

think that we are now in a period in which we should improve our

financial position by building up our strength for the next leap for-

ward. Nevertheless, even in times like this, we need to continually

push forward with an aggressive approach. The Group should take

steps to raise efficiency and rationalize operations while sharing

with stakeholders a sense of expectation about what the future will

hold after the current situation is surpassed.

New Initiatives as an Outside Director

In 2016, the Group began to hold meetings attended only by out-

side directors. The aim of these meetings is to promote the sharing

of thoughts among the outside officers. Based on my many years of

experience, meetings are good venues for sharing information, but

it is difficult to suddenly discuss an issue without advance notice

and make a decision. Open-minded discussions are already being

held at meetings of the Company’s Board of Directors, and further

enhancing communication among outside officers is likely to have

a positive influence on management. Plans call for these meetings

of outside directors to be held on an irregular basis, two or three

times a year.

The JX Group’s future growth will likely require new concepts

that transcend conventional business frameworks. Moving forward,

the Group will continue working to create a future that satisfies even

more people, and I think that everyone can look forward to the

Group’s accomplishments in the years ahead.

Message from an Outside Director

Mutsutake OtsukaOutside Director Advisor of East Japan Railway Company

Mr. Mutsutake Otsuka has long been engaged in the

management of East Japan Railway Company (JR East),

including as President and Representative Director. He has

also held such important posts as Vice Chairman of Ippan

Shadan Hojin Nippon Keizai Dantai Rengokai (KEIDANREN;

Japan Business Federation), and he has served as a

member of the Administrative Reform Promotion Council.


Financial Information 58 ..... Review and Analysis of Fiscal 2015 Results

63 ..... Business and Other Risks

68 ..... Consolidated Financial Statements and Notes

103 ..... Independent Auditor’s Report

104 ..... Principal Group Companies

106 ..... Investor Information

107 ..... IR Website Guide


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SUMMARY OF CONSOLIDATED OPERATING RESULTS

On a consolidated basis, net sales of the JX Holdings Group (“JX

Group”) in the fiscal year ended March 31, 2016, were ¥8,737.8

billion, a decrease of 19.7% year on year. Ordinary loss was ¥8.6

billion, compared with ordinary loss of ¥150.1 billion in the previ-

ous fiscal year. Loss attributable to owners of parent was ¥278.5

billion, compared with loss attributable to owners of parent of

¥277.2 billion in the previous fiscal year. Ordinary income exclud-

ing inventory valuation factors (the impact of inventory

valuation on the cost of sales under the periodic average

method) was ¥260.9 billion, a 2.2% increase year on year.

Special gains totaled ¥44.6 billion, including ¥36.0 billion in

gain on sales of investments in securities. Special losses totaled

¥366.0 billion. Due to the decline in resource prices, we recorded

¥245.3 billion in impairment loss on non-current assets pertaining

to oil and natural gas development and to the Caserones Copper

Mine Project. We also recorded restructuring cost of ¥84.6 billion.

Consequently, loss before income taxes was ¥330.0 billion.

After the subtraction of ¥17.1 billion in income taxes and ¥34.4

billion in loss attributable to non-controlling interests, loss

attributable to owners of parent amounted to ¥278.5 billion,

compared with loss attributable to owners of parent of ¥277.2

billion in the previous fiscal year.

In conjunction with rigorous initiatives to reduce costs and increase efficiency, the JX Group is taking steps to control investment and accelerate the disposal of assets. In these ways, we are working to improve our balance sheet.

Kunimitsu ObaDirector, Senior Vice President

Responsible for Internal Audit Department and Finance & Investor Relations Department

Review and Analysis of Fiscal 2015 Results

Consolidated Financial Results Summary Billions of yen

FY2015 FY2014 Change

Net sales 8,737.8 10,882.5 –2,144.7Ordinary loss (8.6) (150.1) +141.5Ordinary income (excluding inventory valuation factors) 260.9 255.2 +5.7 Energy 166.7 72.2 +94.5 Oil and Natural Gas E&P 28.2 84.9 –56.7 Metals 19.0 55.1 –36.1 Others 47.0 43.0 +4.0Special losses (321.4) (104.9) –216.5Loss attributable to owners of parent (278.5) (277.2) –1.3


Energy BusinessIn the Energy business, net sales were down 21.9% year on year, to ¥7,122.4 billion, while ordinary loss was ¥97.1 billion, compared with

ordinary loss of ¥334.6 billion in the previous fiscal year. Ordinary income excluding inventory valuation factors was ¥166.7 billion, a

130.9% increase from the previous fiscal year.

Changes in Ordinary Income (excluding inventory valuation factors)

Sales of gasoline, kerosene, diesel fuel, and fuel oil A increased

due to a rebound from the previous fiscal year, when sales of

these products declined because of the increase in the con-

sumption tax rate and unseasonable weather in the summer.

However, sales of heavy fuel oil and crude oil for electric power

generation decreased due to such factors as the restart of the

Sendai Nuclear Power Plant and high temperatures in the

winter. As a result, the sales volume of petroleum products

declined year on year. The influence of time lags had an adverse

effect on margins on petroleum products. However, due to

increased efficiency in the supply chain and cost reductions,

centered on repair costs, and to a decline in the cost of fuel

consumed at refineries resulting from lower crude oil prices,

margins on petroleum products increased year on year.

Petrochemical products recorded higher profits due to the

depreciation of the yen and to a decline in the cost of fuel con-

sumed at refineries resulting from lower crude oil prices.

OVERVIEW OF RESULTS BY SEGMENT

Market Data

FY2015 FY2014 Change

Crude oil price (Dubai)*1 ($/bbl) 47 88 –41Copper price (LME) (¢/lb) 250*2 237 311*2 297 –61*2 –60Exchange rate (¥/$) 121*2 120 106*2 110 +15*2 +10

*1. The figure for fiscal 2015 is the average from March 2015 to February 2016, and the figure for fiscal 2014 is the average from March 2014 to February 2015 (nearly equal to arrived crude cost).

*2. Figures are averages for the calendar years.

BUSINESS ENVIRONMENT SURROUNDING THE JX GROUP

Looking at the global economy in the fiscal year under review,

the U.S. economy continued to recover, mainly due to increased

consumer spending. However, in China, the economy deceler-

ated due to slowdowns in production and capital investment

by companies and to restrained investment in infrastructure by

the government. In Japan, the economy was limited to a mod-

erate recovery, primarily due to weak growth in consumer

spending and capital investment.

The Dubai crude oil price, which is a crude oil index price

commonly used in Asia, remained at around $60 per barrel

during the period from the beginning of the fiscal year to July

2015. Subsequently, however, the price dropped significantly as

major oil-producing countries maintained a high level of crude

oil production, resulting in an oversupply. In January 2016, the

price was down to $23 per barrel, the lowest level in 12 years. The

crude oil price then started to rise, but nonetheless it ended the

fiscal year at a low level, at $35 per barrel.

The LME (London Metal Exchange) price for copper, which

is the international index price, remained relatively steady at

approximately $6,000 per ton during the period from the

beginning of the fiscal year to the end of June 2015. However,

the price started to fall due to the slowdown in economic growth

in China, which is the largest copper-consuming country, and

to the stronger U.S. dollar, which makes dollar-denominated

commodities more expensive to non-U.S. buyers. In January

2016, the copper price reached $4,311 per ton, the lowest level in

seven years. The price subsequently recovered slightly, ending

the fiscal year at $4,856 per ton.


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FY2014

(Billions of yen)

0

–20

20

40

60

80

100

120

Oil and Natural Gas E&P Business −¥56.7 billion (84.9 28.2)

84.9

Sales volume+10.0

Crude oil price–110.0

Costs, exchange rate, and others+43.3 FY2015

28.2

5351

2014Jan.–Dec.

2015Jan.–Dec.

9997

($/bbl)BrentDubai

121

2014Jan.–Dec.

2015Jan.–Dec.

115

Sales volume

(Thousands of BD)

Changes in Ordinary Income

Sales volume–4.0

Fuel cost reduction and others+36.0

72.2

FY2014

FY2015

166.7

60

90

120

180

150

(Billions of yen)

Petroleum products+¥32.0 billion (57.1 89.1)

Energy Business +¥94.5 billion (72.2 166.7)

Petrochemical products+¥62.5 billion (15.1 77.6)

0

30

Sales volume+5.0

Margin and others+57.5



Oil and Natural Gas Exploration and Production (E&P) BusinessIn the Oil and Natural Gas E&P business, net sales were down 22.4%, to ¥175.8 billion, while ordinary income declined 66.8%, to ¥28.2

billion.

Changes in Ordinary Income

The sales volume of oil and natural gas was 121 thousand barrels of oil equivalent per day, an increase from the previous fiscal year.

Contributions were made by production from the Papua New Guinea LNG Project and the Kinnoull oil field in the U.K. North Sea,

which commenced production in the previous fiscal year. Other factors that increased profits included reductions in operating

expenses and other costs as well as the effect of the depreciation of the yen. However, the decline in crude oil prices had a significant

influence, and ordinary income decreased year on year.


0

20

40

60

Resources development–¥42.3 billion (18.1 –24.2)

Smelting and re�ning–¥3.5 billion (16.8 13.3)

55.1Copper price

–28.0

Caserones and others–14.3

Recycling and environmental

services–1.7

Electronic materials+5.3

Titanium+6.1

19.0

FY2014

FY2015

(Billions of yen)

Income decline of LSN and others–3.5

Metals Business –¥36.1 billion (55.1 19.0)

2015Apr.–Mar.

237

2014Jan.–Dec.

311Average copper price for the periodPrice range –54 (274 220)–47 (335 288)

(¢/lb)

Electronic materials, recycling andenvironmental services, titanium

+¥9.7 billion (20.2 29.9)


Metals BusinessIn the Metals business, net sales decreased 9.2%, to ¥1,049.7 bil-

lion, and ordinary income declined 76.6%, to ¥13.3 billion.

Ordinary income excluding inventory valuation factors

decreased 65.5%, to ¥19.0 billion.


In the resources development business, due to the decline in

copper prices and other factors, profitability at the Caserones

Copper Mine worsened, and dividends from Escondida

decreased. As a result, ordinary income decreased year on year.

In the copper smelting and refining business, despite the

depreciation of the yen and improvement in TC/RC, ordinary

income decreased year on year due to non-recurring factors,

such as back taxes and impairment loss at LS-Nikko Copper Inc.

In the electronic materials business, PC demand remained slug-

gish, but demand for smartphones and servers was favorable,

and sales volume increased. Accordingly, ordinary income rose

year on year. In the recycling and environmental services busi-

ness, ordinary income declined due to a decrease in the gold

recovery volume. In the titanium business, ordinary income

increased, due in part to the success of cost reductions achieved

through restructuring.

Other Business

In other business, net sales decreased 0.5%, to ¥458.8 billion, while ordinary income increased 12.8%, to ¥44.9 billion.

NIPPO CORPORATION (Construction Business)

In civil engineering works projects, such as road and pavement

construction, public projects recorded a mild decline, while

labor, raw material, and other costs remained high. As a result,

the operating environment remained difficult for NIPPO

CORPORATION (“NIPPO”). In this environment, NIPPO worked

aggressively to obtain orders based on its technological superi-

ority, took steps to increase sales of asphalt mixture and other

products, and strengthened its initiatives to reduce costs and

raise efficiency. In these ways, NIPPO made efforts to secure

sales and profits. On February 29, 2016, NIPPO was prosecuted

by the Tokyo District Public Prosecutors Office for violation of

the Antimonopoly Act regarding a bid for the disaster restora-

tion paving work for the Great East Japan Earthquake ordered

by the Tohoku Branch of East Nippon Expressway Company

Limited. Moving forward, NIPPO will strive to further enhance

and ensure compliance to prevent a recurrence of such

misconduct.


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FINANCIAL POSITION

Total assets at the end of the fiscal year under review were

¥6,724.6 billion, a decrease of ¥698.8 billion from the end of the

previous fiscal year. This decline was attributable to such factors

as decreases in notes and accounts receivable and inventories

due to the decline in the crude oil price. Total liabilities at the

end of the fiscal year were ¥4,796.2 billion, a decrease of ¥197.4

billion. Total net assets were ¥1,928.5 billion, a decline of ¥501.4

billion. Shareholders’ equity was ¥1,498.9 billion, and the share-

holders’ equity ratio was 22.3%. Net assets per share were

¥602.86. Interest-bearing debt as of the end of the fiscal year

amounted to ¥2,581.4 billion, a decline of ¥38.9 billion; the total

of cash and cash equivalents as well as time deposits was ¥492.7

billion; and the net D/E (debt-to-equity) ratio worsened by 0.21

points, to 1.39 times.

At the end of the fiscal year under review, cash and cash

equivalents (hereinafter “cash”) totaled ¥491.3 billion, an increase

of ¥163.4 billion from the beginning of the fiscal year. Cash flows

and factors affecting cash flows are discussed below.

Net cash provided by operating activities was ¥555.0 billion.

Factors contributing to cash from operating activities, such as

decrease in inventories of ¥305.3 billion, decrease in notes and

accounts receivable–trade of ¥229.9 billion, and depreciation

and amortization of ¥227.7 billion, were greater than factors

contributing to a decline in cash from operating activities, such

as loss before income taxes of ¥330.0 billion and decrease in

notes and accounts payable–trade and excise taxes payable of

¥81.9 billion.

Net cash used in investing activities was ¥307.7 billion. This

cash outflow was principally attributable to investments in

petroleum product manufacturing facilities and investments

related to oil and natural gas development.

Net cash used in financing activities was ¥88.0 billion.

Factors contributing to a decline in cash from financing activi-

ties, such as repayment of long-term loans of ¥167.9 billion,

decrease in commercial papers, net of ¥116.0 billion, and

redemption of bonds of ¥42.5 billion, were greater than factors

contributing to cash from financing activities, such as proceeds

from long-term loans of ¥302.2 billion.

Total assets6,724.6

Cash and cash equivalents

492.7

Other assets6,231.9

Shareholders’ equity1,498.9

Non-controlling interests

429.5

Other debt2,214.8

Interest-bearing debt2,581.4

As of March 31, 2016(Billions of yen)

Shareholders’ equity ratio 22.3%Net D/E ratio 1.39 times

ROE –16.2%

Total assets7,423.4Cash and cash

equivalents329.3

Other assets7,094.1

Shareholders’ equity1,936.8

Non-controlling interests

493.0

Other debt2,373.3

Interest-bearing debt2,620.3

Consolidated Balance Sheets

As of March 31, 2015(Billions of yen)

Shareholders’ equity ratio 26.1%Net D/E ratio 1.18 times

ROE –13.6%


Consolidated Cash Flows

(Billions of yen) FY2015

Loss before income taxes –330.0 Depreciation and amortization 227.7 Decrease in notes and accounts receivable–trade 229.9Decrease in inventories 305.3Other 122.1

Cash flows from operating activities 555.0 Cash flows from investing activities –307.7 Free cash flow 247.3 Cash flows from financing activities –88.0


The JX Holdings Group (“JX Group”) faces a variety of risks that may have an important impact on its business performance. The principal risks are those outlined below. Please note that forward-looking statements made in this section are, unless otherwise stated, judgments made by JX Holdings, Inc., as of the date of the presentation of this report.

RISKS AFFECTING THE ENTIRE JX GROUP

1 Country risks relating to sources of raw material supplies

The JX Group procures large quantities of raw materials outside

Japan. In particular, it is almost entirely dependent on limited

crude oil reserves in the Middle East as well as on limited copper

concentrate sources in South America, Southeast Asia, and

Australia. Country risks in those countries or regions—for exam-

ple, involving political instability, social unrest, deterioration in

economic conditions, or changes in laws or policies—may have

an impact on the JX Group’s performance.

2 Risks relating to business operations in China

and other East Asian countries

Sales of such products as refined copper, chemicals, and electronic

materials made by the JX Group depend heavily on demand in

Asian countries, notably China, and the JX Group is expected to

undertake further business expansion in those countries.

In the event that for whatever reason there is a decline or

other changes in demand for the JX Group’s products in these

areas, it may have an impact on the JX Group’s financial position

and business performance.

3 Risks relating to foreign exchange rate fluctuations

Portions of the JX Group’s receipts and payments arise from

business transactions denominated in foreign currencies, and

the JX Group also has substantial assets and liabilities denomi-

nated in foreign currencies. Consequently, fluctuations in for-

eign exchange rates may affect the value of assets, liabilities,

receipts, and payments when converted into yen.

In addition, fluctuations in foreign exchange rates may have

an impact when the financial statements of overseas consoli-

dated subsidiaries or affiliates accounted for by the equity

method are converted into yen.

4 Risks relating to collaboration with third parties

and business investments

In a variety of business fields, the JX Group collaborates with

third parties through joint ventures and other arrangements

and also makes strategic investments in other companies.

These partnerships and investments play an important role in

the JX Group’s businesses, and, in the event that key joint ven-

tures experience financial difficulties for any reason, or it is not

possible to achieve the desired results from collaborative

relationships or investments, this may have an impact on the

JX Group’s financial position and business performance.

5 Risks relating to business restructuring

The JX Group is taking steps to reduce costs, concentrate its

business activities, and enhance efficiency. However, it is possi-

ble that substantial special losses related to such restructuring

may occur.

In the event that the JX Group is unable to execute business

restructuring appropriately, or that the restructuring does not

achieve the envisaged improvements in the JX Group’s busi-

ness operations, this may have an impact on the JX Group’s

financial position and business performance.

6 Risks relating to capital expenditures, investments,

and loans

Continuing capital expenditures, including investments and

loans, are necessary for the ongoing maintenance and growth

of the JX Group’s businesses and for the acquisition of new busi-

ness opportunities. However, it is possible that for such reasons

as inadequacy of cash flows, it may become difficult to imple-

ment these plans. In addition, due to changes in the external

environment or other factors, it is possible that actual invest-

ment amounts will greatly exceed projections, or that projected

earnings will not materialize.

7 Risks relating to resource development

The JX Group conducts exploration and development activities

related to oil and natural gas fields as well as coal and copper

deposits. At present, these activities are in various stages on the

way toward full commercial operation. The success of exploration

and development is influenced by a wide range of factors, includ-

ing the choice of areas for exploration and development, the

construction cost of equipment, permits that must be received

from governments, and fund-raising. In the event that individual

projects do not reach the commercial viability stage and funds

invested cannot be recovered, this may have an impact on the

JX Group’s financial position and business performance. In addi-

tion, recruiting personnel with high-level specialized expertise

and broad experience is vital to the exploration and development

business; however, the competition in obtaining top-quality per-

sonnel is becoming extremely intense in this industry. Therefore,

Business and Other Risks


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in the event that the JX Group is unable to recruit enough top-

quality personnel, this may result in the loss of profit-making

opportunities and a decline in competitiveness.

8 Risks relating to environmental regulations

The JX Group’s businesses are subject to a wide range of environ-

mental regulations. These regulations impose expenses for envi-

ronmental cleanups, and, if environmental pollution were to

occur, the payment of fines and compensation would be required,

making it difficult for the JX Group to continue its operations.

The JX Group’s operations give rise to considerable quanti-

ties of wastewater, gas emissions, and waste materials, and

unforeseen circumstances may cause the volumes of these

discharges to rise above their permitted levels. It is also possible

that in the future environmental regulations may be tightened.

The obligations and burdens imposed on the JX Group by these

environmental regulations and standards may have an impact

on the JX Group’s financial position and business performance.

9 Risks relating to operations

Businesses of the JX Group are exposed to a variety of risks relat-

ing to its operations, such as risks of fire, explosions, accidents,

import or export restrictions, natural disasters, mine collapses,

climatic or other natural phenomena, labor disputes, and

restrictions on the transportation of raw materials or products.

If such accidents or disasters were to occur, considerable losses

may ensue.

The JX Group obtains insurance coverage for accidents,

disasters, and other contingencies to the possible and appropri-

ate extent, but it is possible that compensation may not cover

the full cost of any damages that occur.

10 Risks relating to intellectual property rights

In the execution of its businesses, the JX Group owns patents

and other intellectual property rights of various kinds, but, in

certain circumstances, it is possible that intellectual property

rights may be difficult to obtain or their validity may be con-

tested. It is also possible that the JX Group’s corporate secrets

may be disclosed or misused by a third party, or that owing to

the speed of technical progress, the protection afforded by

intellectual property rights becomes inadequate with respect

to technologies vital to the JX Group’s businesses.

In addition, a claim from a third party of infringement of

intellectual property rights in regard to the JX Group’s technolo-

gies may lead to the payment of substantial royalties or to the

prohibition of the use of the relevant technologies.

In such cases as those referred to, in which the JX Group is

unable to obtain or make adequate use of intellectual property

rights for the conduct of its businesses, the JX Group’s business

performance may be affected.

11 Risks relating to interest-bearing debt

The large size of its interest-bearing debt may restrict the busi-

ness activities of the JX Group. In addition, to make repayments

of principal and interest relating to this debt, it may be neces-

sary for the JX Group to raise funds through additional borrow-

ings or the sale of assets. However, the JX Group’s ability to

conduct such fund-raising may depend upon a variety of factors,

such as the state of financial markets, the JX Group’s share price,

and whether or not there are buyers for the assets. Additionally,

if interest rates rise—either within Japan or overseas—the resul-

tant increase in interest burden may have an impact on the JX

Group’s financial position and business performance.

12 Risks relating to the write-down of inventories

owing to decreased profitability

The JX Group has large amounts of inventories. In the event

that the net market value of inventories at the end of the fiscal

period is lower than the corresponding book value owing

mainly to declines in market prices of crude oil, petroleum

products, and rare metals, the book value must be reduced in

line with net market value. The difference between the book

value and the net market value must be charged to cost of sales

and will result in a decline in profitability. Such write-down of

inventories may have an impact on the JX Group’s financial

position and business performance.

13 Risks relating to the impairment of fixed assets

The JX Group has substantial fixed assets. In the future, if such fac-

tors as changes in the business environment cause the profitability

of fixed assets to decline and make it unlikely that funds invested

can be recovered, their book value will be reduced to reflect the

likelihood of recovery, and it will be necessary to post the amount

of the reduction as an impairment loss. This may affect the

JX Group’s financial position and business performance.

14 Risks relating to information systems

Information systems may become inoperative as a result of an

earthquake or other natural disaster or an accident, and busi-

ness operations may have to be suspended. In such an event,

this may disrupt the production and marketing activities of the

JX Group and have a serious impact on the operations of busi-

ness partners.


RISKS BY SEGMENT

Energy Business

1 Risks relating to fluctuations in margins in the

Petroleum Refining and Marketing business

The margins for petroleum products are determined by factors

beyond the control of the JX Group, largely due to the differ-

ence between crude oil prices and the prices of petroleum

products. Factors influencing crude oil prices include the

Japanese yen to U.S. dollar exchange rate, the political situation

in oil-producing regions, production adjustments by the

Organization of the Petroleum Exporting Countries (OPEC), and

global demand for crude oil. Factors that influence the prices of

petroleum products include demand for petroleum products,

overseas petroleum product market conditions, domestic

petroleum-refining capacity and capacity utilization ratios, and

the total number of service stations in Japan. The JX Group

determines petroleum product prices by appropriately reflect-

ing the supply and demand conditions or market trends of

petroleum products; however, margins may worsen consider-

ably depending on crude oil prices or the market trend of petro-

leum products, and this may have an impact on the JX Group’s


Furthermore, margins for chemicals are affected by the dif-

ference between prices for crude oil and major raw materials,

such as naphtha, and prices for chemicals. These margins are

determined by factors beyond the control of the JX Group.

Chemical prices are affected by such factors as increases in

supply capacity through the construction of new production

facilities or the expansion of existing facilities and demand trends

for apparel, automobiles, home electronics, and other goods.

Owing to weak market conditions, it may be difficult to pass on

cost increases stemming from higher crude oil and other raw

materials prices to product prices. This may have an impact on

the JX Group’s financial position and business performance.

2 Risks relating to demand fluctuations and

competition in the domestic petroleum business

Mainly in the industrialized countries, initiatives related to the

Earth’s environment have been stepped up, with the aim of

accelerating the development of a “low carbon society.” These

initiatives include making reductions in greenhouse gas emis-

sions and promoting the saving of energy and natural resources.

Amid these developments, the demand for petroleum products

in Japan is expected to continue to decline along with the trends

toward the wider use of fuel-efficient automobiles and the transi-

tion toward other energy sources, such as gas and electricity. In

the event that this decline in domestic demand continues or

accelerates, this may have an impact on the JX Group’s financial

position and business performance. Moreover, in the domestic

Petroleum Refining and Marketing business, competition among

industry participants at present is intense, and there is a possibil-

ity that the trend toward lower demand in the domestic market

may accelerate such competition. More-intense competition

may have an impact on the JX Group’s financial position and

business performance.

3 Risks relating to sources of procurement of crude oil

and petroleum products

The JX Group procures all its crude oil from overseas, primarily

from the Middle East, and some petroleum products are pro-

cured abroad and in Japan. Such factors as changes in the

political situation in oil-producing countries, and changes in

the supply and demand balance for petroleum products in

Japan and abroad, may hamper the procurement of crude oil

and petroleum products. Inability to secure an appropriate

alternative supply source may have an impact on the JX Group’s


15 Risks relating to the establishment of the internal

control system

The JX Group is making every effort to enhance compliance,

risk management, and other functions as well as strengthen its

internal control system, including the internal financial report-

ing system. In the event that the JX Group’s internal control

system does not function effectively and such situations occur

as a breach of compliance, the manifestation of risk of loss in a

significant amount, or damage to disclosure credibility, there is

a risk that confidence among its stakeholders may be signifi-

cantly impaired, which may affect the financial position and

business performance of the JX Group.

16 Risks relating to the management

of personal information

The JX Group manages personal information in relation to such

services as petroleum product sales and periodic precious

metal investment plans. The implementation of measures nec-

essary to protect that information may require considerable

expenses going forward. Furthermore, the leakage or misuse of

customers’ personal information may have an impact on the

aforementioned business activities.


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4 Risks relating to inventory valuation

The JX Group values inventories, including crude oil and petro-

leum products, by the average cost method. During a phase of

rising crude oil prices, inventories initially valued at a compara-

tively low level will act to increase profits by pushing down the

cost of sales. However, in a phase of falling crude oil prices,

inventories initially valued at a comparatively high level will act

to decrease profits by pushing up the cost of sales. This may

have an impact on the JX Group’s financial position and busi-

ness performance.

Oil and Natural Gas E&P Business

1 Risks relating to crude oil and gas prices and currency

exchange rate fluctuations in the Oil and Natural Gas

E&P business

Sales in the Oil and Natural Gas E&P business fluctuate along

with changes in crude oil and gas prices and movements in

foreign currency exchange rates. When crude oil and gas prices

are rising and the value of the yen is declining, sales in yen

terms increase. When the crude oil and gas prices are falling and

the yen is appreciating, sales in yen terms decrease. Therefore,

during times when crude oil and gas prices move downward

and the yen is appreciating, the performance of the JX Group is

adversely affected because of the decline in sales in yen terms.

2 Risks relating to securing reserves

As a result of international competition for resources, competi-

tive conditions for the JX Group to secure reserves have become

substantially more challenging. The future oil and gas output of

the JX Group will depend on the extent to which it can secure

reserves through exploration, development, and the acquisi-

tion of resource rights that make possible production on a com-

mercial basis. In the event that the JX Group cannot supplement

its reserves of oil and gas, its production volume may decline in

the future, and this may have an impact on the JX Group’s finan-

cial position and business performance.

3 Risks relating to equipment for oil and natural gas E&P

To conduct exploration and the production of oil and natural

gas, the JX Group must obtain drilling and other equipment

and related services from third parties. When the price of crude

oil is rising and in similar circumstances, such equipment and

services are in short supply. In the event that the JX Group

cannot obtain such equipment and services with the proper

timing and on economical conditions, this may have an impact

on the JX Group’s financial position and business performance.

Metals Business

1 Risks relating to fluctuations in market conditions

in the copper business

The JX Group’s copper business mainly derives profit from its

copper smelting and refining business and investments in over-

seas copper mines. Any changes in related market prices, as

listed below, could have an impact on the financial position and

business performance of the JX Group.

The JX Group’s copper smelting and refining business oper-

ates as a custom smelter that purchases copper concentrate

from overseas copper mines and produces and sells refined

copper. The gross margin mainly comprises smelting and refin-

ing margins and sales premiums.

Smelting and refining margins are determined by negotia-

tions with copper mines. If the supply of copper concentrate to

the market is inadequate owing to such factors as a lower con-

centrate grade, the emergence of an oligopoly of mining

majors, or increased demand in China, India, and other coun-

tries, smelting and refining margins could decline. In addition,

the smelting and refining margins have been concluded in U.S.

dollars. As a result, in the event that the yen appreciates, the

smelting and refining margins will decline.

Sales premiums, which are added to the international

refined copper price, are determined through negotiations

with customers in consideration of a variety of factors, such as

importation costs and product quality. Depending on the out-

come of such talks, sales premiums could be adversely affected.

The JX Group is also exposed to the risk of decrease in invest-

ment return should there be any fall in international prices of

refined copper, since prices of copper concentrate sold by the

mines in which the JX Group has invested are based on interna-

tional prices of refined copper.

2 Risks relating to the stable procurement

of copper concentrate

In view of the tight supply and demand conditions for copper

concentrate, the JX Group has been investing in and financing

overseas copper mines with the objective of securing stable

supplies of copper concentrate. However, if the JX Group is

unable to procure the copper concentrate its smelting and

refining business needs at the appropriate time, owing to any

disruption of operations of the overseas copper mines, which

are the JX Group’s procurement sources, including those in


which the JX Group has invested, the financial position and

business performance of the JX Group could be affected.

3 Risks relating to such factors as demand fluctuations and

technical innovation in the electronic materials business

Many customers of the electronic materials business are in the

IT-related products, consumer electronics, and automotive

industries. Consequently, such factors as supply and demand

situations and price movements in those industries may

have an impact on the JX Group’s business performance.

Additionally, the electronic materials business is in the midst of

intense competition. Therefore, if the JX Group is unable to

respond appropriately to rapid technical innovation or changes

in customer needs, this may have an impact on the JX Group’s


4 Risks relating to fluctuations in procurement prices

of raw materials in the electronic materials business

The prices of the raw materials used in electronic materials fluctu-

ate in accordance with the market prices of metals and other

materials. If increases in the costs of these raw materials cannot

be passed on in the product prices, or if there is some extent of

decline in the market value of inventories compared with the cor-

responding book value at the beginning of the fiscal period, there

may be an impact on the JX Group’s business performance.

5 Risks relating to fluctuations in market conditions

in the recycling and environmental services business

Margins for the recycling and environmental services business

are affected by fluctuations in such factors as metal prices and

foreign exchange rates. Therefore, in the event that metal prices

decline or the yen appreciates, this may have an impact on the

JX Group’s business performance.

6 Risks relating to the procurement of raw materials

for the recycling and environmental services business

In the collection of raw materials for recycling in the recycling

and environmental services business, competition is becoming

intense because primary suppliers, including electronic device

parts manufacturers, are shifting from Japan to overseas and

entering the recycling business. The JX Group is taking steps in

response to this situation, such as expanding overseas procure-

ment. However, in the event that the JX Group is unable to

procure the raw materials for recycling that are necessary for its

recycling and environmental services business, this may have

an impact on the JX Group’s business performance.

7 Risks relating to fluctuating demand

in the titanium business

The demand for titanium metals (titanium sponge and titanium

ingots) is linked primarily to demand for specific purposes, such

as for aircraft, electric power plants, chemical plants, and seawa-

ter desalination plants. Moreover, their use in catalysts is almost

entirely confined to propylene polymerization.

If demand for titanium metals in these specific applications

fluctuates substantially, due to changes in domestic or overseas

political and economic conditions, or due to major changes in

related consuming industries, it may have an impact on the

JX Group’s business performance, since such fluctuations in

demand tend to have a substantial impact on the sales volume

and prices of titanium products.

8 Risks relating to environmental issues surrounding

Gould Electronics, Inc. (a U.S. subsidiary)

In relation to environmental problems that arose in the past in

its business activities, Gould Electronics, Inc., a U.S.-based sub-

sidiary, is a potential responsible party with regard to specific

designated areas within the United States under U.S. environ-

mental laws, such as the Superfund Act. The ultimate financial

burden the subsidiary will bear may depend on numerous fac-

tors, including the quantity of the substance and its toxicity for

which the areas were designated, the total number of other

potential responsible parties and their financial position, and

remedial methods and technologies.

In relation to this matter, Gould Electronics, Inc., is providing

reserves that it considers appropriate, but owing to the factors

referred to above the actual amount of the burden may exceed

these reserves, in which case the JX Group’s business perfor-

mance may be affected.

Other Businesses

1 Risks relating to fluctuating demand

in the construction business

The JX Group’s construction business relies heavily on demand

for contracted paving, civil engineering, and construction

projects. Therefore, declines in public investment and private-

sector capital investment, including residential investment,

may have an impact on the JX Group’s construction business.


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Consolidated Balance SheetJX Holdings, Inc. and Consolidated SubsidiariesAs of March 31, 2016 and 2015

Millions of yenThousands of U.S.

dollars (Note 2)

Assets 2016 2015 2016

Current assets: Cash and cash equivalents ¥ 491,337 ¥ 327,980 $ 4,360,463 Time deposits 1,361 1,313 12,078 Notes and accounts receivable (Note 12):

Trade 774,970 1,007,386 6,877,618 Other 102,519 110,712 909,824 Less: Allowance for doubtful accounts (2,763) (2,162) (24,521) Inventories (Note 6) 1,048,154 1,356,648 9,302,041 Deferred tax assets (Note 20) 78,054 66,049 692,705 Other current assets 157,652 128,472 1,399,113 Total current assets 2,651,284 2,996,398 23,529,322

Investments and long-term receivables: Investments in unconsolidated subsidiaries and affiliates 475,107 486,497 4,216,427 Investments in securities (Notes 7, 11 and 12) 228,718 336,512 2,029,801 Long-term receivables 38,691 45,804 343,371 Total investments and long-term receivables 742,516 868,813 6,589,599

Property, plant and equipment (Notes 8, 9, 11 and 15): Land 947,771 951,647 8,411,173 Buildings, structures and oil tanks 1,720,445 1,692,142 15,268,415 Machinery, equipment, vehicles and other 3,541,953 3,191,546 31,433,733 Construction in progress 59,033 463,922 523,900

6,269,202 6,299,257 55,637,221 Less: Accumulated depreciation (3,815,726) (3,743,641) (33,863,383) Property, plant and equipment, net 2,453,476 2,555,616 21,773,837

Goodwill and other intangible assets: Goodwill 9,020 17,713 80,050 Other 108,439 118,447 962,362 Total intangible assets 117,459 136,160 1,042,412

Deferred tax assets (Note 20) 140,549 67,577 1,247,329Exploration and development investments 550,634 728,312 4,886,706Assets for retirement benefits (Note 14) 273 499 2,423Other assets 68,431 70,029 607,304

Total assets (Note 24) ¥ 6,724,622 ¥ 7,423,404 $ 59,678,931

The accompanying notes are an integral part of these consolidated financial statements.



dollars (Note 2)

Liabilities and Net Assets 2016 2015 2016

Current liabilities: Notes and accounts payable (Note 12):

Trade ¥ 601,322 ¥ 680,551 $ 5,336,546 Other 389,282 426,264 3,454,757 Short-term borrowings (Notes 10, 11 and 12) 649,651 652,399 5,765,451 Current portion of bonds 20,000 42,480 177,494 Current portion of long-term loans (Notes 10, 11 and 12) 142,968 167,156 1,268,797 Commercial papers (Notes 10 and 12) 248,000 364,000 2,200,923 Excise taxes payable (Notes 11 and 12) 367,098 371,326 3,257,881 Income taxes payable 26,939 28,077 239,075 Other provision 37,001 38,480 328,372 Accrued expenses 45,861 42,875 407,002 Asset retirement obligations (Note 15) 1,574 1,420 13,969 Deferred tax liabilities (Note 20) 1,343 1,029 11,919 Other current liabilities 223,947 250,374 1,987,460 Total current liabilities 2,754,986 3,066,431 24,449,645Long-term liabilities: Bonds payable 185,000 205,000 1,641,818 Long-term loans, less current portion (Notes 10, 11 and 12) 1,335,747 1,189,232 11,854,340 Liability for retirement benefits (Note 14) 130,649 116,875 1,159,469 Provision for repairs 64,151 64,104 569,320 Deferred tax liabilities (Note 20) 113,429 146,091 1,006,647 Other provision 12,215 12,572 108,404 Asset retirement obligations (Note 15) 122,745 117,433 1,089,324 Other long-term liabilities (Notes 11 and 12) 77,240 75,817 685,481 Total long-term liabilities 2,041,176 1,927,124 18,114,803Commitments and contingencies (Note 16)

Net assets:Shareholders’ equity:

Common stock:

Authorized – 8,000,000,000 shares in 2016 and 2015

Issued – 2,495,485,929 shares in 2016 and 2015 100,000 100,000 887,469 Capital surplus 746,283 746,711 6,623,030 Retained earnings 465,268 783,615 4,129,109 Less: Treasury stock, at cost – 9,122,175 shares in 2016 and

9,055,789 shares in 2015 (3,959) (3,926) (35,135) Total shareholders’ equity 1,307,592 1,626,400 11,604,473 Accumulated other comprehensive income:

Unrealized gain (loss) on securities 26,810 87,008 237,930 Unrealized gain (loss) on hedging derivatives (11,953) 1,083 (106,079) Foreign currency translation adjustments 184,136 218,413 1,634,150 Retirement benefits liability adjustment (7,661) 3,850 (67,989) Total accumulated other comprehensive income 191,332 310,354 1,698,012 Non-controlling interests (Note 22) 429,536 493,095 3,811,999 Total net assets (Note 22) 1,928,460 2,429,849 17,114,483Total liabilities and net assets ¥6,724,622 ¥7,423,404 $59,678,931


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Consolidated Statement of OperationsJX Holdings, Inc. and Consolidated SubsidiariesFiscal years ended March 31, 2016 and 2015


dollars (Note 2)

2016 2015 2016

Net sales (Note 24) ¥8,737,818 ¥10,882,460 $77,545,421Cost of sales (Note 17) 8,222,572 10,532,913 72,972,772Gross profit 515,246 349,547 4,572,648

Selling, general and administrative expenses (Notes 17 and 18) 577,480 568,432 5,124,956Operating loss (62,234) (218,885) (552,307)

Non-operating income (expenses): Interest and dividend income 45,100 51,146 400,248 Interest expenses (25,369) (26,083) (225,142) Foreign currency exchange gain (loss), net 2,958 (9,864) 26,251 Equity in earnings of affiliates 18,063 47,140 160,304 Other, net 12,874 6,432 114,253

53,626 68,771 475,914Ordinary loss (Note 24) (8,608) (150,114) (76,393)

Special gains (losses): Gain (loss) on sales and disposal of property, plant and equipment, net (4,033) 44,804 (35,792) Gain on sales of investments in securities 35,975 200 319,267 Impairment loss (Notes 8 and 24) (245,334) (88,495) (2,177,263) Loss on valuation of investments in securities (Note 7) (14,850) (37,357) (131,789) Restructuring cost (Note 19) (84,593) (19,139) (750,737) Other, net (8,541) (4,901) (75,799)

(321,376) (104,888) (2,852,113)Loss before income taxes (329,984) (255,002) (2,928,506)

Income taxes (Note 20): Current 60,425 72,076 536,253 Deferred (77,534) (37,108) (688,090)Loss (312,875) (289,970) (2,776,668)Loss attributable to non-controlling interests (34,365) (12,758) (304,979)Loss attributable to owners of parent ¥ (278,510) ¥ (277,212) $ (2,471,690)

Yen U.S. dollars (Note 2)

Loss attributable to owners of parent per share – basic (Note 22) ¥(112.01) ¥(111.49) $(0.99)Cash dividends per share attributable to the year (Note 22) 16.00 16.00 0.14



Consolidated Statement of Comprehensive Income (Loss)JX Holdings, Inc. and Consolidated SubsidiariesFiscal years ended March 31, 2016 and 2015


dollars (Note 2)

2016 2015 2016

Loss ¥(312,875) ¥(289,970) $(2,776,668)

Other comprehensive income (loss): Unrealized gain (loss) on securities (62,111) 39,415 (551,216) Unrealized gain (loss) on hedging derivatives (13,375) (3,586) (118,699) Foreign currency translation adjustments (31,261) 103,136 (277,432) Retirement benefits liability adjustment (12,404) 1,454 (110,082) Share of other comprehensive income (loss) of affiliates accounted for by the equity method (14,509) 25,047 (128,763) Total other comprehensive income (loss) (Note 21) (133,660) 165,466 (1,186,191)

Comprehensive income (loss) ¥(446,535) ¥(124,504) $(3,962,859)

Comprehensive income (loss) attributable to: Owners of parent ¥(397,620) ¥(146,020) $(3,528,754) Non-controlling interests (48,915) 21,516 (434,105)



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Consolidated Statement of Changes in Net AssetsJX Holdings, Inc. and Consolidated SubsidiariesFiscal years ended March 31, 2016 and 2015

Millions of yen

Shareholders’ equity Accumulated other comprehensive income

Common stock Capital surplus Retained earnings Treasury stock Total

Unrealized gain (loss) on

securities


hedging derivatives

Foreign currency

translation adjustments

Retirement benefits liability

adjustment

Total accumu-lated other

comprehensive income

Non-controlling interests Total net assets

Year ended March 31, 2016 Beginning of year ¥100,000 ¥746,711 ¥ 783,615 ¥(3,926) ¥1,626,400 ¥ 87,008 ¥ 1,083 ¥218,413 ¥ 3,850 ¥ 310,354 ¥493,095 ¥2,429,849 Dividends from surplus — — (39,837) — (39,837) — — — — — — (39,837) L oss attributable to owners

of parent — — (278,510) — (278,510) — — — — — — (278,510) Purchase of treasury stock — — — (33) (33) — — — — — — (33) Disposal of treasury stock — 0 — 0 1 — — — — — — 1 C hange in the scope of

consolidation — — — — — — — — — — — — C hange in the scope of

equity method — — — — — — — — — — — — C hange in equity by merger

of affiliates accounted for by the equity method — — — — — — — — — — — —

C apital increase of consolidated subsidiaries — (428) — — (428) — — — — — — (428)

N et changes in items other than those in shareholders’ equity — — — — — (60,198) (13,036) (34,277) (11,511) (119,022) (63,559) (182,581)

End of year ¥100,000 ¥746,283 ¥ 465,268 ¥(3,959) ¥1,307,592 ¥ 26,810 ¥(11,953) ¥184,136 ¥ (7,661) ¥ 191,332 ¥429,536 ¥1,928,460

Millions of yen




securities


hedging derivatives

Foreign currency



adjustment




Year ended March 31, 2015 Beginning of year ¥100,000 ¥746,711 ¥1,119,478 ¥(3,893) ¥1,962,296 ¥51,312 ¥ 5,551 ¥113,204 ¥2,695 ¥172,762 ¥491,236 ¥2,626,294C umulative effects of changes

in accounting policies — — (18,676) — (18,676) — — — — — (257) (18,933)Restated balance 100,000 746,711 1,100,802 (3,893) 1,943,620 51,312 5,551 113,204 2,695 172,762 490,979 2,607,361 Dividends from surplus — — (39,837) — (39,837) — — — — — — (39,837) L oss attributable to owners

of parent — — (277,212) — (277,212) — — — — — — (277,212) Purchase of treasury stock — — — (34) (34) — — — — — — (34) Disposal of treasury stock — 0 — 1 1 — — — — — — 1 C hange in the scope of

consolidation — — 17 — 17 — — — — — — 17 C hange in the scope of

equity method — — 49 — 49 — — — — — — 49 C hange in equity by merger

of affiliates accounted for by the equity method — — (204) — (204) — — — — — — (204)

N et changes in items other than those in shareholders’ equity — — — — — 35,696 (4,468) 105,209 1,155 137,592 2,116 139,708

End of year ¥100,000 ¥746,711 ¥ 783,615 ¥(3,926) ¥1,626,400 ¥87,008 ¥ 1,083 ¥218,413 ¥3,850 ¥310,354 ¥493,095 ¥2,429,849

Thousands of U.S. dollars (Note 2)




securities


hedging derivatives

Foreign currency



adjustment




Year ended March 31, 2016 Beginning of year $887,469 $6,626,828 $ 6,954,340 $(34,842) $14,433,795 $ 772,169 $ 9,611 $1,938,348 $ 34,168 $ 2,754,295 $4,376,065 $21,564,155 Dividends from surplus — — (353,541) — (353,541) — — — — — — (353,541) L oss attributable to owners

of parent — — (2,471,690) — (2,471,690) — — — — — — (2,471,690) Purchase of treasury stock — — — (293) (293) — — — — — — (293) Disposal of treasury stock — 0 — 0 9 — — — — — — 9 C hange in the scope of

consolidation — — — — — — — — — — — — C hange in the scope of

equity method — — — — — — — — — — — — C hange in equity by merger

of affiliates accounted for by the equity method — — — — — — — — — — — —

C apital increase of consolidated subsidiaries — (3,798) — — (3,798) — — — — — — (3,798)

N et changes in items other than those in shareholders’ equity — — — — — (534,239) (115,690) (304,198) (102,157) (1,056,283) (564,066) (1,620,350)

End of year $887,469 $6,623,030 $ 4,129,109 $(35,135) $11,604,473 $ 237,930 $(106,079) $1,634,150 $ (67,989) $ 1,698,012 $3,811,999 $17,114,483




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Consolidated Statement of Cash FlowsJX Holdings, Inc. and Consolidated SubsidiariesFiscal years ended March 31, 2016 and 2015


dollars (Note 2)

2016 2015 2016

Cash flows from operating activities: Loss before income taxes ¥(329,984) ¥(255,002) $(2,928,506) Depreciation and amortization 227,660 197,268 2,020,412 Amortization of goodwill 2,564 2,204 22,755 Increase (decrease) in provision for repairs 50 2,049 444 Interest and dividend income (45,100) (51,146) (400,248) Interest expenses 25,369 26,083 225,142 Equity in earnings of affiliates (18,063) (47,140) (160,304) Loss (gain) on sales and disposal of property, plant and equipment, net 4,033 (44,804) 35,792 Impairment loss 245,334 88,495 2,177,263 Loss (gain) on valuation of investments in securities 14,850 37,357 131,789 Loss (gain) on sales of investments in securities (35,904) (177) (318,637) Decrease (increase) in notes and accounts receivable – trade 229,935 402,558 2,040,602 Decrease (increase) in inventories 305,269 441,782 2,709,168 Increase (decrease) in notes and accounts payable – trade and excise taxes payable (81,948) (119,320) (727,263) Restructuring cost 84,593 19,139 750,737 Other, net (44,846) 66,596 (397,994) Subtotal 583,812 765,942 5,181,150 Interest and dividend income received 68,778 80,925 610,383 Interest expenses paid (31,445) (36,174) (279,065) Income taxes paid (66,187) (73,469) (587,389) Net cash provided by operating activities ¥ 554,958 ¥ 737,224 $ 4,925,080Cash flows from investing activities: Purchase of investments in securities ¥ (22,906) ¥ (36,582) $ (203,284) Proceeds from sales of investments in securities 45,570 307 404,420 Purchase of property, plant and equipment (224,602) (283,383) (1,993,273) Proceeds from sales of property, plant and equipment 13,502 60,640 119,826 Purchase of intangible assets (10,367) (12,586) (92,004) Decrease (increase) in short-term receivables, net (5,974) 5,896 (53,017) Payments of long-term receivables (5,600) (6,320) (49,698) Collection of long-term receivables 7,796 6,837 69,187 Increase in cost of exploration and production of oil and related assets (113,995) (105,017) (1,011,670) Other, net 8,868 (7,609) 78,701 Net cash used in investing activities ¥(307,708) ¥(377,817) $(2,730,813)Cash flows from financing activities: Increase (decrease) in short-term borrowings, net ¥ (1,659) ¥(251,905) $ (14,723) Increase (decrease) in commercial papers, net (116,000) (86,000) (1,029,464) Proceeds from long-term loans 302,208 226,771 2,682,002 Repayment of long-term loans (167,912) (179,291) (1,490,167) Proceeds from issuance of bonds — 60,000 — Redemption of bonds (42,480) (30,480) (376,997) Proceeds from stock issuance to non-controlling interests — 84 — Cash dividends paid (39,837) (39,837) (353,541) Cash dividends paid to non-controlling interests (16,462) (21,984) (146,095) Other, net (5,831) (3,668) (51,748) Net cash used in financing activities ¥ (87,973) ¥(326,310) $ (780,733)Effect of exchange rate changes on cash and cash equivalents 4,080 14,740 36,209Net increase (decrease) in cash and cash equivalents 163,357 47,837 1,449,743Cash and cash equivalents at beginning of year 327,980 280,069 2,910,721Increase in cash and cash equivalents resulting from newly consolidated subsidiaries — 74 —Cash and cash equivalents at end of year ¥ 491,337 ¥ 327,980 $ 4,360,463



Notes to Consolidated Financial StatementsJX Holdings, Inc. and Consolidated Subsidiaries

SIGNIFICANT ACCOUNTING POLICIESNote 1

(a) Basis of Preparation – Consolidated Financial Statements

The accompanying consolidated financial statements of JX

Holdings, Inc. (the “Company”) and its consolidated subsidiaries

are prepared in accordance with accounting principles generally

accepted in Japan, which are different in certain respects as to the

application and disclosure requirements of International Financial

Reporting Standards.

In presenting the accompanying consolidated financial state-

ments, certain accounts and items reported in the consolidated

financial statements that have been filed with the Financial Services

Agency in Japan have been reclassified for the convenience of

readers outside Japan.

(b) Principles of Consolidation and Accounting for

Investments in Unconsolidated Subsidiaries and Affiliates

The accompanying consolidated financial statements include the

accounts of the Company and its significant subsidiaries that are

controlled by the Company (hereinafter collectively referred to

as the “JX Group”). As of March 31, 2016, the Company had 142

consolidated subsidiaries.

For the year ended March 31, 2016, the Company added JX

Nippon Mining & Metals Dongguan Co., Ltd. to the scope of con-

solidation due to its new establishment. The Company excluded

ENEOS-Net Co., Ltd. from the scope of consolidation following its

merger with ENEOS Frontier Co., Ltd., the surviving company.

The consolidated financial statements for the year ended March

31, 2016 do not include the accounts of SHIBUSHI OIL STORAGE

COMPANY, LTD. and certain other subsidiaries, as they are consid-

ered immaterial in terms of the JX Group’s total assets, net sales,

profit (loss) and retained earnings.

Investments in certain unconsolidated subsidiaries and affiliates

are accounted for by the equity method. The JX Group’s consoli-

dated income includes equity in profit (loss) of those unconsoli-

dated subsidiaries and affiliates, after elimination of unrealized

intercompany profits. As of March 31, 2016, the Company has 2

unconsolidated subsidiaries and 30 affiliates that are accounted for

by the equity method.

The Company does not apply the equity method to its invest-

ments in certain unconsolidated subsidiaries and certain affiliates,

including SAIBUNISSOU CO., LTD., as they are considered immate-

rial in terms of the JX Group’s profit (loss) and retained earnings.

The investments in these unconsolidated subsidiaries and affili-

ates are carried at cost, less any write-down due to impairment

deemed necessary.

The balance sheet date of Japan Vietnam Petroleum Co., Ltd.,

JX Nippon Exploration and Production (U.K.) Limited, and 42 other

subsidiaries is December 31. Six companies among them conduct a

provisional settlement of accounts as of March 31. For those that do

not conduct a provisional settlement of accounts, as the difference

between their balance sheet date and the consolidated balance

sheet date does not exceed three months, they are consolidated

on the basis of their financial statements for the fiscal year ended

December 31. We have made necessary adjustments for significant

transactions that have occurred in the period between their balance

sheet date and the consolidated balance sheet date.

With respect to the 11 consolidated subsidiaries and one affili-

ate company accounted for by the equity method whose balance

sheet date is December 31, we previously used their financial state-

ments as of their balance sheet date, and made necessary adjust-

ments for significant transactions that occurred in the period until

the consolidated balance sheet date. However, effective from this

fiscal year, the balance sheet date of these companies was changed

to March 31, or the method of using a provisional settlement of

accounts as of the consolidated balance sheet date in accordance

with a full-year closing was adopted, in order to ensure proper dis-

closure of consolidated financial information.

As a result of these changes, with respect to this fiscal year, we

have consolidated the results of these corresponding companies

for a 15-month period, from January 1, 2015 to March 31, 2016, in

preparing the consolidated financial statements, making necessary

adjustments to the consolidated statement of operations.

The impact of the above changes on profit (loss) and other com-

prehensive income (loss) for this fiscal year was immaterial.

Goodwill at the dates of acquisition of the major consolidated

subsidiaries is amortized by the straight-line method over the

period during which the influence of the goodwill shall apply.

(c) Foreign Currency Translation

The monetary accounts receivable and accounts payable in foreign

currencies are translated into yen using the spot exchange rate at

the balance sheet date, and the differences arising from the transla-

tion are included in the consolidated statement of operations.

In addition, the assets and liabilities of foreign consolidated subsid-

iaries, etc. are translated into yen using the spot exchange rate at the

balance sheet date. Revenues and expenses of foreign consolidated

subsidiaries are translated into yen using the average rate during the

fiscal year, and the differences arising from the translation are recorded

in “foreign currency translation adjustments” and “non-controlling

interests” under “net assets” in the consolidated balance sheet.


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(d) Cash and Cash Equivalents

Cash and cash equivalents comprised cash on hand, demand

deposits in banks and highly liquid investments with original maturi-

ties of three months or less for which risks of fluctuations in value are

not significant.

(e) Investments in Securities

Investments in securities are required to be classified into three cat-

egories: trading, held-to-maturity or other. Held-to-maturity invest-

ment securities are stated at their amortized cost. The JX Group

does not classify any of its investment securities as trading securi-

ties. Marketable securities classified as other securities have been

stated at fair value with any changes in unrealized gain or loss, net

of the applicable income taxes, included directly in shareholders’

equity. Non-marketable securities classified as other securities have

been stated at cost. Cost of securities sold has been determined by

the moving-average method. Significant declines in the value of

other securities that are deemed unrecoverable are charged to loss.

(f) Inventories

Inventories are valued primarily at cost based on the average

method (the amounts in the balance sheet are calculated by writ-

ing down the book value due to any decrease in profitability).

(g) Property, Plant and Equipment

Property, plant and equipment are stated at cost.

Significant renewals and improvements are capitalized at cost.

Maintenance and repairs are charged to income as incurred.

Depreciation of property, plant and equipment is primarily

calculated based on the straight-line method, over the estimated

useful lives as summarized below:

• Buildings, structures and oil tanks 2 – 50 years

• Machinery and equipment 2 – 20 years

(h) Intangible Assets

Amortization of intangible assets, including software for internal

use, is primarily computed using the straight-line method over the

estimated useful lives. Mineral rights are primarily amortized using

the units-of-production method.

(i) Leases

Depreciation of leased assets under finance lease transactions that

do not transfer ownership and whose contract date falls on or after

April 1, 2008, is calculated based on the straight-line method over

the lease term assuming no residual value.

Finance lease transactions that do not transfer ownership and

whose contract date falls prior to April 1, 2008, continue to be

accounted for as operating leases.

(j) Exploration and Development Investment

Regarding the oil and natural gas exploration and development

business, acquisition costs of concessions, exploration and devel-

opment costs, and interest paid until commencement of produc-

tion are capitalized. After production commences, the accounts are

primarily amortized by the units-of-production method.

(k) Allowance for Doubtful Accounts

To prepare for bad debt losses of accounts receivable and loans

receivable, the estimated uncollectable amounts on general

accounts receivable are recorded using the historical experience

of the bad debt ratio, and the estimated uncollectable amounts

on specific accounts, such as doubtful accounts receivable, are

recorded by separately assessing their collectability.

(l) Provision for Repairs

To prepare for payment on future repairs, inspection and repair

costs are calculated related to oil tanks, machinery and equipment

at refineries, and vessels, and the amounts as of the end of the fiscal

year are recorded.

(m) Accounting Method Related to Retirement Benefits

(1) Method of attributing expected retirement benefits to periods

The retirement benefits obligation for employees is attributed to

each period by the benefit formula basis over the estimated years

of service of the eligible employees.

(2) Method of amortizing actuarial gain or loss, and the prior

service cost

Actuarial gain or loss is amortized by the straight-line method over

the average estimated remaining service period, principally over 5

years, beginning from the following fiscal year.

Prior service cost is amortized by the straight-line method over

the average estimated remaining service period, principally 5 years.

(n) Income Taxes

Provision for income taxes is computed based on income (loss)

before income taxes and non-controlling interests. The asset and

liability approach is used to recognize deferred tax assets and liabili-

ties for the expected future tax consequences of temporary differ-

ences between the carrying value amounts and the tax bases of

assets and liabilities.

A valuation allowance is established against deferred tax assets

to the extent that it is more likely than not that the deferred tax

assets may not be realized within the foreseeable future.

The Company and certain domestic wholly-owned subsidiaries

adopted the consolidated tax return system in Japan starting the

year ended March 31, 2011.


currency exchange rates, interest rates and commodity prices

corresponding to the underlying assets and liabilities.

With respect to foreign exchange forward contracts, com-

modity forwards and commodity swaps, the JX Group performs

an effectiveness assessment to confirm if the critical terms of the

hedging instruments and those of the underlying hedged items

are continuously the same during the hedging period and, as such,

the hedge is expected to be highly effective.

In addition, with respect to interest rate swap contracts, the

JX Group performs an effectiveness assessment comparing the

accumulated cash flow fluctuation of hedged items with those

of the hedging instruments. The testing of hedge effectiveness of

interest rate swap contracts that meet the criteria for the exception

method is omitted.

Derivative instruments that are not designated as hedges are

carried at market value, with changes in market value charged or

credited to income for the period in which they arise.

(q) Profit (Loss) Attributable to Owners of Parent per Share

Profit (loss) attributable to owners of parent per share is determined

based on the weighted-average number of shares of common

stock outstanding during the relevant fiscal year.

(o) Research and Development Costs

Research and development costs are expensed as incurred.

(p) Derivative Instruments

The JX Group utilizes derivative instruments to manage its exposure

to fluctuations in commodity prices, foreign currency exchange rates

and interest rates. The JX Group does not utilize derivative instruments

for speculation, in accordance with the Company’s internal policy.

Hedge accounting is primarily applied to derivative instruments.

With respect to qualifying foreign exchange forward contracts and

currency swap contracts, the designation “Furiate-shori” is applied.

The exception method is applied to interest rate swap contracts

that meet the requirements for exceptional treatments.

Hedging instruments are foreign exchange forward contracts,

currency swap contracts, interest rate swap contracts, commodity

forwards and commodity swaps. Hedged items that have a risk of

losses due to fluctuations in market prices, and of which fluctua-

tions in market prices are not reflected in the valuations or of which

fluctuations are avoided by fixing cash flow.

The JX Group utilizes hedging instruments within the amount

of assets and liabilities exposed to market risks. The objective of the

hedging policy is to manage exposures to fluctuations in foreign

The translation of yen amounts into U.S. dollar amounts is included solely for convenience and has been made, as a matter of arithmetic

computation only, at ¥112.68 = U.S.$1.00, the approximate rate of exchange in effect on March 31, 2016. The translation should not be con-

strued as a representation that yen have been, could have been, or could in the future be, converted into U.S. dollars at that or any other rate.

(Application of Accounting Standard for Business Combinations,

and Other Relevant Standards)

The Company adopted the “Accounting Standard for Business

Combinations” (The Accounting Standards Board of Japan (ASBJ)

Statement No. 21, revised September 13, 2013), the “Accounting

Standard for Consolidated Financial Statements” (ASBJ Statement

No. 22, revised September 13, 2013), the “Accounting Standard for

Business Divestitures” (ASBJ Statement No. 7, revised September

13, 2013) and other relevant standards, effective from this fiscal

year. Accordingly, the Company’s accounting method has been

changed to record the differences arising from changes in the

Company’s ownership interests in subsidiaries over which it retains

control in capital surplus, and to record the acquisition-related

costs as expenses in the fiscal year in which they are incurred. In

addition, for business combinations performed from the begin-

ning of this fiscal year, the Company’s accounting method was

changed to reflect any adjustments to the allocation of acquisition

cost arising from the finalization of the tentative accounting treat-

ment in the consolidated financial statements for the fiscal year in

which the business combination occurs. In addition, the presenta-

tion method of “net income” has been changed, and “minority inter-

ests” was changed to “non-controlling interests.” To reflect these

changes, certain reclassifications have been made to the previous

year’s consolidated financial statements.

The Accounting Standard for Business Combinations and other

standards were adopted in accordance with transitional treat-

ment stipulated in Paragraph 58-2 (4) of the Accounting Standard

for Business Combinations, Paragraph 44-5 (4) of the Accounting

Standard for Consolidated Financial Statements, and Paragraph

57-4 (4) of the Accounting Standard for Business Divestitures, and

they have been prospectively adopted from the beginning of this

fiscal year.

The impact of these changes on profit (loss) and capital surplus

as of and for this fiscal year was immaterial.

Notes to Consolidated Financial Statements

U.S. DOLLAR AMOUNTSNote 2

CHANGES IN ACCOUNTING POLICIESNote 3


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The Company will adopt the “Implementation Guidance on

Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26, March

28, 2016) from the beginning of the fiscal year ending March 31, 2017.

The treatment for recoverability of deferred tax assets was

revised by basically continuing to apply the framework of the JICPA

Guidance No. 66 “Auditing Treatment for Judgment of Recoverability

of Deferred Tax Assets” which categorizes entities into five catego-

ries and estimates the deferred tax assets based on those categories.

The changes are as follows:

1. Treatment for entities which do not meet the classification

requirements from Category 1 to Category 5 criteria

2. Classification requirements on Category 2 and Category 3 criteria

3. Treatment for deductible temporary differences which are not

able to make a scheduling on entities which are applicable to

Category 2 criteria

4. Treatment for reasonable recoverable period of temporary dif-

ferences on entities which are applicable to Category 3 criteria

5. Treatment for entities which meet Category 4 criteria and are also

applicable to Category 2 or Category 3.

The impact of this change on the consolidated financial state-

ments is being still evaluated.

“Restructuring cost,” which was included in “Other, net” of “Cash flows from operating activities” in the previous fiscal year was presented

separately from this fiscal year. In accordance with this change, the line items under “Cash flows from operating activities” in the previous

year were reclassified.

As a result of the reclassification, ¥19,139 million in “Other, net” of “Cash flows from operating activities” was reclassified to “Restructuring cost.”

ACCOUNTING STANDARDS THAT HAVE NOT BEEN APPLIEDNote 4

CHANGE IN PRESENTATIONNote 5

Inventories as of March 31, 2016 and 2015 consisted of the following:

Millions of yenThousands of

U.S. dollars

2016 2015 2016

Merchandise and finished goods ¥ 391,021 ¥ 559,124 $3,470,190Work in process 131,556 147,216 1,167,519Raw materials and supplies 525,577 650,308 4,664,333 Total ¥1,048,154 ¥1,356,648 $9,302,041

INVENTORIESNote 6



(a) Other securities as of March 31, 2016 and 2015 are as follows:Millions of yen

As of March 31, 2016 Carrying value Acquisition costNet unrealized

gain (loss)

Securities with carrying value exceeding their acquisition cost:

Stock ¥155,606 ¥ 76,411 ¥ 79,195 Bonds:

Government and municipal bonds 61 60 1 Others — — — Subtotal 155,667 76,471 79,196Securities with carrying value not exceeding their acquisition cost:

Stock 46,813 70,252 (23,439) Bonds:

Government and municipal bonds — — — Corporate bonds — — — Others — — — Subtotal 46,813 70,252 (23,439) Total ¥202,480 ¥146,723 ¥ 55,757

Millions of yen


gain (loss)


Stock ¥282,890 ¥139,448 ¥143,442

Bonds:

Government and municipal bonds 60 60 0

Others — — —

Subtotal 282,951 139,508 143,443

Securities with carrying value not exceeding their acquisition cost:

Stock 15,371 16,226 (855)

Bonds:

Government and municipal bonds — — —

Corporate bonds — — —

Others — — —

Subtotal 15,371 16,226 (855)

Total ¥298,321 ¥155,734 ¥142,587

INVESTMENTS IN SECURITIESNote 7


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Thousands of U.S. dollars


gain (loss)


Stock $1,380,955 $ 678,124 $ 702,831 Bonds:

Government and municipal bonds 541 532 9 Others — — — Subtotal 1,381,496 678,656 702,840Securities with carrying value not exceeding their acquisition cost:

Stock 415,451 623,465 (208,014) Bonds:

Government and municipal bonds — — — Corporate bonds — — — Others — — — Subtotal 415,451 623,465 (208,014) Total $1,796,947 $1,302,121 $ 494,826

Note: Unlisted equity securities of ¥26,238 million ($232,854 thousand) and ¥38,188 million as of March 31, 2016 and 2015, respectively, are excluded from the above table.

(b) Sales of securities classified as other securities for the years ended March 31, 2016 and 2015 are as follows:

Millions of yen

Year ended March 31, 2016 Proceeds from sales Gain on sales Loss on sales

Type of securities:

Stock ¥38,938 ¥32,033 ¥— Total ¥38,938 ¥32,033 ¥—

Millions of yen


Type of securities:

Stock ¥292 ¥187 ¥23

Total ¥292 ¥187 ¥23



Type of securities:

Stock $345,563 $284,283 $— Total $345,563 $284,283 $—

(c) Loss on valuation of investments in securities

Loss on valuation of investments in securities amounted to ¥14,850 million ($131,789 thousand) and ¥37,357 million for the years ended

March 31, 2016 and 2015, respectively.



Recognition of impairment losses on fixed assets for the years ended March 31, 2016 and 2015 resulted primarily from the deterioration of

the business environment.

The impairment losses for the years ended March 31, 2016 and 2015 are as follows:


U.S. dollars

2016 2015 2016

Service stations Land ¥ 965 ¥ 1,510 $ 8,564Buildings 1,361 2,041 12,078Machinery and equipment 396 440 3,514Others 264 634 2,343

2,986 4,625 26,500

Plants Land 91 2,100 808Buildings 1,421 4,254 12,611Machinery and equipment 1,719 9,563 15,256Others 282 4,915 2,503

3,513 20,832 31,177

Assets for exploration and production of oil and natural gas

Exploration and development 226,899 21,256 2,013,658Others 3,603 2,007 31,976

230,502 23,263 2,045,634

Assets for production of copper concentrate, etc. Land 616 393 5,467Buildings 12,904 7,399 114,519Machinery and equipment 61,126 4,711 542,474Construction in progress — 25,577 —Leased assets 2,866 — 25,435Others 2,710 619 24,050

80,222 38,699 711,945

Idle properties and others Land 1,644 2,209 14,590Buildings 224 461 1,988Machinery and equipment 78 25 692Others 10 523 89

1,956 3,218 17,359Other Goodwill 2,530 — 22,453 Total ¥321,709 ¥90,637 $2,855,067

IMPAIRMENT LOSSNote 8


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For the year ended March 31, 2016:

The recoverable amounts of service stations and plants are esti-

mated by discounting future cash flows at a rate of 4.0%.

The recoverable amounts of assets for exploration and produc-

tion of oil and natural gas are estimated by discounting future cash

flows at a rate of 6.5%.

The recoverable amounts of assets for production of copper

concentrate, etc. are estimated by discounting future cash flows at

a rate of 7.8%.

The recoverable amounts of idle properties and others approxi-

mate their estimated fair value. The estimated fair value of land is

determined through the use of real estate appraisal standards.


The recoverable amounts of service stations and plants are esti-

mated by discounting future cash flows at a rate of 4.0%.

The recoverable amounts of assets for exploration and produc-

tion of oil and natural gas are estimated by discounting future cash

flows at a rate of 6.5%.

The recoverable amounts of assets for production of copper

concentrate, etc. are estimated by discounting future cash flows at

a rate of 7.4%.

The recoverable amounts of idle properties and others approxi-

mate their estimated fair value. The estimated fair value of land is

determined through the use of real estate appraisal standards.

Lessee

(a) Finance leases (accounted for as operating leases)

Finance leases that were entered into prior to April 1, 2008 and do not transfer ownership:

(1) Estimated acquisition cost (inclusive of related interest expenses), estimated accumulated depreciation and estimated net book value of

leased assets as of March 31, 2016 and 2015 are as follows:Millions of yen

As of March 31, 2016 Acquisition costAccumulated depreciation Net book value

Buildings, structures and oil tanks ¥ 7,899 ¥7,114 ¥ 785Machinery and vehicles 3,368 2,100 1,268Other 1 1 — Total ¥11,268 ¥9,215 ¥2,053

Millions of yen


Buildings, structures and oil tanks ¥10,157 ¥ 8,963 ¥1,194

Machinery and vehicles 4,644 3,104 1,540

Other 1 1 —

Total ¥14,802 ¥12,068 ¥2,734



Buildings, structures and oil tanks $ 70,101 $63,135 $ 6,967Machinery and vehicles 29,890 18,637 11,253Other 9 9 — Total $100,000 $81,780 $18,220

LEASESNote 9



(2) Future minimum lease payments (inclusive of related interest expenses) as of March 31, 2016 are as follows:

Years ending March 31, Millions of yenThousands of

U.S. dollars

2017 ¥ 481 $ 4,2692018 and thereafter 1,788 15,868 Total ¥2,269 $2,0137

(3) Lease payments, estimated depreciation and estimated interest expense for the years ended March 31, 2016 and 2015 are as follows:


U.S. dollars

2016 2015 2016

Lease payments ¥758 ¥1,040 $6,727Estimated depreciation 650 910 5,769Estimated interest expense 98 119 870

(4) Method of calculating estimated depreciation

Depreciation is calculated using the straight-line method over the lease term of the leased assets assuming no residual value.

(5) Method of calculating estimated interest expense

Interest expense is computed and allocated to each period using the interest method assuming interest expense to be the excess of total

lease payments over the acquisition cost.

(b) Operating leases

Future minimum lease payments for non-cancelable operating leases as of March 31, 2016 are as follows:


U.S. dollars

2017 ¥ 7,974 $ 70,7672018 and thereafter 34,972 310,366 Total ¥42,946 $381,132

Lessor

(a) Finance leases (accounted for as operating leases)

Finance leases that were entered into prior to April 1, 2008 and do not transfer ownership:

(1) Acquisition cost, accumulated depreciation, and net book value of the leased assets as of March 31, 2016 and 2015 are as follows:

Millions of yen


Buildings, structures and oil tanks ¥1,192 ¥970 ¥222 Total ¥1,192 ¥970 ¥222

Millions of yen


Buildings, structures and oil tanks ¥1,242 ¥948 ¥294

Total ¥1,242 ¥948 ¥294


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Buildings, structures and oil tanks $10,579 $8,608 $1,970 Total $10,579 $8,608 $1,970

(2) Future minimum lease revenues (inclusive of related interest income) as of March 31, 2016 are as follows:


U.S. dollars

2017 ¥ 58 $ 5152018 and thereafter 166 1,473 Total ¥224 $1,988

The above table includes future minimum lease revenues under non-cancelable sub-leases as of March 31, 2016 as follows:


U.S. dollars

2017 ¥1 $ 92018 and thereafter 1 9 Total ¥2 $18

Leased assets are sub-leased under the same terms. Therefore, approximately the same amount of the future minimum lease revenues

under the sub-lease transactions is included in the lessee’s future lease payments.

(3) Lease income, depreciation and interest income for the years ended March 31, 2016 and 2015 are as follows:


U.S. dollars

2016 2015 2016

Lease income ¥57 ¥60 $506Depreciation 57 59 506Interest income — 1 —

(b) Operating leases

Future minimum lease revenues for non-cancelable operating leases as of March 31, 2016 are as follows:


U.S. dollars

2017 ¥ 448 $ 3,9762018 and thereafter 5,043 44,755 Total ¥5,491 $48,731



(a) Short-term borrowings as of March 31, 2016 and 2015 are as follows:


U.S. dollars

2016 2015 2016

Loans principally from banks ¥649,651 ¥ 652,399 $5,765,451Commercial papers maturing within one year 248,000 364,000 2,200,923 Total ¥897,651 ¥1,016,399 $7,966,374

The annual weighted-average interest rate applicable to short-term borrowings as of both March 31, 2016 and 2015 was 0.28%.

(b) Long-term debt as of March 31, 2016 and 2015 is as follows:


U.S. dollars

2016 2015 2016

Unsecured bonds in yen, due through 2024, at interest rates ranging from 0.31% to 2.32% ¥ 205,000 ¥ 247,480 $ 1,819,311Loans from banks, life insurance companies and government agencies, due through 2031, at the weighted-average interest rate of 1.27%:

Secured 197,483 226,522 1,752,600 Unsecured 1,281,232 1,129,866 11,370,536Lease obligations 35,813 40,015 317,829 Subtotal 1,719,528 1,643,883 15,260,277Less current portion (167,280) (214,272) (1,484,558) Total ¥1,552,248 ¥1,429,611 $13,775,719

Annual maturities of long-term debt as of March 31, 2016 are as follows:


U.S. dollars

2017 ¥ 142,968 $ 1,268,7972018 164,075 1,456,1152019 108,928 966,7022020 183,970 1,632,6772021 186,057 1,651,1982022 and thereafter 692,717 6,147,648 Total ¥1,478,715 $13,123,136

SHORT-TERM BORROWINGS AND LONG-TERM DEBTNote 10


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Assets pledged as of March 31, 2016 and 2015 as collateral for long-term loans or other debts are as follows:


U.S. dollars

2016 2015 2016

Land ¥ 375,526 ¥ 380,314 $ 3,332,677Other property, plant and equipment (at net book value) 734,437 835,114 6,517,900

Investments in securities 519 1,498 4,606Other 246,779 276,346 2,190,087 Total ¥1,357,261 ¥1,493,272 $12,045,270

In addition, stock of consolidated subsidiaries used as collateral amounted to ¥6,894 million ($61,182 thousand) and ¥122,600 million as

of March 31, 2016 and 2015, respectively, which have been eliminated in the consolidated financial statements.

Secured liabilities as of March 31, 2016 and 2015 are as follows:


U.S. dollars

2016 2015 2016

Short-term borrowings ¥ 918 ¥ 968 $ 8,147Excise taxes payable 213,795 221,877 1,897,364Bonds — 1,480 —Long-term loans (inclusive of current portion) 197,483 226,522 1,752,600Other 900 1,200 7,987 Total ¥413,096 ¥452,047 $3,666,099

In addition, there are secured liabilities corresponding to assets pledged as collateral, such as performance guarantees and loans of JX

Group companies as of March 31, 2016 and 2015 as follows:


U.S. dollars

2016 2015 2016

Performance guarantees ¥1,218 ¥ 7 $10,809Loans of JX Group companies 8,616 11,222 76,464

ASSETS PLEDGED AS COLLATERAL AND SECURED LIABILITIESNote 11

(a) Status of financial instruments

(1) Management policy for financial instruments

The Company raises funds that are required in light of investment

plans mainly through bank loans and issuing bonds. Temporary

surplus funds are managed by only highly safe financial instruments.

Short-term operating funds are raised through bank loans or issuing

commercial papers. Derivative transactions are used to hedge risks

as described below, and speculative transactions are not undertaken.

FINANCIAL INSTRUMENTSNote 12



(b) Fair value of financial instruments

The following tables represent the carrying value, fair value and unrealized gain (loss) as of March 31, 2016 and 2015. Financial instruments

for which it is extremely difficult to determine the fair value have been excluded from the tables below (please see (Note)-2).

Millions of yen

As of March 31, 2016 Carrying value Fair value Unrealized gain (loss)

Assets:

(1) Cash and cash equivalents, and time deposits ¥ 492,698 ¥ 492,698 ¥ — (2) Notes and accounts receivable – trade 774,970 774,970 — (3) Investments in securities 202,480 202,480 — Total assets ¥1,470,148 ¥1,470,148 ¥ —Liabilities:

(1) Notes and accounts payable – trade ¥ 601,322 ¥ 601,322 ¥ — (2) Short-term borrowings *1 649,651 649,651 — (3) Commercial papers 248,000 248,000 — (4) Notes and accounts payable – other 389,282 389,282 — (5) Excise taxes payable 367,098 367,098 — (6) Long-term loans *1 1,478,715 1,489,855 11,140 Total liabilities ¥3,734,068 ¥3,745,208 ¥ 11,140

Derivatives *2 ¥ (17,071) ¥ (36,298) ¥(19,227)

(2) Types of financial instruments and related risks

Trade receivables such as notes and accounts receivable – trade are

exposed to credit risk of customers. In order to minimize such risk, the

Company properly analyzes major customers’ credit status and manages

customers’ accounts for early detection and reduction of default risks.

Trade receivables denominated in foreign currencies and derived

from export sales of products, etc., are exposed to exchange rate

fluctuation risk, however the balance is constantly within the out-

standing balance of notes and accounts payable – trade denomi-

nated in the same foreign currencies.

Of the investment securities, listed equity securities are exposed

to market price fluctuation risk. The Company mainly holds the

shares of business partners, regularly analyzes market prices of

those shares and the financial position of business partners, and

ownership status is reviewed continuously, considering relation-

ships with business partners.

Trade payables such as notes and accounts payable – trade are

due mostly within one year. Some of those payables denominated

in foreign currencies and derived from import purchases of raw

materials are exposed to exchange rate fluctuation risk, however

the net position after netting trade receivables denominated in

foreign currencies is generally hedged by foreign exchange for-

ward contracts.

Short-term borrowings and commercial papers are raised

mainly for operating transactions, and long-term loans are raised

mainly for expenditure in property, plant and equipment, invest-

ment and long-term receivables. Loans with variable interest rates

are exposed to interest rate fluctuation risk, and interest rate swaps

are used for certain long-term loans in order to hedge this risk.

Regarding derivative transactions, in addition to foreign

exchange forward contracts and interest rate swaps noted above,

commodity forwards and commodity swaps are used in order to

hedge market price fluctuation risk of crude oil and the mines that

produce copper concentrate as main raw materials.

The Company complies with the management policy which

clarifies the authorization to execute derivative transactions.

Further, the Company only makes transactions with counterparties

with high credit ratings to minimize credit risks for using derivatives.

Please see Note 1 (p) for information on derivative instruments,

hedged items, hedging policy and the method for the assessment

of the effectiveness of hedging.

The Company manages liquidity risk through controlling cash

management based on a monthly financing plan prepared by each

JX Group company.

(3) Supplementary explanation of items related to fair value

of financial instruments

Fair value of financial instruments is measured based on the quoted

market prices, if available, or reasonably estimated value if quoted

market prices are not available. Since various assumptions and fac-

tors are used in estimating fair value, different assumptions and

factors could result in different fair values. In addition, the notional

amount of the derivative transactions in Note 13 does not repre-

sent the market risk of such derivative transactions.


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Millions of yen


Assets:

(1) Notes and accounts receivable – trade ¥1,007,386 ¥1,007,386 ¥ —

(2) Investments in securities 298,321 298,321 —

Total assets ¥1,305,707 ¥1,305,707 ¥ —

Liabilities:

(1) Notes and accounts payable – trade ¥ 680,551 ¥ 680,551 ¥ —

(2) Short-term borrowings *1 652,399 652,399 —

(3) Commercial papers 364,000 364,000 —

(4) Notes and accounts payable – other 426,264 426,264 —

(5) Excise taxes payable 371,326 371,326 —

(6) Long-term loans *1 1,356,388 1,367,270 10,882

Total liabilities ¥3,850,928 ¥3,861,810 ¥ 10,882

Derivatives *2 ¥ (14,242) ¥ (26,239) ¥(11,997)



Assets:

(1) Cash and cash equivalents, and time deposits $ 4,372,542 $ 4,372,542 $ — (2) Notes and accounts receivable – trade 6,877,618 6,877,618 — (3) Investments in securities 1,796,947 1,796,947 — Total assets $13,047,107 $13,407,107 $ —Liabilities:

(1) Notes and accounts payable – trade $ 5,336,546 $ 5,336,546 $ — (2) Short-term borrowings *1 5,765,451 5,765,451 — (3) Commercial papers 2,200,923 2,200,923 — (4) Notes and accounts payable – other 3,454,757 3,454,757 — (5) Excise taxes payable 3,257,881 3,257,881 — (6) Long-term loans *1 13,123,136 13,222,000 98,864 Total liabilities $33,138,694 $33,237,558 $ 98,864

Derivatives *2 $ (151,500) $ (322,133) $(170,634)

*1. The current portion of long-term loans is included in (6) Long-term loans.*2. The value of assets and liabilities from derivative instruments is shown at a net amount, with the amount in parentheses representing a net liability position.

(Notes) 1. Method to determine the fair value of financial instruments and matters related to securities and derivative transactions Assets (1) Cash and cash equivalents, and time deposits, and (2) Notes and accounts receivable – trade

The carrying value approximates fair value because of their short-term nature. (3) Investments in securities

The fair value of equity securities is based on their quoted market price. The fair value of bonds is based on their quoted market price, or the price provided by financial institutions. Please see Note 7 for information on securities classified by holding purpose.

Liabilities (1) Notes and accounts payable – trade, (2) Short-term borrowings, (3) Commercial papers, (4) Notes and accounts payable – other, and (5) Excise taxes payable

The carrying value approximates fair value because of their short-term nature. (6) Long-term loans

The fair value of long-term loans is based on the present value of the principal amount and interest discounted using the interest rates for instruments with similar terms and maturities. Derivatives Please see Note 13.

2. Unlisted equity securities and bonds, including investments in unlisted unconsolidated subsidiaries and affiliates, in the amount of ¥475,256 million ($4,217,749 thousand) and ¥499,273 million as of March 31, 2016 and 2015, respectively, are not included in investments in securities in the above tables because it is not practicable to estimate their fair value due to the lack of public market price and difficulty in estimating future cash flow.



The JX Group primarily utilizes various derivative instruments in order to hedge the exposure of assets and liabilities due to risks of fluctua-

tions in commodity prices, foreign currency exchange rates and interest rates. Hedge accounting is applied to qualifying derivative instru-

ments. The JX Group does not utilize derivative instruments for speculative purposes.

Principal derivative instruments and hedged items are as follows:

Derivative instruments Hedged items

• Foreign exchange forward contracts • Imports of raw materials and exports of products

• Interest rate swap contracts • Long-term loans

• Commodity forwards and commodity swaps • Purchases of raw materials and sales of products

3. The redemption schedule as of March 31, 2016 and 2015 for monetary receivables and investments in securities with maturities

Millions of yen

As of March 31, 2016Due in one year

or lessDue after one year through five years

Due after five years through ten years Due after ten years

Cash and cash equivalents, and time deposits ¥ 492,695 ¥ 3 ¥— ¥—Notes and accounts receivable – trade 769,237 5,733 — —Investments in securities:

Held-to-maturity debt securities:

(1) Government and municipal bonds — — — — Other securities with maturities:

(1) Government and municipal bonds — 61 — — (2) Other bonds — — — — Total ¥1,261,932 ¥5,797 ¥— ¥—

Millions of yen




Notes and accounts receivable – trade ¥1,003,721 ¥3,665 ¥— ¥—

Investments in securities:


(1) Government and municipal bonds — — — —

Other securities with maturities:

(1) Government and municipal bonds — 60 — —

(2) Other bonds — — — —

Total ¥1,003,721 ¥3,725 ¥— ¥—





Cash and cash equivalents, and time deposits $ 4,372,515 $ 27 $— $—

Notes and accounts receivable – trade 6,826,739 50,879 — —

Investments in securities:


(1) Government and municipal bonds — — — —

Other securities with maturities:

(1) Government and municipal bonds — 541 — —

(2) Other bonds — — — —

Total $11,199,255 $51,447 $— $—

4. Refer to Note 10 for the redemption schedule as of March 31, 2016 for long-term loans.

DERIVATIVE INSTRUMENTSNote 13


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(a) Hedge accounting not applied

The notional amount, fair value and unrealized gain (loss) on derivatives to which hedge accounting is not applied as of March 31, 2016 and

2015 are as follows:Millions of yen

As of March 31, 2016 Notional amountNotional amount due

after one year Fair value Unrealized gain (loss)

Foreign exchange forward contracts:

To sell (U.S. dollars) ¥137,987 ¥ — ¥ 5,280 ¥ 5,280 To sell (Korean won) 2,613 2,187 (1,444) (1,444) To buy (U.S. dollars) 29,613 2,062 (218) (218) To buy (Australian dollars) 713 561 39 39 To buy (Japanese yen) 7 — 0 0Currency swap:

Receipt by yen, payment by Korean won 21,303 17,275 (1,988) (1,988) Total ¥192,236 ¥22,085 ¥ 1,669 ¥ 1,669Commodity-related transactions (metal forward transactions):

To sell ¥ 5,281 ¥ — ¥ 120 ¥ 120 To buy 4,289 — 109 109Commodity-related transactions (oil and natural gas forward transactions):

To sell 11,304 — 1,475 1,475Commodity-related transactions (oil product swaps):

Receiving floating rate and paying fixed rate 566 — 36 36 Receiving fixed rate and paying floating rate 2,819 — 262 262 Total ¥ 24,259 ¥ — ¥ 2,002 ¥ 2,002

Millions of yen




To sell (U.S. dollars) ¥ 82,770 ¥ — ¥ (7,334) ¥ (7,334)

To sell (Korean won) 3,045 2,613 (2,048) (2,048)

To buy (U.S. dollars) 114,776 124 290 290

To buy (Euro) 165 — (5) (5)

To buy (Japanese yen) 15 — 0 0

Currency swap:

Receipt by yen, payment by Korean won 23,545 21,303 (4,927) (4,927)

Total ¥224,316 ¥24,040 ¥(14,024) ¥(14,024)

Commodity-related transactions (metal forward transactions):

To sell ¥ 2,868 ¥ — ¥ (15) ¥ (15)

To buy 4,989 — 8 8Commodity-related transactions (oil and natural gas forward transactions):

To sell 14,280 12,528 (124) (124)

Commodity-related transactions (oil product swaps):

Receiving floating rate and paying fixed rate 4,449 — (347) (347)

Receiving fixed rate and paying floating rate 8,475 — 609 609

Total ¥ 35,061 ¥12,528 ¥ 131 ¥ 131







To sell (U.S. dollars) $1,224,592 $ — $ 46,858 $ 46,858 To sell (Korean won) 23,190 19,409 (12,815) (12,815) To buy (U.S. dollars) 262,806 18,300 (1,935) (1,935) To buy (Australian dollars) 6,328 4,979 346 346 To buy (Japanese yen) 62 — 0 0Currency swap:

Receipt by yen, payment by Korean won 189,058 153,310 (17,643) (17,643) Total $1,706,035 $195,998 $ 14,812 $ 14,812Commodity-related transactions (metal forward transactions):

To sell $ 46,867 $ — $ 1,065 $ 1,065 To buy 38,064 — 967 967Commodity-related transactions (oil and natural gas forward transactions):

To sell 100,319 — 13,090 13,090Commodity-related transactions (oil product swaps):

Receiving floating rate and paying fixed rate 5,023 — 319 319 Receiving fixed rate and paying floating rate 25,018 — 2,325 2,325 Total $ 215,291 $ — $ 17,767 $ 17,767

(b) Hedge accounting

The notional amounts and fair values of derivative instruments to which hedge accounting is applied as of March 31, 2016 and 2015 are

as follows:

Millions of yen

As of March 31, 2016 Main hedged items Notional amountNotional amount due

after one year Fair value


To sell (U.S. dollars) deferral hedge accounting Accounts receivable ¥ 85,643 ¥ — ¥ 1,967 To buy (U.S. dollars) deferral hedge accounting Accounts payable 16,877 — (311) To buy (Euro) deferral hedge accounting Accounts payable 192 — (12) To buy (Canadian dollars) deferral hedge accounting Accounts payable 59 — 1 To sell (U.S. dollars) designation method Accounts receivable 60,774 — 1,187 To buy (U.S. dollars) designation method Accounts payable 158,046 — (1,085) Total ¥321,591 ¥ — ¥ 1,747Interest swaps:

R eceiving floating rate and paying fixed rate

exception method Long-term loans¥494,249 ¥438,869 ¥(19,335)

R eceiving fixed rate and paying floating rate

exception method Long-term loans466 91 6

Total ¥494,715 ¥438,960 ¥(19,329)Commodity-related transactions (oil product swaps):


deferral hedge accounting Raw materials, merchan-dise and finished goods ¥ 77,412 ¥ 25,590 ¥(17,083)


deferral hedge accounting Raw materials, merchan-dise and finished goods 54,287 — (3,261)


To sell deferral hedge accounting Raw materials and finished goods 104,925 — (1,347)

To buy deferral hedge accounting Raw materials and finished goods 21,630 — (696)

Total ¥258,254 ¥ 25,590 ¥(22,387)


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To sell (U.S. dollars) (deferral hedge accounting) Accounts receivable ¥101,797 ¥ 69 ¥ (829) To buy (U.S. dollars) (deferral hedge accounting) Accounts payable 13,465 — 17 To buy (Euro) (deferral hedge accounting) Accounts payable 2,043 — (7) To sell (U.S. dollars) (designation method) Accounts receivable 86,846 — (659) To sell (Euro) (designation method) Accounts receivable 2,869 — (2) To buy (U.S. dollars) (designation method) Accounts payable 206,688 — (4)Currency swap:

Receipt by U.S. dollars, payment by yen

(designation method) Long-term loans130 130 55

Total ¥413,838 ¥ 199 ¥ (1,429)Interest swaps:

Receiving floating rate and paying fixed rate

(exception method) Long-term loans¥418,176 ¥376,748 ¥(11,408)

Receiving fixed rate and paying floating rate

(exception method) Long-term loans1,398 785 21

Total ¥419,574 ¥377,533 ¥(11,387)Commodity-related transactions (oil product swaps):

Receiving floating rate and paying fixed rate

(deferral hedge accounting) Raw materials, merchan-dise and finished goods ¥ 73,263 ¥ 21,738 ¥ (591)

Receiving fixed rate and paying floating rate

(deferral hedge accounting) Raw materials, merchan-dise and finished goods 72,447 — (130)


To sell (deferral hedge accounting) Raw materials and finished goods 103,715 — (374)

To buy (deferral hedge accounting) Raw materials and finished goods 33,696 — 1,565

Total ¥283,121 ¥ 21,738 ¥ 470





To sell (U.S. dollars) deferral hedge accounting Accounts receivable $ 760,055 $ — $ 17,457 To buy (U.S. dollars) deferral hedge accounting Accounts payable 149,778 — (2,760) To buy (Euro) deferral hedge accounting Accounts payable 1,704 — (106) To buy (Canadian dollars) deferral hedge accounting Accounts payable 524 — 9 To sell (U.S. dollars) designation method Accounts receivable 539,350 — 10,534 To buy (U.S. dollars) designation method Accounts payable 1,402,609 — (9,629) Total $2,854,020 $ — $ 15,504Interest swaps:


exception method Long-term loans$4,386,306 $3,894,826 $(171,592)


exception method Long-term loans4,136 808 53

Total $4,390,442 $3,895,634 $(171,539)Commodity-related transactions (oil product swaps):


deferral hedge accounting Raw materials, merchan-dise and finished goods $ 687,007 $ 227,103 $(151,606)


deferral hedge accounting Raw materials, merchan-dise and finished goods 481,780 — (28,940)


To sell deferral hedge accounting Raw materials and finished goods 931,177 — (11,954)

To buy deferral hedge accounting Raw materials and finished goods 191,960 — (6,177)

Total $2,291,924 $ 227,103 $(198,678)



The Company’s domestic consolidated subsidiaries have defined benefit plans and severance indemnity plans. Certain domestic consoli-

dated subsidiaries also have defined contribution pension plans. A premium on employees’ retirement benefits may be additionally pro-

vided upon retirement of an employee. Certain of the Company’s foreign consolidated subsidiaries have defined benefit plans and defined

contribution pension plans.

(a) Defined benefit plan

(1) The changes in the retirement benefits obligation for the years ended March 31, 2016 and 2015 are as follows:


U.S. dollars

2016 2015 2016

Balance at beginning of year ¥324,154 ¥296,455 $2,876,766 Cumulative effects of changes in accounting policies — 29,666 —Restated Balance 324,154 326,121 2,876,766 Service cost 9,460 9,869 83,955 Interest cost 1,694 2,771 15,034 Actuarial gain and loss 10,376 9,214 92,084 Payments of retirement benefits (23,177) (23,951) (205,689) Prior service cost (55) (4) (488) Other (4,625) 134 (41,045)Balance at end of year ¥317,827 ¥324,154 $2,820,616

(2) The changes in plan assets for the years ended March 31, 2016 and 2015 are as follows:


U.S. dollars

2016 2015 2016

Balance at beginning of year ¥207,778 ¥207,959 $ 1,843,965 Expected return on plan assets 4,058 4,410 36,013 Actuarial gain and loss (7,833) 11,742 (69,515) Contributions by the Company 1,276 2,026 11,324 Payments of retirement benefits (17,825) (18,368) (158,191) Other (4) 9 (35)Balance at end of year ¥187,450 ¥207,778 $(1,663,561)

(3) The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as of March

31, 2016 and 2015 for the Company’s and the consolidated subsidiaries’ defined benefit plans.


U.S. dollars

2016 2015 2016

Funded retirement benefits obligation ¥ 254,417 ¥ 247,104 $ 2,257,872Plan assets at fair value (187,450) (207,778) (1,663,561)

66,967 39,326 594,311Unfunded retirement benefits obligation 63,409 77,050 562,735Net liability for retirement benefits in the balance sheet ¥ 130,376 ¥ 116,376 $ 1,157,047

Liability for retirement benefits ¥ 130,649 ¥ 116,875 $ 1,159,469Assets for retirement benefits (273) (499) (2,423)Net liability for retirement benefits in the balance sheet ¥ 130,376 ¥ 116,376 $ 1,157,047

RETIREMENT BENEFITSNote 14


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(4) The components of retirement benefits expenses for the years ended March 31, 2016 and 2015 are as follows:


U.S. dollars

2016 2015 2016

Service cost ¥ 8,916 ¥ 9,472 $ 79,127Interest cost 1,694 2,771 15,034Expected return on plan assets (4,058) (4,410) (36,013)Amortization of actuarial gain and loss 581 (1,435) 5,156Amortization of prior service cost (339) (450) (3,009)Other 698 807 6,195 Total ¥ 7,492 ¥ 6,755 $ 66,489

(5) The compositions of items included in “retirement benefits liability adjustment (before tax effect)” in “other comprehensive income (loss)” for the

years ended March 31, 2016 and 2015 are as follows:


U.S. dollars

2016 2015 2016

Prior service cost ¥ (284) ¥ (446) $ (2,520)Actuarial gain and loss (17,628) 1,093 (156,443)Other 16 758 142 Total ¥(17,896) ¥1,405 $(158,821)

(6) The compositions of items included in “retirement benefits liability adjustment (before tax effect)” in “accumulated other comprehensive

income (loss)” as of March 31, 2016 and 2015 are as follows:


U.S. dollars

2016 2015 2016

Unrecognized prior service cost ¥ (327) ¥ (44) $ (2,902)Unrecognized actuarial gain and loss (11,252) 6,374 (99,858) Total ¥(11,579) ¥6,330 $(102,760)

(7) The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2016 and 2015 is as follows:%

2016 2015

Bonds 43% 39%

Stocks 29 33

Cash on hand and in banks 4 5

Other 24 23

Total 100% 100%

(8) The assumptions used in the calculation of the above information are as follows:

2016 2015

Discount rate Mainly 0.2% Mainly 0.8%

Expected rate of return on plan assets Mainly 2.0% Mainly 2.0%

(b) The required contributions to the defined contribution plan for the years ended March 31, 2016 and 2015 are

¥2,252 million ($19,986 thousand) and ¥2,244 million, respectively.

(c) The required contributions to employees’ pension fund systems, which are accounted for in the same manner as the

defined contribution plan, for the years ended March 31, 2016 and 2015 are ¥891 million ($7,907 thousand) and

¥1,379 million, respectively.



The Company and its consolidated subsidiaries have the following contingent liabilities as of March 31, 2016 and 2015:


U.S. dollars

2016 2015 2016

Debt guarantees:

Unconsolidated subsidiaries and affiliates ¥68,794 ¥ 79,908 $610,525 Other companies and employees 20,546 25,461 182,339

¥89,340 ¥105,369 $792,865

Research and development expenses included in manufacturing cost and selling, general and administrative expenses for the years ended

March 31, 2016 and 2015 are ¥20,684 million ($183,564 thousand) and ¥21,413 million, respectively.

CONTINGENT LIABILITIESNote 16

RESEARCH AND DEVELOPMENT EXPENSESNote 17

Asset retirement obligations recognized on the balance sheet

(a) Overview of asset retirement obligations

Asset retirement obligations include the Company’s obligation to restore real estate under lease agreements entered into in connection

with land used for service stations. Such obligations also include decommissioning obligations upon the termination of production at

development facilities of Oil and Natural Gas E&P business and Metals business.

(b) Method of calculating asset retirement obligations

The estimated period up to payment is assumed as 15 years for the land for service stations and years available to mine or produce oil for

development facilities. Discount rates in calculating asset retirement obligations are from 0.3% to 13.0%.

(c) The changes in the balance of asset retirement obligations for the years ended March 31, 2016 and 2015 are as follows:


U.S. dollars

2016 2015 2016

Balance at beginning of year ¥118,853 ¥ 88,114 $1,054,783 Increase due to purchase of property, plant and equipment 4,449 20,128 39,483 Accretion adjustment 3,124 3,607 27,725 Decrease due to settlement (1,582) (1,926) (14,040) Other changes (525) 8,930 (4,659)Balance at end of year ¥124,319 ¥118,853 $1,103,293

ASSET RETIREMENT OBLIGATIONSNote 15


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The components of selling, general and administrative expenses for the years ended March 31, 2016 and 2015 are as follows:


U.S. dollars

2016 2015 2016

Freight ¥172,776 ¥168,456 $1,533,333Personnel expenses 125,694 122,708 1,115,495Retirement benefits expenses 5,429 4,525 48,181Rental expenses 41,700 42,140 370,075Depreciation and amortization 34,061 32,719 302,281Other 197,820 197,884 1,755,591 Total ¥577,480 ¥568,432 $5,124,956

SELLING, GENERAL AND ADMINISTRATIVE EXPENSESNote 18


Restructuring cost is the cost for disposal of assets and loss due to

withdrawal in the Oil and Natural Gas E&P business and the reform-

ing cost accrued from the manufacturing and marketing business

of residential fuel cell system. Restructuring cost includes ¥76,375

million ($677,804 thousand) as impairment losses on fixed assets.


Restructuring cost is the cost to stop manufacturing multipurpose

products to devote to high-function products in the electro-

deposited copper foil business and the reforming cost accrued

from the manufacturing and marketing business of residential fuel

cell system. Restructuring cost includes ¥2,142 million as impairment

losses on fixed assets.

RESTRUCTURING COSTNote 19



The Company and its domestic consolidated subsidiaries in Japan are subject to corporation, enterprise and inhabitants’ taxes which, in the

aggregate, resulted in statutory tax rates of 33.1% and 35.6% for the years ended March 31, 2016 and 2015, respectively.

(a) The components of deferred tax assets and liabilities as of March 31, 2016 and 2015 are as follows:


U.S. dollars

2016 2015 2016

Deferred tax assets: Loss on valuation of investments in securities ¥ 154,566 ¥ 63,928 $ 1,371,725 Impairment loss 108,989 79,578 967,244 Asset retirement obligations 45,514 43,729 403,923 Liability for retirement benefits 41,553 39,101 368,770 Provision for repairs 19,612 19,711 174,050 Depreciation and amortization 17,513 17,792 155,422 Provision for bonuses to employees 9,085 9,510 80,627 Operating loss carryforwards 472,601 461,477 4,194,187 Other 96,092 107,368 852,787 Subtotal 965,525 842,194 8,568,734 Valuation allowance (541,759) (405,814) (4,807,943) Total deferred tax assets 423,766 436,380 3,760,792Deferred tax liabilities: Depreciation and amortization (126,738) (185,631) (1,124,760) Unrealized gain on land (87,607) (92,993) (777,485) Undistributed earnings of foreign subsidiaries and others (30,017) (30,864) (266,392) Fair value of subsidiaries on consolidation (23,167) (25,336) (205,600) Unrealized gain on securities (20,974) (49,165) (186,138) Tax reserves taken against differences in basis for depreciation (14,642) (40,384) (129,943) Other (16,790) (25,501) (149,006) Total deferred tax liabilities (319,935) (449,874) (2,839,324)Net deferred tax assets and deferred tax liabilities ¥ 103,831 ¥ (13,494) $ 921,468

(b) A reconciliation of the difference between the statutory tax rate and the effective income tax rate for the years ended

March 31, 2016 and 2015 is omitted because a loss before income taxes was recorded.

(c) The “Act for Partial Amendment of the Income Tax Act, Etc.” (Act No. 15 of 2016) and the “Act for Partial Amendment of the

Local Tax Act, Etc.” (Act No. 13 of 2016) were enacted on March 29, 2016.

Consequently, the effective statutory tax rates applicable to the calculation of deferred tax assets and liabilities were

changed in accordance with the following respective elimination periods of temporary differences:

Fiscal year ending March 31, 2017 : 30.9%

Fiscal years ending March 31, 2018 and thereafter: 30.6%

As a result of the change, net deferred tax assets (after offsetting deferred tax liabilities) decreased by ¥5,305 million

($47,080 thousand), and deferred income taxes increased by ¥6,714 million ($59,585 thousand) as of and for the year

ended March 31, 2016.

INCOME TAXESNote 20


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Reclassification adjustments and tax effects allocated to each component of other comprehensive income (loss) for the years ended March

31, 2016 and 2015 are as follows:


U.S. dollars

2016 2015 2016

Unrealized gain (loss) on securities:

Amount arising during the year ¥ (52,182) ¥ 54,663 $ (463,099) Reclassification adjustments for gains and losses included in loss (34,053) 1,572 (302,210) Amount before tax effect (86,235) 56,235 (765,309) Tax effect 24,124 (16,820) 214,093 Unrealized gain (loss) on securities (62,111) 39,415 (551,216)Unrealized gain (loss) on hedging derivatives:

Amount arising during the year (13,875) (15,292) (123,136) Reclassification adjustments for gains and losses included in loss (3,685) 4,692 (32,703) Adjustment of acquisition cost of assets (1,851) 5,642 (16,427) Amount before tax effect (19,411) (4,958) (172,267) Tax effect 6,036 1,372 53,568Unrealized gain (loss) on hedging derivatives (13,375) (3,586) (118,699)Foreign currency translation adjustments:

Amount arising during the year (31,261) 103,136 (277,432)Retirement benefits liability adjustment:

Amount arising during the year (17,367) 2,971 (154,127) Reclassification adjustments for gains and losses included in loss (529) (1,566) (4,695) Amount before tax effect (17,896) 1,405 (158,821) Tax effect 5,492 49 48,740 Retirement benefits liability adjustment (12,404) 1,454 (110,082)S hare of other comprehensive income (loss) of affiliates accounted for

by the equity method:

Amount arising during the year (14,420) 25,294 (127,973) Reclassification adjustments for gains and losses included in loss (89) (247) (790)S hare of other comprehensive income (loss) of affiliates accounted for

by the equity method (14,509) 25,047 (128,763)Total other comprehensive income (loss) ¥(133,660) ¥165,466 $(1,186,191)

OTHER COMPREHENSIVE INCOME (LOSS)Note 21



Loss attributable to owners of parent per share and net assets per share as of and for the years ended March 31, 2016 and 2015 are as follows:

(a) Loss attributable to owners of parent per share


U.S. dollars

2016 2015 2016

Loss attributable to owners of parent ¥(278,510) ¥(277,212) $(2,471,690)Weighted-average number of shares issued during the year (Thousands of shares) 2,486,397 2,486,465

Yen U.S. dollars

Loss attributable to owners of parent per share ¥(112.01) ¥(111.49) $(0.99)

Since we recorded loss attributable to owners of parent per share and no potential shares that could have had a dilutive effect through

the conversion of convertible bonds outstanding exist, diluted loss attributable to owners of parent per share for the years ended March 31,

2016 and 2015 is not presented herein.

(b) Net assets per share


U.S. dollars

2016 2015 2016

Total net assets ¥1,928,460 ¥2,429,849 $17,114,483Non-controlling interests deducted from total net assets 429,536 493,095 3,811,999Net assets attributable to shares of common stock 1,498,924 1,936,754 13,302,485Number of shares of common stock used for the calculation of net assets per share (Thousands of shares) 2,486,364 2,486,430

Yen U.S. dollars

Net assets per share ¥602.86 ¥778.93 $5.35

PER SHARE DATANote 22

(a) Outline of the reporting segments

The JX Group’s reporting segments consist of those constituent

units of the JX Group for which separate financial information is

available that are subject to periodic review for the board of direc-

tors to determine distribution of management resources and to

evaluate business performance.

The JX Group, which includes JX Holdings, Inc., as its hold-

ing company, is composed of segments corresponding to each

product and service based on three core operating companies.

The JX Group treats “Energy”, “Oil and Natural Gas Exploration and

Production (“E&P”)”, and “Metals” as the reporting segments. The

business activities not included in the reporting segments are col-

lectively contained in the “Other” category.

SEGMENT INFORMATIONNote 24

There are no material related party transactions or applicable notes on the parent company or its affiliated companies for the years ended

March 31, 2016 and 2015.

RELATED PARTY TRANSACTIONSNote 23


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The details of the main products and services or business activities of each reporting segment and the “Other” category are as follows:

Energy Petroleum refining and marketing, lubricants, basic chemical products, specialty & performance chemical products, gas, coal, electricity, and new energy.

Oil and Natural Gas E&P Oil and natural gas exploration, development and production.

Metals Non-ferrous metal resources development and mining, copper, gold, silver, sulfuric acid, copper foils, materials for rolling and processing, thin film materials, non-ferrous metal recycling and industrial waste treatment, transportation by ships of products including metal business products, and titanium.

Other Asphalt paving, civil engineering work, construction work, electric wires, land transportation, real estate leasing business, and affairs common to JX Group companies including fund procurement.

(b) Calculation method for net sales, income and loss, assets, liabilities, and other items of the reporting segments

The accounting treatment for the business segments reported herein is generally identical to that stated in Note 1 “Significant Accounting

Policies.” In-house intersegment sales and transfers are based on prevailing market prices.

(c) Information on net sales, income and loss, assets, liabilities, and other items from each reporting segment for the years

ended March 31, 2016 and 2015 are as follows:

Millions of yen

Year ended March 31, 2016 EnergyOil and

Natural Gas E&P Metals Other Total Adjustments *1

Recorded Amount on Consolidated

Financial Statements

Net sales:

Sales to outside customers ¥7,115,825 ¥ 175,755 ¥1,044,914 ¥ 401,324 ¥8,737,818 ¥ — ¥8,737,818 In-house intersegment sales and transfers 6,618 — 4,770 57,472 68,860 (68,860) —

Total 7,122,443 175,755 1,049,684 458,796 8,806,678 (68,860) 8,737,818

Segment income (loss) (97,064) 28,161 13,264 44,856 (10,783) 2,175 (8,608)

Segment assets 3,476,760 1,226,259 1,497,876 2,326,370 8,527,265 (1,802,643) 6,724,622

Segment liabilities 2,677,300 747,357 930,866 2,011,878 6,367,401 (1,571,239) 4,796,162

Other items:

Depreciation and amortization *2 ¥ 98,825 ¥ 66,446 ¥ 51,762 ¥ 6,878 ¥ 223,911 ¥ 3,749 ¥ 227,660

Amortization of goodwill 596 1,108 856 4 2,564 — 2,564

Interest income 1,724 474 334 13,513 16,045 (13,654) 2,391

Interest expenses 10,585 7,849 4,960 12,749 36,143 (10,774) 25,369

Equity in earnings of affiliates 5,618 960 10,239 1,246 18,063 — 18,063

Increase in fixed assets*3 136,193 110,172 63,470 15,468 325,303 9,483 334,786








Net sales:

Sales to outside customers $63,150,737 $ 1,559,771 $ 9,273,287 $ 3,561,626 $77,545,421 $ — $77,545,421 In-house intersegment sales and transfers 58,733 — 42,332 510,046 611,111 (611,111) —

Total 63,209,469 1,559,771 9,315,619 4,071,672 78,156,532 (611,111) 77,545,421


Segment assets 30,855,165 10,882,668 13,293,184 20,645,811 75,676,828 (15,997,897) 59,678,931

Segment liabilities 23,760,206 6,632,561 8,261,147 17,854,792 56,508,706 (13,944,258) 42,564,448

Other items:

Depreciation and amortization *2 $ 877,041 $ 589,688 $ 459,372 $ 61,040 $ 1,987,141 $ 33,271 $ 2,020,412

Amortization of goodwill 5,289 9,833 7,597 35 22,755 — 22,755

Interest income 15,300 4,207 2,964 119,924 142,394 (121,175) 21,219


Equity in earnings of affiliates 49,858 8,520 90,868 11,058 160,304 — 160,304

Increase in fixed assets *3 1,208,671 977,742 563,277 137,274 2,886,963 84,159 2,971,122

(Notes)1. The adjustments include the following: (1) The segment income (loss) adjustment of ¥2,175 million ($19,302 thousand) includes the net amount of ¥2,322 million ($20,607 thousand), which is the income and

expenses of the entire Company not allocated to the reporting segments or the “Other” category. (2) The loss of ¥1,802,643 million ($15,997,897 thousand) in the segment assets adjustment is due primarily to eliminating intersegment receivables by offsetting. (3) The loss of ¥1,571,239 million ($13,944,258 thousand) in the segment liabilities adjustment is due primarily to eliminating intersegment liabilities by offsetting. (4) The depreciation and amortization adjustment of ¥3,749 million ($33,271 thousand) includes ¥3,125 million ($27,733 thousand) in asset retirement obligations

adjusted due to passage of time (interest costs). (5) The increase in fixed assets adjustment of ¥9,483 million ($84,159 thousand) includes ¥4,449 million ($39,483 thousand) in assets that correspond to asset retirement

obligations.2. Depreciation and amortization includes ¥61,118 million ($542,403 thousand) in amortization costs for exploration and development investments.3. The increase in fixed assets includes the ¥106,199 million ($942,483 thousand) increase in exploration and development investments.4. Segment income (loss) is adjusted to ordinary income (loss) stated in the consolidated statement of operations.


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Millions of yen





Net sales:

Sales to outside customers ¥9,116,472 ¥ 226,395 ¥1,153,259 ¥ 386,334 ¥10,882,460 ¥ — ¥10,882,460 In-house intersegment sales and transfers 8,321 — 2,723 74,625 85,669 (85,669) —

Total 9,124,793 226,395 1,155,982 460,959 10,968,129 (85,669) 10,882,460


Segment assets 3,891,131 1,227,170 1,739,627 2,322,360 9,180,288 (1,756,884) 7,423,404

Segment liabilities 2,954,452 714,710 1,021,820 2,025,907 6,716,889 (1,723,334) 4,993,555

Other items:

D epreciation and amortization *2 ¥ 101,395 ¥ 48,314 ¥ 37,313 ¥ 6,170 ¥ 193,192 ¥ 4,076 ¥ 197,268

Amortization of goodwill 596 1,108 497 3 2,204 — 2,204

Interest income 1,881 514 460 13,800 16,655 (13,817) 2,838


Equity in earnings of affiliates 6,832 5,927 33,120 1,261 47,140 — 47,140

Increase in fixed assets *3 163,801 131,728 115,673 13,380 424,582 30,525 455,107

(Notes)1. The adjustments include the following: (1) The segment income (loss) adjustment of ¥3,232 million includes the net amount of ¥3,332 million, which is the income and expenses of the entire Company

not allocated to the reporting segments or the “Other” category. (2) The loss of ¥1,756,884 million in the segment assets adjustment is due primarily to eliminating intersegment receivables by offsetting. (3) The loss of ¥1,723,334 million in the segment liabilities adjustment is due primarily to eliminating intersegment liabilities by offsetting. (4) The depreciation and amortization adjustment of ¥4,076 million includes ¥3,607 million in asset retirement obligations adjusted due to passage of time (interest costs). (5) The increase in fixed assets adjustment of ¥30,525 million includes ¥20,128 million in assets that correspond to asset retirement obligations.2. Depreciation and amortization includes ¥44,349 million in amortization costs for exploration and development investments.3. The increase in fixed assets includes the ¥137,975 million increase in exploration and development investments.4. Segment income (loss) is adjusted to ordinary income (loss) stated in the consolidated statement of operations.

[Related information]

(a) Information by product and service

This information is omitted as it corresponds to the reporting segments disclosed above.

(b) Information by region

(1) Net sales


U.S. dollars

Years ended March 31 2016 2015 2016

Japan ¥7,157,400 ¥ 9,092,953 $63,519,702China 770,615 840,027 6,838,969Others 809,803 949,480 7,186,750 Total ¥8,737,818 ¥10,882,460 $77,545,421

Note: Net sales are calculated based on the customers’ locations, and are categorized into countries or regions.

(2) Property, plant and equipment


U.S. dollars

As of March 31 2016 2015 2016

Japan ¥1,810,912 ¥1,787,165 $16,071,282Chile 474,621 574,288 4,212,114Others 167,943 194,163 1,490,442 Total ¥2,453,476 ¥2,555,616 $21,773,837



There are no significant subsequent events.

SUBSEQUENT EVENTSNote 25

[Information on impairment loss]Millions of yen


Natural Gas E&P Metals OtherCorporate Total or Eliminations Total

Impairment loss ¥8,188 ¥230,502 ¥82,817 ¥202 ¥— ¥321,709

Note: Impairment loss recognized in the “Oil and Natural Gas E&P” segment includes ¥76,375 million ($677,804 thousand) of “Restructuring cost” on the consolidated statement of operations.

Millions of yen



Impairment loss ¥19,638 ¥23,263 ¥47,569 ¥167 ¥— ¥90,637




Impairment loss $72,666 $2,045,634 $734,975 $1,793 $— $2,855,067

[Information on the amortized amounts and unamortized balances of goodwill]

Millions of yen

Years ended March 31, 2016 EnergyOil and


Amortized amount ¥ 596 ¥1,108 ¥ 856 ¥4 ¥— ¥2,564Unamortized balance 5,896 — 3,124 — — 9,020

Millions of yen



Amortized amount ¥ 596 ¥1,108 ¥ 497 ¥3 ¥— ¥ 2,204

Unamortized balance 6,492 4,711 6,510 — — 17,713




Amortized amount $ 5,289 $9,833 $ 7,597 $35 $— $22,755Unamortized balance 52,325 — 27,725 — — 80,050


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Independent Auditor’s Report

Principal Group Companies(As of March 31, 2016)

Energy Business

Company Name Principal Business ActivitiesPercentage of

Voting Rights (%)

JX Nippon Oil & Energy Corporation Manufacturing and marketing of petroleum and petrochemical products 100.0 KASHIMA OIL CO., LTD. Manufacturing of petroleum and petrochemical products 70.7 Osaka International Refining Company, Limited Manufacturing and marketing of petroleum and petrochemical products 51.0 Wakayama Petroleum Refining Co., Ltd. Manufacturing and sales of petroleum products 99.9 Kashima Aromatics Co., Ltd. Manufacturing of petroleum and petrochemical products 80.0 JX Nippon ANCI Corporation Manufacturing of synthetic resin processed products 100.0 JX Nippon Oil & Energy Kiire Terminal Corporation Storage, receiving, and shipment of petroleum products 100.0 JX Ocean Co., Ltd. Sea transport of crude oil and petroleum products 81.1 Nippon Global Tanker Co., Ltd. Sea transport of crude oil 65.0 JX Nippon Oil & Energy USA Inc. Manufacturing and sales of petroleum products 100.0 JX Nippon Oil & Energy Asia Pte. Ltd. Manufacturing and sales of petroleum products 100.0 JX Nippon Oil & Energy (Australia) Pty Limited Investments in companies extracting coal and sales 100.0 ENEOS Frontier Company, Limited Sales of petroleum products 100.0 ENEOS WING Corporation Sales of petroleum products 100.0 JX Retail Service Corporation Sales of petroleum products 100.0 ENEOS Sun-Energy Corporation Sales of petroleum products 100.0 J-Quest Co., Ltd. Sales of petroleum products 100.0 ENEOS GLOBE Corporation Sales of LP gas 50.0 Japan Gas Energy Corporation Sales of LP gas 51.0 Kawasaki Natural Gas Power Generation Co., Ltd. Generation and supply of electric power 51.0 Nippon Oil Finance (Netherlands) B.V. Investments in LNG developments and provision of finance to subsidiaries and affiliates 100.0 JX Nippon Oil & Energy Trading Corporation Sales and lease of automobile-related parts 100.0 Showa Nittan Corp. Sea transport of petroleum products 24.9 Japan Oil Transportation Co., Ltd. Overland transport of petroleum products 29.2

Oil and Natural Gas E&P Business


Voting Rights (%)

JX Nippon Oil & Gas Exploration Corporation Overall management of the oil and natural gas development business 100.0 Japan Vietnam Petroleum Co., Ltd. Exploration, development, production, and marketing of oil and natural gas 97.1 JX Nippon Oil & Gas Exploration (Malaysia), Ltd. Exploration, development, production, and marketing of oil and natural gas 78.7 JX Nippon Oil & Gas Exploration (Sarawak), Ltd. Exploration, development, production, and marketing of oil and natural gas 76.5 Nippon Oil Exploration (Berau), Limited Exploration, development, production, and marketing of oil and natural gas 51.0 Nippon Oil Exploration (Myanmar), Ltd. Exploration, development, production, and marketing of oil and natural gas 40.0 JX Nippon Exploration and Production (U.K.) Limited Exploration, development, production, and marketing of oil and natural gas 100.0 Mocal Energy Limited Exploration, development, production, and marketing of oil 100.0 Merlin Petroleum Company Exploration, development, production, and marketing of oil and natural gas 79.6 Abu Dhabi Oil Co., Ltd. Exploration, development, production, and marketing of oil 32.1 United Petroleum Development Co., Ltd. Exploration, development, production, and marketing of oil 45.0


Metals Business


Voting Rights (%)

JX Nippon Mining & Metals CorporationResources development, manufacturing, and marketing of non-ferrous metals and electronic materials as well as recycling of non-ferrous metal materials 100.0

JX Metals Trading Co., Ltd. Marketing of non-ferrous metal products, etc. 100.0 Pan Pacific Copper Co., Ltd. Manufacturing and marketing of non-ferrous metals 67.8Hibi Kyodo Smelting Co., Ltd. Smelting and refining of copper 63.5 Changzhou Jinyuan Copper Co., Ltd. Manufacturing and marketing of copper wire rods 61.4 SCM Minera Lumina Copper Chile Production and sale of copper and molybdenum ore 77.4JX Nippon Mining & Metals Philippines, Inc. Manufacturing and marketing of copper foil 100.0 Nippon Mining & Metals (Suzhou) Co., Ltd. Manufacturing and marketing of precision rolled and pressing products 100.0 JX Metals Precision Technology Co., Ltd. Manufacturing and marketing of electronic materials, etc. 100.0 JX Nippon Mining & Metals USA, Inc. Manufacturing and marketing of thin-film materials 100.0

Nikko Metals Taiwan Co., Ltd.Manufacturing and marketing of electronic materials, etc., and collection of materials for non-ferrous metal recycling 100.0

JX Nippon Environmental Services Co., Ltd. Recycling and environmental services 100.0 Nippon Marine Co., Ltd. Sea transport for non-ferrous metal products, etc. 100.0 Toho Titanium Co., Ltd. Manufacturing and marketing of titanium 50.4 LS-Nikko Copper Inc. Smelting and refining of copper 49.9 Minera Los Pelambres Copper ore mining 25.0 Japan Collahuasi Resources B.V. Investments in Collahuasi Copper Mine 30.0 JECO Corp. Investments in Escondida Copper Mine 20.0 JECO 2 Ltd. Investments in Escondida Copper Mine 40.0

Others


Voting Rights (%)

NIPPO CORPORATIONPlanning, design, and construction of roads, pavement, civil engineering works, and petroleum-related facilities 57.0

Dai Nippon Construction Co., Ltd. Subcontracting for building and civil engineering construction 78.5

JX Engineering CorporationDesign, construction, and supervision of construction for machinery, electricity, civil engineering, and building construction as well as maintenance 100.0

JX Nippon Real Estate Corporation Sales, rental, and management of real estate 100.0 JX Nippon Procurement Corporation Performance of procurement work on a subcontracting basis 100.0 JX Nippon Finance Corporation Performance of finance-related work on a subcontracting basis 100.0 JX Nippon Business Services Corporation Performance of accounting, payroll, and welfare-related work on a subcontracting basis 100.0 JX Nippon Research Institute, Ltd. Surveys, research, and consulting services, etc. 100.0 Tatsuta Electric Wire and Cable Co., Ltd. Manufacturing and marketing of wire and cable 35.8 Maruwn Corp. Overland transport 38.2


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Investor Information(As of March 31, 2016)

Share Price Range and Trading Volume

Share Price (Yen)

Trading Volume (Millions of shares)

Share Information

Securities Code 5020

Number of Shares Issued 2,495,485,929

Number of Shareholders 197,564

Stock Exchange Listings Tokyo, Nagoya

Major Shareholders

Name of shareholdersNumber of shares held (Thousands of shares)

Percentage oftotal issued shares (%)

Japan Trustee Services Bank, Ltd. (Trust Account) 144,229 5.79

The Master Trust Bank of Japan, Ltd. (Trust Account) 130,663 5.24

Mizuho Bank, Ltd. 76,141 3.05 Sumitomo Mitsui Banking Corporation 65,398 2.62 Mitsubishi Corporation 48,615 1.95 Japan Trustee Services Bank, Ltd. (Trust Account 9) 42,158 1.69The Bank of Tokyo-Mitsubishi UFJ, Ltd. 38,920 1.56 Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. 36,359 1.46INPEX CORPORATION 33,264 1.33 STATE STREET BANK WEST CLIENT - TREATY 505234 31,616 1.26Note: The shareholding ratio is calculated excluding treasury shares (5,712,230 shares).

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Year ended March 31, 2014 Year ended March 31, 2016Year ended March 31, 2015Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.Oct. Nov. Dec. Jan. Feb. Mar.

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Distribution of Shareholders

Financial Institutions in Japan 40.50%Companies in Japan

9.77%

Overseas Investors 29.59%

Securities Companies in Japan 2.90%Treasury Shares 0.23%Others 1.63%

Individuals 15.38%


For further information about the content of this annual report, please contact:

JX Holdings, Inc. Investor Relations Group, Finance & Investor Relations Department

1-2, Otemachi 1-chome, Chiyoda-ku, Tokyo 100-8161, Japan

E-mail: [email protected]

Website: http://www.hd.jx-group.co.jp/english/

IR Website Guide

Please use the IR website together with Annual Report 2016.

WEB http://www.hd.jx-group.co.jp/english/ir/

Initiatives in Socially Responsible Investment

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