Kumho Petro Chemical : 47th Annual General Meeting of Shareholders Reference Material

KUMHO PETROCHEMICAL

47h Annual General Meeting of Shareholders Reference Material

Table of content

No.	Topic	Page.
	Board Chair's Message	02
	Company's Statement on Tcha Partners' Presentation	05
1	Notice of the 47th Annual General Meeting of Shareholders	10
2	Corporate Governance	12

• Board Composition and Operation
• Board Skills Matrix
• Board Committees
• Independent Director Nomination Process

3	Agenda Items	15
	Item 1: Approval of the Financial Statements and Annual Dividends for FY 2023
	Items 2-3: Amendment of the Articles of Incorporation, Proposal for Treasury Shares
	Cancellation (Including Shareholder Proposals)
	Items 4-7: The Board's opinion on the Election of Executive Directors, and Independent
	Directors, and Audit Committee Members
	Item 4: The Election of one Independent Director as a Member of the Audit Committee
	(Including Shareholder Proposal)
	Item 5: The Election of Two Executive Directors
	Item 6: The Election of Two independent Directors
	Item 7: The Election of Mr. Jeung-Won Yang as a Member of the Audit Committee
	Item 8: Approval of the Director Remuneration Limit
4	Appendix
	Summary of Board Activities	32
	Financial Statements (FY2023)	37

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Board Chair's Message

Dear Shareholders,

We extend our deepest gratitude for your continuous interest and support towards Kumho Petrochemical, wishing you a year filled with joy and prosperity. We are pleased to invite you to the upcoming Annual General Meeting (AGM) scheduled for March 22. On behalf of the Board, I would like to take this opportunity to briefly share our accomplishments over the past year and discuss the agenda items for the meeting.

Business Performance and Outlook

The year 2023 was marked by significant external uncertainties due to a variety of complex factors, including high inflation, supply chain disruptions caused by geopolitical tensions and climate change, as well as the decoupling of the global economy. The petrochemical industry also experienced challenges, with a delay in the recovery of chemical product demand due to the global economic downturn, and intensified price competition due to new expansions in China, our largest consumer market. Additionally, a recent increase in freight rates from the Red Sea has led to a reduction in exports to Europe, exacerbating the oversupply situation in Asia and increasing volatility in oil prices.

Kumho Petrochemical recorded consolidated sales of KRW 6.3225 trillion, operating profit of KRW 359 billion, and net income of KRW 447 billion in 2023. These figures represent decreases of 20.7%, 68.7% and 56.2%, respectively, compared to the previous year, primarily due to the delayed recovery in demand and intensified price competition resulting from the expansion of petrochemical sector within China. Despite these challenges, Kumho Petrochemical succeeded in maintaining a solid level of profit compared to the industry peers by strengthening the market dominance of its existing products, continuously reducing costs, and expanding the sales of high-value-added products.

The current business conditions and imbalance between supply and demand are not expected to be resolved in the short term. However, the management and the Board of Directors are committed to enhancing the competitiveness of our core businesses to maintain solid performance against competitors, secure future growth drivers, and achieve sustainable growth, despite the challenging environment.

Shareholder Returns

The dividend for the fiscal year 2023 has been set at 2,900 KRW per share for common shares. The dividend payout ratio is based on a separate net income basis of 25.2%, which is similar to the previous year. Additionally, on March 6, the Board announced the acquisition of treasury shares worth 50 billion KRW (for the purpose of cancellation), and the total shareholder return rate relative to net income, combining the cash dividend size and treasury stock purchase size, is at the level of 41.7%. Over the past three years, the Board has strived to meet shareholders' expectations by consistently implementing shareholder returns of more than 40% through cash dividends and the purchase and cancellation of treasury shares. The Board is focused on enhancing shareholder value from a medium to long-term perspective, emphasizing sustainability rather than expanding shareholder returns in the short term, and will continue to actively communicate with shareholders in this regard. Furthermore, on March 6, the Board of Directors decided to cancel 50% of its treasury shares(common shares 2,624,417) over three years. The Board expects this cancellation decision to dispel market concerns about holding treasury shares while helping to properly evaluate the corporate value of Kumho Petrochemical. The Board promises to continue improving the shareholder return policy while seeking a balance between the company's long-term growth and continuous enhancement of shareholder value.

Board's Achievements

The Board initiated a renewal in 2021, completely revitalizing itself by replacing all members in 2022. It has continuously made improvements to fulfill the promise of enhancing corporate governance and operating a Board centered around independent directors. The efforts of the Board over the past three years to create an effective Board include:

• Enhancing the independence of the Board by separating the roles of the CEO and the Chairman of the Board and appointing an independent director as the Chairman;

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• Establishing Committees such as the ESG Committee, the Transactions Committee, and the Compensation Committee, while ensuring that the Transactions Committee, Compensation Committee, Audit Committee, and Nomination Committee are all composed entirely of independent directors to enable effective and independent operation of the Board;
• Enhancing the transparency of the nomination process for independent directors and laying the foundation for appointing competent independent directors by establishing nomination guidelines for independent director candidates and introducing a competency matrix for the Board, along with a system to manage the candidate pool continuously;
• Introducing a director evaluation system to continuously improve the operation of the Board; and
• Increasing the gender diversity of the Board by achieving a 20% female director ratio.

The Board is proud to have fulfilled all promises made in 2021 over the past three years and will continue to communicate with shareholders to maintain good corporate governance and seek improvements.

Meeting Agendas and Shareholder Proposals

The Board, including myself, has proposed the appointment of 5 directors at this shareholder meeting. Four candidates are for reappointment, and candidate Jeung-Won Yang is a new appointment. Jeung-Won Yang, a veteran in the capital markets, has worked for 13 years at Samsung Life Insurance and 20 years at Samsung Asset Management, serving as the CEO of Samsung Active Asset Management from 2019 to 2021. The Board expects him to contribute significantly to the Board with his balanced and differentiated advice, showcasing his capabilities as a CEO and expertise as an investor. The shareholder proposed independent director candidate is also set to be proposed. After thorough review, the Board finds the shareholder-proposed candidate competent. However, we would like to ask our shareholders to support the Board's nominee for the following reasons:

The current Board already has sufficient experience and competency in accounting, the area of expertise of the shareholder-proposed candidate. The Audit Committee has fulfilled its role impeccably over the past three years with all members having accounting and financial expertise. Following the retirement of Lee-Seok Hwang, candidate Jeung-Won Yang will fill this gap, with his CEO experience and capital market understanding, thus contributing to the Audit Committee's broader perspective.

The Board always respects shareholder rights and listens to their opinions. However, the dissident has continuously shown distrust towards the Board and management without attempting communication - often creating conflicts. A healthy and effective Board requires intense yet constructive discussions and harmony despite diversity. There are concerns whether a candidate recommended by a shareholder in conflict with the current management can positively contribute to creating an ideal Board.

As mentioned, our Board has continuously evolved to meet the global governance standards and is committed to building a Board that contributes to sustainable growth. We request shareholders to recognize the Board's efforts and support the Board's nominees.

Treasury Stock Cancellation

Another key issue is the cancellation of the treasury stock. The Board has been aware of the concerns of investors about holding treasury stocks and announced a plan on March 6 to cancel 50% of our outstanding treasury shares. Since the announcement of our shareholder return policy in 2021, the company has proactively purchased and subsequently cancelled the purchased shares. Including the 50 billion KRW planned this time, the total amount of treasury stock acquisition and cancellation is 300 billion KRW from '22~'24. The remaining treasury shares will be disposed of or canceled only in ways that align with shareholder value after sufficient communication with shareholders.The Board believes it must decide on the appropriate timing and scale for treasury stock cancellation, considering available earnings, long-term strategic investment opportunities, employee compensation, and capital funding costs, especially in the anticipated long-term industry downturn where financial liquidity is crucial. The Amendment of the Articles of Incorporation proposed by the dissident fails to consider these critical factors while potentially hindering the Board's ability to make strategic decisions aimed at enhancing the company, and instead myopically focuses on the dissident's concerns about possible

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misuse. We, therefore, respectfully ask the shareholders to take these factors into consideration and support the Board's proposal.

Detailed information on each agenda item and the company's key achievements are provided in the following materials. We hope that they will assist shareholders in exercising their voting rights.

We remain committed to engaging and collaborating with our shareholders, driving sustainable growth and enhancing shareholder value. We deeply appreciate your continued support and trust in Kumho Petrochemical and wish health and happiness to you and your families.

Sincerely,

Dosoung Choi

Chair of the Board

Kumho Petrochemical

March 2024

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Company's Statement on Tcha Partners' Presentation

Dear respected shareholders,

Tcha Partners Asset Management, acting under the authorization of shareholder Chul-Whan Park, submitted a shareholder proposal which was disclosed publicly on March 4th. We wish to address arguments made by Tcha Partners, which we believe are founded on inaccuracies or are potentially misleading due to selective data use or omissions for their convenience. In light of these claims, we urge our shareholders to consider our detailed rebuttal and the supplementary explanatory materials provided for the agenda items, and to endorse the Board's recommendation.

On the Matter of the Company's Market Valuation Post-Pandemic

The post-COVID-19 era has indeed presented economic challenges and a slowed rebound in demand across the chemical sector, leading to a general downtrend in the stock values of chemical firms, our own included. However, as shown below, the Company has managed to maintain a higher level of stock price compared to its competitors.

* stock price set to 100 as of 2020.12.30

Furthermore, when assessing Total Shareholder Return (TSR), our performance stands commendably against both domestic and international counterparts. Our recent 5-year and 3-year TSR figures are recorded at 79.7% and 4.3%, respectively, markedly outperforming the industry average of 68.2% and -7.3%. This achievement is particularly notable amidst the ongoing downturn within the petrochemical sector since 2022, positioning our company's shareholder returns at a leading level within the industry.

The apparent discrepancy between the calculations of Tcha Partners and our own primarily arises from the differing baseline period for assessment. We select the end of year when no special events occurred, whereas Tcha Partners' calculation is based on January 29, 2021-a date influenced by a temporary surge in stock prices resulting from Mr. Chul-Whan Park's shareholder proposal, which we argue is an unsuitable reference point for TSR evaluation.

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Addressing Concerns Regarding Treasury Shares

The Board acknowledges the concerns expressed by our investors about the potential disposal of treasury shares through means other than retention and cancellation. In response to these concerns, the Board announced on March 6th an initiative to cancel 50%(common shares 2,624,417) of the company's held treasury shares over a three-year span, with an immediate plan to cancel 875,000 shares within the current fiscal year.

It is important to clarify that the Company has never engaged in the disposal of treasury shares as a means of defense against hostile takeovers or misuse to expand control by major shareholders and has no future intentions of adopting such practices. Despite the assumptions made by Tcha Partners, we affirm that there has been no precedent for deploying treasury shares to favor management's allies, nor are there plans to do so.

Given the ongoing downturn in the domestic petrochemical industry-a situation we anticipate enduring for a significant duration-the company is taking a cautious approach to safeguard against potential financial vulnerabilities. Maintaining financial liquidity is crucial, not only for enduring this downturn but also for supporting strategic growth through mergers and acquisitions (M&A) or the pursuit of new business opportunities. Thus, the management and the Board regard the remaining treasury shares to be a strategic reserve for the company whose judicious use can be a key option for bolstering financial liquidity under these challenging market conditions without diluting value for the exsting shareholders.. We commit to maintaining open and transparent communication with our shareholders about our strategies for the management and disposition of treasury shares, ensuring that any actions taken will be in the best interest of enhancing shareholder value and aligned with our long-term strategic objectives.

Strategic Alliance and Stock Exchange with OCI

The exchange of treasury shares with OCI was orchestrated to cement a strategic partnership and foster enduring trust between our two entities, following the creation of a bio-ECH business joint venture, OCIKumho Sdn. Bhd, in 2021. This venture signifies a pivotal step towards securing a stable supply of ECH, a critical

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component for epoxy products, and aligns with our goal to expand epoxy applications over the medium to long term. The joint venture also aims to procure eco-friendly raw materials, such as glycerin, to replace traditional fossil fuels, emphasizing our commitment to sustainability. OCI, with its CA plant in Malaysia and associated utilities, stands as an ideal partner for this initiative, ensuring a synergistic collaboration for the bio ECH production. The establishment of a joint venture is a pivotal activity for the implementation of the company's medium to long-term strategic plan. Introducing a new ECH production technique utilizing the green material glycerin is expected to require a significant period before it begins generating revenue. Therefore, considering the potential for business expansion and the possibility of entering the Malaysian market, the exchange of treasury shares was executed as a mechanism to solidify the long-term trust between the two companies.

This joint venture and the exchange of treasury shares, constituting merely 0.56% of our total shares, underscores a strategic business enhancement move rather than a tactic for management entrenchment. The company's victory in the legal challenge initiated by shareholder Chul-Whan Park with regards to this strategic disposition of treasury shares, further validates the integrity and legitimate rationale for this transaction.

Regarding NB Latex Business

Kumho Petrochemical's NB Latex products, developed in-house, serve as the primary material for medical gloves and are produced through a unique continuous production method worldwide. This method ensures product quality stability (uniformity) and cost competitiveness, while leading in research and development (R&D). Leveraging these strengths, the company has consistently expanded its market share. To enhance its core business, the Company has been converting general-purpose rubber production lines into high-value product lines, also increasing NB-Latex production by dedicating former general-purpose SBR lines. Notably, the medical gloves market was projected to grow steadily by over 8% annually pre-COVID. In response to the growing market, the company added 240,000 tons of capacity through line conversions in 2020 and improved productivity to add another 70,000 tons in 2021, reaching a total production capacity of 710,000 tons. These proactive investments yielded higher-than-expected profits amidst the COVID-19 situation.

From a medium to long-term perspective, predicting market growth and solidify its competitiveness, the Company decided to further expand by 236,000 tons in 2021, aiming to complete this by the second quarter of 2024, as the investment is currently underway. The high profitability of NB-Latex and medical gloves during the COVID-19 crisis attracted new market entrants, especially local companies in China, leading to a significant increase in glove inventories. However, with the pandemic subsiding and demand decreasing from the second half of 2022, the NB-Latex market has entered a downturn. An adjustment period of 2-3 years may be necessary to address the supply-demand imbalance (e.g., exit of less competitive Chinese companies, depletion of glove inventories), after which the market is expected to turn around and continue growing at a rate of over 8% annually. The Company is planning to adjust its NB-Latex production volume based on market conditions, confident in its quality, cost competitiveness, and R&D capabilities to quickly regain market dominance as demand recovers. Furthermore, to lead future markets, the company is also developing various products, including batch-processNB-Latex and bio-basedNB-Latex.

The Board of Directors' oversight

The Board has undergone a complete renewal since the end of 2020, with all members replaced as shown below. Mr. Chan-Koo Park, whom Tcha Partners has criticized, resigned from the board in May 2021. Mr. Jun- Kyung Park, who has not been indicted and has no legal or administrative issues, received endorsements from ISS and Glass Lewis at the time of his appointment. Despite the proxy contest and opposition campaign initiated

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by shareholder Chul-Whan Park, the current board members were elected with widespread support from the shareholders, representing the interests of all shareholders.

The Board has been diligently working to fulfill the medium to long-term management plan and corporate governance improvement promises announced at the 2021 AGM. Notable actions include separating the roles of CEO and Chairman of the Board, appointing an outside director as the Board Chair, and composing key committees entirely of outside directors to significantly enhance the Board's independence. The introduction of a BSM aimed at effective board composition, and the revision of the outside director nomination process, has established a system for appointing capable and independent candidates. Additionally, to proactively address climate change, the company has initiated disclosures in accordance with TCFD guidelines and is faithfully advancing tasks for the transition to eco-friendly products and achieving carbon neutrality by 2050. As a result of these efforts, the company's CDP rating has improved from D to B, and its DJSI score has significantly increased from 23 to 63, receiving recognition from the market.

On Shareholders' Proposals

The Board of Directors, after a thorough review of the candidate proposed by Tcha Partners, Kyung-Ho Kim, has concluded that the nomination of Do-Soung Choi, the Board-recommended candidate, aligns more closely with shareholder value for several reasons.

Firstly, the current Board already possesses sufficient accounting expertise, making Kyung-Ho Kim's capabilities somewhat redundant and unlikely to add new value. In contrast, Do-Soung Choi not only brings accounting expertise but, as a top researcher and market leader in the field of corporate governance in Korea, is expected to make a significant contribution to the ongoing improvement of Kumho Petrochemical's corporate governance.

Secondly, while Kyung-Ho Kim has a background in accounting and has served as a director at banks and financial institutions for many years, the petrochemical industry significantly differs from the financial sector in its industrial characteristics. Already having served a term of three years, Do-Soung Choi has gained knowledge and understandings about the petrochemical industry and the Company's operations and is expected to contribute even more effectively to the Board's functioning as a senior Director in his next term.

Thirdly, although Tcha Partners is the proposer of the shareholder proposal, they held only 20 shares at the end of 2023 and increased their holdings to 7,179 shares (0.03%) by February 7, 2024, the time of the proposal. The Board regards this proposal as realistically emanating from shareholder Chul-Whan Park. Tcha Partners, not being a long-term holder of the Company's shares, and based on this investment history, it is difficult to see the shareholder proposal's purpose as serving the long-term interests of the Company or the entirety of its shareholders, other than short-term results or the interests of a specific shareholder. Additionally, since the proxy contest in 2021, Chul-Whan Park has continuously caused friction with the current Board and management through litigation and objections to Board's decisions, leading the Board to conclude that Chul- Whan Park's interests diverge from those of the overall shareholders. The Board expresses concern that the

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participation of a candidate recommended by Chul-Whan Park's side may hinder constructive discussion and effective operation of the Board.

Factual inaccuracies and misleading assertions

The company has identified numerous factual inaccuracies and misleading claims in the presentation by Tcha Partners:

• Claim that BlackRock reduced its stake due to the rejection of a share buyback request: Black Rock is a well-knownindex investor, making this claim baseless.
• Claim regarding the disposal of treasury shares leading to a decrease in the voting and prope rty rights of ordinary shareholders: This is a biased claim based on the unrealistic scenario of tre asury shares being sold entirely to friendly forces.
• 100% approval rate for board resolutions: The preparation for board resolutions involves thoroug h prior review, and considerable deliberation occurs among individual directors and the board before resolutions are officially proposed. Therefore, a 100% approval rate for board resolutions does not i ndicate ineffective operation or lack of independence of the board.
• Proxy advisors' recommendations for Jun-Kyung Park: Jun-KyungPark has received recomme ndations in favor from ISS, GL, and the Korea ESG Research Institute. The claim selectively choose s information that conveniently support Tcha Partners' position.
• Performance of Kumho Resort: Before acquisition by the Company, Kumho Resort recorded an o perating loss of -6.9 billion won. After the acquisition in 2021, the company improved the sales struct ure and profitability of Kumho Resort, recording operating profits of 0.5 billion won in 2021, 8.8 billion won in 2022, and 13 billion won in 2023.

The company, thus, clarifies its position against the claims made by Tcha Partners and requests the shareholders to oppose the shareholder proposal and support the board's resolutions.

On behalf of the Board of Directors,

Chairman of Kumho Petrochemical Board,

Dosoung Choi

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