Corporate Governance Guidelines

F.C.C. CO., LTD.
Chapter 1 General Provisions(Basic Views on Corporate Governance)
Article 1
Based on its corporate philosophy, the Company endeavors to enhance its corporate
governance as one of the top management issues, aiming to build trust of its stakeholders,
including shareholders, customers, employees, and local communities, conduct an agileand decisive decision-making in a fair and transparent way and pursue its continuous
growth and an increase in corporate value over the medium to long term.
<Corporate Philosophy>“F.C.C. Co., Ltd. is committed to making a contribution to society by supplying products andservices that make the best of ideas and technology to satisfy customers in every way.”
Chapter 2 Relationship With Shareholders(Ensuring Shareholder Rights and Equality)
Article 2
1.

While ensuring equality for our shareholders, the Company also ensures their rights andcreates an environment for them to exercise them appropriately.

2.

The Company creates an environment for shareholders to exercise their rights
appropriately at the General Meeting of Shareholders.

3.

Where a considerable number of votes have been cast against a proposal by the Company
although the proposal was approved at the General Meeting of Shareholders, the Board of
Directors will analyze the reasons behind opposing votes and why many shareholders
opposed, and consider a response where necessary.

(Constructive Dialogue With Shareholders)
Article 3
1.

The Company establishes guidelines related to the creation of systems and initiatives topromote dialogue with shareholders and discloses these as our disclosure policy.
12.

The Company has a system in place to provide appropriate feedback to the Board of
Directors on opinions and other information identified through dialogue with shareholders.

(Basic Policy on Capital Policy)
Article 4
The Company’s basic policy is to continue to pay a stable dividend from a comprehensive
point of view based on consolidated financial performance and dividend payout ratio, etc.,
while striving to improve corporate value by making capital investments and carrying out
research and development activities necessary for future growth and thus maintaining andstrengthening its competitiveness.
(Policy on Cross-Shareholdings)
Article 51.

The Company may hold investment shares from viewpoints, including the maintenanceand strengthening of business relationships with customers and transaction partners, incases where it judges their ownership contributes to enhancing its corporate value in themedium and long term.

2.

The Board of Directors evaluates the suitability of owning cross-shareholdings every year,
taking benefits, risks and the like involved in holding them into consideration, in addition
to the nature and scale of transactions.

3.

The Company appropriately exercises voting rights for cross-shareholdings by respecting
the management policies of the company in question and considering the purpose of theownership of the cross-shareholdings.

(Conflict-of-Interest Transactions)
Article 6
Where Directors attempt to conduct transactions with the Company on behalf ofthemselves or a third party, according to the procedures established by the Companies Act,
they obtain the approval of the Board of Directors and report that material fact to theBoard of Directors.
Chapter 3 Relationships With Stakeholders Other Than Shareholders(Relationships With Stakeholders)
Article 7
The Company recognizes that its sustainable growth and increase in corporate value over2

the medium to long term is the result of diverse stakeholders other than shareholders
providing resources and making contributions, and works to cooperate appropriately withthese stakeholders.
Chapter 4 Responsibilities of the Board of Directors(Roles and Responsibilities of the Board of Directors)
Article 8
1.

The Board of Directors makes decisions on management policies and other importantbusiness execution aimed at sustainable growth and increase in corporate value over themedium to long term given its fiduciary responsibility and accountability to theCompany’s shareholders.

2.

In addition to items stipulated by laws and regulations and the Company’s Articles ofIncorporation, the Board of Directors establishes items to be resolved at the Board ofDirectors according the Regulations of the Board of Directors.

3.

Starting with the development of internal controls, the Board of Directors develops anenvironment to support appropriate risk taking.

4.

To strengthen the independence, objectivity, and accountability of the functions of theBoard of Directors related to Director nomination and remuneration, the Company has
established the Nomination and Remuneration Advisory Committee composed mainly ofindependent Outside Directors as an advisory body to the Board of Directors. The Boardof Directors will fully respect the contents of recommendations provided by theNomination and Remuneration Advisory Committee.

(Composition of the Board of Directors)
Article 91.

The Board of Directors shall be composed of no more than 12 appropriate persons, as
stated in the Company’s Articles of Incorporation, of which no more than 5 are Directors
who are Audit and Supervisory Committee Members.

2.

At least one third of the Board of Directors shall be composed of the independent OutsideDirectors.

3.

To fulfill its roles and responsibilities effectively, the composition of the Board ofDirectors as a whole shall have a balance in diverse knowledge and experience thatconsiders diversity, including gender, internationality, work experience, and age.

4.

The Company thoroughly considers the independence of Outside Directors based on theindependence criteria set by the Tokyo Stock Exchange.
35.

Directors who are Audit and Supervisory Committee Members shall include persons witha sufficient level of expertise on finance and accounting.

(Policy on Appointment and Dismissal of Directors)
Article 10
1.

Directors shall be people with outstanding character and insight, as well as impeccablemorals.

2.

Directors shall be persons with expertise and abundant experience related to the operationsof the Company or persons with expertise and abundant experience in their native field.

3.

The Board of Directors receives recommendations from the Nomination andRemuneration Advisory Committee and decides on the appointment and dismissal ofDirectors based on the composition of the Board of Directors provided for in the precedingarticle while considering the qualities necessary for the appropriate execution of duties bythe Directors.

(Policy on Determining Remuneration for Officers)
Article 11
1.

The Company’s remuneration system for Directors is linked to business performance andshareholder benefit so that it can function as a sound and appropriate incentive forsustainable growth. The Company’s basic policy on remuneration for individual Directors
is to pay reasonable levels based on factors such as work responsibilities. Remuneration
for Directors (excluding Outside Directors and Directors who are Audit and Supervisory
Committee Members) comprises basic remuneration, remuneration based on individualassessment, performance-based bonus, and share-based remuneration. Remuneration for
Outside Directors and Directors who are Audit and Supervisory Committee Members
comprises only basic remuneration considering the duties involved in their roles.

2.

Basic remuneration is a fixed monthly remuneration paid in cash and is determined
comprehensively taking into account factors including position, work responsibilities, andremuneration levels at other companies.

3.

Remuneration based on individual assessment is cash remuneration based on factors suchas a qualitative assessment of the individual Director’s contribution to businessperformance which is paid monthly as an addition to basic remuneration in the following
business year. Performance-based bonus is cash remuneration that reflects key
performance indicators (KPI) aimed at enhancing awareness regarding improving businessperformance each business year. An amount calculated in accordance with consolidated
operating profit for each business year is paid as bonus at a fixed time each year.
4Furthermore, if there are any factors that require special consideration, they will bedeliberated at the Nomination and Remuneration Advisory Committee.
4.

Share-based remuneration is the granting of common shares subject to transfer restrictions(“restricted shares”) until the time of retirement at a fixed time each year with the purposeof promoting shared value with shareholders.

5.

This is considered by the Nomination and Remuneration Advisory Committee using
remuneration levels, etc. at companies of a similar size that belong to the same sector andbusiness category as the Company as benchmarks. The target ratio of different types of
remuneration, etc. at standard times is basic remuneration : remuneration based on
individual assessment : performance-based bonus : share-based remuneration =65:10:10:15.

6.

Regarding items related to remuneration for officers, remuneration for Directors(excluding Directors who are Audit and Supervisory Committee Members) is decided byresolution of the Board of Directors within the scope of the maximum amount approved by
the General Meeting of Shareholders after receiving recommendations from theNomination and Remuneration Advisory Committee, of which Outside Directors form amajority, to ensure appropriateness and the objectivity and transparency of the decisionmaking process. Remuneration for Directors who are Audit and Supervisory Committee
Members is determined through discussions among Directors who are Audit andSupervisory Committee Members within the scope of the maximum amount approved by
the General Meeting of Shareholders. The determination of the specific amount ofremuneration for individual Directors has been entrusted to the President andRepresentative Director by resolution of the Board of Directors, and the President andRepresentative Director makes these decisions based on recommendations from theNomination and Remuneration Advisory Committee.

(Evaluation of the Effectiveness of the Board of Directors)
Article 12
Every year, the Board of Directors analyzes and evaluates its overall effectiveness anddiscloses a summary of the results.
(Training for Directors)
Article 13
The Company holds training for Directors when they assume their office and provides anopportunity for them to acquire necessary knowledge on management, laws andregulations, and finance, etc., and to understand fully the roles and responsibilities
5

expected of them. Incumbent Directors are also given a continuing opportunity to renew
and update such knowledge as necessary.
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