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Corporate Governance

NIPPON FILCON’s basic policy on corporate governance and corporate governance system are as described below.

Basic Policy

NIPPON FILCON recognizes that the purpose and social responsibility of a listed company is to live up to the trust and expectations of stakeholders, ensure management transparency and soundness, sustain and develop the company, and create employment.
In addition, we consider the development and reinforcement of an efficient management structure that can utilize our business resources effectively and rapidly respond to changes in the business environment a critical management priority in the pursuit of sustained mid- to long-term growth in corporate value, and actively implement effective measures to accomplish this.

Corporate Governance System

Organization Chart

Basic Policy on the Development of Internal Control Systems

1. System to ensure that execution of duties by Directors and employees complies with Laws, Regulations, and the Articles of Incorporation
1)The Board of Directors’ Meeting decides important matters concerning management of our company and its group companies, and supervises the execution of duties by directors in accordance with laws and regulations, the Articles of Incorporation, Board of Directors’ Meeting Regulations, Corporate Officer Regulations, and others. 2)Auditors exercise the authority provided them by laws and regulations and audit the execution of duties by directors in accordance with the Board of Auditors’ Meeting Regulations, Corporate Officer Regulations, and Statutory Audit Standards. 3)The Corporate Social Responsibility Dept. audits all work performed by employees of our company and its group companies with respect to compliance with laws and regulations, the Articles of Incorporation, internal rules and regulations, and others, and the details and appropriateness of business execution procedures in accordance with Internal Audit Regulations and Subsidiary Management Regulations. 4)The Board of Directors’ Meeting continuously develops rules and regulations, the Articles of Incorporation, Rules of Employment, the Compliance Regulation of the Nippon Filcon Group, and other internal rules and regulations and seeks to inculcate compliance through dissemination and awareness-raising activities and guidance to ensure that employees behave in accordance with these rules and regulations. 5)If the Board of Directors’ Meeting becomes aware of a violation of the law or regulation, the Articles of Incorporation, or internal rules and regulations, or of behavior contrary to socially accepted norms, it sets up a compliance reporting channel for whistleblowing in accordance with the Internal Whistleblower Regulations for the purpose of accurately ascertaining and promptly correcting the matter. 6)The Board of Directors’ Meeting promulgates in the Code of Conduct a resolute attitude against and the severing of any relations with anti-social forces and develops a system for dealing with and responding to anti-social forces as an organization. In addition, the Board of Directors’ Meeting develops a system for notifying and closely cooperating with the police, legal counsel, and other external organizations.

2. Regulations and other systems related to the management of risks of loss
1)When important matters concerning execution of duties of our company and its group companies are deliberated in the Managing Directors’ Meeting, the participants share their understanding of possible business risks and keep them in mind. 2) When the Board of Directors’ Meeting deliberates on important matters concerning management of our company and its group companies or approves resolutions of such issues, each director deliberates on the matters on the basis of his/her understanding of possible business risks. 3)When a natural disaster or other unforeseen situation that could have a material impact on business continuity occurs, the Representative Director and President personally establishes a response headquarters and prepares emergency response guidelines to prevent the spread of damage and ensure the continuity of business activities, placing the highest priority on securing human lives. 4)The Board of Directors’ Meeting undertakes the geographic spread of production sites, including overseas sites, as a measure to counter the risk of natural disasters and maintains reasonable fire insurance and other accident insurance to assist in securing funds for recovery in the event a disaster strikes.

3. System for ensuring efficient execution of duties by Directors
1)The executive directors, in accordance with the decision-making rules stipulated in the Board of Directors’ Meeting Regulations, submit resolutions to the Board of Directors’ Meeting with respect to matters requiring important decisions in the business execution and execute business after completing discussion and approval procedures, and directors in charge duly report on the status of business execution in a timely manner. 2)To increase the efficiency of the execution of duties by directors, the executive directors attend the Managing Directors’ Meeting held once a week, in principle, and discuss overall business execution policies and other important matters concerning management of our company and its group companies. 3)The executive directors, with respect to the day-to-day execution of duties of employees, continuously develop the Segregation of Duties Rules that describe organizations and the segregation of duties and Official Authority Rules that clearly assign authority and promote systems that enable the persons responsible in each functional organization to rapidly make decisions within the scope of their authority. 4)The Board of Directors formulates the medium-term management plan and management policies, facilitates operational management, receives regular reports on the status of progress at each company and subsidiary, and discusses issues and formulates specific measures to address them. 5)To strengthen the management function, the Board of Directors’ Meeting introduces a corporate officer system to clarify the distribution of duties between management oversight and business execution

4. System for storing and managing information pertaining to the execution of duties by Directors
1)The Board of Directors’ Meeting continually develops the Internal Document Management Rules concerning management standards and the management system for information pertaining to the execution of duties by directors, prepares and stores documents in compliance with laws and internal rules and regulations, and manages documents so that they can be examined and copied by directors, auditors, or the accounting auditor. 2)The Board of Directors’ Meeting promptly discloses those matters whose disclosure is prescribed by laws or regulations or the Timely Disclosure Rules of the Tokyo Stock Exchange. 3)Our company rigorously manages undisclosed internal information in compliance with the Insider Trading Prevention Regulations and prevents illegal trading of the Company’s shares on the basis of insider information. 4)The Company manages information stored by electromagnetic means in accordance with its IT Control Regulations, Directive for Operational Handling Related to the IT Control Regulations, and Management Flow Chart for Responding to Computer Viruses.

5. System for ensuring the appropriateness of operations by the Corporate Group, which comprises NIPPON FILCON and its subsidiaries
1)Each company, etc., and related administrative departments manage and control the operations of subsidiaries in compliance with the provisions of the Segregation of Duties Rules and Subsidiary Management Regulations. 2)At the Managing Directors’ Meeting, quarterly status reports concerning important subsidiaries and others are submitted from those companies and discussed. 3)The Board of Directors’ Meeting dispatches directors or employees to important subsidiaries to serve as directors or auditors of those subsidiaries to supervise and audit the business executed by subsidiaries appropriately. 4)The Board of Directors’ Meeting, in principle, shares information and cooperates in the development of internal control systems of subsidiaries, taking into consideration matters such as the size and business characteristics of the subsidiary in question.

6. System relating to employees assigned to assist with the duties of the Board of Auditors’ meeting and matters relating to the independence of such employees
1)Our company shall assign employees to assist with the duties of auditors when necessary at the request of the auditors and shall appoint, dismiss, evaluate, transfer, or discipline such employees with the consent of the Board of Auditors’ Meeting. 2)Our company shall give auditors supervisory and control authority over such employees for assistance of the execution of duties and ensure their independence from the Board of Directors’ Meeting.

7. System for reporting to Auditors by Directors and employees, systems for reporting to other Auditors, and systems for ensuring that whistleblowers will not suffer any unfair treatment due to their submission of reports
1)Auditors attend meetings of the Board of Directors’ Meeting, management meetings, and other important meetings to ascertain and examine the decision-making process and the status of business execution. 2)Directors and employees of our company and its group companies, at any time, notify auditors of matters that auditors find it necessary and request in addition to matters designated by law. 3)When necessary for the performance of their duties, auditors may at any time request directors and employees to submit and explain certain relevant information without obstruction to the authority of auditors. 4) Our company prohibits disadvantageous treatment to the directors and employees of our company and its group companies due to their submission of such reports to the auditors and keeps all the directors and employees of our company and its group companies informed about that.

8. System to ensure that audits by the Audit Committee are conducted effectively
1) Auditors may at any time exchange opinions and information with the president and representative director, directors, the accounting auditor, and the head of the Corporate Social Responsibility Dept. on the basis of a relationship of trust. 2) When auditors ask for an advance payment of expenses for execution of their duties, our company promptly pays the expenses or debt, except where it is recognized that such expenses are unnecessary for execution of their duties.

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