Corporate Governance Basic Approach Approach to Overall Balance, Diversity and Scale of the Board of Directors (Corporate Governance Code, Supplementary Principle 4.11.1) Through the realization of effective corporate governance, expectations of stakeholders such as shareholders, we aim to prevent situations that might harm corporate customers, other business partners, our offi cers and Fuji Oil Holdings has established a system in which the notifi cation that it has fi ve independent directors/ value, such as violation of laws and regulations, fraud or employees, and society. Board of Directors engages in energetic, substantive independent Audit & Supervisory Board members (including misconduct, and to strive for sustainable growth and discussion while maintaining the appropriate number of two outside Audit & Supervisory Board members) who fulfi ll WEB Fuji Oil Holdings Corporate Governance Guidelines improvement of corporate value over the medium to long See our website for more information about our basic approach to members necessary to make prompt decisions. There are the standards related to independence set by the Tokyo term. In addition, we have positioned corporate governance corporate governance. currently 10 directors. We select candidates from inside and Stock Exchange. We strive to ensure the objectivity and (https://www.fujioilholdings.com/en/ir/policies_and_systems/governance/) as an important mechanism for decision-making that is outside the Company who have excellent character and transparency of the candidate selection process based on transparent, fair, prompt and resolute in order to meet the knowledge. In particular, we select outside directors who the reports of the Nomination and Compensation Advisory have excellent knowledge in specialized fi elds including Committee, which is chaired by an outside director. Status of Corporate Governance (As of June 20, 2019) corporate management and business strategy. The board At present, the Board of Directors is considering the issue aims to help increase corporate value by participating in the of the most suitable structure for the board. From fi scal Company name Fuji Oil Holdings Inc. formulation of management strategies and supervision of 2019, the Company has added one outside director to Company with an Audit & Supervisory Board Institutional design business execution from various points of view. strengthen management oversight, thus increasing the Pure holding company Organizational system The Company believes that the diversity of the Board of ratio of outside directors to 30%. However, the ratio of 3 (including one female) Number of outside directors Directors (including gender, nationality, and expertise) is outside directors has not reached one-third, so we will Composition important, and has appointed three outside directors (one consider how to address this issue in the future. Independent Audit and Supervisory Reference: Meetings Chairperson Total Internal directors outside directors Board members during FY 20181 of whom is female). The Company has also provided 4 Members of the Board President (Hiroshi Shimizu) 14 7 3 (including 2 20 outside members) Assessment of Board Effectiveness President (Hiroshi Shimizu) 102 7 0 Observer 16 Management Council We assess the effectiveness of the Board of Directors in a manner that ensures objectivity and transparency, and use the Independent outside director assessment to improve our corporate governance. Nomination and Compensation 5 2 3 Observer 11 Advisory Committee (Kazuhiro Mishina) In fi scal 2018, we focused on confi rming progress on issues presented in the previous year’s assessment. Internal director 1. Strengthen the supervisory function of the Board of Directors of the holding company ESG Committee 55 — — 2 (Takashi Kadota, C”ESG”O) Issues for improvement identified 2. Clarify the role of the Nomination and Compensation Advisory Committee and further improve its functions in the FY 2017 assessment 4 3. Enhance the diversity of the Board of Directors Standing Audit & Supervisory Board Audit & Supervisory Board 40 0(including 2 13 member (Makoto Shibuya) • Officers assessed: 5 directors and 2 Audit & Supervisory Board members (confirmation of progress on issues: President outside members) Third-party interviews and analysis of and CEO, outside directors, 2 standing Audit & Supervisory Board members; General questions to new directors: 3 new results based on anonymity Notes: 1. April 2018 to March 2019 directors (including 1 outside director)) 2. Includes three executive officers appointed by the president Improvements Organizational reform (review of Corporate Officer system) enhanced the diversity and clarified the roles of the Board of Directors by increasing the number of outside directors by one. Results of the FY 2018 Future Initiatives Corporate Governance Structure (As of June 20, 2019) assessment Enhance group governance in line with large-scale acquisition Points for Improvement and Enhancement of Functions 1. Appropriate supervision to enhance discussions and execution of medium- and long-term strategy 2. Clarify the roles and functions of the Nomination and Compensation Advisory Committee General Meeting of Shareholders Future Policies Accounting auditor Audit & Supervisory Board Board of Directors Nomination and Compensation The Board of Directors discussed and studied the assessment based on reports from third-party organizations. As a result, Advisory Committee the board decided to start formulating an action plan for the issues listed in the assessment. Internal director/ Internal Audit & Supervisory Board member C Comply Independent outside director/ (Chairperson) Address Corporate Governance Code (CGC) E Outside Audit & Supervisory Board member 7 members Explain ESG Committee Items Before the CGC was revised (announced July 2018) After the CGC was revised (announced December 2018) Updated CGC (announced July 2019) E Update C Revision C Update Internal whistleblower system Principle 1.4 Status of and criteria for holding Status of holding and approach to cost of capital Status of holding and approach to Cross-Shareholdings cost of capital External lawyer Internal whistleblower hotline (External contact) (Japan) E New E Principle 2.6: Roles of Corporate — Status of planned human resource assignment/ Same as at left Compliance helpline Pension Funds as Asset Owners (outside Japan) deployment initiatives Management Council Internal Audit Group E Revision E Update C Supplementary Principle 4.11.1 Approach to changing the ratio of Approach to changing the ratio of Board of Directors outside directors outside directors Supplementary Principle 4.11.3 C C C Update Assessment of Board Effectiveness FY 2017 assessment Same as at left FY 2018 assessment 32 FUJI OIL GROUP Integrated Report 2019 33 Corporate Governance Highlight requirements for independence stipulated by the stock advise on the nomination and compensation of outside exchange on which the Company is listed with respect to directors and outside Audit & Supervisory Board members. Principle 1.4: Cross-Shareholdings independence for appointing outside directors and outside Outside Audit & Supervisory Board members regularly Audit & Supervisory Board members. exchange opinions at Audit & Supervisory Board meetings, • Current holding status of cross-shareholdings: 26 cross-held stocks (54.9% reduction on a total acquisition price basis Outside directors supervise management from the and strive for mutual cooperation by sharing information compared with March 31, 2016) perspective of shareholders by attending meetings and and exchanging opinions with internal audit personnel and • We will carefully review whether the benefi ts and risks associated with holdings match the cost of capital calculated using expressing their opinions from an objective point of view. the accounting auditor. One Outside Audit & Supervisory CAPM, and will continue to verify propriety and reduce holdings. Outside directors also serve on the Nomination and Board member also serves on the Nomination and • Approach to cost of capital: Cost of Equity = Risk-free rate* + β value × Risk premium Compensation Advisory Committee, which is an advisory Compensation Advisory Committee as an observer. • Approach to exercising voting rights for specifi c holdings: Aligned with the Company’s holding policy and improves the corporate value of the issuing company body chaired by an outside director, and deliberate and * Uses weighted average risk-free rate taking into account the ratio of shares held by domestic and foreign institutional investors Name Concurrent Post Reasons for Appointment Mr. Mishina has been active for many years at the forefront of research in corporate economics, including management Outside Director University strategy and managerial theory. We believe that we can maintain objective, impartial and fair supervision of our business Compensation System Professor execution by having him attend board meetings to monitor and supervise management from an independent, objective Kazuhiro Mishina viewpoint using his highly specialized learning and extensive experience. The calculation method and actual compensation for fi scal 2018 are as follows. We have completely revised the Ms. Ueno has many years of experience working as a marketing consultant for numerous companies, local governments, etc. She compensation system, and will employ the new system after the required approval procedures. also operates her own business as a manager, works as an outside director for listed