Materiality

The ４℃ Holdings Group has identified risks and opportunities for its business from social issues and has identified materiality. The identified materialities will be addressed by the entire company as medium- to long-term issues.

In the brand business centered on the "４℃" brand, the company has been providing jewelry that satisfies the hearts of the women who wear it, mainly through the production, planning, and sales of jewelry.

The most important thing for a brand business is trust, which cannot be built overnight. Trust is the most important thing for a brand business, and it cannot be built overnight. We have expanded our brand business by consistently maintaining our commitment to quality and hospitality customer service.

In terms of quality, we have established the industry's highest standard quality control system that incorporates scientific methods, analyzing precious metals, identifying diamonds, and hand-checking specification aspects by specialized inspectors. The letters "４℃" engraved on products that meet our rigorous standards represent the trust and confidence that our jewelry is genuine.

In customer service, trainers equipped with specialized knowledge provide education based on a systematized curriculum from basics to application according to the career of each individual fashion advisor. With a wide variety of educational variations, including training, on-site guidance, and on-the-job training, we develop human resources capable of providing hospitality that exceeds expectations.

Under its 7th Mid-Term Business Plan, ４℃, which aims to become a "100-year brand," will work to create value for the next 50 years.

In the past, the jewelry market was limited to luxury or imitation items, such as luxury and costume. Under such circumstances, the "４℃" brand has pioneered the field of "fashion jewelry" and created new value with the desire for women to wear real jewelry in their daily lives.

The "４℃" brand concept of "water" has many faces, including rain, rivers, oceans, and snow. The values of women living in today's world are also expanding greatly. By adjusting the "４℃" brand to the diverse values of women and enhancing its fashionable nature, we will propose products that allow the women who wear them to express their individuality.

As specific action plans of the 7th Mid-Term Business Plan, we will work on restructuring fashion jewelry, expanding department store and EC channels, and deepening customerization and promoting OMO strategy. In fiscal 2024, the first year of the plan, we will increase the number of directors, renew our structure, and develop products by type. In addition, as department stores, the main channel for "４℃", are performing well, driven by luxury goods and inbound demand, we will also strengthen our response to the high price range.

For the steadily growing e-commerce channel, we will continue to evolve to enhance the value of the customer experience and achieve further growth. For customer conversion, we will improve our proposal capabilities by segmenting customer attributes and build engagement with loyal customers by creating special contacts with them.

Daily Fashion "Palette" aims to create a store that is loved by the community, always continuing to provide fun products and services for customers who want to enjoy life and fashion. From fashion clothing for the whole family to underwear, socks, clothing, and bedding, we offer everything at reasonable prices to support the daily lives of the community.

The store offers a wide range of trendy items necessary for a variety of lifestyles for people of all ages and for every season of the year, and seeks to create a store that is easily accessible in the neighborhood. We have been promoting a dominant strategy in the general apparel "Palette" business, mainly in western Japan, and have reached 100 stores by fiscal 2023. Currently, we are continuing to open dominant stores in the Kansai region and are also working to expand into the Kanto market. We intend to expand sales by opening 10 new stores each fiscal year during the 7th Mid-Term Management Plan period and 15 stores each fiscal year thereafter.

In order to make a successful entry into the Kanto market, we will assign store development and store operation personnel to the Kanto base and strengthen the organization for dominant development. In terms of merchandise, the Company will improve product lineups and strengthen its ability to make proposals on the sales floor, especially for women's related product groups. As for planned products, we will strive to improve reliability in terms of price and quality as important products that differentiate us from our competitors.

In addition, we will expand the operation of direct distribution and direct trade, and continue to reduce the cost ratio and strengthen price competitiveness.

As an OEM/ODM apparel and bag manufacturer with both planning and production functions, we are supported by a wide range of customers.

We have many overseas production bases in Bangladesh, China, and Southeast Asia, and can utilize the most suitable production base based on the customer's needs.

In Bangladesh, in particular, we produce knitted and woven fabrics for major mass retailers and specialty store chains, and we are developing cooperative factories not only in Dhaka, the capital city where our office is located, but also in Chittagong, a port city. The recent rapid depreciation of the yen has made the superiority of Bangladesh's production function recognized once again as a strength, and has led to the further enhancement of the country's importance as a production base.

Another strength is the ability of our in-house designers to make proposals. Our designers are involved in the selection of materials, creation of design drawings and specifications, and proposals to our suppliers, enabling us to promptly reflect customer requests and trends in our planning. In order to deliver safe and secure products to our customers and ensure reliability in quality, we have established a quality control office. We have established our own quality standards and are working on quality control to prevent product problems before they occur.

4℃ AQUA PROGRAM was established in 2008 as a joint project between “4℃”, which has a deep connection and empathy with water, and Japan Water Forum%sup%*1%sup%, which works to solve water issues in Japan and abroad.
With the aim of supporting women in developing countries with water-related problems, the program has so far conducted activities in the Republic of Kiribati%sup%*2%sup% and Sri Lanka%sup%*3%sup%.
Since 2016, the program has been implemented in Bangladesh, where ４℃ Holdings conducts local production.

AS’TY., Ltd. donates bath towels to welfare facilities for the elderly to celebrate their longevity on Respect-for-Senior-Citizens Day. We have continued this activity every year since 1972, and 2024 marks the 54th time. This activity has been greatly appreciated by the elderly, and we will continue it in the future.

Regarding issues related to sustainability, the Group has established the "Basic Sustainability Policy" in FY2021, considering it as an important issue to support the management foundation of the Group.

The "Basic Sustainability Policies" set forth four policies on "Environment," "Procurement," "Human Rights," and "Human Resources," and we are promoting efforts to realize a sustainable society through our business activities. Among them, we recognize our efforts to reduce environmental burdens as one of the materialities, and we are actively working to reduce greenhouse gas (GHG) emissions and address climate change under the "Environmental Policy".

We are making concrete efforts to achieve net-zero greenhouse gas (GHG) supply chain emissions (Scope 1, 2, and 3) by FY2050.

In fiscal 2022, we switched to renewable energy sources for the electricity used at our headquarters building, the Quality Control Center of FDC Products Co. The Group aims to achieve a 50% introduction ratio of renewable energy by FY2030, and will continue to promote the switch to renewable energy at stores and Group company facilities.

In addition, we are actively promoting the use of LED lighting, energy conservation, and paperless operation in our stores. We are also working with our suppliers to reduce emissions throughout the supply chain by more closely calculating actual emissions.

We will continue to work with our suppliers to realize a decarbonized society.

In January 2023, the Company endorsed the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) established by the Financial Stability Board (FSB).

We are working to disclose information in accordance with the four disclosure categories of "Governance," "Risk Management," "Strategy," and "Indicators and Targets," with the aim of understanding the risks and opportunities that climate change may pose to our business and responding appropriately to these risks and opportunities.

We have also been responding to CDP questionnaires since 2022, resulting in a score of B- in 2023.

(F.D.C. Products Co., Ltd. is developing a sustainable brand "cofl by ４℃" based on the concept of "beautiful relationship between the earth and jewelry.

Using environmentally friendly materials such as recycled metals, lab-grown diamonds, and upcycled stones, the brand proposes a new type of jewelry for the coming age that reduces environmental impact while maintaining the beauty and emotion of the piece when you hold it in your hand.

In addition, by donating 1% of sales to "more trees," a forest conservation organization*, we are promoting efforts to protect the beautiful forests of Japan, which are close to our hearts. 1,000 yen is equivalent to the planting of one tree in the "more trees forest.

The "more trees" incorporated association is a forest conservation organization founded by musician Ryuichi Sakamoto and headed by architect Kengo Kuma. The organization is engaged in a variety of activities with the keyword "Connecting cities and forests.

In our "Basic Sustainability Policy," we uphold respect for people as our basic philosophy, and based on the recognition that "human resources" are the Group's greatest asset, we aim to enhance corporate value and realize a sustainable society by proactively working to develop diverse human resources.

We also provide opportunities and an environment that encourages employees to develop their skills and build their careers through educational programs, training, and on-the-job training. We are also committed to promoting diversity by striving to create an environment in which individuals can maximize their abilities and play an active role regardless of gender, disabilities, employment status, work style, and other differences.

Even before the term "human capital management" became widespread in the world, we had been working on "human resource development" based on this concept, and it is one of the most important values for our group.

We have systematized "Human Resource Development and Education" in order to implement continuous education for sustainable human resource development from generation to generation.
We are developing education programs by job level based on the three goals of "management human resource development," "fostering corporate culture," and "enhancing business value.

YONDSEY HOLDINGS Group Education System Chart

To develop the next generation of leaders, we offer three educational programs: the "Young Managers' Roundtable," in which participating members present the challenges and future visions of their companies from a manager's perspective, the "Advanced School," a three-year management training school, and the "Women's Activity Support Program" for section managers and above in the group. The "Advanced School," a three-year management training school, and the "Women's Activity Support Program.

We have set a target of having 40.0% female managers by FY2030. To achieve this goal, the "Women's Career Advancement Support Program" includes study sessions led by female outside directors, participation in various outside seminars, and one-on-one meetings with the director in charge to enhance their perspectives and help them step up to management positions.

One of the main objectives of these three educational programs is to build relationships across the Group.

We promote initiatives aimed at passing on values and principles that are important in management, organizational operations, and human resource development.

At the "honest management school," named after the founder's legacy, participants learn about the history of our group, the values and principles of management that have been carefully passed down since our founding, and at the same time discuss issues related to the development of human resources.

In addition, through "compliance training" and "culture reform" initiatives, we are working to build relationships of trust and foster a sense of unity.

We provide education and training to develop capabilities and professional skills that enhance business value.

The "4°C Holdings Business School," which has been held since fiscal 2022, provides young employees up to their fifth year with the company with systematic training in coefficients, IT, business stance, marketing, and other basic knowledge that they need to acquire regardless of their company or job position, in order to develop their skills as businesspersons. The program aims to develop the skills of businesspersons by providing systematic training in basic knowledge such as coefficients, IT, business stance, marketing, etc., which are necessary regardless of the company or job position. The curriculum is designed to take a standard five-year period, but the pace can be varied depending on the individual's willingness to learn and the speed at which the individual learns.

We believe that the health of each and every employee is essential for practicing human capital management.

We aim to create an environment in which all employees of our group can work with vitality, not only in terms of their physical health, but also in a state of "physical, mental, and social well-being.

We are also actively working to improve work-life balance by introducing a teleworking system and reducing overtime hours, and to encourage male employees to take parental leave.

We aim to be a company that is trusted by our customers.
We aim to be a company that gives dreams to its employees.
We aim to be a company that contributes to society.
We aim to be a company that fulfills the expectations of our shareholders.
Our group's management philosophy is based on the fundamental principle of respect for people, and our greatest mission is to contribute to the creation of comfortable lives for people through the provision of products and services.

Respect for human rights is the Group's fundamental materiality in implementing its management philosophy.

The "Human Rights Policy" of our group declares that we respect the human rights of all people involved in our group's corporate activities, and we place importance on the following items.

Elimination of all forms of discrimination and harassment
Elimination of forced labor, child labor, and human trafficking
Avoidance of complicity in human rights abuses
Avoidance of complicity in human rights abuses
Respect for the fundamental rights of employees

We respect the fundamental human rights of individuals and their individuality and diversity, and will not engage in any form of discrimination or harassment based on race, ethnicity, nationality, gender, age, religion, language, disability, sexual orientation, or gender identity.

To prevent harassment, we conduct annual harassment training for all employees to improve their literacy and learn specific responses to avoid being either the perpetrator or the victim of harassment.

In addition, we have established contact points both inside and outside the company for employees and suppliers to consult with us about incidents that occur in the course of our corporate activities, thereby creating a safe working environment for everyone.

(FDC Products, Inc. has initiated human rights due diligence in order to respect the human rights of all people involved in all of our corporate activities.

Based on our human rights commitments (４℃ Holdings Human Rights Policy and F.D.C. Products Basic Purchasing Policy), we identify human rights risks for each stakeholder, conduct assessments, take actions to prevent and mitigate risks, and communicate with stakeholders through information disclosure. We are also working on communication with stakeholders by disclosing information.

By repeating this series of processes, we will achieve respect for human rights and sustainable corporate activities throughout the supply chain. In the future, we will work to expand the scope and improve the accuracy of our assessments, and aim to implement them throughout the ４℃ Holdings Group.

The Group believes that the essence of corporate governance is to ensure the transparency and fairness of decision-making, to make full and effective use of its management resources, and to increase the vitality of management.

(1) Respect the rights of shareholders and ensure their equality.
(2) Build good and smooth relationships with stakeholders, including shareholders.
(3) Ensure transparency through appropriate disclosure of corporate information.
(4) Establish a system to utilize outside directors to enhance the effectiveness of the Board of Directors' oversight of business execution.
(5) Engage in constructive dialogue with shareholders who have investment policies that are consistent with the interests of shareholders over the medium to long term.

From the perspective of further enhancing corporate governance by strengthening the supervisory function of the Board of Directors, we have chosen to establish a company with an Audit Committee in order to improve corporate value over the medium to long term by utilizing the functions of outside directors who do not execute operations themselves.

The Audit Committee holds regular monthly meetings and extraordinary Audit Committee meetings as necessary to audit the execution of duties by representative directors and other executive directors, and to monitor and verify the status of the establishment and operation of internal control systems.

We recognize that constructive dialogue with shareholders and investors is indispensable for the Group's sustainable growth and enhancement of corporate value over the medium to long term, and we strive to enhance such dialogue.

For analysts and institutional investors, we hold biannual financial results briefings with the Representative Director and President as the main speaker. The director in charge also responds to individual interviews for institutional investors.

For individual shareholders and investors, we strive to disclose information in a fair manner through our website. Opinions and requests obtained through these dialogues are fed back to the management team and used to improve management.

We will continue to enhance the quality of our management by deepening communication with investors and other stakeholders and proactively incorporating insights gained through dialogue.

We believe that enhancing the effectiveness of the Board of Directors is crucial to achieving sustainable growth and maximizing corporate value.

In order to confirm whether the effectiveness of the Board of Directors is ensured, we conduct a questionnaire once a year for the directors, and the Board of Directors deliberates on the results of the questionnaire. Based on the results, the Board of Directors analyzes and evaluates the effectiveness of the Board of Directors, identifies action items for the current fiscal year, and works to ensure the effectiveness of the Board of Directors.

≪Evaluation Items
(1) Management of the Board of Directors meetings (frequency of meetings, time required, composition of materials, provision of information, etc.)
(2) Agenda of the Board of Directors meetings (agenda selection, regular reports, etc.)
(3) Functional aspects of the Board of Directors meetings (e.g., multifaceted deliberations, level of discussion, etc.)