Prima Meat Packers : （Delayed) Corporate Governance Report

end two cross-shareholding agreements held by consolidated subsidiaries that no longer represented value for money. The shares held as part of these arrangements were sold off. While other arrangements were somewhat problematic in terms of transaction profitability, significance of holding them was recognized to a certain extent. It was judged that the Company was not in a position to decide to sell these off immediately, and it was decided to continue these arrangements. Furthermore, the two cross-shareholding arrangements that had been decided to be ended in the past fiscal year were sold off.

Exercise voting rights by making a comprehensive judgment from the perspective of, for example, the issuing company's establishment of an appropriate governance system and appropriate decision-making that leads to the enhancement of corporate value over a medium- to long-term. In addition, the Group will engage in dialogue with issuing companies as necessary. When the Group decides that it cannot agree with the company's proposal, it may consider the necessity of selling off shares.

[Principle 1.7 Related Party Transactions]

The Company shall require the approval of the Board of Directors for any transactions involving conflicts of interest between the Group and its Directors, Corporate Auditors and Executive Officers. The Company has a system to report to the Executive Advisory Committee and the Board of Directors any significant transactions that would result in a transaction amount exceeding a certain level when conducting transactions with controlling shareholders, etc.

The Company has established a system to manage transactions between related parties by reporting annually to the Board of Directors on the existence or non-existence of related party transactions between the Group and Directors, Corporate Auditors and Executive Officers, and reporting annually to the Executive Advisory Committee and the Board of Directors on the amount of transactions with controlling shareholders, etc. When conducting transactions including the procurement of raw materials with major shareholders, transactions are finalized upon taking into consideration the prevailing market prices by taking measures such as obtaining quotations from other companies.

The Group's code of conduct states "We realize the comfort and affluence of our employees and ensure a safe and comfortable working environment. We also respect the personality and individuality of our employees." In light of this, the Medium-term Business Plan outlines a goal of "developing human resources, improving job satisfaction, and fostering a mindset of innovation." In order to achieve sustainable growth, the Company considers it important to hire diverse employees in terms of gender, age, nationality, disability, lifestyle, values, and other factors, promote hiring and appointment on the basis of personal character, and create flexible environments and systems that ensure a comfortable workplace for all.

Regarding women, in the action plan based on the Act on the Promotion of Female Participation and Career Advancement in the Workplace, the Company has outlined a plan to raise the percentage of women in middle management posts to 4% or higher by the end of March 2025. The percentage was 1.2% in fiscal 2018, 1.7% in fiscal 2019, and 2.0% in fiscal 2020.

As for foreign nationals, there are just a few staff-level employees, and none are appointed as middle management. The Company will set a target for foreign national employees when the proportion of net sales from overseas surpasses 10%. It should be noted that numerous foreign national middle managers have been appointed in overseas subsidiaries.

Concerning mid-career hires, the Company is recruiting proactively. A target for 12 mid-career hires was set for fiscal 2020, and nine were hired. A target for 12 mid-career hires has been set for the current fiscal year.

In order to achieve sustainable growth, the Company considers "creating a workplace that promotes job satisfaction" to be important, and believes it is necessary to "respect and promote diverse workstyles," "hire and develop excellent human resources," and "conduct occupational health and safety in consideration of physical and mental health." In order to enhance the employee engagement, the Company has established an employee-satisfaction revolution project team and is developing its internal environment.

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[Principle 2.6 Roles of Corporate Pension Funds as Asset Owners]

The Company manages corporate pension funds with the Prima Meat Packers Corporate Pension Fund. Because the management of corporate pension funds impacts not only stable asset formation for employees, but also the financial standing of the Company, personnel with the necessary experience and disposition to manage assets are assigned to the corporate pension fund, a "Basic Policy on Pension Asset Management" has been outlined, and an Asset Management Committee comprising members such as people in charge of human resources and accounting departments and representatives of the labor union to monitor the selection and management of investment products.

The asset management contracting organization adopted by the corporate pension fund accepts the Stewardship Code, and the Company monitors whether appropriate measures are being taken concerning the exercise of voting rights, etc., by this organization.

The personnel assigned to the corporate pension fund, particularly the director of operations, participate in training such as those run by the Pension Fund Association and those run by the asset management contracting organization in order to acquire necessary operational knowledge.

Furthermore, representatives of the labor union and employees are selected as directors and delegates of the corporate pension fund, and a system has been established to appropriately manage conflicts of interest between corporate pension beneficiaries and the Company.

[Principle 3.1 Full Disclosure]

Understanding the objectives of the Corporate Governance Code, the Company proactively discloses information on the following items in accordance with laws and ordinances, and the basic policy of the Company in order to be a company that is trusted by stakeholders.

1. Based on the management philosophy of "be candid and sincere," "create quality products that sustain Prima Group," and "provide value to customers through continuous innovation," the Company aims to be a "company that customers always love and support" through its management policy of strengthening marketing, development and product-commercialization capabilities to increase the scale and quality of sales and profits while promoting management that emphasizes ESG principles.
   Furthermore, the Company formulates and discloses a three-year rolling plan for its Medium-term Business Plan every year.
2. The Company works to strengthen corporate governance in order to practice highly transparent and honest management and to appropriately and flexibly implement decision-making in response to changes.
   A Corporate Governance Basic Policy has been formulated and disclosed for various stakeholders such as shareholders, business partners and customers.
3. Regarding the policy and procedure for deciding the remuneration for Directors, the total annual amount shall be resolved at the Annual General Meeting of Shareholders, and the specific amount of individual remuneration shall be deliberated by the Executive Advisory Committee, which comprises the President and Representative Director and Independent Outside Directors, and shall be decided based on certain standards resolved by the Board of Directors, thereby ensuring transparency.
4. Regarding the appointment and dismissal of senior management and the nomination policy for candidates for Directors and Corporate Auditors, comprehensive consideration is given to necessary knowledge and experience, appropriate risk management and supervision of business execution, the balance and ability to cover each function and business department of the Company, and other factors. In terms of procedures, candidates are proposed by the President, and are determined by the Board of Directors after deliberation by the Executive Advisory Committee.
5. Reasons for the appointment, dismissal, and nomination of candidates for Directors and Corporate Auditors are stated in the Notice of the Annual General Meeting of Shareholders.

[Supplementary Principle 3.1.3 Initiatives on Sustainability, etc.]

Material issues (materiality) for sustainable growth, such as environmental problems, investment in human capital, and intellectual property initiatives are disclosed in the Integrated Report.

[Supplementary Principle 4.1.1 Roles and Responsibilities of the Board (1)]

The Company defines the matters to be resolved by the Board of Directors itself as follows in the Board of Directors Rules.

1. Matters concerning basic management policy
2. Matters concerning the Annual General Meeting of Shareholders

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1. In addition to the preceding items, matters that should be resolved by the Board of Directors in accordance with laws and ordinances, the Articles of Incorporation, or the resolution of the Annual General Meeting of Shareholders, as well as other matters deemed necessary by the Board of Directors
   Matters outside of those listed above are delegated to Senior Management and the heads of business operation organizations based on the Rules for Division of Operations and Responsibilities and the Rules for Authority and Responsibility.

[Principle 4.9 Independence Standards and Qualification for Independent Outside Directors]

The Company has formulated criteria for the independence of Outside Directors and discloses them on its website.

[Supplementary Principle 4.10.1 Appropriate Involvement and Advice from Independent Outside Directors by Establishing Independent Nomination and Remuneration Committees]

The Company is a company with a Board of Corporate Auditors. There are currently two Independent Outside Directors (total of five Directors), and they do not form a majority. However, an Executive Advisory Committee comprising the President and Representative Director and Independent Outside Directors (currently two) has been established to deliberate on the nomination and remuneration of directors, etc., strengthening independence, objectivity, and accountability.

[Supplementary Principle 4.11.1 Preconditions for Securing the Effectiveness of the Board of Directors and Board of Corporate Auditors]

The nomination policy for the Board of Directors is to nominate "persons with extensive knowledge and experience in business operations and management, who fully understand the social responsibility and mission and who can execute business operations and management fairly and adequately based on a high level of self- discipline," and a diverse range of human resources are selected as candidates. Furthermore, the skills, etc., in line with factors such as the Company's management environment and business characteristics are stated in the Corporate Governance Basic Policy. When a proposal for the appointment of Directors is on the agenda, the skills of candidates are stated on the Notice of the Annual General Meeting of Shareholders and skill matrices of the current Directors are stated in the Integrated Report.

[Supplementary Principle 4.11.2 Preconditions for Securing the Effectiveness of the Board of Directors and Board of Corporate Auditors]

In order to ensure that Directors and Corporate Auditors are able to allocate the necessary time and effort to fulfill their roles and responsibilities, concurrent duties are kept within reasonable limits. The status of concurrent duties is stated in documents such as the Notice of the Annual General Meeting of Shareholders, the Business Report, and the Corporate Governance Report.

[Supplementary Principle 4.11.3 Preconditions for Securing the Effectiveness of the Board of Directors and Board of Corporate Auditor]

A questionnaire was conducted among all Directors and Corporate Auditors to evaluate the effectiveness of the Board of Directors. As a result, it was judged that the effectiveness of the Board of Directors has been ensured on the whole.

For more details, please see the Summary of the Analysis Results of the Fiscal 2020 Evaluation of the Effectiveness of the Company's Board of Directors and Future Actions published on July 5, 2021.

[Supplementary Principle 4.14.2 Director and Auditor Training]

Outside Directors and Outside Corporate Auditors receive explanations about matters such as business, operations, and issues from each department and work to deepen their understanding of the Group. Directors and Executive Officers use opportunities such as training run by external organizations to demonstrate higher leadership skills and develop a strategic perspective.

Corporate Auditors proactively participate in various seminars and opinion exchange gatherings with other industries to improve their auditing skills related to business and accounting.

[Principle 5.1 Policy for Constructive Dialogue with Shareholders]

The Company has formulated a "Policy on Systems and Initiatives to Promote Constructive Dialogue with Shareholders" in order to contribute to the sustainable growth of the Company and improve corporate value over the medium- to long-term. The basic policy outlines the following four items.

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1. The Company will proactively promote constructive dialogue with shareholders, primarily through the President and senior management, for sustainable growth and improvement of corporate value.
2. Respecting the principles of the Japanese version of the Stewardship Code, the Company will positively respond to requests from institutional investors and other shareholders for dialogue (interviews).
3. Opinions obtained through dialogue are shared with the President and senior management at the Executive Council and the Board of Directors, and actions to address them will be discussed as necessary.
4. The Officer in charge of dialogue promotion will be the Officer in charge of the General Affairs/Public Relations Departments.

2. Capital Structure

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