NISSIN FOODS GROUP

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Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Supervision in Management

1. Organizational Composition and Operation

Organization Form Company with an Audit & Supervisory Board

Directors

Maximum Number of Directors Stipulated in Articles of Incorporation 15
Term of Office Stipulated in Articles of Incorporation 1 year
Chairperson of the Board President
Number of Directors 8
Appointment of Outside Directors Appointed
Number of Outside Directors 5
Number of Independent Officers Designated from among Outside Directors 3

Outside Directors’ Relationship with the Company (1)

Name Attribute Relationship with the Company (※)
a b c d e f g h i j k
Ken Kobayashi From another company
Masahiro Okafuji From another company
Masato Mizuno From another company
Yukiko Nakagawa Academic
Eietsu Sakuraba Other
  • Categoriesfor “RelationshipwiththeCompany”
  • “◯” when the Director presently falls or has recently fallen under the category;
    “△” when the Director fell under the category in the past;
  • “●” when a close relative of the Director presently falls or has recently fallen under the category; and “▲” when a close relative of the Director fell under the category in the past
  • aExecutive (a person who executes business; hereinafter, the same) of the Company or its subsidiary
  • bNon-executive director or executive of a parent company of the Company
  • cExecutive of a fellow subsidiary of the Company
  • dParty whose major business partner is the Company or an executive thereof
  • eMajor business partner of the Company or an executive thereof
  • fConsultant, accounting professional or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as a director
  • gMajor shareholder of the Company (or an executive of the said major shareholder if the shareholder is a corporation)
  • hExecutive of a business partner of the Company (which does not correspond to any of d., e., or f.) (the Director himself / herself only)
  • iExecutive of a corporation to which outside officers are mutually appointed (the Director himself / herself only)
  • jExecutiveofacorporationthatreceivesadonationfromtheCompany(theDirectorhimself/herselfonly)
  • kOther

Outside Directors’ Relationship with the Company (2)

Name Designation as Independent Officer Supplementary Explanation of the Relationship Reasons for Appointment
Ken Kobayashi Ken Kobayashi concurrently serves as Chairman of the Board of Mitsubishi Corporation. The Company is engaged in transactions including sales of products and procurement of materials with Mitsubishi Corporation. Since joining Mitsubishi Corporation, Mr. Ken Kobayashi has serviced various positions including General Manager of Singapore Branch, Division COO of Plant Project Division, Division COO of Ship, Aerospace & Transportation Systems Division, Group CEO of Industrial Finance, Logistics & Development Group, and assumed the post of President and CEO from June 2010 to March 2016, and the current post of Chairman of the Board since April 2016, chairing the Board of Directors. He has superior knowledge acquired through his extensive business experience at Mitsubishi Corporation and extensive experience as a management executive of a general trading company. When making management decisions, he forms opinions and makes judgments from an objective standpoint, and has fulfilled the role of an overseer and supervisor of the execution of Directors’ duties.
Accordingly, the Company has determined that he is a necessary resource to increase the Group’s corporate value going forward, and the Company has appointed him as Outside Director.
Masahiro Okafuji Mr. Masahiro Okafuji concurrently serves as Chairman & Chief Executive Officer of ITOCHU Corporation. The Company is engaged in transactions including sales of products and procurement of materials with ITOCHU Corporation. Since joining ITOCHU Corporation, Mr. Masahiro Okafuji has served primarily in textile business, assuming posts of President of Textile Company, President of ITOCHU Corporation from April 2010 to March 2018, and the current post of Chairman & Chief Executive Officer since April 2018. He has superior knowledge acquired through his extensive business experience at ITOCHU Corporation and extensive experience as a management executive of a general trading company. When making management decisions, he forms opinions and makes judgments from an objective standpoint, and has fulfilled the role of an overseer and supervisor of the execution of Directors’ duties.
Accordingly, the Company has determined that he is a necessary resource to increase the Group’s corporate value going forward, and the Company has appointed him as Outside Director.
Masato Mizuno Although there are dealings between MIZUNO Corporation, at which he serves as Chairman and the Company, the amount of those dealings is less than 1% of the net sales of either party. Thus, the Company has determined that there is no risk of a conflict of interest with ordinary shareholders Mr. Masato Mizuno has extensive experience and superior knowledge as a management executive at MIZUNO Corporation. When making management decisions, he forms opinions and makes judgments from an objective standpoint, and has fulfilled the role of an overseer and supervisor of the execution of Directors’ duties. Furthermore, he provides timely and appropriate advice with regard to “Promoting global branding,” “Focusing on priority locations,” and “Developing and strengthening human resources for global management,” as set out in the Medium-Term Business Plan. In addition, he has assertively stated his opinions and attended meetings of the Management Advisory Committee as a member of the committee.
Accordingly, the Company has determined that he is a necessary resource to increase the Group’s corporate value going forward, and the Company has appointed him as Outside Director. Although there are dealings between MIZUNO Corporation, at which he serves as Chairman and the Company, the amount of those dealings is less than 1% of the net sales of either party. Thus, the Company has determined that there is no risk of a conflict of interest with ordinary shareholders, and the Company has appointed him as Independent Director.
Yukiko Nakagawa No items to report. Dr. Yukiko Nakagawa earned a doctor’s degree at the Graduate School of Business and Commerce of Keio University and has been continuing with research on diversity and innovation. At the same time, she has been holding teaching positions at Rikkyo University and other educational institutions in Japan and overseas. In such ways and others, she has accumulated many years of business experience as an expert in human resource management as well as human resource development on a global scale and insight and knowledge as an academic. Although she has no experience of direct involvement in corporate management, she has extensive experience in supervision of corporate management gained by working as an outside director at other corporations. Therefore, the Company has determined that she will carry out her role in an appropriate manner as an overseer and supervisor of the execution of Directors’ duties.
Accordingly, the Company has determined that her high level of expertise, knowledge, and her broad-ranging experience, are necessary to increase the Group’s corporate value going forward, and the Company has appointed her as Outside Director. There are no special dealings between Rikkyo University, at which she serves as Professor of Graduate School of Business Administration and the Group. Thus, the Company has determined that there is no risk of a conflict of interest with ordinary shareholders, and the Company intends to designate her as Independent Director.
Eietsu Sakuraba No items to report. Mr. Eietsu Sakuraba has served as Director-General of the Food Industry Bureau and in other senior roles in the Ministry of Agriculture, Forestry and Fisheries, and is also holding a teaching position at Faculty of Agriculture of Takasaki University of Health and Welfare, in the subject on the agricultural diversification. He has extensive experience as mentioned above and superior knowledge as an expert of food safety, reliability and environmental issues in the area of food. In addition, although he has no experience of direct involvement in corporate management, the Company has determined that he will carry out his role of overseeing corporate management, providing advice and the like in an appropriate manner from an objective viewpoint based on his high level of expertise and knowledge, while retaining independence and fairness.
Accordingly, the Company has determined that he is a necessary resource to increase the Group’s corporate value going forward, and the Company has appointed him as Outside Director. There are no special dealings between the Group and Yamato Group Research Institute, at which he serves as Executive Analyst. Thus, the Company has determined that there is no risk of a conflict of interest with ordinary shareholders, and the Company intends to designate him as Independent Director.
Voluntary Establishment of Committee(s) Equivalent to Nominating Committee or Remuneration Committee Established

Committee’s Name, Composition, and Chairperson’s Attributes

Committee’s Name Total Committee Members Full-time Members Internal Directors Outside Directors Outside Experts Other Chairperson
Committee Equivalent to Nominating Committee Management Advisory Committee 8 0 3 3 0 2 Outside Director
Committee Equivalent to Remuneration Committee Management Advisory Committee 8 0 3 3 0 2 Outside Director
Committee Equivalent to Nominating Committee Committee Equivalent to Remuneration Committee
Committee’s Name Management Advisory Committee Management Advisory Committee
Total Committee Members 8 8
Full-time Members 0 0
Internal Directors 3 3
Outside Directors 3 3
Outside Experts 0 0
Other 2 2
Chairperson Outside Director Outside Director

Supplementary Explanation

[Purpose]
The “Management Advisory Committee,” which is chaired by an Independent Outside Director and the majority of which are Independent Officers, has been established since 2015 in order to strengthen the supervisory functions of the Board of Directors and at the same time ensure transparency and fairness in management.
[Duties]
The “Management Advisory Committee” meets three times a year in principle, as an advisory body to the Board of Directors, to deliberate the following matters, reports the result to the Board of Directors and thereby contributes to deliberation and resolution by the Board of Directors.
1. Selection and dismissal of members of the management team
The Committee deliberates policies and criteria for the selection or dismissal of members of the management team, including candidates for Director. In addition, the Committee deliberates and supervises a series of the procedures.
2. Remuneration of Directors
The Committee deliberates and supervises the policy for paying remuneration to Directors and the validity of the determination process from the viewpoint of transparency and fairness of management and the like.
3. Other items regarding corporate governance
In addition to the above, the Committee raises and deliberates agenda items necessary for further improving the governance system of the Company as appropriate. Specifically, the Committee considers the evaluation of management of the Board of Directors, company’s organizational structure, Chief Executive Officer (CEO) succession plan and other matters.
[Composition] (As of June 25, 2020)
The Committee consists of four Independent Officers and three Internal Directors, and an Outside Director (Independent Committee member) is appointed as chairperson. The Committee is held three times a year in principle. The office is established in the Company’s General Affairs Division.
Name Position at the Company
Committee member Koki Ando President & Representative Director, CEO
Committee member Noritaka Ando Executive Vice President & Representative Director, COO
Committee member Yukio Yokoyama Director, CFO, and Managing Executive Officer
Chairperson Masato Mizuno Outside Director/Independent Officer
Committee member Yukiko Nakagawa Outside Director/Independent Officer
Committee member Eietsu Sakuraba Outside Director/Independent Officer
Committee member Naohiro Kamei Outside Director/Independent Officer
Committee member Chisugi Mukai Outside Director/Independent Officer
[Activities]
The Committee met four times during the fiscal year ended March 31, 2020, and the attendance of the Committee members at the meetings is as follows.
(Attendance of Each Committee Member)
Name Attendance
Committee member Koki Ando 4/4 (100%)
Committee member Noritaka Ando 4/4 (100%)
Committee member Yukio Yokoyama 4/4 (100%)
Committee member Isao Karube 2/3 (67%) ※
Chairperson Masato Mizuno 4/4 (100%)
Committee member Yukiko Nakagawa 4/4 (100%)
Committee member Naohiro Kamei 4/4 (100%)
Committee member Chisugi Mukai 4/4 (100%)
※ Dr. Isao Karube retired from position due to resignation as of January 10, 2020.

Audit & Supervisory Board Member

Establishment of Audit & Supervisory Board Established
Maximum Number of Audit & Supervisory Board Member Stipulated in Articles of Incorporation 4
Number of Audit & Supervisory Board Member 3

Cooperation among Audit & Supervisory Board Member, Financial Auditor and Internal Audit Department

In order for the Company to ensure a tripartite audit, Internal Auditing Office, which is under the direct control of President & Representative Director, CEO, is engaged in internal audits, in addition to audits conducted by Audit & Supervisory Board Members and Financial Auditor. The three parties hold meetings once every two months in principle with the aim of improving efficiency of the audit and exchange opinions over observation of the audit and relevant information.

Appointment of Outside Audit & Supervisory Board Member Appointed
Number of Outside Audit & Supervisory Board Member 2
Number of Independent Officers Designated from among Outside Audit & Supervisory Board Member 2

Outside Audit & Supervisory Board Member’s Relationship with the Company (1)

Name Attribute Relationship with the Company (※)
a b c d e f g h i j k l m
Naohiro Kamei From another company
Chisugi Mukai Lawyer
  • Categoriesfor“RelationshipwiththeCompany”
  • “○” when the Audit & Supervisory Board Member presently falls or has recently fallen under the category; “△” when the Audit & Supervisory Board Member fell under the category in the past;
  • “●” when a close relative of the Audit & Supervisory Board Member presently falls or has recently fallen under the category; and “▲” when a close relative of the Audit & Supervisory Board Member fell under the category in the past
  • aExecutive (a person who executes business; hereinafter, the same) of the Company or its subsidiary
  • bNon-executive director or accounting advisor of the Company or its subsidiary
  • cNon-executive director or executive of a parent company of the Company
  • dAudit & Supervisory Board Member of a parent company of the Company
  • eExecutive of a fellow subsidiary of the Company
  • fParty whose major business partner is the Company or an executive thereof
  • gMajor business partner of the Company or an executive thereof
  • hConsultant, accounting professional or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as an Audit & Supervisory Board Member
  • iMajor shareholder of the Company (or an executive of the said major shareholder if the shareholder is a corporation)
  • jExecutive of a business partner of the Company (which does not correspond to any of f., g., or h.) (the Audit & Supervisory Board Member himself / herself only)
  • kExecutive of a corporation to which outside officers are mutually appointed (the Audit & Supervisory Board Member himself / herself only)
  • lExecutive of a corporation that receives a donation from the Company (the Audit & Supervisory Board Member himself / herself only)
  • mOther

Outside Audit & Supervisory Board Member’s Relationship with the Company (2)

Name Designation as Independent Officer Supplementary Explanation of the Relationship Reasons for Appointment
Naohiro Kamei Mr. Naohiro Kamei served as executive of Mizuho Bank Ltd., which is one of the banks with which the Company has an account, until March 2006. However as more than 13 years have passed since he retired from this office, the Company has determined that there is no risk of a conflict of interest with the general shareholders. In addition, Mr. Kamei served as Executive Officer of Mizuho Securities Co., Ltd., which has transactions with the Group, until April 2010. However as more than ten years have passed since he retired from this office, the Company has determined that there is no risk of this impacting on his independence. Mr. Naohiro Kamei has many years of experience in serving in the financial industry through positions in The Fuji Bank Limited (current Mizuho Bank, Ltd.) and Mizuho Securities Co., Ltd., and also is well-versed in corporate management from his previous and current posts such as President & Representative Director of Mizuho Capital Partners Co., Ltd., Director of Cobalt Investments Co., Ltd. and Outside Corporate Auditor of KYORIN Holdings, Inc. Accordingly, the Company has determined that his insight as a professional in finance and accounting as well as extensive experience as management executive can be leveraged in the Group’s auditing, and the Company has appointed him as Outside Audit & Supervisory Board Member.
In view that there is no transaction between KYORIN Holdings, Inc., at which he has served as Outside Corporate Auditor, and the Group, and that it has been more than ten years since he retired from Mizuho Securities Co., Ltd. that the Group has transactions with (no actual transaction in FY2018), the Company has determined that there should be no potential conflict of interest with general shareholders.
Chisugi Mukai No items to report. The Company has appointed Mr. Chisugi Mukai as Outside Audit & Supervisory Board Member to receive his guidance and advice from a professional point of view as a lawyer. Although he has no experience of direct involvement in corporate management, he is well-versed in corporate legal affairs as a lawyer and possesses ample knowledge for governing corporate management gained from his experience as auditor at other corporations. Therefore, the Company has determined that he will carry out his duties in an appropriate manner. The Company has determined that requirements for independence, including that he is not from a major shareholder or major business partner, are satisfied and that there is no risk of a conflict of interest with ordinary shareholders.

Independent Officers

Number of Independent Officers 3

Matters relating to Independent Officers

Incentives

Implementation of Measures to Provide Incentives to Directors Performance-Based Pay, Stock Options

Supplementary Explanation

The Company has granted stock options to the Company’s Directors (excluding Outside Directors), Executive Officers (including those already retired) and employees, as well as subsidiaries’ directors (including those already retired) for the purpose of providing incentives toward enhancement of business performance of the Company and promoting value sharing with our shareholders.
Remuneration for Director consists of the “basic remuneration” paid according to position and role importance of the Director as well as corporate performance and individual performance and the “remuneration-type stock options” for the purpose of increasing motivation and incentives toward the contribution to sustained improvement of business performance and enhancement of corporate value over the medium to long term.

a. Basic remuneration
This remuneration consists of the fixed portion based on the position and the role of the Director and the performance-based portion that is linked to business performance of the Company and the degree of personal achievements during the fiscal year under review.
The performance-based portion is designed to be varied within the range of up to 20% of the base amount according to the actual results of the “consolidated performance indicators” and “individual performance evaluation indicators” of the Company and will be reflected in the performance-based portion of the “basic remuneration” of the following fiscal year.
b. Remuneration-type stock options
The Company provides part of the remuneration as stock options for shares so that heightened motivation and morale to contribute to sustained improvement of business performance and enhancement of corporate value over the medium to long term will result in promotion of shareholders’ interest of the Company.
The percentages of the “basic remuneration” and the “remuneration-type stock options” to the total amount are designed to be about 60-80% for the former and about 20-40% for the latter, depending on the position and the fluctuations in the stock price.

However, in view of the nature of the duties, the remuneration for Outside Director is not linked to business performance and consists only a fixed portion of the “basic remuneration” paid according to the position.

Recipients of Stock Options Internal Directors / Employees / Subsidiaries’ directors / Other

Supplementary Explanation

Recipients of stock options are the Company’s Directors (excluding Outside Directors), Executive Officers, some of the employees, and some of directors of the Company’s subsidiaries.

Director Remuneration

Disclosure of Individual Directors’ Remuneration Selected Directors

Supplementary Explanation

The total amounts by type of remuneration for each classification of Directors, Audit & Supervisory Board Members, and Outside Directors and Outside Audit & Supervisory Board Members are reported in annual securities report.

Policy for Determining Remuneration Amounts or Calculation Methods Thereof Established

Disclosure of Policy for Determining Remuneration Amounts or Calculation Methods Thereof

Remuneration for Director consists of the “basic remuneration” paid according to position and role importance of the Director as well as corporate performance and individual performance (not exceeding ¥700 million per year (of which ¥100 million or less is for Outside Directors); by resolution of the 68th Ordinary General Meeting of Shareholders held on June 28, 2016), and the “remuneration-type stock options” (not exceeding ¥500 million per year (by resolution of the 60th Ordinary General Meeting of Shareholders held on June 27, 2008)) for the purpose of increasing motivation and incentives toward the contribution to sustained improvement of business performance and enhancement of corporate value over the medium- to long-term within the scope of the total amount resolved by the General Meeting of Shareholders. However, in view of the nature of the duties, the remuneration for Outside Director is not linked to business performance and consists only of “basic remuneration” paid according to the position.
The procedures for the above are decided by the Board of Directors after the appropriateness of said procedures is deliberated and verified by the Management Advisory Committee, the majority of which are Independent Outside Directors and Independent Outside Audit & Supervisory Board Members.
Furthermore, although remuneration for Audit & Supervisory Board Member is determined through discussions with the Audit & Supervisory Board within the scope of the total amount resolved by the General Meeting of Shareholders (not exceeding ¥60 million per year, by resolution of the 47th Ordinary General Meeting of Shareholders held on June 29, 1995), in view of the nature of auditing service, remuneration for Audit & Supervisory Board Member is not linked to business performance and consists only of “basic remuneration” paid according to the position. The Company resolved to abolish the Retirement Benefits Plan for Officers at the General Meeting of Shareholders held in June 2008.

Supporting System for Outside Directors and / or Audit & Supervisory Board Member

The Company believes it is important to build an environment where it is made easier for Outside Directors and Outside Audit & Supervisory Board Members to conduct their activities to supervise the management team highly effectively from an objective standpoint.
Accordingly, the Company delivers documents containing agenda items in advance and provides opportunities of giving explanations as necessary prior to the holding of any Board of Directors meeting with the aim of promoting understanding of the items and invigorating the discussion by the Board of Directors. The Company provides newly appointed Directors and Audit & Supervisory Board Members with opportunities to receive training by persons responsible for each area concerning the industry trend surrounding the Company, the status of each business of the Group and future strategies to promote their understanding of the Company’s business. In addition, the Company provides periodic seminars and training for Directors and Audit & Supervisory Board Members as appropriate with the aim of ensuring solid deliberation by the Board of Directors. On top of the foregoing, the “Liaison Committee of Independent Outside Directors and Audit & Supervisory Board Members,” a meeting of Independent Outside Directors and Audit & Supervisory Board Members, is held on an as-needed basis to promote information sharing and smooth cooperation between them.
While we do not place staff dedicated to assisting the operations of Outside Directors, staff of the General Affairs Division that serves as the office for the Board of Directors and employees of other relevant divisions perform supporting duties for information sharing among Directors including distribution of materials in advance and sending meeting results to ensure smooth execution of Outside Directors’ duties. In addition, for Outside Audit & Supervisory Board Members, several dedicated staff members for Audit & Supervisory Board Members (Full-time) perform supporting duties to ensure smooth execution of Outside Audit & Supervisory Board Members.

Status of Persons Who Have Retired from a Position Such as President & Representative Director

Name Title/Position Responsibilities Working Form and Conditions (Full-time/Part-time, Paid/Unpaid, etc.) Date of Retirement from Position Such as President Term of Office
- - - - - -

Advisory or Any Other Position in the Company : 0

2. Matters on Functions of Business Execution, Audit and Supervision, Nomination and Remuneration Decisions (Overview of Current Corporate Governance System)

The Company has eight Directors (of which, five are Outside Directors) and they attend “regular meetings of the Board of Directors” that are held on a regular basis and “extraordinary meetings of the Board of Directors” held on an as-needed basis to deliberate and resolve matters to be resolved by the Board of Directors as stipulated in the laws and regulations, the Articles of Incorporation and various other regulations. Also, the Directors monitor other Directors’ execution of their duties upon receiving reports on the status of execution of duties by Directors. Besides meetings of the Board of Directors, the Directors also attend meetings of the Management Committee (consisting of Directors (excluding Outside Directors), Executive Officers with special titles and Audit & Supervisory Board Members (Full-time)) that are regularly held, to take part in decision-making and monitoring other Directors on execution of their duties.
The Company has three Audit & Supervisory Board Members (of which, two are Outside Audit & Supervisory Board Members). Each Audit & Supervisory Board Member attends important meetings including the meetings of the Board of Directors in compliance with the Audit Standards of Audit & Supervisory Board Members predefined by the Audit & Supervisory Board, and in accordance mainly with the audit policy and audit plans for the fiscal year under review. Each member also collects information from Directors and Executive Officers regarding the status of execution of their duties through interviews, inspects important approval/decision documents, and performs on-site inspections at the head office and other principal business locations. They also perform audits by monitoring or verifying the status of the internal control systems with regard to which the Board of Directors made a resolution.
With regard to nomination of candidates for Directors and Audit & Supervisory Board Members, and decisions on remunerations, etc., following deliberations and verifications over the appropriateness by the Management Advisory Committee, they are deliberated and determined by the Board of Directors for Directors, while for the Audit & Supervisory Board Members, the decision on nomination is subject to consent of the Audit & Supervisory Board and the decision on their remunerations is also delegated to the Audit & Supervisory Board.
Pursuant to the approval from the shareholders at the 61st Ordinary General Meeting of Shareholders held on June 26, 2009, the Company appointed Deloitte Touche Tohmatsu (Converted to a limited liability company and changed its name to Deloitte Touche Tohmatsu LLC on July 1, 2009) as Financial Auditor with an audit contract signed, and has commissioned it to perform audits in accordance with the Companies Act and Financial Instruments and Exchange Act.

3. Reasons for Adoption of Current Corporate Governance System

The Company has adopted the structure of a company with an Audit & Supervisory Board instead of a company with committees or a company with an audit and supervisory committee, thereby appointing Outside Directors and Outside Audit & Supervisory Board Members who monitor execution of the Company’s business operation from an independent and fair standpoint, and ensuring transparency of the business management under the executive officers system introduced to build a mechanism allowing prompt execution of business operations.
With the aim of strengthening governance, based on a resolution at the 68th Ordinary General Meeting of Shareholders held on June 28, 2016, we have reduced the number of Internal Directors by six, to three, and increased the number of Outside Directors by one, to five. By making Outside Directors the majority, the Company is further strengthening supervisory functions and promoting swifter decision-making.

Corporate Governance

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