NH Foods : Corporate Governance Report

Corporate Governance Report

Last Update: June, 29, 2017

NH Foods Ltd. Juichi Suezawa President and Representative Director

Contact: [phone]

Securities Code: 2282 http://www.nipponham.co.jp/eng/index.html

The corporate governance of NH Foods Ltd. (the "Company") is described below.

I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information

1. Basic Views Basic Views on Corporate Governance

2. In order to establish a corporate governance system which Nipponham Group (the "Group") considers most appropriate and in order to make such system functional so that the Company is able to exercise social responsibility for the Group and to realize the vision of the Group as the "World Leader in Delivering the "Joy of Eating"", the Company hereby presents its basic views on the corporate governance of the Group and will continuously strive to enhance such corporate governance.

3. The principles of corporate governance of the Group are to enhance its management transparency and efficiency, to ensure timely and proper decision-making as well as appropriate business operations, to enable proactive and courageous business judgments and to clarify its responsibility.

4. [Reasons for Non-compliance with the Principles of the Corporate Governance Code]

   (Supplementary Principle 4-1-3) (Plan for Successors, including Chief Executive Officer, etc.)

   With respect to the succession plan for the Chief Executive Officer (CEO), etc., during the New Medium-Term Management Plan Part 5, the Company will set out a profile, including character, skills, and experience, etc., that the Company values for the positions of CEO, etc., and establish a plan for the development of his/her successor. When establishing such development plan, the Company will ensure its effectiveness by organically associating such plan with various training currently provided for the Management, managers and the candidates therefor.

   (Principle 4-6) (Oversight and Operation of Business)

   As a company with an Audit & Supervisory Board (kansayaku board), the Audit & Supervisory Board Members (kansayaku) and the Audit & Supervisory Board (kansayaku board) oversee execution of the duties of the Board of Directors and the Management. Further, in order to ensure the transparency of the Board of Directors, the Company appoints multiple Independent Directors. Currently, multiple Independent Directors and Audit & Supervisory Board Members (two (2) full-time Audit & Supervisory Board Members and three (3) Outside Audit & Supervisory Board Members) oversee the Board of Directors, while maintaining a certain distance from the business operations. The Company has not appointed any Inside Directors who do not carry out business operations, though the Board of Directors continuously examines the numbers of positions that non-Executive Directors should hold on the Board of Directors.

   [Disclosure Based on the Principles of the Corporate Governance Code]

   The Company has established a corporate governance system which the Company considers most appropriate and continuously strives to enhance its corporate governance system in order to realize a vision of the Group as the "world's leading company at providing the joy of eating". Further, the Company has enacted and announced the "Nipponham Group Fundamental Policy on Corporate Governance" setting forth its basic views on and framework of corporate governance of the Company.

   "Nipponham Group Fundamental Policy on Corporate Governance" (Japanese) http://www.nipponham.co.jp/ir/policy/pdf/20170629_01.pdf

   (English) http://www.nipponham.co.jp/eng/ir/policy/pdf/20170629_01.pdf

   In addition, please see the following status of the Company's response to the 73 items of the General Principles, Principles and Supplementary Principles of "Japan's Corporate Governance Code".

   Table for Implementation Status of the Corporate Governance Code (Japanese) http://www.nipponham.co.jp/ir/policy/pdf/20160629_02.pdf(English) http://www.nipponham.co.jp/eng/ir/policy/pdf/20160629_02.pdf

   The contents of the matters required to be disclosed by the "Corporate Governance Code" are as follows.

   (Principles 1-4) Fundamental Policy on Cross-Shareholdings and Guidelines for Securing Appropriate Measures to Exercise Voting Rights

   For the purposes of maintaining and expanding our business relationships and stabilizing funding, we acquire and maintain shares of our business partners, etc. primarily upon their request to hold such shares.

   We review all issues of our equity investments once a year in consideration of stock price fluctuation risk and credit risk, etc. of the issuing companies. We continue to hold only those shares that we determine to be essential for sustainable growth of the Group, such as for reinforcement of alliances, in order to maintain

   business transactions and expand our business. On the other hand, if we determine that the necessity of holding certain shares has become low, we dispose of such shares accordingly in consideration of the stock price and market trends.

   When exercising the voting rights of cross-shareholding, we deliberate on proposals offered by the companies and respect such proposals so long as they do not disregard the interests of shareholders. However, if any misconduct (including misconduct by any member of the management) or any antisocial behavior occurs at such companies, we exercise our voting rights so that the companies' corporate governance is improved.

   (Principles 1-7) Framework in Connection with Engaging in Transactions between Related Parties

5. When we conduct competitive transactions or conflicting interest transactions, as stipulated by laws, with the Corporate Officers, we conduct such transactions only upon approval of the Board of Directors and report the result to the Board of Directors.

6. We inspect whether there have been are any transactions between us and the Directors, Executive Officers or their family members, and the details of such transactions, if any, once a year. In addition, we also inspect such transactions, as necessary, during audits by the Audit & Supervisory Board Members and audits by the Accounting Auditor and during internal audits.

(Principles 3-1) Appropriate Disclosure and Securing Transparency

1. Company Objectives (Management Principles, etc.) and Business Strategies and Business Plans

2. Principles and Management Vision

   The Company's principles and management vision are disclosed in the following URLs: http://www.nipponham.co.jp/eng/group/vision/ http://www.nipponham.co.jp/eng/group/vision/ci.html http://www.nipponham.co.jp/eng/group/vision/brand.html

3. Mid-term Business Plans

   The Company's mid-term business plans are disclosed in the following URLs: http://www.nipponham.co.jp/eng/ir/library/briefing_session/pdf/2015/20150513.pdf http://www.nipponham.co.jp/ir/library/financial/pdf/2015/20150511_02.pdf

4. Basic Views and Fundamental Policy on Corporate Governance

5. Basic Views on Corporate Governance

   The Company's basic views on corporate governance are as stated in "I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information", "1. Basic Views" of this Report.

6. Fundamental Policy on Corporate Governance

   The Company's fundamental policy on corporate governance is disclosed in the following URLs: http://www.nipponham.co.jp/ir/policy/pdf/20170629_01.pdf (in Japanese) http://www.nipponham.co.jp/eng/ir/policy/pdf/20170629_01.pdf (in English)

7. Policies and Procedures for Board of Directors Determining Compensation of Senior Management and Directors

   Please see Attachment 2 "Policy of Determination of the Compensation, etc., and the Method of Calculation" attached to the Fundamental Policy on Corporate Governance.

8. Policies and Procedures for Board of Directors Appointing Senior Management and Nominating Candidates for Directors and Audit & Supervisory Board Members

9. Policies for Nominating Candidates for Directors

   The Board of Directors nominates candidates for Directors of the Company while taking into consideration a good balance among the appointed Directors with diverse knowledge, experience and skills in order to exercise its roles and responsibilities required as the Board of Directors and to maintain the diversity of the Board of Directors as a whole.

10. Policies for Nominating Candidates for Audit & Supervisory Board Members

    The Board of Directors nominates candidates for Audit & Supervisory Board Members while taking into consideration a good balance among the appointed Audit & Supervisory Board Members with diverse knowledge, experience and skills.

11. Policies for Appointing Executive Officers

    The Board of Directors appoints an Executive Officer from among candidates who are knowledgeable about the business, etc., of the Group while taking into consideration various aspects such as skills, experience and performance.

12. Procedures for Nomination and Appointment

13. Directors

    The Executive Appointments Committee prepares an original draft of candidates and proposes it to the President and Representative Director. The President and Representative Director proposes a draft of candidates back to the Executive Appointments Committee, taking such proposal into consideration, and the Executive Appointments Committee submits the deliberated result to the Board of Directors. The Board of Directors determines candidates for the Directors to be proposed at the general meeting of shareholders while respecting the submission of the Executive Appointments Committee.

14. Audit & Supervisory Board Members

15. The Executive Appointments Committee prepares an original draft of candidates and proposes it to the President and Representative Director. The President and Representative Director proposes a draft of candidates back to the Executive Appointments Committee, taking such proposal into consideration, and the Executive Appointments Committee submits to the Board of Directors the deliberated result to which the Audit & Supervisory Board has consented. The Board of Directors determines candidates for the Audit & Supervisory Board Members to be proposed at the general meeting of shareholders while respecting the submission of the Executive Appointments Committee.