(Delayed) Corporate Governance Report

Corporate Governance Report

Last Update: April 8, 2021

KAGOME CO., LTD.

Satoshi Yamaguchi, President & CEO

Contact: Telephone: 03-5623-8503 (the main switchboard number)

IR Group, Finance & Accounting Department

Securities Code: 2811

http://www.kagome.co.jp/

The corporate governance of Kagome Co., Ltd. (the "Company") is described below.

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

Basic Information

1. Basic Views

In accordance with its corporate philosophy of "appreciation," "nature" and "corporate openness," the Company aims to achieve sustainable growth and improve the mid- to long-term value of the Company. The Company acknowledges corporate governance to be a critical management issue toward these objectives.

The Company considers further strengthening of "autonomy" complemented by "heteronomous" to be the fundamentals of its corporate governance. It will ensure objectivity and transparency, forming a basis by designing its own concept of corporate governance adapted to the present day, while incorporating diverse outside viewpoints by working to attract more "Kagome Fan Shareholders" and leveraging the function of external directors among other things.

The Company aims to deliver a high degree of accountability and achieve the "corporate openness" in its interactions with stakeholders, while employing the unique attributes and originality of Kagome.

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

The Company implements every principle of the Corporate Governance Code in its entirety.

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

Principle 1.4 Cross-Shareholdings

(1) Policy regarding cross-shareholdings

The Company holds the shares of companies if it judges that doing so is necessary to achieve sustainable growth or enhance its social value and economic value, or to build good relations with business partners and facilitate business as part of management strategy, including business alliances and the stable procurement of raw materials. Under the basic policy of disposing or reducing, as promptly as possible, the holding of certain shares which are considered insignificant in light of the situation at the end of the immediately preceding business year, the Company examines at meetings of the Board of Directors every year the significance, economic rationality and other factors of cross-shareholding and determines whether or not to continue each holding and the number of shares to be held. In the examination of economic rationality for each holding, the ratio of the amount which the issuer of the shares contributed to the profits of the Company in the immediately preceding business year to the value of the shares held by the Company at the end of the business year is calculated. When the ratio is below a figure equivalent to approximately double the average ROA of the Company for the past five years on a non-consolidated basis, such shares shall be subject to review for sale. In addition, shares whose market price has declined 30% or more from the book value thereof and shares of a company with whom the Company has transactions amounting less than 100 million yen per year are also subject to review for sale thereof. Moreover, shares of the Company's suppliers and clients that do not meet these standards shall be subject to deliberation at meetings of the Board of Directors every year as to whether or not to sell them and those chosen shall be sold.

As a result of a review, the Company sold some of its cross-shareholdings in FY2020.

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(2) Criteria for exercise of voting rights concerning cross-shareholdings

When exercising voting rights concerning cross-shareholdings, the Company comprehensively judges the arguments for and against, taking into consideration whether or not the proposed motion will help strengthen appropriate corporate governance systems or enhance shareholders value or the proposed motion's impact on the Company, and the Company exercises voting rights appropriately.

Where necessary, the Company engages in dialogue with the issuing company over the content of a proposed motion, etc.

1. Policy for responding to cases where the intention to sell the Company's shares concerning cross- shareholding is indicated
   If a company holding the Company's shares for cross-shareholding (shareholder in cross-shareholding) indicates its intention to sell the shares, the Company will unconditionally agree to the sale. In this case, any shares of the shareholder in the cross-shareholding held by the Company shall be disposed of as promptly as possible.

Principle 1.7 Related Party Transactions

The Company monitors related party transactions through its Board of Directors by setting out in the Regulations of the Board of Directors that any related party transaction requires the prior approval of the Board of Directors and that any related party transaction that takes place must be promptly reported to the Board of Directors and by conducting operations in accordance with the Regulations. The Audit & Supervisory Committee also conducts audits in accordance with the audit & supervisory standards of the Audit & Supervisory Committee.

Principle 2.6 Exercise of Functions as Asset Owner of Corporate Pension Plan

The Company has introduced a defined contribution pension system for its employees' asset formation. In light of the significant impact of the management of the pension plan on the employees' asset formation, the Company aims to appropriately manage the assets by selecting investment products from a number of perspectives, providing education on asset management to the employees and monitoring management performance on a half-yearly basis.

Principle 3.1 Full Disclosure

1. The Company's vision (corporate philosophy, etc.) and its management strategy and medium-term management plan are disclosed on the Company's website and in financial results presentation materials, etc.
   (URL: http://www.kagome.co.jp/company/about/philosophy/)
2. The Company discloses its basic views on corporate governance and its Basic Policy of Corporate
   Governance on the Company's website and in its annual reports, corporate governance reports, integrated reports, CSR reports, etc.
   (URL: http://www.kagome.co.jp/company/csr/management/governance/)

[Basic Policy of Corporate Governance]

In accordance with its corporate philosophy of "appreciation," "nature" and "corporate openness," the Company aims to achieve sustainable growth and improve the mid- to long-term value of the Company. The Company acknowledge corporate governance to be a critical management issue toward these objectives.

The Company considers further strengthening of "autonomy" complemented by "heteronomous" to be the fundamentals of its corporate governance. It will ensure objectivity and transparency, forming a basis by designing its own concept of corporate governance adapted to the present day, while incorporating diverse outside viewpoints by working to attract more "Kagome Fan Shareholders" and leveraging the function of external directors among other things.

The Company aims to deliver a high degree of accountability and achieve the "corporate openness" in its interactions with stakeholders, while employing the unique attributes and originality of Kagome.

1. The Company discloses the policy and procedures by which the Board of Directors determines the compensation of senior management and directors in its annual reports, corporate governance reports, integrated reports, etc.
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1. When the Board of Directors appoints senior management and nominates candidates for directors and audit & supervisory board members, the Company's policy is to appoint people who will help improve the mid-tolong-term value of the Company, and the procedure is that the Board of Directors approves candidates selected by the Remuneration and Nomination Advisory Committee, which is made up of a majority of independent external directors, and to put proposals on candidates for directors before the General Meeting of Shareholders. In addition, the Company implements regular reviews and checks of the appropriateness of selecting officers by assessing the officers' performance and operating the
   Remuneration and Nomination Advisory Committee.
2. The appointment and removal of candidates for directors and external directors are explained in notices of convocation of general meetings of shareholders.
   (Notice of the Annual General Meeting of Shareholders URL: http://www.kagome.co.jp/company/ir/meeting/)

[Supplementary principle 4-1-1: Scope of Delegation of Authority to the Management Team]

The Company transitioned to a corporate structure with an audit and supervisory committee. The transition separates executive functions from supervisory functions, which helps clarify business responsibility and speed up decision-making and execution of operations. The provisions of the Articles of Incorporation enable important decision-making to be left wholly or partially to directors by resolution of the Board of Directors. The Board of Directors mainly assumes the role of making decisions via deliberation on the Company's policies and management strategies and matters that will help improve the mid- to long-term value of the Company and monitoring their progress, and important matters related to business execution except for matters such as business reorganization, M&A, the transfer or receipt of transfer of significant assets, the borrowing and lending of large amounts of funds, and personnel affairs, are left to the management led by the President, in principle.

Principle 4.9 Independence Standards and Qualifications for Independent External Directors

The Company has established "Standards for Judging the Independence of External Directors" and discloses these in notices of annual general meeting of shareholders, annual reports, corporate governance reports, integrated reports, etc. At present, one of the standards for judging independence stipulates that the total term of tenure as external director must be within eight years, but in the future the Company will verify the relationship between term of tenure and independence as it sees fit and will examine an appropriate term of tenure.

[Supplementary principle 4-11-1: Preconditions for Board of Directors and Audit & Supervisory Board Effectiveness]

The Company believes that, to realize improvement in the mid-tolong-term value of the Company by fully demonstrating the advisory function and monitoring function of the Board of Directors, it is desirable to ensure that the Board of Directors is of an appropriate size to be able to conduct high quality deliberation, while ensuring a composition that strikes a balance with diversity in terms of age, gender, knowledge, capability and experience. The procedure for appointing director candidates is that the Board of Directors makes decisions via deliberation by the Remuneration and Nomination Advisory Committee, the majority of whose members are external directors.

The Board of Directors currently consists of 10 directors, seven of whom are directors (excluding directors who are audit and supervisory committee members) and three of whom are directors who are audit and supervisory committee members. Five of its directors are independent external directors. The external directors have various career backgrounds including corporate management, academic, tax accountant, and lawyer, and they also have vast experience and knowledge for diversity management, business globalization, and extension of healthy life expectancy through food that form part of the Company's mid- to long-term vision. One of the goals under the Company's long-term vision is "50% of the workforce consisting of women--from employees to executive officers" by around 2035-2040, and the Company is also aiming for early achievement of this goal with respect to its Board of Directors.

[Supplementary Principle 4-11-2: Preconditions for Board of Directors and Audit & Supervisory Board Effectiveness]

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The Company stipulates in its internal regulations that the approval of management meeting must be obtained when a director excluding external director of the Company serves simultaneously as an officer of other companies, and the Company receives reports as necessary on the status of concurrent posts of external directors of the Company and confirms that they are able to fulfil their roles and responsibilities as directors of the Company, and there are no particular problem as of disclosure of this Code. The status of concurrent posts at other companies held by external directors is disclosed in notices of annual general meeting of shareholders, annual reports, corporate governance reports, etc.

[Supplementary Principle 4-11-3: Preconditions for Board of Directors and Audit & Supervisory Board Effectiveness]

The Company conducted an evaluation of the effectiveness of the Board of Directors in October 2020. A summary of the results is as follows.

1. Method of implementation of the evaluation Implementation of survey of directors (all 6 areas, 31 criteria) The survey categories were as follows.

1. Design of the Board of Directors (frequency of meetings, size, composition, utilization of remote meetings, etc.)
2. Operation of the Board of Directors (time [explanations and deliberations], provision of information, secretariat support, etc.)
3. Proposals of the Board of Directors (coverage of themes, timing of submission of proposals, progress reports, etc.)
4. Quality of discussions of the Board of Directors (objectivity and multifaceted nature of discussions, accountability, leadership of chair, etc.)
5. Corporate governance structure (appointment and compensation decision process, dialogue with stakeholders, etc.)
6. Overall evaluation (improvement of corporate value, decision-making, effectiveness of functions,

appropriateness of judgments, etc.)

Survey of the Remuneration and Nomination Advisory Committee (5 criteria) Survey of the Audit and Supervisory Committee (7 criteria)

Discussions involving the Chairperson of the Board and external directors Deliberations by the Board of Directors based on the foregoing

2. Summary of evaluation results

The evaluation of the Company's Board of Directors following discussions based on the foregoing was that the Company's Board of Directors is generally adequate in all areas (1) - (6) and its effectiveness is fully ensured.

The criteria for which the evaluation was particularly high were as follows.

• The timing and frequency of holding meetings of the Board of Directors are appropriate.
• The size (number of members) of the Board of Directors and the ratios of internal and external directors are appropriate.
• The Board of Directors comprises members with a good balance of diversity in terms of gender, international experience, specialization, and career experience, etc., required to ensure its effectiveness.
• The time spent explaining the meeting agendas is appropriate.
• Adequate time for deliberations on important agenda items is secured.
• Time is allocated based on the priority level of agenda items.
• The timing of sending out agenda items in advance and advanced explanations is adequate, and suitable information is provided in full for deliberation of agenda items.
• The Board of Directors is managed efficiently and effectively by means of utilization of remote meetings and resolution in writing as well as digitalization of reference documents, etc.
• The timing of deliberations and proposals for important individual themes is appropriate.
• The progress of important projects and management plans is reported in a timely manner and followed up appropriately.
• The Chairperson of the Board steers discussions to a clear conclusion by exhibiting appropriate leadership and using a neutral standpoint.
• Initiatives for governance are being implemented tailored to the unique needs of the Company.
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• The process used for selection, appointment and dismissal, evaluation, and determination of compensation of senior management (officers) is appropriate.
• The Board of Directors undertakes prompt, flexible decision-making.
• The Board of Directors provides both the advisory function for important decision-making and the monitoring function for the performance of duties, which are functioning effectively.
• The operations of the Board of Directors are reviewed and improved on a continuous basis.

In the latest evaluation of the effectiveness of the Board of Directors, the issues for which the Company recognized the necessity of further improvement were "comprehensive deliberation on important matters," "reporting on the status of the execution of business operations (prioritization and planning of items of business of the Board of Directors' meetings)," and "provision of information on the Company and its general business operations." In this evaluation, the Company collected opinions from the Directors on the themes that need to be discussed at the Board of Directors' meetings, based on which the Board of Directors will consider the themes for the board to discuss in the next fiscal year and what constitutes reporting of business execution status, and work to schedule deliberations, after discussions held between the Chairperson of the Board and external directors. Additionally, regarding the provision of information regarding the Company and its general business operations, meetings will be arranged outside of board meetings for external directors so as to bury any gaps in information among external directors due to differences in terms of office or role. At these meetings, information will be provided from internal departments and external directors will be able to exchange information, etc., which will serve to improve the current situation.

In addition, with regard to the Remuneration and Nomination Advisory Committee, suggestions were made concerning the development of medium- to long-term succession plans. With regard to the Audit and Supervisory Committee, suggestions were made that more agile and proactive exercising of rights should be carried out beyond simple defensive functions. The Board of Directors of the Company recognizes the above as issues to be addressed and will work on relevant initiatives.

The Company will seek to further improve the effectiveness of the Board of Directors based on the results of the latest evaluation of the effectiveness of the Board of Directors.

[Supplementary principle 4-14-2: Training Policy for Directors and Audit & Supervisory Board Members] The Company's policy is that Directors receive training on the roles and responsibilities of Directors on becoming Directors. The secretariat of the Board of Directors explains the management status and the corporate governance structure to external directors when they take up office, and also provides them with opportunities to visit overseas subsidiaries, plants, orchards and other business premises and to deepen their understanding of the Company's management after they take up office.

In FY2016, the Company began providing training to all officers as part of planning for the development of successors. The training focuses on the roles and responsibilities and management knowledge required of senior managers, and helpful approaches and frameworks for the formulation and execution of strategies.

The Company encourages Directors and Executive Officers to participate in outside seminars and external organizations, and the cost of this is borne by the Company in accordance with internal regulations based upon requests by Directors, Executive Officers, etc.

Principle 5.1 Policy for Constructive Dialogue with Shareholders

Based on the idea that increasing understanding of the Company's business operations through "dialogue and exchange activities" with shareholders and institutional investors will contribute to the Company's sustainable growth and improvement in its corporate value, the Company actively conducts IR activities through dialogue and exchange between shareholders and institutional investors and the Company's representatives and other senior management as well as its office employees.

The Company's IR Department is in charge of dialogue and exchange with shareholders and institutional investors, and the IR Department makes proper disclosure while examining how it responds with the President and the Director in charge in accordance with the Company's policy of "fair, simple and timely" disclosure.

The IR Department deals with interviews with shareholders and institutional investors, including interviews given by the President and the Director in charge, taking the purpose of the interview and the attributes of the interviewees into consideration. As for the disclosure and presentation of financial results, etc., the relevant

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