Sapporo : Corporate Governance Report

Corporate Governance Report

Last Update: May 6, 2021

Sapporo Holdings Limited

President and Representative Director: Masaki Oga

Contact: 81-3-5423-7407

Securities Code: 2501

http://www.sapporoholdings.jp/english/

The corporate governance of Sapporo Holdings Limited (the "Company") is described below.

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

Basic Information

1. Basic Views

1. Basic Views

The Company has set forth as follows Sapporo Group's "Management Philosophy", "Fundamental Management Policy", and "Fundamental Operational Principles", and in order to realize the foregoing and strive for the sustained enhancement of the Group's overall corporate value, will value the strengthening and enhancement of the Group's corporate governance as a vital managerial goal, will clearly specify supervisory, executive and audit functions within the Group under a holding company structure, and will endeavor to strengthen managerial oversight with a view to greater transparency in management and the attainment of the Group's business objectives.

(1) Management Philosophy

Sapporo will contribute to the evolution of creative, enriching and rewarding lifestyles.

(2) Fundamental Management Policy

The Sapporo Group strives to maintain integrity in corporate conduct that reinforces stakeholder trust and aims to achieve continuous growth in corporate value.

(3) Fundamental Operational Principles

Under a pure holding company structure, with the fundamental operational principles for the Sapporo Group as set forth below, the Sapporo Group, while allowing the business divisions within the Sapporo Group to maintain their autonomy, will pursue optimization and the creation of synergy for the Sapporo Group as a whole, and will aim to maximize corporate value.

1) Principles for the Group's Overall Optimization

With the maximization of Sapporo Group's value and the Group's overall optimization understood as goals, the Group's companies will focus energy on their respective business activities and in turn contribute to improving the Group's consolidated performance results.

2) Principles of Autonomy and Independence

The Sapporo Group's companies will work to enhance their operating foundations and aim to be independent, with a view to achieving the purposes for which they were established and accomplishing their respective missions under Sapporo's management policy.

The Company will delegate to Group company Presidents the executive authority they require to manage their businesses, and the Group company Presidents will assume responsibility for such management. Likewise, the Company will provide all support and advice necessary for the growth and development of the Group's companies.

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3) Principle of Mutual Cooperation

The Company and the Group's companies, while taking economic feasibility into consideration, will cooperate with each other in the procurement of materials, products, services and the like, as well as in other areas of business promotion, and will endeavor to achieve synergistic effects for the Group.

The Company, with respect to its basic approach and operation policy etc. to Corporate Governance, has put in place the "Basic Policy on Corporate Governance", which is disclosed on the Company website. Please refer to the following URL to view said policy: https://www.sapporoholdings.jp/en/csr/governance/policy/pdf/basic_governance_approach_2021.pdf

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

The Company has implemented all of the principles of the Corporate Governance Code.

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

[Basic Policy 1-4.Strategically-Held Shares]

[Policy on Strategic Holding of Shares]

The Company is engaged in businesses such as alcoholic and non-alcoholic beverages, food, and real estate, which are closely connected with its customers' lifestyles, and believes it to be necessary, for the purposes of business strategy, to maintain cooperative relationships with the many companies along its supply chain from development through procurement, manufacturing, logistics and sales. On the basis of this belief, the Company may in some cases retain Strategically-Held Shares if, after comprehensively considering the state of such cooperative relationships, the Company finds that doing so will help raise corporate value over the medium-to-long term. The Board of Directors will regularly verify annually whether the Company's Strategically-Held Shares are being appropriately retained and managed in accordance with its strategic holdings policy. As a result of the verification, the Company will reduce the amount of Strategically-Held Shares in order to conform to its strategic holdings policy.

[Details of Verification pertaining to Strategically-Held Shares]

In FY2020, the Board of Directors verified whether the Company's Strategically-Held Shares were being appropriately retained and managed in accordance with its strategic holdings policy from the viewpoints of objectives, risks, returns and capital efficiencies, etc. As a result of the verification, the Company decided to sell a portion of Strategically-Held Shares.

[Exercise of Voting Rights pertaining to Strategically-Held Shares]

In exercising voting rights pertaining to Strategically-Held Shares, the Company shall comprehensively judge whether or not to approve, from a medium-to-long term perspective, in light of the Company's holdings policy and the common interests of the shareholders of the investee. Details of the agenda will be discussed with the investee as necessary.

On this point, please refer to "5. Basic Policy on Strategic Holding of Shares and on the Exercise of Voting Rights Pertaining to Strategically-Held Shares" in the abovementioned "Basic Policy on Corporate Governance", which sets forth the policy detailed in the previous paragraph.

[Basic Policy 1-7. Transactions between Related Parties]

In cases where, pursuant to the Board of Directors Rules, it is necessary for the Company to carry out a competitive transaction, a self-dealing transaction, or a conflict-of-interest transaction with a Director, the Company must first obtain approval from the Board of Directors.

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For transactions with major shareholders etc., internal rules are set forth elsewhere, and all officers and employees are thoroughly notified of such rules.

On this point, please refer to "7. Transactions Between Related Parties" in the abovementioned "Basic Policy on Corporate Governance", which sets forth the policies detailed in the previous paragraph.

[Basic Policy 2-6. Performance of Function as Asset Owner of Corporate Pension]

The method of management of corporate pension fund established by the Company is set forth in "11. Management of Corporate Pension Fund" in the aforementioned "Basic Policy on Corporate Governance"; please refer to that document.

[Basic Principles 3-1. Ensuring Appropriate Disclosure of Information]

1. The Company's "Management Philosophy" and "Fundamental Management Policy" are as follows.
   1) Management Philosophy
   The Company will contribute to the evolution of creative, enriching and rewarding lifestyles 2) Fundamental Management Policy
   The Sapporo Group strives to maintain integrity in corporate conduct that reinforces stakeholder trust and aims to achieve continuous growth in corporate value.

With regard to the details of the Sapporo Group Long-Term Management Vision "SPEED150"for the period from 2017 to 2026 and the "Group Management Plan 2024", the five-year plan starting from 2020, please refer to the following URL:

https://www.sapporoholdings.jp/en/strategy/vision/

1. The Basic Approach to Corporate Governance is also set forth in this report "I. 1. Basic Views" and in "1. Basic Thinking on Corporate Governance" in the abovementioned "Basic Policy on Corporate Governance"; please refer to those documents.
2. The Company has established a "Compensation Committee" as an advisory body of the Board of Directors. The policies and procedures for decision-making regarding Directors' compensation are set forth in "II. 1. [Director Remuneration] Disclosure of Policy on Determining Remuneration Amounts and

Calculation Methods" in this report and "13(5)②. Compensation Committee" in the abovementioned "Basic Policy on Corporate Governance"; please refer to that document.

1. The Company has established a "Nominations Committee" as an advisory body of the Board of Directors. The policies and procedures for appointment and dismissal of senior management and appointment of Directors are set forth in "13(5) ① . Nominations Committee" in the abovementioned "Basic Policy on Corporate Governance"; please refer to that document.
2. The reasons for the selection or appointment of Directors and Directors who are Audit & Supervisory Committee Members are disclosed in the "Notice of Convocation of Ordinary General Meetings of Shareholders." In the event of the dismissal of senior management, the reason for the dismissal shall be disclosed in a timely and appropriate manner.
   The Notices of Convocation of the 95th through the 97th Ordinary General Meetings of Shareholders are disclosed on the Company website; please refer to the following URL: https://www.sapporoholdings.jp/en/ir/event/meeting/

[Supplemental Principle 4-1① . Scope of Delegation to Management]

In addition to the matters set forth in laws and regulations and the Company's Articles of Incorporation, the Company has set forth, in the "Board of Directors Rules", the matters that are to be determined and decided

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by the Board of Directors, including the Group's management policy and business plans, and other material matters relating to the conduct of corporate operations in business companies.

In combination with other internal regulations, these Rules clarify the scope of matters delegated to management, allowing management to engage in swift decision-making within the scope of its authority via the Management Council, Group Management Council, and other advisory bodies.

[Principle 4-9. Standards and Qualifications for Judging Independence of Independent Outside Directors]

The independence standards for Outside Officers of the Company are set forth in "II.1 [Independent Officers] Matters relating to Independent Officers" of this report and in "Appendix 1. Standards for Independence of Outside Directors" in the abovementioned "Basic Policy on Corporate Governance"; please refer to these documents.

[Supplemental Principle 4-11① . Approach to Balancing the Knowledge/Experience/Abilities, and to the Diversity and Scale, of the Board of Directors as a Whole]

The overall structure of the Company's Board of Directors is set forth in "13(5)②. Nominations Committee" in the abovementioned "Basic Policy on Corporate Governance"; please refer to that document.

[Supplemental Principle 4-11②. Status of Director Concurrent Appointments as Officers of Other Listed Companies]

The Company discloses the material concurrent appointments of its Directors in the business reports and general shareholders' reference materials indicated in Notices of Convocation of Ordinary General Meetings of Shareholders; please refer to the Company website for details. We have judged that all such concurrent appointments are limited to a reasonable scope, in consideration of the time and effort required for appropriate performance of the duties and responsibilities of a Company Director. https://www.sapporoholdings.jp/en/ir/event/meeting/pdf/210225_01.pdf

[Supplemental Principle 4-11③. Assessment of the Effectiveness of the Board of Directors]

As set forth in "13(6) Assessment of the Board of Directors" in the abovementioned "Basic Policy on Corporate Governance", each year, the Company, on the basis of self-evaluations by each Director, analyzes and assesses the effectiveness of the Board of Directors and discloses a summary of the results.

1. Initiatives in FY2020 in Response to the Results of Board of Directors Effectiveness Assessments for FY2019
   In the assessments for FY2019, it was recognized and shared once again that there was a need to provide information to Outside Officers, as well as to further deepen discussions and continuously confirm the status of progress, in the course of implementing the medium-to-long term management framework and the mid- term management plan.

In response to the abovementioned results of the assessments, in FY2020, the Company organized the agenda items presented to the Board of Directors in accordance with changes in organizational design and endeavored to increase the constructiveness of discussions, by way of clarifying points of discussion at the Board of Directors meetings through the following initiatives.

1. Prior explanation of agenda items to Outside Directors and improvement of methods for provision of information to Outside Directors
2. Review of the discussion process and schedule in the respective Advisory Committee pertaining to the Nominations Committee, Compensation Committee and Outside Directors Committee
3. Enhancement of provision of management information by sharing a summary in respect of the Management Council

In addition, by establishing a web conference system, Board of Directors meetings were held 15 times a year as scheduled even under the state of emergency resulting from the COVID-19.

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(2) Results of Board of Directors Effectiveness Assessments for FY2020

With respect to the Board of Directors effectiveness assessments for FY2020, in continuation of similar practices in FY2019, all Directors took an anonymous survey. With respect to the results of this survey, the Company conducted feedback early and, with securing enough time, a discussion with a view toward ascertaining the current states of affairs and recognizing issues and challenges was conducted at the Board of Directors meeting held in January 2021.

The result of the assessment was that evaluations rose or were maintained as regards 80% of the questions, as compared with the 2019 evaluations and then it was judged that the effectiveness of the Board of Directors as a whole was ensured from the viewpoint of its composition, management, and roles and duties. On the other hand, it was recognized and shared that there was a need to further deepen discussions and continuously confirm the status of progress after grasping the whole picture, in the course of implementing the mid-term management plan and investments and loans.

By way of solving the identified issues and implementing continuous assessments that make use of appropriate methods, the Company is making an effort to further improve the effectiveness of its Board of Directors.

[Supplemental Principle 4-14②. Training Policy for Directors]

The Company is implementing the following training to enable Directors to acquire a deeper understanding of their roles and duties and fully discharge their responsibilities.

1. Persons newly appointed as Directors will undergo training in regard to the necessary laws and regulations including the Companies Act, and in regard to corporate governance.
2. After the appointment of any Director, the Company will continue to provide a diverse program of training activities, to be conducted internally and externally, in regard to legal amendments and business issues and challenges etc.
3. Persons newly appointed as Independent Outside Directors will receive explanations necessary in regard to the corporate profile of Sapporo Group, the Group's management strategy and financial condition, and other important matters, and will also be provided with opportunities to observe Group company production facilities and research sites etc. for the purpose of acquiring a deeper understanding of the Sapporo Group.
   With respect to this paragraph, please also refer to "13(8) Training Policy for Directors" and "14(5) Training

Policy for Audit & Supervisory Board Members" in the abovementioned "Basic Policy on Corporate Governance."

[Principle 5-1. Policy on Constructive Dialogue with Shareholders]

The policy on constructive dialogue with shareholders is set forth in "16. Dialogue with Shareholders" in the abovementioned "Basic Policy on Corporate Governance"; please refer to that document.

2. Capital Structure

		Foreign Shareholding Ratio		From 10% to less than 20%
[Status of Major Shareholders]
		Name / Company Name			Number of Shares			Percentage (%)
				Owned
	The Master Trust Bank of Japan Ltd. (on	6,928,200		8.88
	trust)
	Custody Bank of Japan, Ltd. (on trust)	3,296,700		4.22
	Mizuho Trust & Banking of the employee	2,442,400		3.13
	pension trust of Custody Bank of Japan, Ltd.
	Nippon Life Insurance Company	2,237,364		2.87
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