Yukiguni Maitake : Corporate Governance Report

Corporate Governance Report

	CORPORATE GOVERNANCE		YUKIGUNI MAITAKE CO., LTD.

Last Update: June 27, 2022

Yukiguni Maitake Co., Ltd. Masafumi Yuzawa, President and CEO, Representative Director Contact: Takenori Sakurai, Senior Executive Officer, （Chief Financial Officer）

Securities Code:1375 https://www.maitake.co.jp/

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

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

1. Basic Views

As a "comprehensive manufacturer of premium mushroom", Yukiguni Maitake Group (the "Group") has established a solid

business foundation and is working as one to help people in Japan and abroad continue to support a healthy and enriched livelihood. The Group believes that it is indispensable to establish timely and accurate decision-making and action mechanisms to enhance the efficiency and integrity of management in response to a request in a global society in order to achieve the realization of increasing sustainable corporate value through responsible corporate management for a variety of stakeholders such as shareholders, customers,

employees, business partners and local communities.

To that end, the Group acknowledges strengthening corporate governance as an important management priority and is working on speeding up decision-making, strengthening management supervising functions, improving management transparency, and establishing corporate ethics. The Group will continue to fulfill its social responsibilities based on safety and security at the core. And we will meet the expectations of our stakeholders by pursuing the functionality of mushrooms, which are blessing from nature, and by strict quality control and stable production based on human technology. Also, we are aiming for sustainable growth and coexistence with fruitful nature.

[Reasons for Non-compliance with the Principles of the Corporate Governance Code] [Supplementary Principle 3.1.3 Disclosure of the Company's Initiatives on Sustainability]

In order to promote the ESG strategy disclosed in the mid-term business plan, the Company has newly established the Sustainability Management Committee on December 21, 2021 which deliberates a policy on sustainability at the Group and important matters related to initiatives towards the sustainable growth of the Group as a whole and solving social issues. After deliberated and reviewed at this committee, the Company has formulated the Sustainability Policies and has newly established a sustainability site on the Company's website.

(Sustainability Policies)

As a company that utilizes and nurtures

the blessing of nature, we will work together with our stakeholders to pursue

the enrichment of nature, people and society, aiming for sustainable growth and coexistence with fruitful nature.

* Contribute to the richness of nature

We will evolve an environment-friendly and recycling-oriented business model, protect the rich natural environment of the region and contribute to the sustainability of the global environment.

* Contribute to people's health

Through the supply of safe, secure and high-quality products, we will contribute to the maintenance and improvement of health that supports people's happiness and affluent lives.

* Contribute to the development of society

We will contribute to the realization of prosperous society sharing economic and social value that we strive to sustainably increase with our stakeholders.

For the Behavioral guidelines under the Sustainability Policies, please confirm the Company's website. https://www.maitake.co.jp/sustainability/management/

(Disclosure of Human Capital and Intellectual Properties)

With respect to intellectual properties, we have made an inventory of technology held by the Company and have formulated a strategy for investing in, and making use of, intellectual properties and intangible assets. We will make appropriate use of the domain of right and that of know-how, which will lead to rising mark-up rates and increasing sales revenue of our proprietary products. Through these initiatives, we will create flows to reinvest in intellectual properties and intangible assets and increase corporate value.

In addition, with respect to human capital, for the purpose of developing and ensuring human resources to realize the mid-term business plan, we have revised a system to be closer to job-oriented employment, while improving a support system to develop the

next generation. We continue to formulate a policy for human resource strategies to support sustainably increasing corporate value and promote our initiatives.

With respect to our initiatives in human capital, etc., we are currently reviewing the specific content of disclosure to make investors easy to understand information disclosure. As soon as getting things ready for disclosure, we will disclose the initiatives on the Company's website.

(Enhancement of the Quality and Quantity of Disclosure based on the TCFD or its Equivalent)

As of November 17, 2021, the Company expressed approval of the "Task Force on Climate-Related Financial Disclosures (TCFD) Opinion" which requests the appropriate disclosure of information on the financial impact on a company of climate changes and partially started information disclosure in accordance with the TCFD opinion.

For the disclosure of the TCFD, please refer to the Company's website. https://www.maitake.co.jp/sustainability/environment/tcfd/

We will continue to accelerate our initiatives to realize decarbonized society, make efforts to improve the content of information disclosure in accordance with the TCFD opinion, and renew our disclosure appropriately.

[Disclosure under each Principle of the Corporate Governance Code]

[Supplementary Principle 1.2.4 Development of an Infrastructure for Electronic Voting, English Translations of Notice of Convocation of the General Meeting of Shareholders]

The ratio of foreign shareholders of the Company is approximately 12%. In consideration of increasing foreign shareholders who hold the Company's shares and its business development in the future, the Company uses the Electronic Voting Platform, provides English translations of the Notice of Convocation in a narrow sense and Reference Document of the General Meeting of Shareholders, and posts the above on the Company's website. Through these initiatives, we have developed infrastructures that foreign shareholders, etc. can obtain English translations of the Notice of Convocation of the General Meeting of Shareholders.

[Principle 1.4 Cross-Shareholdings]

With respect to cross-shareholdings, we hold the appropriate number of shares in consideration of sufficiently close examination only if we acknowledge rationality to hold shares such as conducive to increasing the Company's corporate value over the mid- to long-term through maintaining and strengthening the transactional relationship of business, information gathering, and maintaining and developing business alliance relationship.

With respect to cross-shareholdings, the Board of Directors meeting held in November 2021 verified the importance, economic rationality and other factors of holding, and we sold shares whose purposes had been achieved except for those held for the purposes of maintaining and strengthening transactional relationship or information gathering. In the future as well, the regular Board of Directors meetings will verify the above.

The Company comprehensively judges approval or disapproval and appropriately exercises the voting rights as to cross- shareholdings, in consideration of viewpoints such as whether or not conducive to strengthening appropriate corporate governance structure and to increasing shareholder value and making impact on the Company. We will request an issuer company to hold discussion about the proposal details, as necessary.

[Principle 1.7 Related Party Transactions]

The Company is operating its transactions based on the Related Party Transaction Management Rules. At the beginning of the actual transaction, the Company submits to the Board of Directors for approval after excluding related officers as special interested parties from the quorum of the resolution in order to prove the transaction is not prejudicial to the common interests of shareholders. In addition, we investigate related parties' transactions as of the end of the fiscal year, report the results to the Board of Directors, and grasp and monitor the details of the transactions.

[Supplementary Principle 2.4.1 Ensuring Diversity in the Promotion to Core Human Resources]

The Company has formulated the Plan of Act for General Employer pursuant to the Act on the Promotion of Female Participation and Career Advancement in the Workplace to promote female advancement, and discloses a ratio target for promotion of women to middle managerial positions on the Ministry of Health, Labour and Welfare's website. https://positive- ryouritsu.mhlw.go.jp/positivedb/detail?id=7075

Furthermore, in order to aggressively promote the assignment of female managers, we conduct questionnaires and discussions for female supervisors who are candidates for managers and make use of the results thereof for reviewing training plans, etc. Otherwise, to ensure diversity in the promotion to core human resources, sixty percent or more of middle managerial positions of the Company consist of midcareer hires, and the Company has the composition of the middle managerial positions making use of their respective knowledge. We will continue to make efforts to ensure and develop diverse human resources not in favor of career and gender. With respect to the promotion of foreign nationals to core human resources, we will advance the acquisition of human resources necessary for future business development.

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

The Company has established a policy for the management of pension assets, and each procedure is carried out in accordance

with the agreement. In addition, the Company delegates investment to financial institutions.

Furthermore, we assign a person in charge within the Human Resources and General Affairs Department responsible for business and make efforts to learn specialized knowledge through participation in outside training and explanation from entrusted financial institutions. In addition to receiving investment reports from financial institutions on a quarterly basis, the Company monitors the investment status through each company's website.

[Principle 3.1 Full Disclosure]

1. Business Principles, Strategies and Plans

1. Business Principles

The Company's motto and management philosophy are as follows and are disclosed on the Company's website.

"Company Motto"Contribution towards society with quality products A worthwhile workplace

"Management Philosophy" Contribution towards enrichment of citizens' livelihood and the prosperity of food culture Realize contributions to local communities and shareholders, executives and employees Respect corporate ethics

2) Business Strategies and Plans

The Company discloses the mid-term business plan for the period from the fiscal year ended March 31, 2022 to the fiscal year ending March 31, 2026 on the Company's website.

https://ssl4.eir-parts.net/doc/1375/ir_material_for_fiscal_ym/107999/00.pdf

(ii) Basic Views and Guidelines on Corporate Governance

The basic views and guidelines on the Company's corporate governance are as described in I, 1. Basic Views of this report.

(iii) Policies and Procedures in Determining the Compensation of Directors

Policies and procedures in determining the compensation of Directors are as described in II, [Director Compensation], Policy on Determining Compensation Amounts and Calculation Methods of this report.

1. Board Policies and Procedures in the Appointment/Dismissal of the Senior Management and the Nomination of Directors Candidates
   <>
   The Company has a basic policy to nominate appropriate persons from among persons who can meet the trust of management from shareholders and discharge their duties and responsibilities, can contribute to the sustainable development and increasing corporate value of the Group, or understand well the trend of management environment and competition, etc. surrounding the Group, together with the history, corporate culture, characteristic of employees, etc. of the Group, and can make the most of these factors for increasing corporate value.
   Based on this policy, the Board of Directors nominates candidates for Directors in comprehensive consideration of character, experience, the terms of office of Directors of the Company, etc. from among persons who have career, ability, leadership, a wide field of vision, noble ethical views, and the spirit of obeying law, appropriate for persons who are involved in managerial decision- making and supervising the execution of business.
   The Nomination and Compensation Committee conducts checks and monitoring of the appropriateness of the basic policy for selecting candidates for Directors and the process of deciding the candidates after request for consultation from the Board of Directors and sends a report to the Board of Directors. The Board of Directors confirms the report from the Nomination and Compensation Committee and makes a final decision on candidates for Directors.
   Candidates for Outside Directors are nominated in comprehensive consideration of character, positions of Directors concurrently serving as Directors at other companies, the terms of office of Outside Directors, etc. from among persons who have the high level of specialized knowledge and a wealth of experience such as legal affairs, accounting and taxation and knowledge on corporate management.
   In the event of the significant low performance against business goal, a significant scandal and a breach of compliance or otherwise in the event it is considered to be difficult that the Company's sustainable growth and increasing corporate value over the mid- to long-term will be realized, the Nomination and Compensation Committee shall offer an opinion on the consultation of dismissal to the Board of Directors regarding the dismissal of Business Executive Directors including CEO. The Board of Directors shall sincerely receive the opinion from the Nomination and Compensation Committee and hold a consultation with the committee.

<> Candidates for Directors who are Audit and Supervisory Committee Members are determined at the Board of Directors with

consent of the Audit and Supervisory Committee.

The Audit and Supervisory Committee nominates candidates for Directors who are Audit and Supervisory Committee Members from among persons who have knowledge and experience to perform appropriate audits, especially, a persons who has sufficient knowledge about finance and accounting regarding managerial decision-making and the situation of execution of business after carefully reviewing appropriateness as Audit and Supervisory Committee Members chiefly in consideration of whether or not it is possible to fulfill the term of office, ensuring independence from executives, keeping fair and unbiased attitude, and conducting the evaluation of management. In addition, the Audit and Supervisory Committee nominates candidates for Outside Directors who are Audit and Supervisory Committee Members, not only confirming independence in consideration of relations between a company

and its parent company, relations with Representative Director and other Directors and principal employees, etc., but also in comprehensive consideration of the possibility of attendance on the Board of Directors meetings, the Audit and Supervisory Committee, etc.

(v) Reasons for Nomination as a Candidate for Director

The Company posts reasons for nomination as an individual candidate for Director in the "Notice of Convocation of the Ordinary General Meeting of Shareholders."

https://www.maitake.co.jp/ir/stock/meeting/

[Supplementary Principles 3.1.2 Providing English Language Disclosures Bearing in Mind the Number of Foreign Shareholders] The ratio of foreign shareholders of the Company is approximately 12%. In consideration of increasing foreign shareholders who

hold the Company's shares and promoting its global development in the future, the Company provides English translations of the consolidated financial results, materials for financial results briefings and important press releases, and posts the above on the Company's website.

[Supplementary Principles 4.1.1 Brief Summary of Delegation to Directors]

The Company has formulated the "Rules for the Board of Directors" and determines contents to be deliberated at the Board of Directors meetings pursuant to laws and regulations. In addition, the Company has formulated the "Rules for Executive Officers" and the "Rules for Administrative Authority" and thereby clearly specifies the scope and content of the matters which the management can execute.

[Principle 4.8 Effective Use of Independent Outside Directors]

All four (4) Outside Directors of eight (8) Directors of the Company are Independent Outside Directors to make management transparent and to strengthen the supervisory function. Independent Outside Directors have provided useful advice and opinions from an independent standpoint at the Board of Directors meetings with their respective insights, experience, and specialties.

[Supplementary Principles 4.8.3]

The Company has a controlling shareholder and thus has newly established the Special Committee which consists of Independent Outside Directors as of December 1, 2021 from a perspective of protecting the interests of minority shareholders. The Special Committee deliberates and reviews important transactions and acts with the controlling shareholder to be occurred in the future, confirms validity for ongoing transactions once a year, and sends a report to the Board of Directors. Through these initiatives, we will continue to make efforts to protect minority shareholders.

[Principle 4.9 Independence Standards and Qualification for Independent Directors]

The independency of Independent Outside Directors is judged pursuant to the Companies Act and the Independence Standards of the Tokyo Stock Exchange. Also, the Company strives to select persons who can be expected to contribute to constructive consideration for the Board of Directors with efforts to deepen understanding of the Company's business and actively giving advice from the perspective of improving corporate value based on their knowledge.

[Supplementary Principle 4.10.1 Nomination Committee and Compensation Committee]

The Company has established the Nomination and Compensation Committee, the majority of which consists of Outside Directors as an advisory body of the Board of Directors and President and CEO, Representative Director. The Nomination and Compensation Committee sends the Board of Directors a report about Directors' compensation and the nomination of candidates for Directors as described in [Principle 3.1 Full Disclosure], (iii) and (iv) of this report.

[Supplementary Principle 4.11.1 View on the Balance among Knowledge, Experience and Skills of the Board of Directors as a Whole, and Also on Diversity and Size of the Board of Directors]

The Board of Directors of the Company consists of Directors who have different backgrounds such as special knowledge and experience. The number of Directors will be no more than twenty (20) for quick decision-making. In addition, the Board of Directors of the Company currently consists of eight (8) Directors (including four (4) Outside Directors).

We ensure the balance and diversity of knowledge, experience and ability of a whole board including Directors who are Audit and Supervisory Committee Members. Skills matrix at the Board of Directors of the Company is described on the last page of this report.

[Supplementary Principle 4.11.2 Directors' Concurrent Positions at Other Listed Companies]

The Company discloses the important concurrent positions of Directors and candidates for Directors in the "Notice of Convocation of the Ordinary General Meeting of Shareholders" and the "Security Report" each year.

[Supplementary Principle 4.11.3 Summary of the Results of Evaluation of the Board of Directors]

In order to analyze and evaluate the effectiveness of the Board of Directors as a whole, we conducted a self-assessment of the management of the Board of Directors, including the composition, operation, agenda, support structure, and compensation in April 2022, in the form of an unsigned questionnaire survey to all Directors (seven (7) members) and all Audit and Supervisory Committee Members (four (4) members) who comprise the Board of Directors.

In the evaluation, all Directors and all Audit and Supervisory Committee Members were asked to self-evaluate (1) the role and function of the Board of Directors, (2) the composition and scale of the Board of Directors, (3) the operation of the Board of Directors,

1. communication with the management, (5) coordination with audit organizations, and (6) relationship with shareholders and investors. The results were reported to the Board of Directors, issues were identified, problems were shared, and future measures were discussed.
   Consequently, the results were generally positive, and we evaluated that the Board of Directors was properly operated and that the effectiveness of the Board of Directors was ensured.
   On the other hand, from the self-evaluation, internal and external officers commented that further improvements are necessary for (1) the implementation of continuous succession plans (successor plans) from a long-term standpoint, (2) the effective operation and further improvement of deliberation at the Board of Directors meetings, (3) the introduction and provision of training opportunities to Directors, (4) strengthening coordination between Outside Directors and the Audit and Supervisory Committee, and
2. disseminating information to shareholders and investors, and promoting constructive dialogue. We will strive to improve the identified issues by implementing measures such as securing deliberation time, scrutinizing the deliberation targets, and securing opportunities for explanations from business execution to the Board of Directors.

[Supplementary Principle 4.14.2 Training Policy for Directors]

The Company provides essential information, knowledge, and lectures regarding business activities for Directors to fulfill their roles and responsibilities properly. Also, Outside Directors shall be given opportunities for understanding the Company's business through discussions with the top management, etc. and production plant tours, etc.

[Principle 5.1 Policy for Constructive Dialogue with Shareholders]

Regarding dialogue with shareholders, the General Manager of the Corporate Planning Division, which has responsibility for Investor Relations, unifies and corresponds with related departments based around the Investor Relations and Public Relations Department through appropriately exchanging information. Also, the General Manager of the Corporate Planning Division shall share the opinions received through dialogue with shareholders with Director in charge and report to the Board of Directors in order to use them in business operations so the Company establishes the organizational structure which contribute to the sustainable growth and the improvement of corporate value for the medium- to long-term. In terms of dialogue with shareholders, the Company manages insider information appropriately in accordance with the "Rules for Prevention of Insider Trading" and the "Fair Disclosure Rules Compliance Manual".

In addition, regarding various information disclosure, the Company endeavor to fulfill the dialogue with shareholders by timely disclosure via the press or website.

2. Capital Structure

			Foreign Shareholding Ratio			From 10% to less than 20%
[Status of Major Shareholders]
			Name / Company Name	Number of Shares	Percentage
			Owned	(%)
		Shinmei Holdings Co., Ltd.			19,963,000	50.07
		The Master Trust Bank of Japan, Ltd. (Trust Account)	2,349,700	5.89
		BNP PARIBAS SECURITIES SERVICES LUXEMBOURG/JASDEC/FIM/LUXEMBOURG
		FUNDS/UCITS ASSETS			1,491,600	3.74
		Custody Bank of Japan, Ltd. (Trust Account)			1,407,900	3.53
		HSBC BANK PLC A/C M AND G (ACS))			945,039	2.37
		SMBC Nikko Securities Inc.			614,300	1.54
		STATE STREET LONDON CARE OF STATE STREET BANK AND TRUST, BOSTON SSBTC A/C UK	267,886	0.67
		LODON BRANCH CLIENTS-UNITED KINGDOM
		Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.	261,800	0.66
		JP MORGAN CHASE BANK 385781			197,544	0.50
		STATE STREET BANK AND TRUST COMPANY 505019	194,300	0.49
			Controlling Shareholder			－
			(except for Parent Company)
			Parent Company			Shinmei Holdings Co., Ltd. (unlisted)

Supplementary Explanation