J Oil Mills : (Delayed) Corporate Governance Report

Corporate Governance Report

Last Update: July 1, 2022

J-OIL MILLS, Inc.

Tatsuya Sato

Representative Director, President and CEO

Contact: [phone]

Securities Code: 2613

http://www.j-oil.com/en/

The corporate governance of J-OIL MILLS, Inc. (the "Company") is described below.

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

Other Basic Information

1. Basic Views

The Company is working to enhance its corporate governance, seeking to realize honest and transparent management that wins the trust of its stakeholders, while striving to enhance its internal control to improve the efficiency of the corporate governance.

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

Please refer to the Corporate Governance Code Implementation Status Table at the end of this document for the implementation status of each principle established in the Code.

[Principle 1.3] (Basic Strategy for Capital Policy)

The Company implements an appropriate capital policy based on an understanding of the cost of capital in order to enhance corporate value. In addition, we will allocate operating cash flow and external financing in a well-balanced manner to growth investment including M&A, capital investment, and shareholder returns. By setting targets for ROE and ROIC as key management indicators, we will aim to build an optimal capital structure that is appropriate for the Company Group's business structure and achieve a structure that stably outperforms the cost of capital. We will reconsider the targets for ROE and ROIC by taking into account major changes in the economic environment surrounding the Company due to factors such as a surge in raw material prices and the depreciation of yen.

With regard to dividends, we will allocate cash flow generated through earnings expansion to investment for growth, and raise the consolidated dividend payout ratio from 30% with the aim of strengthening stable and continuous returns to shareholders.

[Principle 1.4] (Cross-Shareholdings)

The Company Group has positioned the "improvement of asset efficiency" as an important issue in its Sixth Medium-Term Business Plan, and has a policy to reduce cross-shareholdings by half and allocate them to investments for growth by FY2024.

We will hold the minimum amount of shares that are deemed to contribute to the enhancement of our corporate value. In determining whether or not to hold such shares, the significance of holding such shares is individually confirmed from multiple perspectives, including the economic rationality of holding such shares (whether the benefits and risks associated with holding such shares are commensurate with the costs of holding such shares) and the probability of improving profitability (the benefits of continuing to hold such shares and the prospects

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for future transactions). For those shares that are deemed to have significance, the Board of Directors reviews them on a regular basis, and for those shares for which the appropriateness of holding cannot be confirmed, we will proceed with the sale after obtaining the full understanding of the business partner. In addition, even if the significance of holding shares is recognized, we may sell them in accordance with the basic policy of reducing cross-shareholdings, taking into consideration the market environment, management and financial strategies, and other factors. In FY2021, the Company sold seven of its cross-shareholdings (amount of sale: 656 million yen), and of these, six were sold in their entirety.

With respect to the exercise of voting rights for cross-shareholdings, the Company exercises voting rights based on the premise that the shares will contribute to the enhancement of the Company's corporate value, and by making a comprehensive judgment as to whether the exercise of voting rights will contribute to the sustainable growth and medium- to long-term corporate value of the investee company. Specifically, the following criteria will be established and individual approval or disapproval will be determined.

• Quantitative evaluation: Safety, profitability, business performance, dividend payout ratio, risk of impairment due to falling stock prices, etc.
• Qualitative evaluation: Significant subsequent events, notes on the premise of a going concern, unusual opinions of the Accounting Auditor, material illegal or anti-social acts, etc.

[Principle 1.7] (Related Party Transactions)

In the event that a Director engages in a competitive transaction or a transaction with a conflict of interest as defined in the Companies Act, the Company shall approve the transaction at a meeting of the Board of Directors in accordance with the "Board of Directors Regulations" and report the results to the Board of Directors.

In addition, transactions with major shareholders, etc., are carried out after necessary approval in accordance with the "Board of Directors Regulations" and "Approval Rules" depending on the size and importance of the transaction.

In this way, we monitor the appropriateness of the terms and conditions of transactions with related parties and prevent them from harming the common interests of the Company and its shareholders.

[Supplementary Principle 2.4.1] (Ensuring Diversity)

1. Approach to ensuring diversity

The Company Group promotes diversity, equity, and inclusion in its human resources, work styles, and employment. In FY2022, we established the DE&I Promotion Office, a dedicated department. In the Sixth Medium-Term Business Plan, we will pursue the existence values of our corporate philosophy system of "Work together to achieve high targets and exceed expectations," and further promote diversity through measures for women, male childcare, seniors, diversity within individuals, mid-career hires, people with disabilities, foreign nationals, and others.

2. Voluntary and measurable goals for ensuring diversity

• Changes in the ratio of women in management positions

FY2018: 5.0%	FY2019: 5.7%	FY2020: 6.0%	FY2021: 6.0%
FY2024 (target): 12.0% FY2030 (target): 30.0%

• We will maintain the ratio of women in the newly hired regular employees at 40% or more.
• The number of professional hires (mid-career hires) are increasing year by year. In FY2021 we hired 2.5 times as many mid-career workers as five years ago, and the percentage of mid-career hires out of total employees was 25% as of April 2021, as compared to 15% in 2017. In FY2022 we plan to hire mid-career workers in the corporate divisions, business divisions, and production divisions as well. We will accelerate our growth areas by recruiting talent with high expertise.
• As of the end of March 2022, six employees are foreign nationals. We expect to continue hiring talented people and promoting them to management positions regardless of their nationality.

3. Status of ensuring diversity

• As mentioned above, the number of women in management positions is increasing every year. In the previous fiscal year, approximately 40% of the new graduates hired were women, and approximately 30% of the mid-career hires were women.

4. Human resource development policies and internal environment policies to ensure diversity

In FY2018 we launched the Cassiopeia Project, a cross-organizational project to promote the active participation of women in the workplace. In conjunction with the launch of a dedicated portal site and internal

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social media platform, we have enhanced theme development, planning, and initiatives, and have conducted female employee workshops, career training sessions for young female employees, roundtable discussions for female managers, and mentor training courses for female managers and general employees. In addition, unconscious bias training for executives and line managers, which goes into the awareness and attitude of not only female employees but also their superiors and colleagues, and workshops on male childcare support were conducted. Furthermore, we have put in place an internal environment that supports flexible work styles by providing programs such as a flextime system without core time, hourly paid leave, teleworking, and satellite offices. Currently, with diversity as the keyword, project members participate in a wide range of activities, expanding the theme to include diversity within individuals and the participation of seniors and people with disabilities in addition to the participation of women. The Company Group promotes the use of childcare leave by men, and the number of men taking childcare leave in the sales and production divisions has been increasing. 35% of all eligible male employees have used childcare leave as of March 2022. Going forward, we plan to further expand the acquisition of leave to create a more comfortable working environment. Furthermore, through the post-retirement reemployment system, we are preparing a working environment for employees over the age of 60.

[Principle 2.6] (Roles of Corporate Pension Funds as Asset Owners)

The Company has established a Pension Asset Management Committee consisting of Executive Officers in charge of Finance and Human Resources, labor unions, etc., and the Committee listens to the opinions and reports of multiple financial institutions with expertise and manages the investment assets by reviewing asset allocation as appropriate under the basic policy of managing pension assets with controlled risk. We have entrusted the management of our pension assets to major financial institutions in a diversified manner, all of which have accepted Japan's Stewardship Code.

[Principle 3.1] (Full Disclosure)

1. Management philosophy and management strategy

(1) Management philosophy

For more information on our management philosophy, please refer to "Corporate Philosophy" section of "About J-Oil Mills"

https://www.j-oil.com/en/company/statement.html

(2) Management strategy

The Company Group is striving to improve its corporate value based on the Sixth Medium-Term Business Plan for the four-year period starting in FY2021, and is allocating the necessary management resources to achieve this goal. For more information on the Medium-Term Business Plan, please refer to the "Medium-Term Business Plan" in the "Management Policy" section of "Investor Relations" https://www.j-oil.com/en/ir/management/plan.html

The annual progress is also disclosed in the "Presentation Materials." https://www.j-oil.com/en/ir/library/presentation.html

2. Basic views on corporate governance

Please refer to the "Corporate Governance" on our website for the policy, overview, and diagram of the system. https://www.j-oil.com/en/ir/management/governance.html

In addition, please refer to "Section 4. Status of the Submitting Company, 4. Corporate Governance" in the 20th Securities Report.

https://pdf.irpocket.com/C2613/mCOP/Ahss/toPD.pdf(in Japanese)

3. Policies and procedures for determining the remuneration of Directors and senior management

It is our policy to clarify the linkage between the remuneration of Directors, etc., and the Company's performance and stock value, and to share relevant information with our shareholders. The Company's executive remuneration is as described in "II. 1. [Director Remuneration], Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods" in this report.

4. Candidates for Directors are nominated from various fields inside and outside the Company with requirements based on their ability to promote the enhancement of corporate value through the realization of the corporate philosophy and management strategy. Candidates are selected through evaluation of their performance of duties and at the Board of Directors, and screening and growth support is performed through

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executive training and internal executive candidate training. The Nomination Advisory Committee receives reports from the Representative Director, President and CEO on the development of candidates, and has opportunities for dialogue with candidates, etc., and after deliberating on candidates for Directors, provides advice and recommendations to the Board of Directors. The Board of Directors makes a resolution to nominate candidates for Directors after considering such advice and recommendations.

The appointment of Executive Officers shall be resolved at the Board of Directors meeting after going through the same procedures as those for nominating candidates for Directors.

In nominating candidates for Audit & Supervisory Board Members, the Audit & Supervisory Board recommends candidates from both inside and outside the Company who have practical experience and specialized knowledge and experience in accounting, law, etc., based on the basic policy of ensuring sound and sustainable growth of the Company and a good corporate governance system, and the Board of Directors passes a resolution to nominate candidates for Audit & Supervisory Board Members after considering the background, etc., of the recommended candidates.

If any reason arises for the dismissal of an Executive Officer, the Board of Directors will deliberate and pass a resolution, and if any reason arises for the dismissal of a Director or Audit & Supervisory Board Member, the Board of Directors and the Audit & Supervisory Board will deliberate respectively, and implement procedures in accordance with the Companies Act. The dismissal of Executive Officers and Directors is subject to deliberation by the Nomination Advisory Committee, depending on the reason.

The explanation of the nomination of candidates for Directors and Audit & Supervisory Board Members is given in the section on the proposal for the election of Directors and Audit & Supervisory Board Members at the Annual General Meeting of Shareholders for each fiscal year.

Notice of Convocation of General Meeting of Shareholders: https://www.j-oil.com/en/ir/stock/meeting.html

[Supplementary Principle 3.1.3] (Sustainability Initiatives)

1. Sustainability initiatives

The Company Group recognizes ESG initiatives as an important management issue.

In FY2020 we established the Sustainability Committee and have been operating it continuously since. Chaired by a Director, the committee forms the foundation for promoting sustainability companywide. Giving top priority to climate change measures in the supply chain, the Company is working to overcome challenges by sharing sustainability issues and reducing environmental impacts companywide in everything from procurement to production, logistics, and sales. Considering that the environmental initiative in raw materials procurement is particularly important, we combined two subcommittees under the Sustainability Subcommittee, the Environmental Subcommittee and Sustainable Procurement Subcommittee, into the Sustainable Procurement and Environmental Subcommittee in February 2022 in order to strengthen the driving force for ESG so that it is more in line with our business model. The new subcommittee, as well as two other subcommittees, namely the Human Rights Subcommittee, and Sustainable Product Development Subcommittee, set targets for sustainability issues and formulates and implements concrete action plans.

In November 2020, the Company announced its endorsement of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and joined the TCFD Consortium. In order to facilitate disclosure based on the TCFD recommendations, we established the TCFD Project under the Sustainability Committee. Designating a Director as the project owner, the project facilitates the disclosure of information in line with the disclosure items recommended by TCFD recommendations.

Sustainability Website: Response to the TCFD recommendations

https://www.j-oil.com/sustainability/environment/climate_change/tcfd.html(in Japanese)

2. Investing in human resources

In the Sixth Medium-Term Business Plan, we will build human resources, organizations, and culture to "Work together to achieve high targets and exceed expectations" in order to appropriately respond to the rapidly changing external environment and achieve fundamental changes for the next era.

To achieve this goal, we will work to disseminate our corporate philosophy system, develop strategic human resources, and implement initiatives from the three perspectives of strengthening human resource development, promoting diversity in human resources, and reforming management.

• In order to strengthen human resource development, we will realize "individual-oriented career formation" that maximizes the potential of each individual based on autonomous career development, as well as the early development of next-generation management and leaders. We will enhance education and training,
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support career development, and implement job rotation and talent management tied to the Career Development Program (CDP).

• To promote diversity, in addition to hiring human resources with strengths and unique character that will drive our growth strategy, we will create an environment in which diverse human resources can play an active role regardless of their attributes and values. While implementing the PDCA cycle based on regular employee awareness surveys, we will promote office reforms that incorporate the concept of telecommuting, remote work, and Activity-Based Working (ABW) to minimize restrictions on time and place. In addition, while further promoting the participation of female employees, we will also work on themes such as the promotion of male childcare and the participation of people with disabilities and senior human resources.
• In management reform, we work to improve the management skills of managers, who will become "change leaders," in order for them to create and lead an organization that can take on the challenge of corporate growth by utilizing diverse human resources. We will strengthen management education and information visualization for managers, and work to further improve and reform management skills in terms of both awareness, and knowledge and information. We will work on awareness and improvement through unconscious bias training, 1-on-1 meetings between managers and staff members, 360-degree evaluations, and utilizing the results of employee attitude surveys.
  The number of training programs are increasing year by year. In FY2021 we implemented a new business skills training program for junior employees (covering accounting, finance, marketing, logical thinking, etc.), 1-on-1 training for managers, and a career development program for 40-year-olds in addition to our existing programs for 30-,50-, and 55-year-olds, thereby actively supporting employees' autonomy.
  Visit our website for details on our initiatives to promote diversity in human resources, educational system, and more.

https://www.j-oil.com/sustainability/social/diversity_inclusion/(in Japanese)

https://www.j-oil.com/company/recruit/info/education.html(in Japanese)

3. Investment in intellectual property

Investment in intellectual property is essential for us to strengthen our foundation for the future, which is the goal of the Sixth Medium-Term Business Plan.

Traditionally, the Company Group has sought to secure intellectual property rights through its activities in research and development, production, and proposals to customers. In addition to the manufacturing technology for oils and fats, we contribute widely to society by adopting the technology for oils and fats with long-lasting effects and the technology for water and oil retention of texture-enhancing materials in our products.

As a result of these efforts, we came in ninth in the food manufacturing category of the Japio-SDGs Patent Index announced by the Japan Patent Information Organization (Japio) (for Japanese Unexamined Patent Publications for 2021 announced by Japio in February 2022). We were also placed tenth in the monthly SDGs Corporate Ranking for SDG 2: Zero Hunger (for Japanese Unexamined Patent Publications in August 2021 announced by Japio in November 2021) and 67th in the yearly SDGs Corporate Ranking (for PCT international applications in 2019 announced by Japio in September 2021).

We will continue to discuss investment items at meetings of the Board of Directors and other bodies.

[Supplementary Principle 4.1.1] (Brief Summary of the Scope of Matters Delegated from Board of Directors to the Management)

The Board of Directors is responsible for making decisions on important business operations and statutory matters based on the Company Group's medium- to long-term business plan, supervising the execution of duties by Directors, and establishing an appropriate internal control system.

In addition to what is stipulated in laws and regulations and the Articles of Incorporation, the Board of Directors also stipulates matters to be resolved by the Board of Directors in the Board of Directors Regulations. Other decisions on business execution are delegated to the Representative Director, President and CEO and the Executive Officers in charge. The details of such decisions are set forth in internal regulations such as the Approval Rules and the Rules for Division and Segregation of Duties.

[Supplementary Principle 4.1.3] (Succession Planning)

The Board of Directors and the Nomination Advisory Committee, chaired by an Independent Outside Director, are proactively involved in the formulation and operation of a next-generation manager development program, which aims to identify and develop management executives, including the Representative Director, President

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