Basic Policy on Corporate Governance

Based on our corporate philosophy, which is “Contributing to the creation of a vital society and a healthy lifestyle through our fermentation technology and biotechnology in a way that achieves harmony with nature,” the Takara Group benefits society by unlocking new potential in the culinary, lifestyle, and life science fields through our fermentation technologies for traditional Japanese sake and our cutting-edge innovation in biotechnologies and by continuing to create new value.

 

Under the ten-year long-term management vision Takara Group Vision 2020 announced in 2011, we aim to expand not only the domestic business but also our overseas business based on our uniquely robust business portfolio that consists of the promising growth areas of Biomedical and Health Foods Businesses in addition to the foundation businesses of Alcoholic Beverages and Seasonings while at the same time building a well-balanced business structure that can hold up well to business environment changes. Under the three-year Takara Group Medium-Term Management Plan FY2020, the concrete action plan for our long-term vision, we have set a basic policy of further increasing overseas sales ratio together with having a full product line-up and many products with a competitive edge both in Japan and overseas with the aim of building up a great number of fields in which we can beat competitors and establish a balanced business foundation able to grow revenues significantly no matter what environmental changes occur. Based on this policy, we are announcing a policy of aiming to improve ROE through performance targets such as net sales, operating income, and overseas sales ratio, as well as through investment in growth and appropriate shareholder returns. Specifically, we will pay dividends based on operating income with a target of 30% for the deemed dividend payout ratio* together with implementing acquisitions of treasury stock and sales of cross shareholdings in a flexible manner as circumstances permit.

 

The steady implementation of the long-term vision and the Medium-Term Management Plan and the achievement of continuous growth and an increase in corporate value over the medium-to-long term requires a corporate governance structure that provides transparent, fair, timely, and resolute decision making based on the perspective of stakeholders, including shareholders, customers, employees, creditors, and local communities, and the Group is making efforts in accordance with the specific policies set forth in the attached Takara Holdings Corporate Governance Policy.

*Deemed dividend payout ratio: Total dividends / Consolidated operating income x (1 - Statutory effective tax rate) ≒ 30%

Corporate Governance Structure

The Company has adopted the Audit & Supervisory Board system of corporate governance from the perspective of strengthening supervisory functions. Under this structure, directors with a high level of expert knowledge and extensive experience in each business carry out management decision-making and oversee operations in order to perform auditing and supervision of business execution at each operating subsidiary through the formulation and implementation of management strategy while highly independent external directors and external Audit & Supervisory Board members with broad knowledge based on the perspective of all stakeholders, including shareholders, are involved in the audit and supervision of business execution, thereby carrying out highly effective supervision of directors.

 

In addition, Takara Holdings has formulated the “Rules and Regulations for Overseeing Group Companies,” and, as the holding company, while maintaining independence and autonomy among Group companies, requires each company to deliberate and consult in advance on important management matters through a management committee system which includes the Group Strategy Committee, adopting a structure that provides supervision of business execution while supporting appropriate risk taking.


Corporate Governance System

(As of June 28, 2018)

Directors and Board of Directors

The Company’s Board of Directors is composed of nine directors, including two external directors. Based on the resolution of the 105th General Shareholders’ Meeting held on June, 2016, the Company adopted a system of electing a number of external directors for the purpose of sustained growth and improving corporate value over the medium-to-long term.

 

Moreover, the term of office for directors is one year in order to respond promptly to the management environment and to clarify the management responsibility of the directors.

 

Evaluation Results of the Effectiveness of the Board of Directors

Takara Holdings evaluates the effectiveness of the Board of Directors, primarily its operational aspects.
Please refer to the attached file about the summary of the results of the evaluation in fiscal 2018.

Audit & Supervisory Board Members and Audit & Supervisory Board

The Company’s Audit & Supervisory Board is composed of five Audit & Supervisory Board members, including three external Audit & Supervisory Board members. The Company’s Audit & Supervisory Board members and Audit & Supervisory Board make appropriate decisions from an independent and objective standpoint with regard to the performance of their roles and responsibilities.

 

Furthermore, the Audit & Supervisory Board members do not only appropriately implement accounting and operational auditing through participation at the Board of Directors’ meetings and various important management committees and forums for the exchange of views with the management team and internal auditing departments, but also make a variety of recommendations to the management team when they deem it necessary.

Activities with Important Repercussions for Corporate Governance

Policies concerning our publicly traded subsidiary Takara Bio Inc.
Takara Holdings Inc. is the parent company of Takara Bio Inc., holding 60.9% of the voting rights of Takara Bio (1st section of Tokyo Stock Exchange; Securities code number: 4974) as of June 28, 2018. The relationship between the Company and Takara Bio is outlined below.

1) Listed subsidiary Takara Bio
On April 1, 2002, Takara Bio was spun off from the parent company as a wholly owned subsidiary. Subsequently, the parent company's share of voting rights was reduced to its current level through third-party capital increases, public subscriptions, the issue of bonds with warrants, and other corporate actions.

As of June 28, 2018, Takara Holdings is a holding company comprising 62 subsidiaries and three affiliates. Takara Bio is positioned as the subsidiary specializing in biotechnology and promoting biotechnology-related businesses for the Group.

2) Holding company management of Group companies
Takara Bio abides by the "Rules and Regulations for Overseeing Group Companies" and receives reports on decisions and other actions of the Board of Directors, but is not required to seek the approval of the Board before enacting policies and operates independently of the holding company.

Further, although Takara Bio's representative directors, and other Board members and executive officers, are requested to attend meetings of the Group Strategy Committee, Takara Bio Coordination Committee and other committees of the Company as circumstances require, the objective of this attendance is to discuss overall Group policies and facilitate reporting among Group companies, and does not inhibit the autonomy or independence of Takara Bio.

Policies on response to large-scale purchases of the Company's shares (takeover defense guidelines)
Based on the approval of the 96th General Shareholders’ Meeting, held on June 28, 2007, Takara Holdings introduced policies on its response to large-scale purchases of the Company’s shares without the prior agreement of the Company’s Board of Directors (Takeover Defense Guidelines). These policies were introduced with the objective of ensuring and enhancing the corporate value of Takara Holdings and the Takara Group and thereby the common interests of shareholders.

 

Subsequently, the partial revision and continuation of Takeover Defense Guidelines was approved at the 99th General Shareholders’ Meeting, held on June 29, 2010, and the 102nd General Shareholders’ Meeting, held on June 27, 2013. Recently, spurred by the expiry of the period of validity of the measures, the meeting of the Company’s Board of Directors, held on May 9, 2016, resolved on the partial revision of the content, including the establishment of a new Independent Committee, which was approved at the Company’s 105th General Shareholders’ Meeting, held on June 29, 2016.

 

For details, see this page (Takeover Defense Guidelines).