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    2222   JP3299600001

KOTOBUKI SPIRITS CO., LTD.

(2222)
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Kotobuki Spirits : Corporate Governance Report

06/29/2021 | 03:01am EST

Corporate Governance

Last Updated: June 23, 2021 Kotobuki Spirits Co., Ltd.

President & CEO: Seigo Kawagoe Contact: Shinji Matsumoto Director General Manager

Corporate Planning Division Securities Code: 2222 https://www.kotobukispirits.co.jp/

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

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

1. Basic Views

Kotobuki Spirits Co., Ltd. (the "Company") strives to reinforce and enhance its corporate governance practices while aiming to continuously maximize shareholder value over the long-term. To such ends, we heighten the soundness and efficiency of our management while also focusing on the interests of each and every stakeholder who lends support to our business initiatives, underpinned by management philosophy impelling us "to create happiness, provide happiness," as a basic policy of our business.

Management Philosophy

"To create happiness, provide happiness."

Corporate Motto

"Thankfulness & Gratitude" "Originality & Ingenuity" "Earnestness & Sincerity"

Business Creed

  • We take our pleasure in pleasing our customers.
  • We talk dreams each other, and strive daily to be the number one.
  • We have consciousness of being professionals and true courage, and inspire people.
  • We set high goals, earnestly strive, and accomplish them without fail.
  • We will realize both materialistic and spiritual affluences by creating higher values.

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

[Supplementary Principle 4.1.3] Specific plans regarding successorship of the CEO and other top executives Although the Company does not prepare specific plans regarding successorship with respect to the CEO and other top executives at this point in time, its management does recognize the notion that bringing up the next generation of top management is one of the highest management priorities that must be addressed in order for the Company to achieve sustainable growth and increase corporate value over the medium to long term. As such, we implement training programs for our mid-career executives and others, and are furthermore taking steps to hasten development of management skills by engaging in initiatives that address business challenges, with the aim of cultivating the next generation of senior managers who will spearhead the organization's sustainable growth and development. Going forward, the Board of Directors will appropriately supervise efforts that include those of developing our next generation of senior managers with its sights set on increasing our corporate value over the medium to long term based on the deliberations and recommendations of the Nominating and Remuneration Advisory Committee, a majority of whose members are Independent Outside Directors.

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[Supplementary Principle 4.2.1] Management remuneration system linking remuneration to financial results over the medium to long term

The Company makes decisions regarding Director remuneration upon having considered factors that include business results relative to specific positions of the Directors. We strive to ensure that management's remuneration functions as a healthy incentive for generating sustainable growth. To such ends, when it comes to remuneration mechanisms that better link management remuneration to medium-tolong-term business results and shareholder value going forward, the Board of Directors will consider factors that include the necessity of such mechanisms and objective and transparent procedures, based on the deliberations and recommendations of the Nominating and Remuneration Advisory Committee, a majority of whose members are Independent Outside Directors.

- 2 -

[Disclosure Based on the Principles of Japan's Corporate Governance Code]

[Principle 1.4] Cross-shareholdings

The Company maintains cross-shareholdings based on the view that doing so helps it to maintain and develop favorable business relationships while also enabling it to maintain stable financing relationships. We accordingly hold stock deemed to help increase our corporate value, and the Board of Directors regularly assesses holdings with respect to the medium- to long-term economic rationale of such holdings, the status of transactions, and other such factors. Based on such policy, we act to reduce holdings if we find there to be an absence of rationale for maintaining such holdings. We appropriately exercise our voting rights upon comprehensively placing consideration on factors that include how the outcome might affect sound management of the issuing company and enhancement of its corporate value over the medium to long term.

[Principle 1.7] Related party transactions

When conducting related party transactions, we appropriately engage procedures with respect to the Board of Directors and disclose such matters in our securities reports and other such documents. We subject all Officers of the Company (including officers of the Kotobuki Spirits Group (the "Group")) to surveys regarding related party transactions, and monitor such activity. When it comes to transactions within the Group, we strive to ensure compliance with our "Regulations on Affiliate Management" which forbid any such transaction that would be detrimental to the interests of either party.

[Principle 2.6] Roles of corporate pension funds as asset owners

Whereas Company and some of its consolidated subsidiaries previously enrolled in an employee's pension fund for companies in Tottori Prefecture's food industry, that fund was dissolved per approval of Japan's Minister of Health, Labour and Welfare granted on March 25, 2016. The Company has no corporate pension funds under management at this time.

[Principle 3.1] Full disclosure

  1. Company objectives (management philosophy, etc.), business strategy, and business plans
    The Company's business policies and other such information is disclosed in its financial statements, presented in its financial results briefings, and posted to its corporate website.
  2. Basic views and basic policy on corporate governance
    The Company strives to reinforce and enhance its corporate governance practices while aiming to continuously maximize shareholder value over the long-term. To such ends, we heighten the soundness and efficiency of our management while also focusing on the interests of each and every stakeholder who lends support to our business initiatives, underpinned by management philosophy impelling us "to create happiness, provide happiness," as a basic policy of our business. The Company's basic views and basic policy on corporate governance are stated under "1. Basic Views" of this Report and posted to its corporate website.
  3. Board of Director policies and procedures in determining remuneration of senior management and Directors
    For basic policy on Director remuneration and methods for determining such remuneration, refer to the section, "Disclosure of Policy for Determining Remuneration Amounts or Calculation Methods Thereof" under "Director Remuneration" in this document.
  4. Board of Director policies and procedures in appointing and dismissing senior management and nominating Director candidates
    When deciding on senior management and Director candidates, the Company engages a policy of nominating qualified individuals capable of fulfilling such duties and responsibilities upon making judgment on comprehensive factors that include a candidate's character, experience, knowledge, aptitude and health. Director candidate nominations are proposed at general meetings of shareholders, upon having been deliberated on at meetings of the Board of Directors attended by the Independent Outside Directors. Going forward, to further enhance objectiveness and transparency of the procedures to appoint and decide on senior management and Director candidates, we will seek advice from the Nominating and Remuneration Advisory Committee, a majority of whose members are Independent Outside Directors.
  5. Individual appointments and dismissal of the senior management and nominations of Director candidates by the Board of Directors

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The Company's Notifications of General Meeting of Shareholders disclose details upon appointment of senior management and nomination of Director candidates by the Board of Directors. Such details include career profiles of Director candidates in relation to their individual appointments and nominations, and reasons for appointment and career profiles of all Director candidates. In the event that the Company deems there to be objective grounds for dismissing a senior manager or Director amid a scenario where the Company finds, for instance, that the senior manager or Director has significantly damaged the Company's corporate value upon having violated laws, regulations, the Articles of Incorporation, etc., the Board of Directors will resolve to remove the senior manager or Director upon having appropriately engaged in exhaustive deliberations in a meeting of the Board of Directors attended by the Independent Outside Directors. Going forward, to further enhance objectiveness and transparency of the procedures of appointment and dismissal of senior management and nomination of Directors, we will establish and seek advice from the Nominating and Remuneration Advisory Committee, a majority of whose members are Independent Outside Directors.

[Supplementary Principle 4.1.1] Roles and Responsibilities of the Board of Directors (the scope of matters delegated to the management)

The Company's Board of Directors is bound by stipulations of the Articles of Incorporation, laws and regulations. Meanwhile, the Company's "Regulations of the Board of Directors" stipulate matters to be resolved by the Board of Directors. Through its pure holding company structure, the Company aims to achieve a swift and flexible approach to decision-making and Group management carried out with a sense of immediacy by keeping the Group's functions of management supervision separate from its functions of business execution. To such ends, the Company's "Regulations on Affiliate Management" and its "Regulations on Delegation of Authority" clearly specify the scope of authority delegated in relation to decision-making that pertains to business of Group companies, and the scope of matters subject to reporting.

[Principle 4.9] Independence standards and qualification of Independent Outside Directors

The Company appoints as Independent Outside Directors those who do not maintain interests that might conflict with those of general shareholders, in compliance correspondingly with provisions of the independence criteria of "the Guidelines concerning Listed Company Compliance, etc." stipulated by the Tokyo Stock Exchange. As for qualification required of Independent Outside Directors, the Company appoints those who are likely to constructively engage in deliberations during meetings of the Board of Directors, from a standpoint of neutrality and objectivity.

[Supplementary Principle 4.11.1] Views on balance, diversity and size of the Board of Directors

The Company's Board of Directors comprises six Inside Directors, (including one Director who is an Audit and Supervisory Committee member), who have diverse expertise as well as a deep knowledge of the Group's businesses, a sense of balance and achievement, and decision-making ability; as well as four Outside Directors (including two Directors who are Audit & Supervisory Committee members), including one female Director, who have diverse perspectives as well as a wealth of experience and advanced knowledge and expertise regarding corporate management, finance and accounting, legal affairs, and society and culture, etc., aiming at lively deliberations and quick decision making. The Company strives to achieve an overall composition and scale of the Board of Directors that is optimal from the perspectives of sustainable growth and increase in corporate value over the medium to long term. Furthermore, going forward, the procedure for selecting Director candidates will include deliberations by the Nominating and Remuneration Advisory Committee, a majority of whose members are Independent Outside Directors.

[Supplementary Principle 4.11.2] Directors with concurrent assignments

Concurrent assignments of the Company's Directors are disclosed in the General Meeting of Shareholders Notifications and securities reports. Outside Directors of the Company concurrently serving as officers of other listed companies are to rationally limit the scope of such duties so that they are able to devote the time and effort required for them to appropriately fulfill their respective roles and responsibilities as Outside Directors of the Company.

[Supplementary Principle 4.11.3] Evaluation of the effectiveness of the Board of Directors

The Company carried out an analysis and evaluation based on the results of a "Survey Related to Effectiveness of the Board of Directors" conducted for all Directors (including Directors who are Audit and Supervisory

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Committee Members) in March 2021 and discussion in the Board of Directors meetings. As a result, at this time, the Board of Directors has been evaluated to be achieving overall effectiveness as it has a good overall balance of knowledge, experience, and capability for performing the roles and responsibilities of the Board of Directors, it maintains an appropriate size, and its meetings are run appropriately with decisions made based on high-quality, active discussion. Going forward, the Company will conduct evaluations of the effectiveness of the Board of Directors once a year, disclosing a summary of the evaluations and continuing its efforts to improve the Board of Director's effectiveness.

[Supplementary Principle 4.14.2] Training policy for Directors

Upon ushering in Outside Directors, the Company provides them with opportunities to learn and understand details pertaining to the Company's business environment, particularly those involving the Company's history, business overview, and tours of the Group's factories. The Directors engage in diligent study to ensure that they acquire knowledge and information necessary for them to fulfill their roles and responsibilities as Directors. This involves, taking part in seminars that draw on external specialized institutions and other such bodies and participating in training exchanges with external organizations and other such bodies. The Audit and Supervisory Committee members belong to the Japan Audit & Supervisory Board Members Association, and accordingly improve their auditing skills by gaining access to knowledge and information they need as Audit and Supervisory Committee members by participating in various training sessions held by the Association.

[Principle 5.1] Policy on constructive dialogue with shareholders

The Company's policy on systemic development and initiatives for facilitating constructive dialogue with its shareholders is as follows:

  1. The Company's investor relations activities are spearheaded by the President & CEO and the Director and General Manager of the Corporate Planning Division;
  2. Investor relations information is handled by the Corporate Planning Division which is the department in charge of IR in coordination with related departments of the business company;
  3. The Company's primary IR activities encompass efforts that involve holding biannual financial results briefings and quarterly meetings with individual institutional investors and analysts, and engaging in planning and operation of the investor relations section of the corporate website. The Company also posts materials and video footage of its financial results briefings and general meetings of shareholders to the investor relations section of its corporate website;
  4. The Company shares opinions, etc. gained through IR activities by appropriately reporting such feedback in meetings of the Board of Directors and Executive Committee; and
  5. The Company appropriately and prudently controls insider information when engaging in dialogue on the basis of its "Regulations on Information Disclosure" and its "Regulations on Preventing Insider Trading."

2. Capital Structure

Foreign Shareholding Ratio

From 10% to less than 20%

[Status of Major Shareholders]

Name

Number of Shares Owned

Shareholding Ratio

(Shares)

(%)

S. Kawagoe Corporation

9,300,000

29.88

The Master Trust Bank of Japan, Ltd. (Trust

2,137,300

6.87

account)

SSBTC CLIENT OMNIBUS ACCOUNT

(Standing proxy: The Hongkong and

1,394,364

4.48

Shanghai Banking Corporation Limited,

Tokyo Branch

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This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Kotobuki Spirits Co. Ltd. published this content on 29 June 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 June 2021 07:00:37 UTC.


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