Takara Leben : Corporate Governance Report

Corporate Governance

CORPORATE	Takara Leben Co., Ltd.

Last Update: June 27, 2022

Takara Leben Co., Ltd.

Kazuichi Shimada, Representative Director, CEO and

President Executive Officer

Contact: Masashi Yamamoto, Director, CFO, Managing Executive Officer and

Executive General Manager of Administration Headquarters

Tel. [phone]

Securities Code: 8897 https://www.leben.co.jp/

The state of corporate governance of Takara Leben Co., Ltd. ("the Company") is described below.

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

1. Basic Views

Rather than simply pursuing profit, the Company strongly believes that it must comply with laws and corporate ethics and carry out its duties as a responsible member of corporate society.

While maintaining close relationships with customers, shareholders, and employees-our core stakeholders-we continuously consider how we can deliver further satisfaction. In addition, we believe that reflecting the feedback received from various other stakeholders in our business while responding in ways that keep in mind what our company should achieve and for whom will lead to sound and efficient business management as a going concern.

Further, by not limiting ourselves to a systematic check and balance function but rather by spreading the roots as indexes or systems, we will work so that the check and balance across the entire company will function in sync with each person's awareness.

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

Note: The reason is presented based on the Code revised in June 2021.

The Company implements each principle of Japan's Corporate Governance Code.

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

Note: Information is presented based on the Code revised in June 2021.

[Principle 1-4]

Policy on reducing cross-shareholdings

The Company's main purpose in cross-shareholding is the facilitation of business relationships. The Company makes decisions regarding the continuation of its cross- shareholding primarily in consideration of stock prices. It continues its cross-shareholding if the cross-holding is reasonable. If the significance of cross-shareholding declines, the Company will sell the shares in stages, considering the situation of the companies.

Examination of cross-shareholdings

The Board of Directors and other bodies examine cross-shareholdings in detail to determine if their purpose is appropriate and the benefits and risks related to the cross-shareholdings are worth the capital cost. Summaries of these examinations are disclosed.

Criteria for exercising voting rights related to cross-shareholding

The Company's main criteria for ensuring the appropriateness of cross-shareholdings are their economic rationality and their improvement of corporate value. In making comprehensive judgments, the Company examines the medium- to long-term economic rationality of and outlook for individual stocks in consideration of return and risks and examines whether each shareholding will contribute to the increase of corporate value over the medium and long term.

[Principle 1-7]

The Company's Board of Directors Regulations stipulate that conflict of interest transactions involving Directors shall require the advance approval of the Board of Directors. The regulations also stipulate that the terms and conditions of conflict of interest transactions should be the same as the general terms and conditions. The terms and conditions are disclosed in the notice of the General Meeting of Shareholders and the securities report.

[Supplementary Principle 2-4-1]

The Company believes that hiring and cultivating diverse human resources will improve corporate value over the medium and long term. One of the priorities in the mid-term management plan is personnel development and establishment of a rewarding workplace environment. The Company has been steadily developing and implementing a system that enables employees to be hired and promoted to managerial positions based on their abilities regardless of their gender, race, nationality or other attribute.

The Company will continue to actively promote women. The Company aims to achieve the following targets by the end of FY2030: (i) 30% of all employees will be women (As of December 1, 2021, 19.5% of all employees are women.) and (ii) the ratio of female managers to all female employees will equal the ratio of managers to all employees (as of December 1, 2021, 8.5% of all female employees are managers; and managers are 28.2% of all employees).

To promote more women, the Company is undertaking the initiatives below. The Company will build an environment where all employees, including women, can work without concerns.

• Introducing a system helping employees hire babysitters (2021)
• Expanding the range of jobs where teleworking is possible (2020)
• Creating a project team to promote women's participation (2021)

As of December 1, 2021, 59.7% of all of the Company's employees joined the Company mid-career, and 86.4% of all managers were hired mid-career. The Company will continue to promote employees to managers according to their abilities regardless of their being hired as new graduates or mid-career employees.

At the same time, the Company will actively hire foreign nationals and promote them to management positions according to the development of its businesses.

The goal of the Company is to become a company that is more trusted and loved by continuing to create new value through its enablement of its diverse human resource to fully demonstrate their capabilities.

[Principle 2-6]

The Company does not have a corporate pension fund plan.

Note: To enable employees to steadily accumulate assets, the Takara Leben Group has introduced a retirement allowance system and the SME retirement allowance mutual aid plan.

[Principle 3-1]

(1) Company objectives (e.g., business principles), business strategies, and business plans

• The Company's objectives (e.g., business principles) are described on the vision and mission page of the Company's website (https://www.leben.co.jp/corporate/vision.html).
• The Company's business strategies and business plans are described on the Mid-Term Management Plan page of the Company's website (https://www.leben.co.jp/en/ir/midterm.html).

1. Basic views and guidelines on corporate governance based on the principles of the Code (draft) are described in I. 1 Basic Views of this Report.
2. Board policies and procedures in determining the remuneration of the senior management and Directors

The Board policies and procedures in determining the remuneration of the senior management and Directors are described in the securities report and II. 1. Organizational Composition and Operation of this Report.

1. Board policies and procedures in the appointment/dismissal of the senior management and the nomination of candidates for Director and Audit & Supervisory Board Member
   Basic policies and procedures for appointment/dismissal and nomination
   The appointment and dismissal of senior management and the nomination of candidates for Directors are discussed by the Nomination Committee, a voluntary advisory body, and decided upon by the Board of Directors in consideration of the sustainable improvement of the Company's performance and the appointment and nomination criteria and dismissal criteria below.
   (a) Appointment and nomination criteria
   - Having a passion for improving the Company's business or greatly contributing to the operating results of the Company - Having a good personality and considerable insight and being very law-abiding
   - Having remarkable foresight
   - Being physically and mentally healthy
   - Being able to look at the entire Company and make fair and objective decisions, and being able to respect others
   (b) Dismissal criteria
   - Events revealing that senior management members obviously do not meet the appointment and nomination criteria
   The Board of Directors determines the nomination of candidates for Audit & Supervisory Board Members after the Nomination Committee is consulted with and the Audit & Supervisory Board agrees on it.
2. In the explanations of the individual appointment or dismissal of senior management and the nominations of candidate Directors and Audit & Supervisory Board Members, the reasons for the individual appointment or dismissal are described in the notice of the Ordinary General Meeting of Shareholders.

[Supplementary Principle 3-1-3]

Information regarding the Company's initiatives regarding sustainability and investment in human capital and intellectual property and risks and revenue opportunities related to climate change is available on the Company's website. Please refer to the following URL:

https://www.leben.co.jp/sustainability/

[Supplementary Principle 4-1-1]

The Company has established the Board of Directors Regulations under which the Board of Directors shall decide on matters set out in laws and regulations and the Articles of Incorporation and basic matters in the management execution and shall supervise the execution of these decisions. The Company has also established the Regulations for Administration Authority, which sets out the scope of the responsibilities delegated to management. Under the regulations, the Representative Director, President and Executive Officer shall represent the Company governed by the Articles of Incorporation and the resolution of the Board of Directors and execute the duties delegated by the General Meeting of Shareholders or the Board of Directors. The Representative Director, President and Executive Officer shall also decide on matters delegated to them by the Board of Directors, including the approval of the operating plans of divisions based on the annual business plan determined by the Board of Directors, and shall execute these decisions. The matters listed below must be discussed by the Board of Directors.

1. Basic management
2. Development, purchase and disposal of land
3. Overseas business
4. Accounting and finance
5. Human resources, general affairs, labor, education, etc.
6. Officers, etc.
7. Legal affairs and intellectual property
8. Affiliates
9. Real estate (excluding real estate for business), goods, etc.
10. Research, fees, etc.

[Supplementary Principle 4-3-2,4-3-3]

The Board of Directors consists of 15 members, seven of which are outside officers. The supervisory functions of the Board of Directors are effective and it consults with the voluntary Nomination Committee, whose majority are independent Outside Directors, on the appointment/dismissal of Directors, Audit & Supervisory Board Members, the CEO and other members of management. Through fair and transparent discussion, the Board makes decisions flexibly according to the situation in consideration of evaluations of the Company's performance, etc. The Board of Directors nominates or appoints people who are able to fulfill their duties and responsibilities as Director, Audit & Supervisory Board Member, the CEO or other member of management regardless of gender, age or nationality, fully considering their personality and insight. In addition, the Board of Directors selects people who are able to contribute to corporate value over the medium and long term to be Director candidates, the CEO or other members of management and people who are able to contribute to the establishment of a fair management oversight system to be Audit & Supervisory Board Member candidates.

[Principle 4-8]

The Company appoints four independent Outside Directors who possess sufficient qualities that enable them to fulfill their roles and responsibilities in order to contribute to achieving the sustainable growth of the Company and increasing corporate value over the medium and long term.

[Principle 4-9]

The Company appoints Outside Directors who are independent officers in accordance with requirements for Outside Directors stipulated in the Companies Act and the independence criteria stipulated by the Tokyo Stock Exchange.

[Supplementary Principle 4-10-1]

The Company has established two voluntary committees, the Nomination Committee and the Compensation Committee, to enhance the objectivity and transparency of the processes for selecting Directors and determining remuneration, etc. and to enhance and strengthen the corporate governance system.

Each committee consists of three or more Directors selected by resolution of the Board of Directors and the majority of each committee are independent Outside Directors. The chairperson of each committee is an independent Outside Director. In this way, the Company provides appropriate opportunities for the independent Outside Directors to be involved and to advise the Company.

The Board of Directors consults the Nomination Committee about the matters listed below prior to its decisions and the Nomination Committee advises the Board of Directors and is involved in the Board's deliberations appropriately, including on issues related to gender, diversity and skills.

• Composition of the Board of Directors and the balance of Board members
• Appointment/dismissal of Directors
• Selection and dismissal of the Representative Director and senior Executive Officers
• Criteria for assessing independence of Outside Directors
• Succession planning

The Compensation Committee determines remuneration for individual Directors. Remuneration for individual Directors is determined based on the policy for determining remuneration, etc. for individual Directors determined by the Board of Directors based on advice from the Compensation Committee.

[Supplementary Principle 4-11-1]

The Company believes that the Board of Directors must be composed of Directors whose knowledge, experience and abilities are well balanced so that they are able to effectively fulfill their roles and responsibilities. In addition, the size of the Board of Directors must be appropriate and the Board must be diverse.

The Company's policies and procedures for the nomination of Directors are determined to ensure that nominated Director candidates have good personalities, insight and track records and are familiar with company management or have a high level of expertise. The Board of Directors selects Director candidates in consultation with the Nomination Committee. A skill matrix that shows each Director's expertise and experience is disclosed on the final page of this Report and the Notice of the 50th Ordinary General Meeting of Shareholders.

[Supplementary Principle 4-11-2]

The concurrent posts of the Directors and Audit & Supervisory Board Members are disclosed every year in the securities report and the notice of the general meeting of shareholders.

[Supplementary Principle 4-11-3]

The Company evaluates and analyzes the effectiveness of its Board of Directors for the purpose of improving the Board's function.

In FY2021, to evaluate the effectiveness of the Board of Directors, the Company, in cooperation with a consulting firm, conducted an anonymous survey of all Directors, including Outside Directors and Audit & Supervisory Board Members on the composition and operation of the Board of Directors, discussions at Board meetings, training for officers, and the performance of the Directors.

The overall results of the survey are positive, and the Company affirms that the Board of Directors is effective. The Company sees improvement in the diversity in the Board of Directors and the provision of information necessary for discussions, areas which the Company considered to be challenges in the previous evaluation. The challenges pointed out in the survey include the enhancement of discussions about management strategies, including strategies related to the Group-wide crisis management system and investment in human capital, and the reflecting of the opinions of shareholders and investors in the Company's actions.

The Company will fully examine the challenges and continue to implement initiatives to enhance the functionality of the Board of Directors.

[Supplementary Principle 4-14-2]

The Company regularly provides training to the Directors and asks that the Audit & Supervisory Committee Members participate in external seminars and workshops continually to acquire necessary knowledge and update it.

[Principle 5-1]

At the Company, the Office of the President is in charge of IR. The Company believes that reflecting the voices of many shareholders in its business will result in the healthy, efficient and stable growth of the Company and actively accepts shareholder requests for discussion (interview). The Company's policies on system development and initiatives are described in III. 2. IR Activities.

[Principle 5-2]

The Company accurately calculates capital cost (the cost of equity capital and the weighted average cost of capital (WACC)) and formulates management strategies and management plans based on its management philosophy. The Company discloses outlines of its management strategies and plans. The Company reviews and analyses the progress of its management strategies and plans every year and revises them as necessary, including changes in business structures, additional investment in businesses and capital expenditures, and changes in plans for the allocation of management resources, including investments for the cultivation of human resources.

2. Capital Structure

Percentage of Foreign Shareholders10% or more and less than 20%

[for trust account]

	Name / Company Name		Number of Shares Owned (Shares)		Percentage (%)
	Yoshio Murayama		25,633,600	23.51
	The Master Trust Bank of Japan, Ltd. (Trust account)		11,365,500	10.42
	Custody Bank of Japan, Ltd. (Trust account)		2,874,400	2.64
	Murayama Kikaku Co., Ltd.		2,000,000	1.83
	RUDEN HOLDINGS Co., Ltd.		1,600,000	1.47
	NORTHERN TRUST CO. (AVFC) RE FIDELITY FUNDS		1,495,500	1.37
	Takara Leben Business Partner Shareholding Association		1,309,800	1.20
	Sumitomo Mitsui Banking Corporation		1,184,000	1.09
	JP MORGAN CHASE BANK 385781		1,091,339	1.00
	SSBTC CLIENT OMNIBUS ACCOUNT		1,069,983	0.98
Controlling Shareholder (except for Parent Company)	―――
Existence of Parent Company	None

Supplementary Explanations

• The above information about the Status of Major Shareholders is as of March 31, 2022.
• The Company owns 11,948,807 shares as treasury stock which are excluded from the number of shares held by major shareholders above.
• The shareholding percentage is calculated based on the number of shares of stock excluding treasury stock.

3. Corporate Attributes

	Listed Exchange and Market Division	Prime Market of the Tokyo Stock Exchange
	Fiscal Period	March
	Type of Business	Real estate
	Number of Employees (consolidated) as of the End of the	At least 1,000
	Previous Fiscal Year
	Net Sales (consolidated) for the Previous Fiscal Year	100 billion yen or more, but less than 1 trillion yen
	Number of Consolidated Subsidiaries as of the End of the	From 10 subsidiaries to less than 50 subsidiaries
	Previous Fiscal Year

4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder

―――

5. Other Special Circumstances which may have Material Impact on Corporate Governance

―――

II. Business Management Organization and Other Corporate Governance Systems regarding Decision Making, Execution of Business, and Oversight

1. Organizational Composition and Operation

Organization FormCompany with an Audit & Supervisory Board

[Directors]

	Maximum Number of Directors Stipulated in Articles of	15
	Incorporation
	Term of Office Stipulated in Articles of Incorporation	1 year
	Chairperson of the Board	President
	Number of Directors	12
	Appointment of Outside Directors	Appointed
	Number of Outside Directors	4
	Number of Independent Directors	4

Relationship with the Company (1)

Relationship with the Company*

Name

Attribute

a

b

c

d

e

f

g

h

i

j

k

Kenji Kawada

From another company

Chiaki Tsuji

Attorney-at-law

Keiko Yamahira

From another company

Naohito Yamagishi

Other

• Categories for "Relationship with the Company"
• "" indicates that the director currently falls under the category, or did so recently, and "" indicates that the director fell under the category in the past.
• "●" indicates that a close relation falls under the category, or did so recently, and "▲" indicates that a close relation fell under the category in the past.

1. Executive (a person who executes business; hereinafter the same) of the Company or its subsidiaries b Non-executive director or executive of a parent company of the Company
   c Executive of a fellow subsidiary of the Company
   d A party whose major client or supplier is the Company or an executive thereof e Major client or supplier of the Company or an executive thereof
   f Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company besides remuneration as a director
   g Major shareholder of the Company (or an executive of said major shareholder if the shareholder is a corporation)
   h Executive of a client or supplier of the Company (which does not correspond to any of d., e., or f.) (the director himself/herself only)
   i Executive of a company, between which and the Company outside directors/auditors are mutually appointed (the director himself/herself only) j Executive of a company or organization that receives a donation from the Company (the director himself/herself only)
   k Other

Relationship with the Company (2)

	Name		Independent		Supplementary Explanation		Reasons for Appointment
		officer		of the Relationship
							Mr. Kenji Kawada has been involved in the management of financial institutions and
							business companies and has extensive experience and achievements in management and a
							wide range of knowledge and insight. The Company considers that he will make a
	Kenji Kawada		○		―――		significant contribution to the management of the Company and therefore nominates him
							as an Outside Director. He has no interests in the Company and his position is independent.
							Therefore, the Company believes that he is not at risk of having any conflict of interest
							with the general shareholders and therefore designates him as an independent officer.
							While not previously involved in the Company's management other than her service as an
	Chiaki Tsuji		○		―――		Outside Director, Ms. Chiaki Tsuji has expertise, extensive experience, and an established
				track record as a lawyer in Japan and Germany. Therefore, the Company believes that she
							will contribute to the improvement of the transparency and supervisory functions of the