2022-2024～Towards 100th anniversary – Creating new value in a new normal era～

高千穂交易株式会社
TAKACHIHO KOHEKI CO.,LTD.

AGENDA
１
Reviewing our previous mediumterm management plan and sortingout the issues we face

2
Concepts and management
strategy underlying our new
medium-term management plan

◼ Summary of our business performance◼ Summary of our basic strategies◼ Results of our structural reforms◼ Our management issues and policy on making
improvements◼ Our corporate vision◼ Overview of our new medium-term managementplan

3
ESG initiatives in support of our
new medium-term managementplan◼ Various ESG/SDG initiatives◼ Management targets (FY2022-FY2024)➢ Contributing to the environmental field◼ Business strategy➢ Contributing to the societal field➢ Initiatives for growth with an eye on tackling new
business reforms➢ Basic strategies◼ State of our governance system◼ Strengthening corporate governance➢ Targets by segment◼ Capital policies➢ Improving capital profitability➢ Shareholder return policy➢ Procuring and allocating cash2

Positioning of our new medium-term management plan
Period covered by our current medium-term management plan

Period covered by our new mediumterm management plan

Stage３
Challenges for Creation~To create new corporate value~

Stage２The challenge of changing～Next stage to 70th～*1◼
◼
◼

Stage１Creating motivation for Job among
employees
Improving customer satisfaction
Establishing a new business model◼ Self-realization on the part of employees◼ Inspiring customers◼ Developing business with a sustainable competitive
advantage◼ Improving capital profitability◼ Attaining key performance indicators (KPIs) in ourmanagement plan
◼ Commitment to shareholders

Realize productivity improvements~IT strategy & personnel system reform~◼

Improving ROE

Loyal Customer Strategy*2

Optimizing our business portfolio

Creating a new revenue baseTowards a growth stage

FY2019FY2021

FY2022 to FY2024

Profit-structure reform※1 We will commemorate the seventieth anniversary of our founding in fiscal year 2021.
※2 A strategy through which we aim to provide added value and thereby create and reinforce relationships with satisfied customers.

Maximization of corporate value

3

Reviewing our previous medium-term management
plan and sorting out the issues we faceSummary of our business performance◼ The numerical targets for the final year of the previous medium-term plan were revised downwards: sales from 26 billion JPY to 21.7 billion JPY andordinary income from 1.8 billion JPY to 1.1 billion JPY.
In the business of fire-protection systems in Thailand, plant construction has been at a standstill due to a slump in crude oil prices. In addition, group management has not been functioning properly, which
has led to a drop in profits.
Global business and office- and retail-related markets have been slowing down due to the spread of COVID-19.
There has been sluggishness in various new businesses, such as our EC business and our RFID business.

•

Primaryfactors••

Targets for the final year

◼ Due to a failure to meet our performance targets, the ROE failed to reach our initial forecast of 8%.
◼ For shareholder returns, a consolidated dividend payout ratio of 40% or more (minimum dividend of 24 JPY) will be implemented.

Sales and ordinary income

Capital profitability

Shareholder returns

Net Sales

Revised: 21.7 billion JPY
Pre-revision: 26.0 billion JPY

ROE forecast: 8%

Ordinary income

Revised: 1.1 billion JPY
Pre-revision: 1.8 billion JPY
経常利益
Ordinary
income

売上Sales

21,700⚫

5.3%

ROE (%)(Millions of JPY)

Dividend
payout ratio

At least 40%

Minimum
dividend

24 JPY per year

FY2019FY2020

FY2021 (forecast)

4.0%
20,616

20,591

1.4%
885

926

FY20192019年度FY20202020年度1,100

FY20212021年度(Forecast)

FY20192019年度FY20202020年度FY20212021年度Dividend per
share

24 JPY

25 JPY

50 JPY*

Dividend
payout ratio

112.1%

40.6%

57.8%

Current-term
net income

191 million JPY

548 million JPY

770 million JPY* Includes commemorative dividend of 15 JPY.

(Forecast)5

Summary of our basic strategies(i) Strengthen our competitiveness and improve our profitability through value-adding initiatives
Sales expansion resulting from efforts to concentrate on loyal customers and from the growth of our managed service business.
Although we have improved the profitability of and streamlined our low-profit businesses, we have not generated operating income.

Select and concentrate on high value-added businesses that pursue customer
satisfaction through a loyal customer strategy.

Basic Strategy 1 target amount: + 2.5 billion JPY(compared to FY2018)• Increase sales to loyal customers and growth rate in the number of loyal customers
Sales growth rate: 22%, growth rate in the number of loyal customers (client companies): 15%＊Loyal customers: Clients with whom we engage in transactions of at least 30 million JPY in sales per company＊Loyal customers on a non-consolidated basis

Generate operating income by improving the profitability of and streamlining our
6
low-profit businesses.

14,40014,90015,70016,50016,900• Business downsizing and cost-sharing achieved through a merger with Takachiho Comtec.
• Downsizing of GuardFire Singapore.
• Despite carrying out the above, there remain issues as operating income has not been generated forthe entire Group.

Carry out profit-structure reform by expanding recurring revenue model, suchas MSP and maintenance

Expansion of sales
Forecasted amount of growth for FY2021 + 2.1 billion JPY• Expand recurring revenue model through the growth of our managed service (MSP*)
business for the provision of cloud-based wireless LAN＊Managed service: Our original service through which maintenance, operations, and alive
monitoring of cloud products are offered on a subscription basis.

FY20182018年度(Unit: millions of JPY)

FY20192019年度FY20202020年度

2021年度FY2021 forecast

修正前目標
Pre-revised target

予想

6Summary of our basic strategies(ii) Creating a revenue base through new businesses
Although sales of Mechanical Component Products for the United States expanded, the originally planned growth could not be achieved
due to the sluggish fire protection business in Thailand and the withdrawal of the EC business, which is a new business.

Expand global business in China, Southeast Asia and the United States（Strengthening of Fire protection business and Mechanical Component
Products）• In addition to the fact that group management of our fire-protection business in Thailand was
not functioning, the construction of new plants was significantly delayed due to the effects ofsluggish crude oil prices and the spread of COVID-19 infections.

Basic Strategy 2 target amount: +3.6 billion JPY(Compared to FY2018)(Breakdown)⚫ Global business + 2.0 billion JPY⚫ New revenue base: + 1.6 billion JPY

9,100• Sales of unit products for housing equipment in China have floundered due to delays incommercialization.
• Industrial equipment products for the US market have doubled in terms of sales and grossprofit since FY2018 due to increased stay-at-home demand from COVID-19.
Business development through proactive investments, the scope of which
includes M&A and business tie-ups / Strengthen cloud- and software-related
businesses

5,500

5,900
4,800

• By investing in venture capital, we were able to secure contact points with venturecompanies with new technologies and implemented an open innovation education
program.
• The EC business and cloud camera business, which are new businesses, were sluggish, and adecision was accordingly made to withdraw from the EC business.

5,400

Sales are flat
Forecasted amount of growth for FY2021 – 100 million JPY• RFID business is sluggish.
• We are developing and have taken steps to commercialize EMLINX, a cloud-based information
distribution service for stores designed to allow communities to share information on shoplifting
and theft.

FY20182018年度(Unit: millions of JPY)

FY20192019年度FY20202020年度

2021年度FY2021 forecast

修正前目標
Pre-revised target

予想

7Summary of our basic strategies(iii) Business structure reforms and improved productivity
We are making steady progress with respect to organizational reforms and are also strengthening our marketing functions, which had been an issue
that we needed to address. We need to focus on increasing the efficiency of operational processes while we repeatedly engage in a process of trial anderror.
Reform our personnel system

Improve operational efficiency through organizational reforms◼ We raised our salary level to that of our industry through the reformation of
our personnel system.
◼ We introduced a 360-degree evaluation system to promote fair evaluations.

• Share and improve the efficiency of operations through the consolidation of internal operations andtechnical support units.

Carry out working style reforms

Redesign our organization to adapt to business, reform our sales organization,and strengthen our SE and marketing functions◼ By having built a teleworking environment prior to the emergence of COVID19, we smoothly achieved a 70% teleworking rate.
◼ We have also improved productivity through progress made in terms ofshifting to a paperless system.

• Accelerate the launching of new products and implement digital marketing through the strengthening ofmarketing functions.

• Contribute to achievements through the acquisition of large-scale projects by dealing with customers in a
way that involves the integration of sales and SE functions.

Centralize management information and review operational processes
through IT investments• Reduce infrastructure management costs and improve efficiency by shifting internal infrastructure into
the cloud (such as by adopting Office 365 and a cloud-based core system).
• The optimization of operational processes and the centralization of management information remain
issues for the next mid-term plan.

8

Results of our structural reforms
Issue addressed

Results
I.
II.
III.

Business portfolio optimizationIV.

By absorbing subsidiaries serving a market that is expected to shrink (mailing business), we have improved the efficiency of our structure.
Reallocate resources from low-growth businesses to growth businesses such as services and support.
We reduced personnel costs at Takachiho Fire, Security & Services (Thailand) Ltd., reallocated human resources to service products, anddownsized Guardfire Singapore.
Concentration of resources to increase market share in the electronic products.

We succeeded in commercializing a managed service provider (MSP) for our service and support business (Cisco Meraki). In addition toestablishing a high-revenue business model, we also succeeded to create a revenue base.

Establish a new revenue base

Changes in sales in our service & support business (millions of JPY)
2,122

1,940

2,350

上期
First half

Cloud-based wireless LAN system
MSP business

下期
Second half
Forecast for second half
下期見込

1,366

1146

1010

976

930

984

FY2019FY2020

FY2021

SD-WAN
Centralized management ofmultiple WAN routers

Cloud mail security

Changes in the operating income component ratios in our service and support business

Wi-Fi services forcorporate customers

システム
Systems

26%
43%

37%

23%

31%

40%

FY2018FY2021 (forecast)

Cloud services

サービス&サポート
Service & support*◼

Strengthened sales of MSP services based on the use of cloud-based wireless LAN systems.

Devices
デバイス◼

Expanded network maintenance contracts.

◼

Expanded various network subscription models (Velocloud, d-dive, Vade secure, and more).

＊We calculated changes in sales and operating income component ratios for “service & support” products in the system segment.

9

Our management issues and policy on making improvements
Issues requiring awarenessChanges in sales
Sales (millions of JPY)

18,15019,58118,80919,987

19,57019,894

19,037

20,591

20,616

21,700In looking back at our performance over the last decade, we
see that most of our income has been earned on a nonconsolidated basis.
➡ Review the business portfolio of the entire group andimprove profitability.

単体
Non-consolidated

Primary factors

Consolidated
連結

Forecasted
FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020◼

◼

FY2021The PMI of group companies and group management did not function primarily for ouracquired Thai fire protection business (GF) and RFID business (MC); the resulting
deterioration of business performance caused an impairment loss to be posted.
We were unable to identify synergies across the entire Group.

Changes in net income
Current-term net income (millions of JPY)

557

566

770
595

単体

Strengthen business portfolio management functions andengage in discussions

547

491

1.

280

Non-consolidated

連結Consolidated

191

131

103

Forecasted

Impairment
減損
FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY20202.

FY2021

3.

-87
MC*1

Measures for improvement

-253

-184

-260

Establish an Investment Committee and strengthensupervisory, examination, and monitoring functions to be
carried out at the time of execution.
Commence discussions on the businesses that failed tosurpass growth and revenue expectations during our previous
medium-term management plan.
Establish a new business model and create a new revenue
base.

GF*2
Impairment loss on goodwill (millions of JPY)

＊１：Mighty Cube (MC) became a subsidiary in 2012. RFID-based inventory-management systems are provided.
＊２：Guardfire (GF) became a subsidiary in 2014. Our fire-protection system business was rolled out across the ASEAN region.

10

Concepts and management strategy underlying our
new medium-term management planOur corporate vision

Creativity lies at the heart of all our business activities. This allows us to pursue our three principal goals:.
Corporate philosophy

Enhancing customer satisfaction
Gaining worldwide trustContributing to society

Issues affecting customers◼ Building a business environment for the newnormal era◼ Network security measures◼ Measures to address store crime◼ Add value to customer services andmanufacturing

当社の強みとミッション
Our strengths

Our new medium-term managementplan◼ Accurately identify market needs
Demonstrate marketing capabilities

We aim to realize a prosperous society and will

◼ Quickly introduce leading-edge global
products to the Japanese market◼ Technological prowess to continuously
provide new value and products to the market

Societal issues that we face
◼ Dealing with climate change and disasters◼ Crime deterrence and prevention◼ Contributing to a highly livable society throughthe promotion of digital transformation (DX)

work to take on the challenge of creating witha view to carrying out new business reforms
and realize new value creation in order toresolve societal issues and issues that are
faced by our customers on an ongoing basis.

In order to maximum corporate value:◼ Provide the following, which are backed by ahigh level of technological prowess:◼ We will promote a business strategy to giverise to new value;

Consulting / Development design services /After-sales services◼ Promotion of [Capital Policy] aiming for
optimal capital structure without
accumulating equity capital.
◼ Practice of [Governance] suitable for aprime-listed company◼ Relationships of trust with customers
cultivated over many years⇒Total number of accounts: 25,000

12Overview of our new medium-term management plan

Medium-term slogan～Towards our 100th anniversary – Creating new value in a new normal era～

Achieve ordinary income of 2.0 billion JPY and current-term net income of 1.4 billion
JPY for the fiscal year ending in March 2025.
Set the KPI for our new medium-term management plan to an 8% average ROE forthree fiscal years and implement our business plan and capital policies.

◼

Increaseshareholder value◼

Capital strategy◼

Limit increases in equity capital in order to improve return on invested capital and thebalance sheet.

◼
◼

Maintain a dividend payout ratio of 100% until the average ROE for three years exceeds 8%
Consider using interest-bearing debt for control capital costs.
◼

Growth strategy for new business transformation:◼
◼

Strengthening the management baseSet aside a total of 3.0 billion yen over 3 years for a strategic investment framework.

➢ Promotion of strategies for loyal customers/Growth of service business/Creation of future core businesses

Business strategy◼
◼
◼

Governance

Establish an Investment Committee and strengthen supervisory, examination, andmonitoring functions to be carried out at the time of execution.
Establish a Nomination and Compensation Committee to ensure fairness, objectivity, andtransparency.
Set KPIs for capital efficiency in executive compensation to promote management from theperspective of shareholders.

Accelerate the transition from goods to services
13

Management targets (FY2022 to FY 2024)
We will achieve the sustainable growth of our Group and medium- to long-term increases in corporate value withthe basic policies of "Concentrating on high value-added businesses transformation"and "Creating new value by strengthening the management base,"
PointsNumerical objectives
FY2021 (forecast)◼ Promote a growth strategy for business transformation

FY2024➢ Expand high-profit businesses in core areas➢ Growth of service businesses

Net Sales

21,700 million JPY

26,000 million JPY

Ordinary
income1,100 million JPY

2,000 million JPY

Net income

770 million JPY

1,400 million JPY

ROE

5.3%

10.0% (target)
8.0% (required)

Dividend
payout ratio

57.8%➢ Build new businesses and new business models◼ Build a robust governance structure to support business andstrengthen our management base
➢ Optimal allocation of resources for realizing a growth strategy for the entireGroup➢ Transform the entire company, including business models andorganizations, with the power of digital tools➢ Improve capital efficiency

50 JPY dividend per share

100％
Maintain a dividend payout ratio of
100% until the average ROE forthree years exceeds 8%.

14

Reference: Approach to reaching 10 billion JPY in market capitalization of tradable shares toconform to the listing maintenance standards of the prime-listed market.
In valuations of electronics trading companies, a certain level of correlation between PBR and ROE can be seen.
We will continue our policy of a 100% dividend payout ratio until we attain an 8% average ROE for 3 fiscal years, therefore there will be no change in equity capitalfor a certain period after the next fiscal year, which means that higher profits will directly lead to a higher ROE.
If our ratio of tradeable shares does not decline, the market capitalization of tradeable shares is expected to surpass the 10.0 billion JPY level once our PBR exceeds
1.08.

◼
◼
◼

Correlation between ROE and PBR
PBR
1.8

Company A

Current-term net
income1.6
1.4

R² = 0.6857
当社が目指す水準
Our target level

1.2

Company C

1.0
Our company

0.8Company I

FY2024(target)770 million JPY

1,400 million JPY(forecasted EPS)

(86.5 JPY)

(157.2 JPY)

ROE

5.3%

Equity capitalCompany E
Company H

0.6

Company B

FY2021(forecast)ーFY2022-FY2024

Exceeds 8% average
Zero increase in equity capital until 8%
average ROE for 3 fiscal years is attained

CompanyCompany
F
D

Company J

PBR to attain 10.0 billion in tradeable shares market capitalization : 1.08

Company

0.4
0.2
0.0
0.0%

2.0%

※Refer to figures as of the end of June 2021.

4.0%

6.0%

8.0%

10.0%

12.0%

Improved ROE and PBR

ROE15

Concepts and management strategy underlying our
new medium-term management plan
➢ Business strategy

Growth initiatives for new business transformation➤ Segment change
New segment
Current segments

New segment

Systems

Cloud services and support

Beginning in the term covered by our new medium-term
management plan (FY ending March 2023), cloud-based
subscription-type service businesses and maintenancebusinesses will be positioned as growth businesses and treatedseparately as segments from the standpoint of growth potential
and profitability.

Systems
Devices※ "Services and support" under the existing systems segment will be renamed "Cloud
services and support" to comprise a new segment.

Devices

Cloud services and support

Systems

Devices

Power modules
Access control systems
Silicon microphones
Cloud-based wireless LAN

Facial recognition
systems

Soft-close units

Cloud services• MSP and other services constituting an integration of
Equipment, cloud services, and operation management
within the systems segment

Retail• The electronic article surveillance (EAS) system, surveillance camera systems• Store management systems• Display products security systems

Electronics• Semiconductors, IC/electronic parts, sensors• Various types of modules

Maintenance• Maintenance services for products coming within thesystems segment

Office• Access-control systems• Auto Mailing Insertion Systems
・Network systems• RFID systems

Industrial
equipment• Slide rails, gas springs• Soft-close units, electronic locks

Global• Fire-protection systems

17

Growth initiatives for new business transformation➤ Restructuring our basic strategies

Basic strategies

Promote and deepen “Loyal customer
strategy”
Expand businesses with high profitability andgrowth potential among existing businesses＋4,3002,300
10,900Devices

10,400
Promote anddeepen “Loyal
customer strategy”

Systems
11,1009,000

ii.

Growth of service businesses
Transformation from "selling goods" to "selling services”

Cloud services andsupport

FY2021*(forecast)

Devices
デバイス

iii.

Creation of future core businesses
Acquiring a new revenue base through launching new
businesses and business model

Growth of service
businesses

4,000

21,700Related segmentsi.

26,000

Sales (millions of JPY)

New新規事業
business
プロジェクトprojects

FY2024(targets)

Systems
システム

Cloud
services and support
クラウドサービス&サポート

Service businesses+4,300 million JPY
Breakdown of sales growth
Loyal customer strategy

iv.

Strengthening the management basev.

Setting a total of 3 billion yen as the limit for strategic investments
Semiconductor
Products

Mechanical
Components

Maintenance

RetailOfficeGlobalCloud services※Some figures for the current fiscal year’s forecast have been rounded.

※A breakdown of sales for FY2021 is presented based on the assumption that segments have been separated.

18

Basic strategy(i) Promote and deepen “Loyal customer strategy”

Our top market share areas

Expand businesses with highprofitability and growth potential
among existing businesses*1

The electronic article surveillance (EAS) system, surveillance camera systems
in drug store market
Office security systems for foreign-affiliated companies
Mechanical parts for ATMs and copiers machines *2

Further expansion of market share
Loyal customers and market share

Core areas Focus markets◼ Increase in corporate clients with whom we have earned at least 30
million JPY in sales per company

System segment

87
companies

FY2018100
companies

RetailOfficeData center
Plant
Logistics

More than130
companies

FY2020Device segment
Electronics companies
Digital equipment market
Housing equipment
In-vehicle on-board devices
Global (US, Asia)

FY2024◼ Average sales per company for all customers approx. 10M JPY ➡ 20% increase

Corresponding high-profit businesses andbusinesses with high growth potential
Build a safe, secure, comfortable system environment
Optimize corporate management and business operations• Labor-saving and smart-store solutions• Combining network security elements• Surveillance camera systems with image recognition and AI technology• Logistics and store solutions based on the use of RFID technology

TK’s original solution proposal from single item sales
Adding value at a high level to customers’ manufacturing and products• Acoustic/voice, communications, sensors, power supply solutions• AI and image-recognition solutions• Combination proposals and modularization• Unitization of mechanical parts• PWB (printed circuit boards)• Cables and power-supply products

Initiatives for expanding our loyal customer base andmarket share•

Loyal customer strategy
Strategy by which we provide added value to create satisfied
customers with whom relationships are strengthened.

•••

Based on relationships of trust with customers whom we have cultivated over many years, we will ascertain potential customer needs,
generate new added value for which we have harnessed our strengths in the areas of information and technology, and resolve issues
faced by our customers.
Maximize group synergies that transcend corporate and organizational boundaries.
Increase market share with high value-added products that are unique and superior.
Build WIN-WIN relationships that will help give rise to growth and high profits for customers, manufacturers, and the Company.

*1 In-house survey*2 Mechanical parts: Slide rails with dampers, mechanical fixtures for opening/closing mechanisms and drawers

19Basic strategy(ii) Growth of service businesses

From "selling goods" to "selling services”

Realize customer successCustomer success cycle ~ growth factors ~Numerical targets
Growth of cloud services andsupport

Percentage of total sales

Percentage of total operating income

FY2021 (forecast) 10%

FY2021 (forecast) 40%

FY2024 (target) 15％

FY2024 (target) 45%～50％
MSP sales

FY2021 (forecast) 500 million JPY

Data

Customer value
Develop services
Improve services

Reduce cancellation rates byimproving levels of customer
satisfaction and providing value
on a continuous basis.

Investments

FY2024 (target) 1.2 billion JPY

TK Eco System
Multi-cloud service

Managed service
Differentiation with our unique cloud service resulting from theintegration of maintenance and operation management services▼Integrated services are provided for a monthly fee

Corresponding services

SERVICE
Equipment

Maintenanceand operation
management

Solve problems
Reduce management costs

Investing to improve service andimproving services by utilizing datastored in the cloud

MSP (subscription model)

Cloud service

Accumulation and utilization of data
Service improvements

Customer• Cloud-based wireless LAN• Switch• Network security

Evolution
Building TK’s own B2B
platform that integrates
physical security and networks.

◼ Further evolution from cloudbased MSP services◼ Our own proprietary platform forthe centralized management ofphysical security and network
security◼ Leveraging data to further
improve services

Access-control systems/cloud security

Multi-factor authentication/zero trust

Free-WiFi authentication
Integrated service platform

Big data• Cameras• Access control system andother services added20

Basic strategy(iii) Creation of future core businesses
Establish new businesses and business models

Creating demand: Towards becoming a business that accounts for more than 5% of total ordinary income for the entire TK Group in 5 years

Cloud-based crime-prevention
information service

Cloud-based video system

SaaS-based RPA solutions

Cloud-based crime-prevention information distribution
service for stores that shares information across companies
and industrial sectors

Image confirmation and AI image analysis can be
performed in the cloudReal-time confirmation from any terminal

Cloud-based RPA solutions for which no server or
terminal is needed

Prevention of store crimes

Easy to install for immediate usage

Resolves worker shortages through operational streamlining

Safe and secure local environment

Crime detection

Reduce costs of adoption and management

Developed EMLINX, our proprietary platform

Scheme and focus areas for creating new businesses and business models
USA: Silicon Valley Innovation Center, JPN: Business Development Department

New business development areas
Cyber-security (vulnerabilities, privacy), climate change (SDGs, ESG), blockchains (metaverse, VR/AR, Web3, NFTs), robots(labor-saving, automation, logistics, automation, sensors), quantum computers, 5G/6G, smart homes

Existing customers

Providing new commodities
Retail sector (camera analysis, privacy issues, labor-saving), office sector (TK cloud service, SASE, bringing net security into the cloud,logistics solutions), electronics sector (mid-sized, Asian manufacturers, acoustics, communications, sensors), industrial equipment sector(global commodities, existing alternatives), support for solution proposals

Information sources x collaborations
Creating new businesses and business models by
obtaining various information and collaborating withthem..

VC

Own
information
sourcesPotential customers

Universities

21Basic strategy(iv) Strengthening the management basePromote the following initiatives with a view to strengthening the management base that supports our business

Shift management resources
to businesses to which weshould direct our focus

Promote digital transformation

Develop human resources andstrengthen investments inhuman resources

Improve capital efficiency

i.
ii.

Shift human resources to businesses on which we should focus and carry out an optimal allocation of personnel.
Form an organization capable of executing strategies:✓

In order to promote company-wide loyal customer strategy and digital marketing, we will collect functions distributed in the system business in one placeand carry out marketing activities that transcend the organization.

iii.

Carry out business portfolio management.

i.
ii.
iii.

Improve the efficiency with which leads (potential customers) are acquired through digital marketing.
Improve customer satisfaction and reduce internal costs through the enhancement of customer services.
Promote the automation of internal processing and the move to paperless operations for small-scale customers.

i.

Hire and cultivate human resources required for the growth of service businesses and solution businesses that
constitute focus businesses.
Engage in the management of human resources in a manner that is highly transparent and that meets with thesubstantial approval of employees through the promotion of a new human resources system.

ii.

i.
ii.
iii.

Improve capital efficiency by controlling inventory assets.
Improve the receivables turnover period: Improve capital efficiency through the growth of our monthly billing service businesswith short payment terms.
Set decision criteria through the ascertainment of revenue on an operating income base for each project and deal.

22

Basic strategy (iv) Strengthen our management base➤

Shift management resources to businesses that should be focused on

Business portfolio management using four-quadrant analysis

Organize the positioning of each business with axes consisting of Market attractiveness (growth) and Leveraging our strengths (profitability).
◼
◼

Proactively invest in focus businesses using an investment framework.
Re-evaluate the direction of businesses with issues by assessing market and customer conditions.

Focus businesses•

HigherCloud services

We will shift management resources to and engage in proactive
investments in business areas that are expected to help increase our corporate
value and that can allow our strengths to be fully harnessed. As well as
improving profitability, this will strengthen our ability to weather downturns in
performance (such as by eliminating impairment losses).

Higher added value

CCTV
Image recognition, AI

Mature businesses
We will expand our market share through distinctiveness and superiority.
We will increase our efficiency and our profitability.

Revenue-improvement businesses••

We will develop products and services with high added value and uniqueness.
We will shift from the selling of goods to the selling of services.

Businesses with issues••

Revenue-improvementbusinesses

Focus businesses

Businesses with issues

Mature businesses

Fire protection
systems

Office solutions

RFID
Electronic article surveillance(EAS) system
Mechanical
Components

In this medium-term management plan, we will, in accordance with our
corporate philosophy, promote cross-sectional discussions on businesses withissues from the standpoints of such as synergy effects, and growth.
In particular, we will strengthen the governance of Group companies and holdbusiness review meeting with every month.

*Prepared by the Company based on growth rate projections and profitability over the three-year period
covered by our medium-term management plan.

Labor saving, crime prevention
Retail solutions

CCTV

Semiconductors

Market attractiveness (growth)••

Device solutions

Increaseproductivity andefficiency

Mailing

Lower

Leveraging our strengths (profitability)

Higher23

Basic strategy (iv) Strengthening the management base➤Promote digital transformation

Promote the digital transformation of
the management baseWe will improve customer services to achieve improvements in sales efficiency and thegrowth of our service businesses as well as improve profitability by transforming ourinternal processes.

Key measures for the digital transformation of our company➢ Promoting digital transformation through a company-wide cross-sectional project

PromotionmarketingSales activities

Transactions

After-sale services

Strengthen promotions

Strengthen management

Improve the efficiency of transactional operations

Improve customer satisfaction

Efficient acquisition of leads (prospective
customers) through digital marketing

Establish management methods based on the useof sales force automation (SFA) tools.

Improved sales efficiency

Improve efficiency by adopting EC for supply
transactions and electronic invoices and contracts.

Reduced operating costs

Improve the quality of customer services by providing
a Web-based operational support reception desk andconstructing a knowledge website.

Growth of our service
businesses

Establish operations of a new core system
Strengthen our internal IT base and further develop a work-from-anywhereenvironment by establishing operations of a cloud-based core system and linking thissystem with SFA tools and auxiliary systems.

Improved profitability
24Basic strategy (iv) Strengthening the management base➤Develop human resources and strengthen investments in human resources
Promote a new personnel system to develop DX and global human resources, provide support for women’s activities, and engage
in the flexible allocation of human resources as well as strengthen our shareholding association to enable employees to become
shareholders.

◼ Look into introducing a DX personnel and global
personnel development support program.
◼ Hire personnel required for the growth of corebusinesses.
◼ Introduce a side-job system with the aim ofcreating new knowledge.
◼ Support women’s activities.
◼ Select professional and management positions.
◼ Shift to the flexible reallocation of humanresources.

Establish a scheme to enablevarious career paths to coexist

Promote the sharing of thecommon interests ofshareholders◼ Expand the employee stock
ownership incentive program with theaim of raising awareness ofmanagement participation among
employees:➢ Incentive amounts will increase from 10%
to 50%.

◼ Increase the rate of employee stock
ownership.

Concept of our new personnel system◼ Promote initiatives to support a work-lifebalance:➢ Paid-leave utilization rate: 70%➢ Childcare-leave utilization rate: 100％
◼ Continue to promote telework.
◼ Introduce a system that provides for three days off
per week on a test basis (April 2022).

Reform working styles

Strengthen job-based andperformance-based compensation
systems◼ Strengthen the pay-for-performanceand pay-for-job schemes and theiroperations.
◼ Review salary levels according to themarket to which individuals are
assigned.
◼ Introduce and utilize 360-degree
evaluations.
◼ Introduce ROIC evaluations for
sections.

25

Basic strategy(v) Setting a total of 3 billion JPY as the limit for strategic investments

Set up a 3.0 billion JPY strategic investment framework to create new corporate value
Strengthen our business foundation
Proactively invest in focus businesses and domains

Launch of new
business

Accelerate growth drivers

Start up and commercialize new
businesses and business models

Future core areas

Invest in venture capital funds, alliances with
software companies, M&As, and more.

2.6 billion
JPY
Investments to growservice business3.0
billionInvest in realizing the needs of
JPYloyal customers

Create new businesses and business models

Growth of service businesses
Develop new products and services

Core areas

Promote and deepen a loyal
customer strategy

Invest to develop new businesses, such as service businesses andplatform-building initiatives.

Invest to develop new businesses, such as solution units for therealization of customer needs.

400 million
JPY
Strengthen internal
foundation

Invest in our internal foundation: Invest in SFA, RPA, and other internal IT
solutions; invest in the development of human resources; expand employee
stock ownership incentives. *Included in some PL

26

Segment targets
Develop businesses focused on growth areas and develop solutions for the resolution of issues affecting customers.
売上構成
Sales
composition

Numerical targets for operating income and a breakdown thereof(millions of JPY)

2,050

Systems

Global 25%

デバイス
Devices
Cloud
services and support
クラウドサービス＆サポート

Office 37%

400

Systemsシステム

Priority measures for each segment

Retail 38%
We will carry out segment separationfrom the fiscal year ending in March 2023.

◼ Provide full-stack IT solutions for supporting the digital transformation ofcustomers, including with respect to working styles, customer contact
points, and business models.
◼ Create security systems that help solve such societal problems as
shoplifting, theft, and a shrinking workforce.

Cloud services and support
1,130
Maintenance
43%

260

885

Cloud
services 57%

710

Devices

609
750
276

FY2020◼ Expand cloud-based solutions suited to new-normal working styles thatare not tied to specific locations.
◼ Aim to reduce the operational management of customers and improvecustomer satisfaction through a managed service that integrates
operations, maintenance, and critical monitoring.

420

Industrial
equipment
49%

420

FY2021(forecast)

FY2021*(forecast)

FY2024(targets)＊Breakdown of operating income for FY 2021 in the event that segment separation is carried out .

Electronics
51%◼ Accommodate the need for semiconductors and electronic devices in
response to, among other factors, the spread of 5G, the IT upgrading ofplants through DX, and the adoption of robots.
◼ In order to increase customer satisfaction, we will shift from engaging insingle-device sales to engaging in a business involving the provision ofsolution proposals.
◼ Expand our global business (United States and Asia).
*From the fiscal year ending in March 2023, we will set cloud services and maintenanceservices as the cloud services and support segment.

27

Concepts and management strategy underlying our
new medium-term management plan
➢ Capital policies

Improving capital profitability

In order to create new corporate value after taking into consideration the overall financial soundness of the Company, we
will steadily implement capital policies towards improving our capital profitability and our current balance sheet.

Profit growth

Improve profitability

Creating new
corporate value◼ Exceeding 8% average ROE for threefiscal years◼ Structural reform and strengthening ofexisting businesses◼ Appropriately manage our business portfolio.
◼ Ascertain revenue as it corresponds to operating profit
by project and job.

Reduce sales and generaladministrative costs◼ Increase profit rates by reducing costs.

Optimize the allocation ofmanagement resources◼ Proactively invest in core businesses and personnel.

Strengthen shareholder
returns◼ Maintain a dividend payout ratio of 100% until theaverage ROE for three years exceeds 8%.

◼ Flexibly reallocate human resources.

◼ Cultivate businesses in growth areas

Improve our balance sheet byutilizing leverage◼ Reduce inventory assets.

Improve capital efficiency

Investments and M&As

◼ Limit increases in equity capital◼ Optimize capital costs◼ Reduce working capital through the growth of our
subscription model.
◼ Study the use of interest-bearing debt whencarrying out investments and M&As.
◼ Carry out disciplined investment activities inaccordance with discussions held by our Investment
Committee.

29

Shareholder return policy
Shareholder return policy during our medium-term management plan
We regard management that takes capital profitability into account to mean the constant maintenance of an ROE at 8% or higher and efforts to obtain even higher levels of
an ROE. Upon taking into consideration the Company's highly secure financial base and other factors, we will implement the following in an effort to proactively return
profits to shareholders without increasing equity capital based on our existing stable dividend policy.

◼ We will maintain a 100% dividend payout ratio until the average ROE for 3 fiscal years reaches 8%.
We plan to maintain the current minimum dividend policy of 24 JPY. We also plan to conduct a review of our shareholder return policy in the fiscal
year after we reach an average ROE of 8% for 3 fiscal years.

Changes in dividends per share (JPY)The current policy will be continued until we reach an average ROE of 8% for 3 fiscal years.

Special dividend
15

24

24

24

24

25

FY20162016年度FY20172017年度FY20182018年度FY20192019年度FY20202020年度Minimum dividend iscurrently 24 JPY

35

FY20212021年度FY2022
2022年度FY2023
2023年度FY20242024年度・・・・・

30

Raising and allocating cash

Utilize obtained operating cashflow and surplus funds for shareholder returns and making strategic investments.
The use of interest-bearing debt to control capital costs shall also be studied.

Cash inflow (raise)
Create cashflow

Use interest-bearing debt

Cash outflow (distribute)
Investments for growth

Shareholder returns

Interest-bearing debt

3-year operating
cashflow of 2.5 to
3.5 billion JPY

Surplus funds

Strategic investment
framework of 3.0
billion JPY

Point 1
Management that prioritizes financial soundness above all else

Shareholder returns of
3.0 to 4.0 billion JPY

Shift to management that emphasizes capital profitability.

Cash on hand(required cash)

Point 2
Strengthen service businesses with high capital efficiency.
➡ Lower the base of cash on hand (required cash).
31

ESG initiatives in support of our new medium-term
management planVarious initiatives for ESG/SDGs

Our basic policy on sustainability
We regard the resolution of environmental issues, societal issues, and corporate governance issues as important matters of management policy.
Under a corporate philosophy of “Creation,” we will contribute to the realization of a prosperous future and sustainable society as a technology
trading company after also taking the supply chain into account.

E

Contributing to the environmental field~Environmentally-conscious solutions~S

Deal with climate change

Contribute to the protectionof the global environment

Engage in eco-activities for the office(reduce CO2 emissions).

Provide various types of environmental
sensors and product services.

Use eco-cars for sales vehicles.

Reinforce the environmental consciousness of workplaces andfacilities with “Verkada”

Develop healthy, rewarding
workplace environments

Promote health-oriented
management.

Establish a Health and Safety
Committee.
Promote a paperless system.

Provide disaster-information services.

Engage in appropriate waste disposal
practices and reduce the amount ofwaste.

Plans to accommodate the TCFD.

Contribute to a recycling-oriented
society (3R).

G Resolving corporate

Contributing to the societal field～Realizing a safe and secure society through technology～

Undertake the IT upgrading ofinternal systems.
Establishment of a teleworkenvironment and the maintenance ofregulations
Appoint a diverse range of humanresources.
Establish child-care and nursing-careleaves, increase the rate at which
paid leaves are taken, and promote azero-overtime approach.

Contribute to a livable society
through the promotion of DX

Provide support for the latest
technology markets, including AI, IoT,
5G, and RPA.
Support customer streamlining andconvenience through the provision ofcloud services.

Deter and prevent crimes

Provide support for access security.

governance issues

Enrich education

Improve IT solutions.
Provide various education training
programs.

Establish ties with industrial societies,
the Japan Association of Electronic
Article Surveillance Machines, andthe National Shoplifting and Crime
Prevention Organization.

Provide support for the safety andsecurity of local communities throughcrime prevention.

Provide crime-prevention support tooffices and plants.

Provide support for officemanagement.

Provide support for preventing anddeterring crimes affecting stores.

Promote OJT.
Enact a qualification acquisition
incentive program.

Strengthen governanceEngage in initiatives for corporate
governance code.
Comply with our CSR Charter andCorporate Code of Conduct.
Establish various committees.
Upgrade governance education.

Security services to protect customers frombecoming victims of crime33

Contributing to the environmental field➤Reinforce the environmental consciousness of workplaces and facilities with Verkada
In addition to the security of workplaces and facilities, the "visualization of information that contributes to environmental friendliness" isachieved by linking environmental sensors and hybrid cloud-based AI cameras.

Environmental sensors
Works well in a wide range of situations
Measurable items
・Temperature
・Humidity
・PM2.5・Noise◼
◼
◼

・AQI (Air Quality Index)
・Cigarette and e-cigarette smoke
・TVOC (total volatile organic compounds)
・MotionEnvironmental changes in the office can be monitored in real time through links with hybrid cloud-based
AI cameras.
Sensor readings can be visualized.
Equipped with an alert function that is activated in emergencies, these sensors can be used to ascertain
conditions in detail with live video.

•••

Visualization of working environmental spaces in offices, facilities, andmanufacturing sites.
Detects temperature and other environmental changes inside serverrooms.
Detects cigarette smoke in schools and other locations where smoking is
prohibited.

Reduce environmental risks••

Detects air pollution, noise, vibrations, land subsidence, bad odors, andother pollution risks.
Strengthens the monitoring and observation of information that
contributes to environmental conservation.

By visualizing environmental information…
Rapid identification of environmental changes and prompt responses.
Controls temperature, humidity, and air quality at proper levels and can analyze factors causing environmental changes from the data.

We provide total support for the security and health of workplace and facility environments
and contribute to environmentally conscious measures implemented by customers.
34

Contributing to the societal field➤

Security services to protect customers from becoming victims of crime1
Throughsecurity services that provide safety, security, and comfort, the provision of total support is made possible by our top-classdomestic market share.

Physical security

Cloud security
Surveillance camera system
EMLINX
Sharing information on store crimes•
Cloud services

Product-monitoring system

Other companies’ cases are
subject to camera image checks(*masking process)Notification emails are sent tonearby member stores uponregistration

Facial recognition system••◼

This system operates by detecting the faces of visitors with a dedicatedcamera installed at the entrance of a facility and authenticating themagainst facial data registered in advance.
This system can quickly and accurately detect and verify any visit to afacility by a specific person.

•
Easy registration ofcases
Can be perused, searched, andanalyzed

Can produce and output reports anddamage notifications (original data)
instantly•

Crime prevention solution that contributes to loss
reduction and crime elimination by sharing information onthefts with others in the community and enabling staff
across different stores to immediately respond on acoordinated basis.
The more information is aggregated, the more it cantransition from enumerating lists to engaging in analytical
work.
This analysis will lead to the next step and effective
measures.

Store operations will be rendered more efficient by utilizing a high degree of flexibility in terms of satisfying space, functional, design, and other requirements and a cloud-based
system.
◼

We offer office security and network features that are indispensable for a business environment on a comprehensive basis.
We propose security and comfort backed by a strong track record in the area of safety management and the development of thelatest technology.
◼
We use EMLINX, our own proprietary platform, to resolve crime-prevention issues faced by our customers. Further
penetration of the system will help reinforce our information network in the area of crime prevention (i.e., increase theadded value we can offer).

We are committed to contributing to the creation of an environment in which our customers and the users of customer services canlive with peace of mind.
35

Status of the Company's Governance Structure
Board of Directors responsible for attaining our new medium-term management plan

Name

Position

Skill matrix

Term ofofficeCorporate management

Finance, accounting

GlobalTakanobu Ide

President and Chief Executive Officer
President & Executive Officer

3 years●●

Yoshiaki Hirata

Director and Executive Officer
General Manager, Device Business Division
In charge of Device Group Companies
In charge of the Nagoya Branch

7 years●●

Masazumi Uematsu

Director and Executive Officer
In charge of Administration & Operations
In charge of Southeast Asian Group Companies

7 years

Ichidou Tatsumi

Director and Executive Officer
General Manager, System Business Division

3 years●

Tetsuo Wasano

Outside Director

7 years●●

Michitoshi Tsuruoka

Outside Director

3 years●●●

Legal, compliance

IT, technology

Risk management

Sales, marketing

●

●

●

●

●

●

●

●

●

●

●

●

Human resources, labor,
personnel development

●

●

●

●

ESG, sustainability, SDGs

●

●

●

●

*Up to five primary skills possessed by each individual are marked with a blue dot (●).
*The term of office is the number of years as of February 8, 2022.

Percentage of directors consistingof outside directors

Outside directors

State of the establishment of various committees

33.3%

In-house directors◼ Investment Committee – To be established in April 2022
◼ Nomination and Compensation Committee - Established in October 2021
◼
◼
◼
◼
◼
◼

Crisis Management and Compliance Committee
Information Disclosure Committee
Personnel Committee
Health and Safety Committee
Environment Committee
Information Security Committee

36

Strengthening corporate governance (1)Establish an Investment Committee01◼

We will improve the quality of discussions held by the Board of Directors and Board of Executive Officers by strengthening supervisory
and review functions pertaining to investment decisions, including those that concern our M&A strategy.

PurposeMonitor progress subsequent to an
M&A
Thoroughly verify the appropriatenessof an investment project, including any
concerning our M&A strategy

Investigate investment criteria and exit
criteria as they apply in the short tomedium term

Chaired by: Director in charge of Administration and Operations

Committee members

Members: Management Planning Section, Business Development Department: Administration Department: Investment Execution Section◼

Positioning of committee

Positioned as an advisory committee to improve the quality of discussions held by the Board of Directors and Board of Executive
Officers◼

The Investment Committee checks and discusses investment projects in advance and disseminates a set of knowledge andexpertise on making an investment decision to the Board of Directors and Board of Executive Officers.

Frequency of meetings

Assumed to be twice a year (and flexibly convened for any large investment project)
37

Strengthening corporate governance (2)Establish a voluntary Nomination and Compensation Committee

02

◼
◼

◼

Strengthen the fairness, transparency, and objectivity of procedures related to nominations and compensation.
Endeavor to enhance corporate governance.

Composition of the Committee◆ Composed of at least three directors selected by the Board of Directors with a majority of members consisting of outside directors.
◆ The chairperson will be selected by way of the adoption of a resolution by the Nomination and Compensation Committee.

Revise performance-linked compensation for directors

03

◼
◼

◼

Increase the ratio of performance-linked compensation and stock-based compensation for officers.
A capital efficiency index will be newly adopted as a KPI for performance-linked compensation in addition to ordinary income.

Compensation for officers◆ Fixed compensation
87% ➡ 70%
◆ Performance-linked compensation 13% ➡ 30% (when 100% target attained)◆ Aiming for a stock-based compensation ratio of 15%◼

Compensation-determination process◆ Performance-linked compensation⁻ Rate at which the single-year ordinary income and current-term net income plan is
attained◆ Performance-linked stock-based compensation⁻ Rate at which our medium-term management plan as well as our target plan interms of consolidated ordinary income, consolidated current-term net income, andcapital efficiency (ROE) are attained

Issues to be studied in the future◼
◼

Appointment of female directors for the purpose of strengthening our initiatives for ensuring diversity.
Restructuring of our personnel system at group and global levels as well as our evaluation and compensation system.

38

◼

Direct any inquiries you may have regarding this document to the following:

TAKACHIHO KOHEKI CO., Ltd.
Masaya Iwamoto, General Manager, Administration Department

E-mailir-takachiho@takachiho-kk.co.jp

TEL

03-3355-1111

This document includes statements in connection with future performance. Such statements encapsulate risks and uncertainties and do notguarantee future performance. Note that future performance could differ from targets due to changes in the management environment andother factors.
In addition, this document is made available solely for the provision of information and is not intended to be used as a solicitation fortransactions.