Governance For Yutaka Foods Corp

As a listed subsidiary with potential inherent conflicts of interest, Yutaka should hold itself to a higher corporate governance standard. This is critical to protect minority shareholders and build up investor confidence.

We believe that the following should be done immediately to improve corporate governance at Yutaka.

• Explaining in detail how conflicts of interest are mitigated in relation to transactions with the parent company. Yutaka does not provide much discussion about transactions with its major shareholders, however this is clearly a very important area of concern for shareholders. As listed companies using the public infrastructure of the capital markets, management has a responsibility to provide a level of explanation that is trusted by the market   
   

• Transition to Company with an Audit and Supervisory Committee
   

• As a listed subsidiary, Yutaka should hold itself to a higher corporate governance standard and put in place additional measures to reassure minority shareholders that they are treated fairly in relation to its parent company. This is critical to build up investor confidence.
   

• Appoint majority of Board of Directors as Independent Directors. Although Yukata satisfies the CGC principal that 1/3 of its board of directors composed of independent outside directors, we encourage the Company to engage in a board search for high-quality independent directors. A 50% ratio for independent directors is more sensible given the large influence that Toyo Suisan holds as controlling shareholder, and the many areas of potential conflict of interest
   

• Unwinding of this cross-holding stake as that there is no strategic business relationship between Yutaka and Semba Tohka and any business relationship, if any, is very small.
   

• Return the loan to Yutaka and distributed to shareholders as a special dividend as the loan could be seen as giving Toyo Suisan preferential access over Yutaka’s cash balance and be interpreted negatively by the market.