Joshin Denki : Corporate Governance Report21/06/28

Corporate Governance Report

Last Update: June 28th, 2021

Ryuhei Kanatani

Representative Director and President and Executive Officer

Joshin Denki Co., Ltd

Contact: Management Planning Department [phone]

Securities Code: 8173

https://www.joshin.co.jp/joshintop/ir_en.html

The status of the Company's corporate governance is as follows.

I Basic concept of corporate governance, capital structure, corporate attributes and other basic information

1. Basic concept

The Company aims to strengthen its efforts in the home appliance retail business, which we have developed up over many years since our establishment, and to become a business management organization that can respond quickly and accurately to the rapidly changing business environment. In order to accurately understand the actual situation in the field of sales and to make effective and efficient decisions, many of our directors are in charge of business execution. At the same time, with the aim of utilizing objective viewpoints different from those of people from within the company as well as to strengthen the management system and further improve transparency, outside directors and outside auditors have been appointed as independent officers. In this way, we intend to enhance our corporate governance while further strengthening the current system of directors and auditors. In addition, we will strive to promptly and accurately disclose information to shareholders and investors from the perspective of management transparency.

[Reasons for not implementing individual principles of the Corporate Governance Code]

The Company has implemented all of the principles of the Corporate Governance Code.

[Disclosure based on the principles of the Corporate Governance Code]

[Principle 1-4:Cross-Shareholdings]

As stated in the "Annual Securities Report," the Company's policy is to hold shares from the perspective of enhancing the Company's corporate value over the medium to long term, with the aim of strengthening business relationships and promoting smooth business operations. Taking into account the percentage of total assets, eligibility of the purpose of shareholding, and profits and dividends derived from business relationships, the Company comprehensively reviews stock prices, valuation gains and losses, business conditions, and other factors reported to the Board of Directors on a quarterly basis. In the event the significance of the shares is deemed diminished, the Company shall appropriately dispose of such shares through dialogue and negotiation with the shareholding party. Regarding the criteria to exercise voting rights, the Company shall exercise such rights in light of the purpose of holding such shares and by comprehensively taking into consideration the governance system and business performance of the issuing company.

[Principle 1-7: Transactions with related parties]

Regarding all transactions which may cause conflicts of interest, such as transactions between related parties, the Company has established Internal rules which require the Board of Directors to deliberate and pass resolutions on such transactions. In addition, the Company shall regularly confirm each year whether or not there are any transactions between the Company's officers and their close relatives (including companies in which such persons hold a majority of voting rights) and the Company. In addition, as stated in the "Report on Corporate Governance," within the system to ensure the appropriateness of business operations, an internal whistleblowing system (public interest notification system) has been established in order to monitor this system.

[Principle 2-6: Demonstrating our function as an asset owner of corporate pensions]

The Company appoints personnel with experience and expertise in asset management, and who have been involved in asset management for many years at organizations entrusted with the management of corporate pension assets, as internal consultants. In asset management, our basic policy is "sound and stable asset development for the employees", under which we avoid fixed investment in the traditional four asset classes, flexibly reconfigure our portfolio in response to changes in the management environment. In addition, since fiscal 2019, we have been contributing to risk response premiums in preparation of a worsening management environment, and thereby eliminating the impact on the Company's financial position as much as possible. In addition, verification of investment results is carried out by the Asset Management Committee on a quarterly basis to continuously improve operations, and reports on the stewardship activities of Institutions entrusted with asset management are requested as a monitoring system.

[Principle 3-1: Enhancement of Information Disclosure]

(1) Corporate philosophy, management strategies, and management plans

Since June 2006, the Company has disclosed the management philosophy and other information in the "Joshin Magokoro CSR Report" (currently called the "Magokoro Integrated Report"). (The "Magokoro Integrated Report" is also available on our website (https://www.joshin.co.jp/joshintop/csr/) (Japanese only) )

Regarding our medium-term management plan, the "JT-2023 Management Plan," a three-year plan covering the period from April 2020 to March 2023, has been announced. This plan can be viewed on our website. (https://www.joshin.co.jp/joshintop/ir_en.html)

(2) Basic concept and Basic policy on Corporate Governance

As disclosed in the "Magokoro Integrated Report" and the "Report on Corporate Governance" etc., our basic concept on corporate governance is to strengthen its efforts in the home appliance retail business, which we have developed up over many years since our establishment, and establish a management control system that can respond quickly and accurately to the rapidly changing business environment, achieve sustainable growth, and improve medium to long term corporate value.

1／13

(3) Policies and procedures for the Board of Directors in determining remuneration of Senior Management and Directors

The total amount of remuneration for Directors is set by resolution at the General Meeting of Shareholders, and monetary remuneration is set within the range of 240 million yen per year. The Nomination and Compensation Committee, which is chaired by one of independent outside directors who comprise the majority of it, and in cosultation with the Board of Directors, deliberates on the allocation of compensation to individual directors based on the "Regulations on Compensation for Directors," and the Board of Directors shall make a decision based on its report.

Criteria regarding remuneration for Directors is set as "Directors and Executive Officers" and the standard monthly remuneration is set at no more than 200% of the maximum monthly salary as set forth in the employee salary system. Remuneration for Directors is determined based on the remuneration ratio and business performance of each Director. The standard for the remuneration ratio is set at 1.0 for "Directors and Executive Officers," 1.2 for "Directors and Managing Executive Officers," 1.4 for "Directors and Senior Managing Executive Officers," 1.7 for "Directors and Vice President and Executive Officer," 2.0 for "Director and President and Executive Officer," and 1.7 for "Director and Chairman and Representative Director". The remuneration ratio for the CEO is separately set by adding 0.2 to this ratio. The amount of remuneration for outside directors shall be determined on an individual basis, taking into consideration factors such as societal standards, career of the outside director concerned, and knowledge and experience in the specialized fields.

Of the total amount of remuneration for individual directors, 70% is set as fixed monetary remuneration, 10% as individual performance-linked remuneration (variable between 0% and 200%), and 20% as performance-linked stock remuneration (variable between 0% and 200%). The stock- based remuneration is determined by resolution at the General Meeting of Shareholders. The purpose of this system is to further clarify the linkage between business performance, stock value and directors' remuneration, and to increase awareness of the directors' contribution towards the improvement of business performance over the medium to long term, and to increase corporate value by sharing the benefits and risks of stock price fluctuations with the shareholders.

1. Policies and procedures for the Board of Directors in the appointment and dismissal of senior management and the nomination of directors and auditor candidates

In the selection and dismissal of Directors, the Nomination and Compensation Committee deliberates after consultation with the Board of Directors based on the basic principle that such Director possesses knowledge, understanding, and experience on the Company's management policies, business content, and issues, etc., and can contribute to the enhancement of the Company's corporate value over the medium- to long-term, and the Board of Directors makes a decision based on the recommendations of the Nomination and Compensation Committee. As for Auditors, such personnel with experience in the Company's business operations and management, internal control, and financial management, etc., and who can use their insights in auditing based on their carrier background are nominated with the consent of the Board of Auditors. In addition, regarding outside directors and outside auditors, importance is placed on the wealth of experience and high level of insight such persons possess in their respective fields, and independecy they are possessed of, and these functions are exhibited in the Board of Directors and the Board of Auditors.

1. Explanation of individual appointments, dismissals and nominations in the event of the appointment or dismissal of senior management and the nomination of candidates for directors and auditors by the Board of Directors

Candidates for Directors and Auditors are disclosed in the reference documents of the "Notice of Convocation of the General Meeting of Shareholders" along with a brief personal history and concurrent positions held by each candidate. The Nomination and Compensation Committee consults with the Board of Directors and deliberates on the appointment and dismissal of the Directors to ensure a fair and highly transparent process, and the Board of Directors decides on the appointment and dismissal proposal based on the received report. With regard to the appointment and dismissal of Auditors, the Board of Directors shall decide on a proposal for appointment and dismissal based on the results of discussion at the meeting of Board of Auditors.

[Supplementary Principle 4-1-1 Scope of delegation to management]

The Board of Directors shall prepare resolutions on important matters such as management policies concerning corporate management, and entrust each Director with high-level judgment and decision-making as the person in charge of the execution of business of his assigned area. By defining the scope of delegation in detail through the Board of Directors regulations, managing executive officer regulations, regulations for division of duties, and rules for request for managerial decision-making etc., the Board of Directors shall establish an organizational structure which enables each director to work in close coordination and make high-level and flexible decisions.

In addition to regular meetings of the Board of Directors at least once a month, extraordinary meetings of the Board of Directors shall be held flexibly as the need arises, and the Board of Directors shall supervise the status of business execution by the Directors at the Board of Managing Executive Officers meeting held once a week.

[Principle 4-9: Criteria to determine the degree of independence of independent outside directors and their qualifications]

Criteria to determine independence at the Company is based on satisfying both the requirements for outside officers required by the Companies Act and the independence standards required by stock exchanges, and appropriate personnel who can contribute to the enhancement of corporate value and shareholder interests are registered with the stock exchanges as candidates for outside officers, with the approval of the General Meeting of Shareholders as independent officers. Criteria to determine independence are disclosed in the "Report on Corporate Governance". Criteria to determine independence are deliberated by the "Nomination and Compensation Committee", in consultation with the Board of Directors as appropriate, and the Board of Directors decides the criteria based on the received report.

[Supplementary Principle 4 -11-1 Concept regarding the balance of knowledge, experience and skills, diversity and size of the Board of Directors as a whole]

Based on the belief that diversity of the Directors comprising the Board of Directors affects its effectiveness and significantly impacts sustainable growth and the enhancement of corporate value over the medium to long term, the Company's Board of Directors has deliberated on the balance and diversity of the composition of the Board of Directors, including the knowledge, experience and abilities of the Directors. As a result, the Company formulated the "Skill Matrix" for Directors and Auditors and published it in the notice of convocation of the 73rd Ordinary General Meeting of Shareholders as a nomination proposal prerequisite for Directors and Auditors.

The Company considers the skill matrix to be a tool to ensure diversity in the Board of Directors by recruiting a wide range of personnel with strengths in specific fields, and uses it to visualize the process to determine any excess or deficiency in skills among the Directors and to balance such excess or deficiency by the selection and dismissal of internal and external Directors.

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[Supplementary Principle 4 -11-2 Directors and corporate auditors holding concurrent positions at other listed companies]

When a proposal on candidates for Directors and Auditors in the General Meeting of Shareholders is submitted, the status of concurrently held positions are disclosed in the business reports and reference documents of the "Notice of Convocation of General Meeting of Shareholders". Some candidates are holding concurrent positions as outside officers of other listed companies, but this is not particularly considered to be an obstacle in their attendance at the meetings of the Board of Directors and the Board of Auditors of the Company, and the number of concurrent positions remains within a reasonable range.

[Supplementary Principle 4 -11-3 Analysis and Evaluation of the Effectiveness of the Board of Directors as a Whole]

The Company continuously promotes efforts to improve the effectiveness of the Board of Directors, which plays a central role in the efforts of the Company to enhance its corporate value and shareholder profits over the medium to long term. For the fiscal year ended March 2021, an "Assessment Committee for Board of Directors", consisting of outside directors and auditors, was established to investigate the effectiveness of the Board of Directors, targeting all directors and auditors who are members of the Board of Directors. The Company conducted anonymous questionnaires and interviews with the directors, and the results were reported to the Board of Directors, along with the opinions of outside directors. The Board of Directors confirmed that the Board of Directors is functioning effectively based on the analysis of the survey results, and also identified constructive opinions and suggestions obtained in the course of the survey as issues which can contribute to the further improvement of the effectiveness of the Board of Directors and is formulating action plans to address such. A summary of the evaluation results of the effectiveness of the Board of Directors for the fiscal year ended March 2021 was disclosed on June 1, 2021 (Japanese only).

[Supplementary Principle 4 -14-2 Training Policy for Directors and Auditors]

The Company provides opportunities for Directors and Auditors to improve their skills by acquiring the necessary knowledge and to remain up to date on the appropriate knowledge, so that such persons can properly fulfill their expected roles and responsibilities. For Directors, Auditors, and Managing Executive Officers, training by external instructors is provided six times a year on Corporate Law, Financial Instruments and Exchange Act, and other legal authorities and obligations under laws and regulations, as well as training for officers needed to acquire and remain up to date on legal and other related knowledge and skills required for the management practices of the Company. At the same time, the system to obtain advice from lawyers, certified public accountants, tax accountants, and other specialists on a case-by-case basis has been enhanced. As many of our directors are in charge of various operations in the Company and are engaged in tasks that require a high level of judgment, we believe that total training is indispensable for the execution of each operation in the Company.

[Principle 5-1 Policy for constructive dialogue with shareholders]

The basic concept and framework for information disclosure are disclosed in the Company's Integrated Report. Regarding specific activities related to IR, a forum for dialogue, such as financial results briefings, individual IR for institutional investors, and IR seminars for individuals are provided, and questions and requests received by phone or from the Company website are appropriately handled on a daily basis.

2. Capital structure
	Percentage of shares held by foreigners	Less than 10%
	[Status of major shareholders]
	Name and/or Title		Number of shares owned	Percentage (%)
		(stock)
	Joshin Denki Employee Shareholding Association		1,734,832	6.46
	The Master Trust Bank of Japan, Ltd. (trust account)		1,531,000	5.70
	The Dai-ichi Life Insurance Company, Limited		1,350,000	5.03
	Resona Bank, Ltd.		1,251,010	4.66
	Custody Bank of Japan, Ltd. (trust account)		755,570	2.81
	Sumitomo Mitsui Trust Bank, Limited		600,000	2.23
	Mitsubishi UFJ Trust and Banking Corporation		571,603	2.13
	Sharp Corporation		542,500	2.02
	Sompo Japan Nipponkoa Insurance Inc.		506,500	1.88
	Daikin Industries, Ltd.		447,792	1.66
	Existence of controlling shareholders (excluding the parent	---
	company)
	Parent company	No

1. [Status of Major Shareholders] is based on the shareholder registry as of March 31, 2021.
2. Percentages (%) in the above table are calculated after excluding treasury stock (1,178,099shares).

3. Corporate attributes

Stock exchange listing and market segment Fiscal Year

Industry

Number of employees (Consolidated) as of the end of the previous fiscal year

Net sales for the previous fiscal year (consolidated) Number of consolidated subsidiaries as of the end of the previous fiscal year

Tokyo First Section

March

Retail

1,000 or more

100 billion JPY or more and less than 1 trillion JPY

10 or more and less than 50

1. Guidelines on measures to protect minority shareholders in transactions, etc. with controlling shareholders
   ---
2. Other special circumstances which may significantly affect corporate governance

---

3／13

1. Status of management control organizations and other corporate governance systems related to management decision-making, execution and supervision

1. Matters related to organizational structure, organizational management, etc.
	Organizational structure		Company with auditors
	[Directors]
	Number of directors as stipulated in the Articles of Incorporation	15 persons
	Term of office of directors as stipulated in the Articles of	1 year
	Incorporation
	Chairman of the Board of Directors		President
	Number of directors		9 persons
	Appointment of outside directors		Nominated
	Number of outside directors		3 persons
	Number of outside directors who are designated as independent	3 persons
	directors
	Relationship with the Company (1)
	Name	Affiliation		Relationship with the company	*
				a b c d e	f	g	h	i	j	k
	Shojiro Nozaki	From another Company					△
	Kinya Naito	Attorney at Law								○
	Keiko Yamahira	From another Company								○
	Junko Kawano	From another Company								○

• Categories for "Relationship with the Company"
• "〇" when the director presently falls or has recently fallen under the category; "△" when the director fell under the category in the past
• "●" when a close relative of the director presently falls or has recently fallen under the category; "▲" when a close relative of the director fell under the category in the past
  a. Executive 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 company 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 listed 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 compensation as a director/auditor
  g. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a legal entity)
  h. Executive of a client or supplier company 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 external directors/auditor 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. Others

Relationship with the company (2)

Name	Independent	Supplementary Explanation on Applicable	Reason for Appointment
Officers	Items
			In addition to many years of experience in a financial
			institution and specialized knowledge, and Shojiro Nozaki has
			abundant experience and insight in corporate management.
		Shojiro Nozaki is a former employee of Resona	He has been judged as a person who can provide advice and
		Bank, Ltd. which is the Company's bank of	recommendations on the corporate activities of the Company
		transaction. However, he has been retired for	from an objective, broad and sophisticated perspective. He is
Shojiro Nozaki	○	the past 11 years. After retiring from the bank,	a former employee of Resona Bank, Ltd. However, the
he has also served as a director of a business	Company's share of bank transactions at said bank is not
		corporation and a medical corporation which	significant, and would not affect his independence.
		do not have business transactions with the	Furthermore, the said person was appointed as an
		Company.	independent director because there are no special stakes
			between the Company and the said person, and there is no
			reason for concern regarding conflict of interest with general
			shareholders.
			Using his experience and expertise as a lawyer, Kinya Naito
			has been judged as a person who can provide advice and
			recommendations on the compliance management of the
		Attorney at law (No business relationship with	Company from an objective, broad and sophisticated
Kinya Naito	○	perspective. Furthermore, the said person was appointed as
the Company)
		an independent director because there are no special stakes
			between the Company and the said person, and there is no
			reason for concern regarding conflict of interest with general
			shareholders.

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					Keiko Yamahira has abundant experience and insight in
					corporate management, and has been judged as a person
					who can provide advice and recommendations on the
					corporate activities of the Company from an objective, broad
Keiko Yamahira	○		---		and sophisticated perspective. Furthermore, the said person
					was appointed as an independent director because there are
					no special stakes between the Company and the said person,
					and there is no reason for concern regarding conflict of
					interest with general shareholders.
					Using her expertise and experience in the promotion of
					participation by women and in the fields of management
					consulting, Junko Kawano can provide advice and
					recommendations on the marketing strategies of the
Junko Kawano	○		---		Company and regarding diversity management from an
		objective, broad and sophisticated perspective. Furthermore,
					the said person was appointed as an independent director
					because there are no special stakes between the Company
					and the said person, and there is no reason for concern
					regarding conflict of interest with general shareholders.
Existence of arbitrary committee corresponding to a nomination
committee or compensation committee		present

Status of the establishment of an arbitrary committee, composition of committee members, and attributes of the committee chairman (chairperson)

		Committee	Full time	Company	Outside	Outside			Committee
	Name of the	committee	Others
	Members	directors	directors	experts		Chairman
	Committee		members	(persons)	(Persons)	(Persons)
		(Persons)	(Persons)	(Persons)		(Chairperson)
Arbitrary committee	Nomination and								Outside
corresponding to a	Remuneration	6	0	2	4	0		0
	Directors
nomination committee	Committee
Arbitrary committee	Nomination and								Outside
corresponding to a	Remuneration	6	0	2	4	0		0
	Directors
compensation committee	Committee

Supplementary Explanation

The Company has established the Nomination and Compensation Committee as an advisory body to the Board of Directors in order to strengthen corporate governance by ensuring the independence, objectivity, and transparency of the functions of the Board of Directors concerning decisions on the nomination and compensation of representative directors and directors, etc., as well as personnel matters such as plans of succession for the Chief Executive Officer.

The Nomination and Compensation Committee is an arbitrary committee which performs functions corresponding to both the Nomination Committee and the Compensation Committee, and consists of independent outside directors, representative directors, and directors appointed by resolution of the Board of Directors, and the chairman of the committee is elected by mutual vote from among the independent outside directors.

[Auditors]
Existence of the Board of Auditors	Established
Number of auditors as stipulated in the Articles of Incorporation	5 persons
Number of auditors	4 persons

Coordination between auditors, accounting auditors, and the internal audit department

The accounting auditor, EY Ernst & Young ShinNihon LLC, reports the details and results of audits to the Board of Auditors regarding the settlement of accounts and quarterly financial results, and seeks to actively collaborate with the Board as needed to enhance the effectiveness of audits, such as through the exchange of information.

As an internal audit function, the Auditing Department, which reports directly to the President, conducts regular internal audits of each department to check the status of business execution, prevent fraud and errors, and provide advice on business improvement. The results of internal audits are regularly reported to the auditors on a monthly basis.

Appointment of outside auditors	Nominated
Number of outside auditors	2 persons
Number of outside auditors appointed as independent directors	2 persons

Relation with the company (1)

Name

Affiliation

Relationship with the company*

a

b

c

d

e

f

g

h

i

j

k

l

m

Masayasu Hashimoto

From another Company

△

Yoshio Hayakawa

Certified public accountant

△

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