TSI : CORPORATE GOVERNANCE

CORPORATE GOVERNANCE

CORPORATE GOVERNANCE

	May 30, 2022
	TSI Holdings Co., Ltd.
	Tsuyoshi Shimoji, Representative Director and President
Contact:	03 (6748) 0002

The corporate governance of TSI Holdings (the "Company") is described below.

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

1. Basic Views

The Company, in an effort to build a business operation structure befitting a fashion and apparel company engaged in business globally, seeks to step up its internal control, for rigorous compliance with laws and regulations and for risk management, while developing a structure that enables decision-making that is highly sound, transparent, and swift, under a corporate philosophy that we create value that shines the hearts of people through fashion and share the happiness of living tomorrow together with society. We will make efforts to keep our corporate value growing as stated in our basic business policy with the aim of further upgrading our corporate governance while building good relationships with our stakeholders by way of these efforts.

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

Principle 1.4 Cross-Shareholdings

To run its operations smoothly and maintain or reinforce its business relationships, the Company cross-holds shares. This contributes to enhancing its corporate value in comprehensive consideration of its medium- to long- term financial reasonableness and outlook.

The Company reduces its cross-shareholdings that have diminished in effect, in consideration of the conditions of target companies, such as for dividend, while verifying the significance of cross-holding and reporting it at the Board of Directors meetings.

In exercising its voting rights, the Company comprehensively decides to vote in favor or against each of proposals from a perspective of whether it is in conformity to the purpose of the cross-shareholding and whether it contributes to maintaining or enhancing the target company's corporate value and its shareholder value.

Principle 3.1 Full Disclosure

Supplementary Principle 3.1.3

For the Company's sustainability efforts and investments in human capital and intellectual properties, see a section titled "Disclosure Based on the Principles of the Corporate Governance Code."

The Company will reduce CO2 emissions generated across the value chain toward achieving carbon neutrality by 2050, given potential effects of risks and revenue opportunities that are related to climate change on the

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organization's operating activities and revenue. To this end, we will gather and analyze necessary data, laying down, by the end of February 2023, a roadmap to visualize and reduce CO2 emissions in Scope 3.

Principle 4.1 Roles and Responsibilities of the Board (1)

Supplementary Principle 4.1.3

The Company regards a plan on a successor to the Representative Director and President as an important business management issue, which is, and will continue to be, deliberated on by the Nomination and Remuneration Advisory Committee, the majority of which consists of outside directors.

Disclosure Based on the Principles of the Corporate Governance Code

Principle 1.7 Related Party Transactions

A proposed conflict of interest transaction between the Company and a director is required to be reported to, and resolved by, the Board of Directors under applicable laws and regulations and the Board of Directors Rules. The Company discloses specific details of transactions between itself and related parties in accordance with applicable laws and regulations while reporting them periodically to the Board of Corporate Auditors.

Principle 2.3 Sustainability Issues, Including Social and Environmental Matters

Supplementary Principle 2.3.1

Principle 3.1 Full Disclosure

Supplementary Principle 3.1.3

Principle 4.2 Roles and Responsibilities of the Board (2)

Supplementary Principle 4.2.2

1. The Company's Sustainability Efforts

The Company released a sustainability statement: "Creating a Sustainable Future with Fashion Entertainment: Beautiful Planet Earth, Radiant Society, Happy Life," laying down materialities and key goal indicators (KGIs) that would be the foundation on which the TSI Group would generate a sense of happiness in the long term and in a sustained manner through its operating activities.

We set up the SDGs Promotion Office in September 2021 to pursue sustainability activities while keenly working to build internal platforms and raise awareness on the part of employees.

For reports on specific activities, see SUSTAINABILITY STORY BOOK.

https://www.tsi-holdings.com/pdf/TSI_SUSTAINABILITY_20220418_FIX_ENG_REV3.pdf

(2) Investments in Human Capital and Intellectual Properties

(i) Investments in human capital

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People are the source of value in our business activities and therefore our greatest asset.

Having set diversity, employee wellbeing, health and safety, and fair labor conditions as important materialities, we will strive to improve the environment to enable all staff working together to thrive happily, both physically and mentally.

To deal with the era of change, the Company will invest in education, training, and development of employees. For developing multi-skilled workforce, we will arrange for programs through which employees acquire needed skills, including enhancement of job rotations, training schemes, and self-learning systems.

(ii) Investments in intellectual properties

For the Company, a brand business player, intellectual properties such as trademark rights and copyrights are highly important for operational purposes. Intellectual properties constitute the base of creative value to be delivered to customers as we seek to put into practice "Creating worldwide sympathy and social value with the power of fashion entertainment," which is laid down as a purpose in the Medium-term Management Plan dubbed TSI Innovation Program 2025 (TIP25).

We will avidly invest in expertise, such as in designing business model and communication, in an effort to deliver customer experience, going beyond customer expectations other than merely developing superior designs and brands.

Principle 2.4 Ensuring Diversity, Including Active Participation of Women

Supplementary Principle 2.4.1

(1) Ensuring diversity

The TSI Group will create an environment where anyone can thrive diversely by pursuing efforts to bring about diverse and flexible work life for everyone in a manner befitting them.

(2) Voluntary and measurable goals for ensuring diversity and their status

(i) Female promotion to managerial positions

While female employees accounted for 27.0% of total managerial positions at the Company at the end of February 2022, we have laid down a goal of raising the ratio to 40% by the end of February 2025.

(ii) Promotion of foreign nationals to managerial positions

Although we are yet to set any goal for promotion of foreign national employees to managerial positions, we will continue to internally deliberate on this subject.

1. Voluntary and measurable goals for promotion of midcareer hire employees to managerial positions and their status
   Although no goals are in place for promotion of midcareer hire employees to managerial positions, we have established diverse work systems (flextime system, reduction of working hours, and second job system) and diverse training programs to accommodate the unique individuality within the TSI Group which brings together

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companies with different organizational climates and cultures. We operate our personnel system appropriately while introducing internal position solicitation and job rotation schemes and flexibly accepting diversity in work, job category, and work history.

1. Human resource development policy and internal environment improvement policy intended to ensure diversity and their status

(i) Human resource development policy intended to ensure diversity

For ensuring diversity in promoting core personnel, we ensure evaluation and promotion of employees solely based on their individual skills paying no heed to gender, age, and nationality.

While recruiting employees, we actively hire midcareer professionals, including those from other sectors, in addition to hiring new graduates. For promotion of female employees to managerial positions, we will keenly work to further raise the ratio of female managerial positions, wherein it is already over 25% of all managerial positions at the Group.

While more than 100 foreign national employees already work for the Group as a whole, mainly at overseas subsidiaries, we intend to avidly recruit employees in an effort to further secure highly-skilled professionals with an eye on expansion of overseas business in the coming years.

(ii) Environmental improvement aimed to let diverse employees thrive further

To let diverse employees fully exert their skills in accordance with their own lifestyles, TSI Group companies take measures, such as applying flexible work hours and work formats, revise pay levels, ease burden of shop work clothes, among other employee welfare matters, and will continue to upgrade these measures.

(iii) Pursuit of diversity and inclusion

We will work to reform awareness on the part of individual employee to create an ethos respecting diversity and an environment where diverse employees can grow and thrive with work satisfaction. This is in line with efforts that individual employees with various gender, age, nationality, and physical and mental conditions can thrive in accordance with their characteristics, skills, and conditions.

(iv) The status of efforts to ensure diversity

The following efforts are in progress toward ensuring diversity in accordance with employees' characteristics.

• Active participation of women

While female managerial positions accounted for 27.0% of all managerial positions at the Group at the end of February 2022, we set a goal of raising the ratio to 40% by the end of February 2025, and recruit and promote employees with an eye on raising the ratio of female managerial positions and among highly senior positions.

• Further employment of foreign national workers

Employment of foreign national workers by the Group has been growing year after year, and going forward, we are now in the process of employing foreign nationals in a more planned manner.

• Utilization of elderly professionals equipped with experience and past achievements

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The Group, working to actively keep employing personnel up to age 65, has an increasing number of instances where employees at the age of 65 or above thrive as the Group further continues to recruit and promote employees irrespective of age.

• Empowerment of people with disabilities

To date, the Group's special case subsidiaries in the main have been keenly empowering people with disabilities. Its employees with disabilities accounted for 2.39% of the total workforce at the end of February 2022. Going forward, we seek to generate work satisfaction on their part in ways more directly linked to operations.

• Understanding promotion for LGBT

To date, the Group has had an ethos equipped with a high level of understanding about LGBT, dual surnames, common-law marriage, and is now in the process of eliminating gender-based treatment by reviewing and amending various packages, such as the congratulatory or condolence rules (including wedding congratulation payment), for a widened scope.

The following efforts are in progress from a perspective of not only employee characteristics but also workstyle diversity.

• Improvement of diverse workstyle programs for reduced working hours and remote work

The Group improves rules and programs to bring about workstyles more diverse than before, such as: i) a program for reduced working hours in units of 30 minutes and up to four hours; ii) a staggered working hours program allowing employees to change work start time from 8:00 to 13:00; iii) flextime system; iv) lifting of ban on second jobs while subsiding telework environment improvements. In addition, we work to review and amend these programs and lay down new ones, going forward.

• Creation of a work environment and programs that are friendly to pregnancy, giving birth, and child-rearing We achieved 98.1% in childcare leave taking ratio and 93.2% in return from childcare leave ratio through: i) the above-mentioned reduced working hour program allowing employees to work in units of 30 minutes and up to four hours; ii) a helpful measure by setting a childcare with reduced working hours for period of up to child graduation from six-year elementary school; and iii) well-thought-out communication at employee's return from childcare leave. We continue to work on this situation to maintain or improve it.

◎Creation of programs allowing employees to balance between nursing care and work

We work to address work restrictions due to nursing care, hospital visit, and treatment as they will likely grow in the future, including flexible operation for hospital visit holiday, given that total nursing care leave day count, currently up to 93 days under applicable laws, will be extended to a maximum of 365 days.

Principle 2.6 Roles of Corporate Pension Funds as Asset Owners

The Group monitors the status of investment of its pension assets periodically, reviewing and revising the weightings of its strategic assets as required. It periodically evaluates asset management companies regarding not only quantitative aspects, such as for investment performance, but also comprehensive aspects, including

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