TENPOS : Corporate Governance Report

Corporate Governance Report
CORPORATE GOVERNANCE	TENPOS HOLDINGS Co, Ltd.
	Last Update: August 2, 2022
	TENPOS HOLDINGS Co., Ltd.
	Atsushi Morishita, President and Representative Director
	Contact:	[phone]
	Securities code:	2751
	https://www.tenpos.co.jp/

The corporate governance of TENPOS HOLDINGS (the "Company") is described below.

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

1. Basic Views

＜Invest in growing sectors as 100-year company＞

The Company's basic approach to corporate governance is to establish a sound management system that can respond quickly to changes, efficient, complies with laws & regulations, and social ethical standards. We are working with the vision of "increasing the survival rate of small and medium-sized restaurants from 45% to 90% in five years by supporting them as Doctor Tempos. To achieve this goal, the company will gradually transform itself from its current core business of selling goods & recycled goods, into a 100 billion company that provides information and services to restaurants under the name of "Dr. Service.

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

【Code 1-2-4】Electronic exercise of voting rights, English translation of convocation notices

At present, the Company has not offered electronic exercise of voting rights (e.g., the electronic voting platform) or translated the convocation notice into English. Although the percentage of overseas investors among the Group's shareholders is small , we will take measures when we deem necessary, based on this percentage and other factors in the future.

【Code 4-1-2 Roles and Responsibilities of the Board,

Mid-term Business Plan】

The Company currently do not have a mid-term plan.

This is because the company, which currently has annual sales of 30 billion, has set 100 billion as its next goal. To achieve this goal, we are trying to do activities that cannot be represented by a stacked budget. We will utilize various means, such as M&A and business alliances, in the process of transforming ourselves from a kitchen equipment sales company into a comprehensive service industry (services required by restaurant workers, including finance, real estate information provision, sales promotion, design, interior work, and temporary staffing) in the food service industry.

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【Code 4-1-3 Role and Responsibility of the Board,

Engagement in the succession plan for the CEO】

The Company's Board considers the development of candidates for CEO and other positions to be an important issue, but has not currently prepared a clearly articulated succession plan.

However, for the past three years, we have been conducting monthly "executive training" for directors and senior managers of our subsidiaries to develop human resources who will lead our group in the future. As for steak restaurant 'Asakuma', a Standard Listed subsidiary, the new president from this fiscal year has already been chosen by election of the six participants in a six-month "competition for the president's position" by the executives and employees.

【Code 4-3-3 Role and Responsibilities of the Board,

Dismissal of the CEO】

The Company's Board has not established specific criteria for the dismissal of the CEO. When a situation arises in which the dismissal of the CEO is objectively considered appropriate, such as when the CEO has violated laws, regulations, or the Articles of Incorporation, or when the CEO has caused significant damage to corporate value, the Company's Board, with the attendance of outside directors and outside auditors, will fully deliberate and decide whether the CEO should be dismissed.

【Code 4-10,4-10-1 Use of Optional Approach】

The company has not yet established a voluntary nomination and compensation committee. As the compensation of the CEO, who is the founder, is less than 30 million yen, the committee is considered unnecessary. At the same time, at the 30 Annual General Meeting of Shareholders this year, the number of Independent Outside Directors was increased from one to two. Therefore, the Company will consider the appropriate involvement and advice of these Independent Outside Directors when electing Directors from the next term onwards.

【Code 4-11-3 Preconditions for Board and Kansayaku Board Effectiveness】

The Board of the Company is not currently analyzing or evaluating its effectiveness but will begin working on this content in the 31st fiscal year (next fiscal year) and will disclose a summary of the results.

Disclosure Based on the Principles of the Corporate Governance Code

The Company believes that it is important to enhance the transparency and public nature of management by accelerating decision-making, clarifying management responsibility, enhancing and strengthening the compliance system, and disclosing information in a timely and appropriate manner.

【Code 1-4Cross-Shareholdings】

The Company owns so-called"Cross-holding-shares," but it holds only two kind of stocks (of which one is listed) and the amount held is extremely small. The Board will make a comprehensive judgment of the appropriateness and rationality of holding these stocks, taking into consideration their contribution to

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business growth and investment efficiency, and will reduce our holdings as appropriate when the need for such holdings declines. The Company has decided not to exercise our voting rights in the stocks we hold at this time.

【Code 1-7 Related Party Transactions】

When the Company engages in transactions (related-party transactions) with officers, major shareholders, etc., the Board shall, in advance, establish appropriate procedures and disclose the framework for such transactions in accordance with the materiality and nature of the transaction in order to ensure that such transactions do not harm the Company or the common interests of shareholders and do not give rise to any such concerns. In addition, the Board will endeavor to monitor (including approval of transactions) in accordance with such procedures. In the event of a related party transaction, the details of the transaction will be disclosed in the annual securities report and other relevant documents.

【Code 2-4 Ensuring Diversity, Including Active Participation of Women】

Based on the recognition that the existence of diverse perspectives and values reflecting different experiences, skills, and attributes within the company can be a strength for sustainable growth of the company, the Company abolished the mandatory retirement age system and have been actively hiring mid-career employees based on their experience and abilities regardless of gender, nationality, or age as we expand our business.

The Company has also established an open recruitment system for managerial positions and have in place a system that provides opportunities for a diverse range of human resources to play an active role. Currently, there is one female director (14% of the Board of Directors), and at Tempos Busters, the core company of the group, the ratio of female store managers, etc. is 10%, but it will continue to actively develop and promote female core personnel with a goal of increasing ratio to 15%. The non-Japanese employee's ratio is 3% at this time (excluding Asakuma's employee)

【Code 2-5-1 Whistleblowing】

The Company has established and operates a hotline as a means for employees to directly provide information on suspicious activities under the law. The contact points are the Internal Audit Office and the Administration Department, and reports are made to the Board and the Board of Statutory Auditors as appropriate. In addition, the Company has an annual contract with an outside consulting firm to receive whistleblower reports from employees, and the guidance of how to use it is posted in an easily viewable location and included in the comments section of their paycheck stubs.

【Code 2-6 Role of Corporate Pension Funds as Asset Owners】

As of the date of this report's update, there is no corporate pension in the company.

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【Code 3-1 Full Disclosure】

In addition to appropriate disclosure in accordance with laws and regulations, the Company discloses and proactively disseminates the following items (in addition to items required to be disclosed under each principle of this Code) from the perspective of ensuring transparency and fairness in corporate decision-making and achieving effective corporate governance.

1. Company's goals (management philosophy, etc.), management strategies, and management plans The management philosophy of the Company, which aims to become a "business scientist," is stated on the Company's website. The Company's management policy is described in its financial statements and annual securities report.
   (Company's website)https://tenpos.co.jp/profile/
   (Management philosophy:https://www.tenpos.co.jp/profile/company/
2. Basic views and guidelines on corporate governance

The Company discloses its basic stance on corporate governance, capital structure, and other basic information in "1. Basic Stance on Corporate Governance, Capital Structure, Corporate Attributes and Other Basic Information" in this report.

1. Board policies and procedures in determining the remuneration of the senior management and directors
   The Board has established a policy regarding this matter. The Board has also confirmed that the policy is consistent with the policy for determining the individual compensation of the Board for the current fiscal year as approved by the Board. Details of the policy are disclosed in the Notice of the 30th Ordinary General Meeting of Shareholders.
2. Board policies and procedures in the appointment/ dismissal of the senior management and the nomination of directors and Kansayaku candidates
   In appointing senior executive management and candidates for the Board, the Company selects candidates based on a comprehensive judgment of their ethics, capability, experience, personality, insight, and whether or not they understand and practice the Company's management philosophy and contribute to improving the Company's corporate value. President and founder Mr. Morishita is also involved in monthly talent development program to evaluate candidates.
   Independent outside directors include persons with management experience at other companies.
3. Explanations with respect to the individual appointments/ dismissals and nomination based on 4. The reasons of nomination of individual candidates of Directors and Statutory Auditors are described in the Notice of the Ordinary General Annual Shareholders' Meeting of the company.

【Code 3-1-2 Providing English Language Disclosures】

The Company publishes an English-language version (simplified version) of its financial statements and earnings release materials. In consideration of the ratio of overseas investors among our shareholders, the company will continue and enhance to disclose materials in English.

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【Code 3-1-3 Disclosure of sustainability initiatives】

In disclosing its management strategies, the Company discloses its sustainability initiatives.

Specifically, the company's main businesses are the sale of new and used kitchen equipment to restaurants, catering services, and other food service businesses, and the refurbishment and sale of tables, chairs, counters, and other items for retail stores and store interior decorations, etc. We are committed to reducing, reusing, and recycling without wasting resources.

The Company will strive to develop a business plan that is aware of the impact of climate change and other factors on our business activities and earnings hereafter.

In investing in human resources to support our business activities, we have been conducting monthly "Directors' Training" for directors and senior managers of our subsidiaries since FY 2018 to develop human resources who will be responsible for the future of our group. In addition, to develop talent for "Dr. Service," which is one of our key strategies, we have been providing training to 250 employees for 5 hours per week, 240 hours per year, and we are also practicing the strengthening of on-site capabilities.

【Code 4-1-1 Roles and Responsibilities of the Board,

The scope of delegation to management】

The Company's Board determines matters to be decided in accordance with laws, regulations, and the Articles of Incorporation in accordance with the "Rules of the Board.

In addition, the "Detailed Rules of the Board" defines the criteria for Board' resolutions and reporting matters and clarify the scope of decisions to be made by the Board.

【Code 4-2-1 Roles and Responsibilities of the Board, Remuneration Systems】

The Company's Board designs the compensation system and determines specific compensation amounts in accordance with objective and transparent procedures to ensure that the compensation of the management team functions as a sound incentive for sustainable growth. In doing so, the Company appropriately sets the ratio of compensation linked to medium- to long-term business performance and the ratio between cash compensation and compensation in the form of company stock (stock options and RS).

【Code 4-3-2 Roles and Responsibilities of the Board, Appointment and Dismissal of the CEO】

Recognizing that the appointment of the CEO is the most important strategic decision in the company, the Company's Board has established a process for appointing a qualified individual and spends sufficient time and resources in accordance with procedures that are objective, timely, and transparent.

Specifically, once every four to five years, we hold a "competition for the president's position" at the group subsidiaries. The competition takes about six months and involves a selection of capable individuals from within the company and sometimes from outside the company, who compete to demonstrate their abilities in accordance with five or so predetermined themes. Based on these processes, the Board will be involved in the selection of the appropriate person to serve as the CEO.

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