BUSINESS REPORT Fiscal Year ended March 31, 2016

Transcription

1 BUSINESS REPORT Fiscal Year ended March 31, 2016 I. Status of the Group (1) Review of Operations for the Fiscal Year 1) Progress of operations and results During the fiscal year under review, the Japanese economy held to a path of gradual recovery amid a scenario in the first half of the fiscal year where stronger corporate earnings, a more upbeat jobs environment and other such positive developments emerged against a backdrop of firming equities markets, a weakening yen and lower oil prices, and underpinned by various measures being taken by the government and the Bank of Japan. However, the situation remains unpredictable given prevailing uncertainties with respect to the economic outlook which became evident in the latter half amid materializing risk of an economic slowdown in China and emerging nations in conjunction with a drastically appreciating yen and stock price volatility since the beginning of In the consumer electrical appliance retail industry to which the Company belongs, demand to replace household necessities generated a strong and favorable market for certain products, yet durable consumer goods continued to suffer from a prolonged pullback in spending amid a situation of demand having been eroded by an earlier surge in sales fueled at the time by the Japanese government s ecopoints program for electrical appliances and a rush to buy products ahead of Japan s consumption tax hike. From a product perspective, even though results of television sales were favorable due to a trend of rising single unit prices amid moves toward larger screen sizes and growing demand for 4K televisions, performance for the full year was lackluster given sense that the trend of increasing unit prices ongoing since the beginning of the year has subsided and adverse effects of the consumption tax increase. Meanwhile, refrigerators, washing machines, microwave ovens and other cooking appliances, vacuum cleaners, hair and beauty appliances, and other white goods generated firm results. The sales environment for air conditioning units continued in an unstable manner with substantial fluctuations from season to season, such as a hot spell over the summer months, a warm winter after the third quarter, then heavy snowfalls and drops in temperature in the beginning of the year. Also, market conditions were weak for computers, digital cameras, mobile phones and other home information appliances in general. Against this backdrop in the electrical appliance market, the Group has been implementing various structural reforms over the last several years such as those involving Implementation of Personnel System Reform and Improvement and Reform of Store Efficiency. In addition, with the aim of providing better customer-oriented service leveraging strengths derived from operating one of Japan s largest network of stores, we have also been taking active steps to develop into a leading company in the Internet of Things (IoT) era. To that end, we have been promoting services that include: 1. lifestyle support services that provide peace of mind (services that involve keeping a watchful eye on elderly people, New The Anshin comprehensive warranties for home appliances and electronics, long term guarantees, etc.); 2. smart house services (YAMADA SXL HOME CO., LTD. and Yamada Wood House Co., Ltd.); 3. home renovation services (Housetec Inc.); 4. Yamada online shopping mall services (Yamada Mall and YAMADA WEB COM); 5. environmental solutions business ( outlet & reuse stores, CIC Co., Ltd., Inversenet Co., Ltd., Azuma Metal Co., Ltd.); 6. financing and credit card services (Yamada Financial Co., Ltd., loyalty point program membership services, services for corporate customers, etc.), and; proprietary merchandise development services (the Herb Relax series, Every Pad series, designer home appliances series, etc.). In the area of sales, we eliminated competition among our own stores by forging ahead with store closing on a large scale and made substantial gains in terms of store efficiency results. The latter was achieved by readjusting product mixes through renovations of stores and conversions of store formats, pursuing efforts to optimize inventories, and striving for optimal and maximum sales efficiencies by taking a systematic approach with respect to staffing. We have also been engaging in efforts that involve

2 developing proprietary IoT business, promoting various structural reforms, shifting from quantity to quality, and enhancing what we offer by going from physical products to intangible services. As a result, despite operating in a market for electrical appliances that has been lackluster partially due to the prolonged pullback in spending resulting from government policies and the consumption tax hike, we have achieved considerable year-on-year improvement in gross profit margin, and we have also attained positive results from our efforts to substantially reduce various selling, general and administrative expenses. Going forward, under a management framework consisting of three representative directors (as of April 1, 2016), the Yamada Denki Group will act as one of Japan s largest network and services IoT company as it continues to take on challenges that involve working to achieve further positive outcomes by developing and promoting new businesses, enhancing and forging ahead with various structural reforms, and fortifying our existing businesses. The Group aims to increase its social value, and develop together with society. To this end, we engage in ongoing CSR-oriented operations that are genuine, and continue to carry out CSR activities proactively. Details of the Group s CSR activities are continuously published in its CSR REPORT as well as Monthly CSR Activities, which are posted on the Company website ( Please note that some of these documents are published in Japanese only. As of the end of the fiscal year under review, we have 947 consolidated retail stores (comprising 637 stores directly managed by the Company, 161 stores managed by Best Denki Co., Ltd. and 149 stores operated by other consolidated subsidiaries), and a total of 12,087 retail stores overall with the inclusion of those managed by our subsidiaries and franchise stores. As a result of the above, consolidated net sales for the fiscal year under review amounted to 1,612,735 million, down 3.1% year on year, operating income totaled 58,158 million, up 192.0% year on year, ordinary income was 62,734 million, up 76.5% year on year, and profit attributable to owners of parent was 30,395 million, up 225.4% year on year. Investors should be aware that our net sales have decreased in comparison with the previous fiscal year due to extraordinary factors. For one, the sales figure for the prior fiscal year includes sales recorded for deliveries made on or after April 1, 2014 for certain orders received before the consumption tax increase surge in demand prevailing up to March 31, Also, the accounting period of the Company differs from that of its consolidated subsidiaries (on a nonconsolidated basis it is April 1 to the end of March in the following year, while on a consolidated subsidiary basis it is March 1 to the end of February in the following year), which also had a negative impact on year-on-year sales. Also, as a special factor, foreign exchange losses of 4,054 million were recorded owing to the sharp yen appreciation that has been occurring since January For reference, when adjusting ordinary income to exclude this special variable, the adjusted amount is 66,789 million, which is roughly the amount forecasted in the earnings forecasts. Items Sales of the corporate group by item Fiscal Year Previous Fiscal Year (April 1, 2014 to March 31, 2015) Current Fiscal Year (April 1, 2015 to March 31, 2016) (Millions of yen) Change (Decrease) Amount % Amount % Amount % Home electrical appliances/ home information appliances 1,439, ,392, (46,806) (3.3) Other products 225, , (4,828) (2.1) Total 1,664, ,612, (51,635) (3.1) Note: Consumption tax is not included. 2) Capital investment Capital investment during the fiscal year under review totaled 26,901 million and mainly included the following:

3 21,232 million for buildings and structures, and tools, furniture, and fixtures for Tecc Land Ageo and other new stores, etc., 455 million for land for business use, etc., and 5,213 million for guarantee deposits for Concept LABI TOKYO and others. 3) Capital procurement At a meeting of the Board of s held on May 7, 2015, the Company made a resolution to enter into an agreement with SoftBank Corp. (as of July 1, 2015, its corporate name was changed to SoftBank Group Corp.) on a capital and business alliance and to dispose of treasury stock through a private placement to SoftBank Corp., and received a payment of 22,760 million on May 25, ) Business transfers, absorption-type company split or incorporation-type company split N/A 5) Business transfers from other companies N/A 6) Succession of rights and obligations relating to other entities business as a result of absorptiontype merger or company split The Company executed an absorption-type merger with its wholly-owned subsidiary Kimuraya Select Co., Ltd. with an effective date of September 1, ) Acquisition or disposal of shares, other equities, or subscription rights to shares of other companies N/A (2) Trends in Operating Results and Assets Net sales (millions of yen) Ordinary income (millions of yen) Profit attributable to owners of parent (millions of yen) Basic earnings per share (yen) Total assets (millions of yen) Net assets (millions of yen) Fiscal 2012 Fiscal 2013 Fiscal 2014 Fiscal ,701,489 1,893,971 1,664,370 1,612,735 47,906 50,187 35,537 62,734 22,203 18,666 9,340 30, ,138,389 1,196,288 1,122,407 1,146, , , , ,722 Note: At the meeting of the Board of s held on August 12, 2013, the Company passed a resolution to conduct a ten-for-one stock split effective October 1, However, the Basic earnings per share amounts shown here were calculated on the assumption that the aforesaid stock split was conducted at the beginning of Fiscal (3) Important Parent Company and Subsidiaries 1) Relationship with the parent company N/A

4 2) Major subsidiaries Company Name Minami-Kyushu Yamada Denki Co., Ltd. Capital (Millions of yen) Ratio of Voting Rights (%) Okinawa Yamada Denki Co., Ltd Cosmos Berry s Co., Ltd Matsuya Denki Co., Ltd Seiden Co., Ltd Yamada Financial Co., Ltd Credit card business Kyushu Tecc Land Co., Ltd CIC Co., Ltd Principal Business Sale of home electrical appliances and home information appliances, etc. Sale of home electrical appliances and home information appliances, etc. Sale of home electrical appliances and home information appliances, etc. Sale of home electrical appliances and home information appliances, etc. Sale of home electrical appliances and home information appliances, etc. Sale of home electrical appliances and home information appliances, etc. Industrial waste processing consignment business Yamada Eco Solution Co., Ltd Product delivery and installation business Inversenet Co., Ltd Sale of used computers Project White Co., Ltd YAMADA SXL HOME CO., LTD. 9, Sale of home electrical appliances and home information appliances, etc. Contracting, design and construction for detached houses, and construction and sale of detached tract houses Housetec Inc Manufacture and sale of housing equipment BEST DENKI CO., LTD. 37, Yamada Denki (Shenyang) Commercial Co., Ltd. Yamada Denki (China) Investment Co., Ltd. Millions of U.S. dollars 66 Millions of U.S. dollars (50.0) Y s select Co., Ltd Notes: Sale of home electrical appliances and home information appliances, etc. Sale of home electrical appliances and home information appliances, etc Investment, wholesaling Sale of pharmaceuticals and daily necessities, etc. 1. The ratio of voting rights within parentheses represents the ratio of indirectly held voting rights. 2. Y s select Co., Ltd. was newly established as of July 1, 2015 through an incorporation-type split from Kimuraya Select Co., Ltd. 3. On September 1, 2015, Kimuraya Select Co., Ltd. merged with the Company through an absorption-type merger. (4) Issues the Group will be Addressing Looking ahead to the fiscal year ending March 31, 2017, although we expect a negative effect from financial market fluctuation, which has been observed in stock prices and exchange rates since January 2016, and also increased risk of economic slowdown in the emerging countries, notably China. We also expect a pause to financial market adjustments. Accordingly, the future outlook continues to be unclear. Nevertheless, in Japan, factors such as increased consumer spending, which is a result of personal incomes improving under a more positive employment environment, lower resource prices, and a firm increase in capital expenditure indicate that corporate earnings will continue to improve. In addition, we also expect a lift in markets that benefit from events such as the Rio de Janeiro Olympics that will be held over the summer and a surge in demand ahead of the consumption tax hike in April 2017 is also expected, albeit limited. Therefore, overall, we expect economic activity in Japan to continue on a track of gentle recovery. The consumer electrical appliance retail market, in which the Group belongs, will enjoy underlying support from the aforementioned firm economic activity, and it is expected to perform steadily owing to the increased demand for visual-related products accompanying the Olympics, a firm demand for upgrading white

5 goods, and a (limited) surge in demand ahead of the price hike in consumption tax. Operating as a consumer electrical appliance retailer under this market environment, we will continue to implement structural reforms and initiatives with medium- to long-term focuses. While working to broaden and deepen our business range, we will work to shift from quantity to quality by developing new businesses designed for improved customer satisfaction via the transition from products to services through original adoption of IoT utilizing the strengths of Japan s largest-scale store network and service network; by continuing to promote various structural reforms; and by reinforcing existing businesses. In this way, we will raise profitability by improving the gross profit margin and reducing selling, general and administrative expenses, and, at the same time, boost corporate value. As a leading company in the consumer electrical appliance retail industry, we will aim to develop relationships of trust with a variety of stakeholders. We will also continue to promote CSR-oriented operations in which we leverage Group synergies, increase our social value, and develop together with society. (5) Principal Business (As of March 31, 2016) The Group mainly operates an expansive store network of large-scale home electrical appliance specialty stores that primarily handle home electrical appliances and digital-related products, and has business locations throughout Japan. (6) Principal Offices and Plants (As of March 31, 2016) 1) Yamada Denki Co., Ltd. Hokkaido 34 Saitama 33 Shizuoka 13 Tottori 5 Saga 7 Aomori 10 Chiba 33 Gifu 10 Shimane 5 Oita 5 Akita 11 Tokyo 39 Aichi 29 Okayama 14 Nagasaki 5 Iwate 10 Kanagawa 34 Shiga 6 Hiroshima 14 Kumamoto 4 Miyagi 18 Niigata 19 Osaka 17 Yamaguchi 13 Miyazaki 13 Yamagata 11 Toyama 13 Kyoto 8 Ehime 8 Kagoshima 4 Fukushima 14 Ishikawa 9 Hyogo 19 Kochi 9 Tochigi 16 Fukui 6 Mie 11 Kagawa 8 Ibaraki 14 Nagano 19 Nara 6 Tokushima 5 Gunma 19 Yamanashi 5 Wakayama 5 Fukuoka 27 Total 637 2) Minami-Kyushu Yamada Denki Co., Ltd. Kagoshima 4 Total 4 3) Okinawa Yamada Denki Co., Ltd. Okinawa 7 Total 7 4) Matsuya Denki Co., Ltd. Hokkaido 9 Chiba 4 Osaka 20 Kagawa 3 Iwate 1 Tokyo 1 Kyoto 6 Tokushima 3 Yamagata 1 Niigata 1 Hyogo 5 Kochi 1 Fukushima 1 Aichi 15 Nara 2 Kumamoto 4 Saitama 1 Shiga 2 Okayama 5 Kagoshima 1 Total 86 5) Seiden Co., Ltd. Hyogo 7 Total 7 6) Kyushu Tecc Land Co., Ltd. Fukuoka 5 Oita 5 Kumamoto 7 Saga 1 Nagasaki 1 Kagoshima 11 Total 30 7) Project White Co., Ltd. Hokkaido 1 Tokyo 6 Aichi 1 Fukuoka 1 Total 9

6 8) Y s Select Co., Ltd. Tokyo 5 Total 5 9) Best Denki Co., Ltd. (including consolidated subsidiaries) Hokkaido 6 Kanagawa 5 Okayama 1 Saga 9 Okinawa 9 Iwate 1 Nagano 1 Yamaguchi 4 Oita 10 Singapore 11 Saitama 3 Shizuoka 1 Kagawa 1 Nagasaki 12 Malaysia 7 Chiba 2 Hyogo 1 Tokushima 1 Kumamoto 19 Tokyo 1 Shimane 3 Fukuoka 45 Miyazaki 8 Total ) Yamada Denki (Shenyang) Commercial Co., Ltd. China 1 Total 1 (7) Employees (As of March 31, 2016) 1) Employees of the corporate group Number of Employees Change from the Previous Fiscal Year 19,183 (10,219) Decrease of 1,222 (Decrease of 485) Note: The number of employees represents the number of currently working employees, and the average annual number of part-time and temporary employees is shown separately in parentheses. 2) Employees of the Company Number of Employees Change from the Previous Fiscal Year Average Age Average Years of Service 10,725 (8,487) Decrease of 170 (Decrease of 448) Note: The number of employees represents the number of currently working employees, and the average annual number of part-time and temporary employees is shown separately in parentheses. (8) Principal Creditor (As of March 31, 2016) Creditor Amount of Loan Payable (Millions of yen) Mizuho Bank, Ltd. 88,137 Sumitomo Mitsui Banking Corporation 49,626 The Bank of Tokyo-Mitsubishi UFJ, Ltd. 45,504 THE TOWA BANK, LTD. 12,670 The Gunma Bank, Ltd. 12,580 THE HACHIJUNI BANK, LTD. 12,530 The Hokuetsu Bank, Ltd. 4,210 THE NISHI-NIPPON CITY BANK, LTD. 4,000 Sumitomo Mitsui Trust Bank, Limited 1,184 (9) Other Significant Matters concerning Current Status of the Corporate Group N/A

7 II. Status of the Company (1) Status of Shares (As of March 31, 2016) 1) Total number of authorized shares 2,000,000,000 shares 2) Total number of issued shares 966,489,740 shares 3) Number of shareholders 75,936 persons 4) Major shareholders (top 10) Name of Shareholders Number of Shares (Thousand shares) Shareholding Ratio (%) Tecc Planning Co., Ltd. 65, Goldman Sachs International (Standing proxy: Goldman Sachs Japan Co., Ltd.) 56, Japan Trustee Services Bank, Ltd. (Trust account) 50, SoftBank Group Corp. 48, Royal Bank of Canada Trust Company (Cayman) Limited (Standing proxy: Tachibana Securities Co. Ltd.) BNY GCM CLIENT ACCOUNT JPRD ISG (FE-AC) (Standing proxy: The Bank of Tokyo-Mitsubishi UFJ, Ltd.) 33, , The Master Trust Bank of Japan, Ltd. (Trust account) 28, Noboru Yamada 24, The Gunma Bank, Ltd. 17, Japan Trustee Services Bank, Ltd. (Trust account 9) 16, Notes: 1. The Company holds 164,133 thousand shares of treasury stock and is excluded from the above list of major shareholders. 2. Shareholding ratio is calculated excluding treasury stock. (2) Status of Stock Acquisition Rights 1) Stock acquisition rights at the end of the fiscal year Name Stock acquisition rights for Fiscal 2013 (issued on July 12, 2013) Stock acquisition rights for Fiscal 2014 (issued on July 14, 2014) Stock acquisition rights for Fiscal 2015 (issued on July 13, 2015) Number of stock acquisition rights 4,784 units 4,607 units 6,289 units Type and number of shares to be issued upon exercise of stock acquisition rights 478,400 shares of common stock (100 shares per stock acquisition right) 460,700 shares of common stock (100 shares per stock acquisition right) 628,900 shares of common stock (100 shares per stock acquisition right) Subscription amount payable for the granted stock acquisition rights No payment of cash in exchange for stock acquisition rights shall be required No payment of cash in exchange for stock acquisition rights shall be required No payment of cash in exchange for stock acquisition rights shall be required Amount of property to be contributed upon exercise of stock acquisition rights 100 yen per stock acquisition right (1 yen per share) 100 yen per stock acquisition right (1 yen per share) 100 yen per stock acquisition right (1 yen per share) Exercise period of stock acquisition rights From July 13, 2013 to July 12, 2043 From July 15, 2014 to July 14, 2044 From July 14, 2015 to July 13, 2045 Notes: 1. The conditions for exercise of stock acquisition rights indicated above are as follows: If the situation arises within the exercise period of stock acquisition rights stated above where the Stock Acquisition Right Holder does not hold any position with the Company or a subsidiary of the Company as a director, audit & supervisory board member, executive officer, or employee, the stock acquisition rights can only be exercised in a lump-sum during a period of 10 days beginning on the day following the day of said loss of position (if the 10th day falls on a holiday, the following business day will be deemed the final valid day). 2. The Stock Acquisition Right Holder shall not be required to pay in money as the remuneration receivable from the Company shall be offset against above amount payable for subscription.

8 2) Stock acquisition rights granted to as compensation for the duties performed and held by officers of the Company at the end of the fiscal year Name Stock acquisition rights for Fiscal 2013 (issued on July 12, 2013) Stock acquisition rights for Fiscal 2014 (issued on July 14, 2014) Stock acquisition rights for Fiscal 2015 (issued on July 13, 2015) Status of Stock Acquisition Rights Held by Officers of the Company (excluding External ) Number of stock acquisition rights 4,430 units Number of holders 13 Number of stock acquisition rights 4,467 units Number of holders 14 Number of stock acquisition rights 6,289 units Number of holders 14 External Number of stock acquisition rights Number of holders Number of stock acquisition rights Number of holders Number of stock acquisition rights Number of holders Number of stock acquisition rights 286 units Number of holders 2 (Note) Number of stock acquisition rights 140 units Number of holders 1 (Note) Number of stock acquisition rights Number of holders Note: These stock acquisition rights were issued during their term of office as s. 3) Stock acquisition rights granted to employees, etc. as compensation for the duties performed during the fiscal year N/A 4) Other status of stock acquisition rights Stock acquisition rights attached to euro yen zero coupon convertible bonds subject to call due 2019 issued in accordance with a resolution at a meeting of the Board of s held on May 27, 2014 Euro yen zero coupon convertible bonds subject to call due 2019 (issued on June 12, 2014) Number of stock acquisition rights (Unit) 10,000 Type of shares to be issued upon exercise Common stock of stock acquisition rights Number of shares to be issued upon exercise of stock acquisition rights Issue price of stock acquisition rights Exercise period of stock acquisition rights Share issue price and additional paid-in capital per share in the event of issuance of shares upon exercise of stock acquisition rights (Yen) Conditions for exercise of stock acquisition rights Matters regarding transfer of stock acquisition rights Outstanding balance of bond with Stock acquisition rights (Millions of yen) The greatest integer obtained by dividing the total principal amount of the bonds corresponding to exercise requests by the conversion price Without contribution From June 26, 2014 to June 14, 2019 Issue price: 538 Additional paid-in capital per share: 269 Until March 28, 2019, the holder of the bond with stock acquisition rights may exercise the rights during the period from the first day of the following fiscal quarter to the last day of such fiscal quarter, only when the closing price of the common stock of the Company for any 20 consecutive trading days ending on the last trading day of a fiscal quarter exceeds 130% of the conversion price applicable on such last trading day. Partial exercise of stock acquisition rights is not permitted. As the stock acquisition rights are attached to a convertible bond with stock acquisition rights, they cannot be separately transferred from the bond. 100,316

9 (3) Status of the Officers of the Company 1) Status of s and s (As of March 31, 2016) Position in the Company Responsibilities Name Representative, President Representative, Executive Vice-President CEO COO Managing Executive Officer & General Manager, General Affairs Division Senior Managing Executive Officer & General Counsel, New Business Development Office Senior Managing Executive Officer & General Counsel, Corporate Planning Office, SxL Management Office and CSR Promotion Office Managing Executive Officer, General Manager, Service Division & General Manager, Merchandise Sales Department Noboru Yamada Tadao Ichimiya Mitsumasa Kuwano Hiroyasu Iizuka Jun Okamoto Masaaki Kurihara Senior Executive Officer & General Counsel, Legal Office Haruhiko Higuchi Senior Executive Officer & General Manager, Corporate Business Tatsuo Kobayashi Department Senior Executive Officer & Head of LABI Shinjuku Higashiguchikan Shinichi Samata Senior Executive Officer Deputy General Manager, Service Division Akira Fukui & General Manager, Operation Department (standing) (standing) Senior Executive Officer & General Manager, Development Division Senior Executive Officer & General Manager, Advertisement Promotion Division Senior Executive Officer, General Manager, Local Administration and Financial Division & General Counsel, Affiliates Office Senior Executive Officer & General Manager, Sales and Marketing Division Shigeaki Yamada Masaru Yamada Kenichi Koyano Shouji Orita Tsukasa Tokuhira Hiroyuki Fukuyama Makoto Igarashi Ginji Karasawa Yutaka Nakamura Masamitsu Takahashi Notes: 1. s Tsukasa Tokuhira and Hiroyuki Fukuyama are External s. 2. s Yutaka Nakamura and Masamitsu Takahashi are External Audit & Supervisory Board s. 3. The Company has submitted notification to the Tokyo Stock Exchange that External s and External Audit & Supervisory Board s have been designated as independent officers as provided for by the aforementioned exchange. 4. Significant concurrent positions held by s and s at other entities during the fiscal year under review are as follows: Position Representative Representative Name Other Entities at Which Significant Concurrent Positions Are Held Concurrent Position Noboru Yamada Tecc Planning Co., Ltd. Representative Yamada Wood House Co., Ltd. Representative Tadao Ichimiya Tecc Planning Co., Ltd. Remarks

10 Position Name Other Entities at Which Significant Concurrent Positions Are Held Mitsumasa Kuwano CIC Co., Ltd. Y-Just Co., Ltd. Azuma Metal Co., Ltd. Hiroyasu Iizuka Minami-Kyushu Yamada Denki Co., Ltd. Okinawa Yamada Denki Co., Ltd. Inversenet Co., Ltd. Housetec Inc. Concurrent Position Jun Okamoto Project White Co., Ltd. CIC Co., Ltd. Y s select Co., Ltd. Best Denki Co., Ltd. Yamada Wood House Co., Ltd. Azuma Metal Co., Ltd. Yamada Eco Solution Co., Ltd. Housetec Inc. Masaaki Kurihara Project White Co., Ltd. Minami-Kyushu Yamada Denki Co., Ltd. Yamada Eco Solution Co., Ltd. Cosmos Berry s Co., Ltd. CIC Co., Ltd. Inversenet Co., Ltd. Haruhiko Higuchi Tecc Planning Co., Ltd. Akira Fukui Yamada Eco Solution Co., Ltd. TESS Co., Ltd. Gunma Sogo-setsubi Co., Ltd. Best Denki Co., Ltd. Shigeaki Yamada Yamada Wood House Co., Ltd. Gunma Sogo-setsubi Co., Ltd. Tecc Planning Co., Ltd. Masaru Yamada Puinpul Co., Ltd. Representative Tecc Planning Co., Ltd. Kenichi Koyano Housetec Inc. YAMADA SXL HOME CO., LTD. Best Denki Co., Ltd. CIC Co., Ltd. Inversenet Co., Ltd. Cosmos Berry s Co., Ltd. TESS Co., Ltd. Yamada Wood House Co., Ltd. Azuma Metal Co., Ltd. Y s select Co., Ltd. Representative Shouji Orita Kyushu Tecc Land Co., Ltd. Representative Okinawa Yamada Denki Co., Representative Ltd. Minami-Kyushu Yamada Denki Co., Ltd. Representative Matsuya Denki Co., Ltd. Seiden Co., Ltd. Best Denki Co., Ltd. Remarks

11 Position Name Other Entities at Which Significant Concurrent Positions Are Held Concurrent Position Tsukasa Tokuhira Cross Co., Ltd. Representative Fic Limited Hiroyuki Fukuyama Hiroyuki Fukuyama Professional Engineer Office Audit & Supervisory Board Representative Representative Makoto Igarashi Okinawa Yamada Denki Co., Ltd. Minami-Kyushu Yamada Denki Co., Ltd. CIC Co., Ltd. Yamada Eco Solution Co., Ltd. Inversenet Co., Ltd. Cosmos Berry s Co., Ltd. Matsuya Denki Co., Ltd. Seiden Co., Ltd. Yamada Financial Co., Ltd. Kyushu Tecc Land Co., Ltd. Y-Just Co., Ltd. TESS Co., Ltd. Gunma Sogo-setsubi Co., Ltd. Y s select Co., Ltd. Project White Co., Ltd. Housetec Inc. Yamada Wood House Co., Ltd. YAMADA SXL HOME CO., LTD. Best Denki Co., Ltd. Azuma Metal Co., Ltd. Tecc Planning Co., Ltd. Remarks

12 Position Audit & Supervisory Board Audit & Supervisory Board Audit & Supervisory Board Other Entities at Which Significant Name Concurrent Position Concurrent Positions Are Held Ginji Karasawa Okinawa Yamada Denki Co., Ltd. Minami-Kyushu Yamada Denki Co., Ltd. CIC Co., Ltd. Yamada Eco Solution Co., Ltd. Inversenet Co., Ltd. Cosmos Berry s Co., Ltd. Matsuya Denki Co., Ltd. Seiden Co., Ltd. Yamada Financial Co., Ltd. Kyushu Tecc Land Co., Ltd. Y-Just Co., Ltd. TESS Co., Ltd. Y s select Co., Ltd. Project White Co., Ltd. Housetec Inc. Yamada Wood House Co., Ltd. Azuma Metal Co., Ltd. Yutaka Nakamura JIN CO., LTD. Masamitsu Takahashi Hikari Certified Public Tax Accountants Corporation Takahashi Tax & Management Co., Ltd. Representative Partner Representative Remarks 5. External Masamitsu Takahashi has a qualifications of the certified public accountant and small and medium enterprise management consultant, and has a considerable degree of knowledge on finance and accounting. 2) s retired during the fiscal year under review Name Date of Retirement Reason for Retirement Positions and Responsibilities in the Company and Significant Concurrent Positions at the Time of Retirement Ginji Karasawa June 26, 2015 Resignation

13 3) Total amount of remuneration to s and s Category Number of Recipients Amount of Remuneration, Etc. (Millions of yen) (External ) (2) (8) 4 46 (External ) (2) (10) Total Notes: 1. The table above includes 1 who retired at the conclusion of the 38th Ordinary General Meeting of Shareholders held on June 26, The amount of remuneration, etc. of s does not include employee salaries paid to persons who are concurrently s and employees. 3. At the 31st Ordinary General Meeting of Shareholders held on June 27, 2008, shareholders passed a resolution to set the maximum amount of s remuneration at 750 million or less per annum (providing that this amount does not include salary paid to a for his service in a concurrent employee role). In addition, at the 36th Ordinary General Meeting of Shareholders held on June 27, 2013, shareholders passed a resolution to set the amount of stock option remuneration at 300 million per annum in a separate framework. 4. At the 29th Ordinary General Meeting of Shareholders held on June 29, 2006, shareholders passed a resolution to set the maximum amount of s remuneration at 68 million or less per annum. 5. The above amounts of remuneration include the following: Provision for directors bonuses of 112 million for the fiscal year under review (14 s) Remuneration relating to stock compensation-type stock options of 224 million for the fiscal year under review (15 s) 4) External officers a. Significant concurrent positions at other entities and relationships between the Company and such other entities Tsukasa Tokuhira serves as Representative of Cross Co., Ltd. and Representative of Fic Limited. The Company has a trading relationship with Cross Co., Ltd. that includes the provision of outsourced operations. However, because the scale of this relationship is insubstantial and accounts for less than 0.001% of the Company s consolidated net sales, the Company believes that it is not significant enough to cause a conflict of interests. There is no special relationship between the Company and Fic Limited. Hiroyuki Fukuyama is Representative of Hiroyuki Fukuyama Professional Engineer Office. There is no special relationship between the Company and the entity at which he holds the significant concurrent position. Yutaka Nakamura serves as of JIN CO., LTD. and the Company has a trading relationship with JIN CO., LTD. that includes the product purchasing. However, because the scale of this relationship is insubstantial and accounts for less than 0.04% of the Company s consolidated net sales, the Company believes that it is not significant enough to cause a conflict of interests. Masamitsu Takahashi is Representative Partner of Hikari Certified Public Tax Accountants Corporation and Representative of Takahashi Tax & Management Co., Ltd. There is no special relationship between the Company and the entities at which he holds the significant concurrent positions.

14 b. Major activities during the fiscal year under review Attendance at the meetings of the Board of s and the Meetings of the Board of s (Held 21 times) Number of Attendance Attendance Rate Meetings of the Audit & Supervisory Board (Held 13 times) Number of Attendance Attendance Rate Tsukasa Tokuhira, 95% % Hiroyuki Fukuyama, 94% % Yutaka Nakamura, 95% 100% Masamitsu Takahashi, 95% 100% Note: As Hiroyuki Fukuyama has been appointed from the 38th Ordinary General Meeting of Shareholders held on June 26, 2015, the total number of attendance is 16. Expressions of opinions at meetings of the Board of s and the Audit & Supervisory Board 1. Tsukasa Tokuhira provides valuable opinions and suggestions to management of the Company based on his abundant experience as a long-standing leader in the distribution industry. 2. Hiroyuki Fukuyama has a wealth of experience and wide knowledge as a company executive. He provides valuable opinions and suggestions to management of the Company from a perspective of CSR, such as environmental responses centered on manufacturing and regional contribution measures. 3. Yutaka Nakamura comments mainly from a perspective of a company executive with wealth of experience. 4. Masamitsu Takahashi provides advice and suggestions to ensure adequacy and appropriateness of decision-making by the Board of s, primarily by giving opinions from a perspective as a tax accountant. He also provides necessary comments whenever appropriate with regard to the accounting system and internal audit of the Company. c. Summary of details of limited responsibility contract N/A (4) Independent Accountants 1) Name KPMG AZSA LLC 2) Amount of remuneration, etc. Amount of remuneration for services stipulated in Article 2, Paragraph 1 of the Certified Public Accountants Act to be paid by the Company to the independent accountants Total amount of cash and other economic benefits to be paid by the Company and its subsidiaries to the independent accountants (Millions of yen) Amount of payment Notes: 1. In the audit contract between the Company and its independent accountants, remuneration paid for audits under the Companies Act and audits under the Financial Instruments and Exchange Act are not clearly distinguished and cannot be practically separated. Accordingly, the amount in 2) above is the aggregate amount. 2. After having performed the necessary verification as to the appropriateness of matters such as the content of the independent accountants audit plan, the status of performance of financial audit, and the basis for the calculation of the estimated remuneration, the has decided to consent to the amount of remuneration, etc. to be paid to the independent accountants. 3. Some of consolidated subsidiaries of the Company are audited by independent accountants firms other than the independent accountants of the Company.

15 3) Details of non-audit services N/A 4) Policy on dismissal or non-reappointment of independent accountants If the judges that action is necessary, such as in cases where the independent accountants execution of its duties is impeded, the will determine the contents of a proposal to be submitted to the General Meeting of Shareholders regarding the dismissal or non-reappointment of the independent accountants. In addition, if the items stipulated in the matters set forth in items of Article 340, Paragraph 1 of the Companies Act are deemed applicable to the independent accountants, the independent accountants will be dismissed based on the agreement of all s. If this occurs, an selected by the will report the fact of the independent accountants dismissal and the reason for the dismissal at the first General Meeting of Shareholders held after the dismissal. 5) Outline of limited liability agreement N/A

16 (5) System for Ensuring the Properness of Business Operations and Implementation of That System The following is a summary of the systems to ensure that the directors perform their duties in compliance with the applicable laws and the Company s Articles of Incorporation and to ensure that all other operations by the Company are carried out in a proper manner. System for ensuring the properness of business operations 1. System for ensuring that directors and employees perform their duties in compliance with the applicable laws and regulations and the Articles of Incorporation a. Compliance Committee s in charge of compliance shall organize the Compliance Committee, which is involved in formulating corporate ethics policies and basic policy and standards on compliance with laws and regulations (compliance provisions), and establish codes of conduct on that basis requiring that directors and employees act in accordance with laws and regulations, the Articles of Incorporation and the Company s employment rules and other internal rules. Education to directors and employees shall be provided to ensure thorough implementation in this regard led by the Compliance Committee. These initiatives are reported on a regular basis to the Board of s and the. b. Establishment of the CSR Committee and consultation meetings with outside experts on CSRfocused management The Company shall establish the CSR Committee, in full recognition of the significance of corporate social responsibility, as a means of putting CSR-focused management into practice as part of the management policy. The CSR Committee shall pursue initiatives based on the Code of CSR Ethics in areas that include compliance, labor, customer satisfaction, local communities, and environmental issues. In order to draw on opinions from outside sources, the Company shall also establish consultation meetings with outside experts on CSR-focused management. The meeting shall act as a forum for regular reporting on the progress of initiatives and opinion exchange. c Whistle-blowing system Upon becoming aware of incidents involving the performance of duties by the Company s directors and employees that are questionable in terms of laws and regulations, individuals regardless of their position shall report such matters directly to the organizational contact set up to receive internal reports, pursuant to the Regulations on Operation of Whistle-Blowing System. The Compliance Committee shall endeavor to make the existence of the whistle-blowing system known. d Internal Audit Office The Internal Audit Office shall operate independently of the Company s operating divisions. It shall perform internal audits on legal compliance of individual sectors and audits encompassing areas such as, information security management systems (ISMS), information systems, information security and personal information protection. It shall also audit work processes and other operations of individual sectors, and take steps to uncover and prevent improprieties and to improve processes. 2. System for storage and control of information concerning the directors performance of their duties a. Manager in charge of information storage and management With respect to the storage and management of information pertaining to the directors performance of duties, the Company shall store the documents set forth below (including electro and magnetic records thereof) along with related materials under the responsibility of the director in charge of general affairs and in accordance with the Company s Regulations on Document Management and Handling. i. Minutes of General Meetings of Shareholders ii. Minutes of meetings of the Board of s iii. Financial statements iv. Internal circulars for managerial decision (ringi-sho) v. Minutes of meetings of respective committees vi. Documents otherwise designated in the Company s Regulations on Document Management and Handling b Amendments to document handling regulations Approval of the Board of s shall be obtained when amending the Regulations on Document Management and Handling. c The Company shall develop regulations related to protection of personal information and management of trade secrets, and store and manage personal information and important trade

17 secrets in an appropriate and safe manner. 3. Regulations on risk of loss and other systems a. Risk Management Regulations The director in charge of risk management shall organize the Risk Management Committee and formulate the Risk Management Regulations. Accordingly, the committee shall categorize risks in the regulations and establish specific risk management systems. b. Crisis management system in the event of disaster The director in charge of risk management shall prepare a disaster response manual and develop crisis management system in accordance with the manual. The director in charge of risk management shall endeavor to make details of the manual known and provide education regarding disaster response. 4. System to ensure that directors perform their duties efficiently When making decisions on allocating duties of directors and conferring segregations of duties and authority of individual sectors, the Board of s (or the representative directors) shall be careful not to make decisions that would result in bloated back-office operations, overlapping administrative sectors, intertwined areas of authority or would otherwise significantly impede efficiency. 5 System for ensuring the properness of business operations of the Group consisting of the Company, its parent company and its subsidiaries a The Company shall establish an office of affiliate management, and accordingly create a system for overseeing the management and performance of subsidiaries and ensuring the properness of such business operations. b The Company s subsidiaries shall execute their business operations in accordance with basic affiliation agreements and internal regulations of the respective companies, and such agreements and regulations shall be reviewed as needed. c To achieve optimal performance and budget management of its subsidiaries, the Company shall hold monthly Group company review committee meetings for managing subsidiaries overall performance and budgets on the basis of medium-term business plans and annual budgets, and furthermore hold weekly Group company meetings with its principal subsidiaries. d When deemed necessary, the Internal Audit Office may conduct internal audits related to business operations of subsidiaries. 6.System for reporting to the Company on matters pertaining to performance of duties by subsidiaries directors, etc. a The Company shall stipulate the procedures and content of reporting to the Company from subsidiaries in basic affiliation agreements and provide appropriate guidance and advice on matters reported, while respecting the autonomy of subsidiary management. b The Company shall hold monthly Group company briefing sessions where it receives reports on the status of subsidiary management and financial position to ensure the properness of subsidiary business operations. 7.Regulations on management of risk of loss of subsidiaries and other systems a The Company shall make its basic risk management guidelines thoroughly known to its subsidiaries in accordance with the basic affiliation agreements. b The Company shall receive weekly risk management status reports from all of its subsidiaries, by receiving checklists for monitoring compliance. c The Company s principal subsidiaries shall establish basic policies on risk management. d In the event that the office of affiliate management receives a report on risk of loss from a subsidiary, it shall investigate the relevant facts in the case and report the matter to the Board of s and the. 8.System for ensuring that subsidiaries directors, etc. perform their duties efficiently a The Company s Board of s shall formulate medium-term business plans, medium- to longterm management strategies and other such documents in which subsidiaries are involved, and coordinate with subsidiaries in establishing key management goals based on such plans and strategies, and making progress in that regard. b The Company shall stipulate procedures in its basic affiliation agreements with respect to individual matters for approval involving its subsidiaries, and take steps to streamline decision-making in that

18 regard. 9.System for ensuring that subsidiaries directors, etc. and employees perform their duties in compliance with the applicable laws and regulations and the Articles of Incorporation a The Company shall verify the status of subsidiaries operations using weekly checklists for monitoring compliance, and report such outcomes to the Compliance Committee as necessary. b The Company s whistle-blowing system shall also be used by its subsidiaries to prevent violations of laws and regulations and the Articles of Incorporation. The Company shall receive reports regarding the status of any disciplinary action taken on the basis of violations of laws and regulations or the Articles of Incorporation. c The Company may assign its directors, members and employees to concurrently serve as audit & supervisory board members of a subsidiary, thereby coordinating with audit & supervisory board members of the subsidiary in performing legal compliance audits of duties performed by the subsidiary s directors and employees. 10.System regarding employees to assist duties of members when the members request to assign such employees, and matters regarding the independence of such employees from the directors a Assigning an employee to act as an audit assistant When an member requests directors that an employee be assigned as an audit assistant to assist in his or her duties, the directors shall make the necessary organizational changes and personnel rotations upon consulting with the member. b Duties of an audit assistant Audit assistants shall be formally posted as assistant to member and assist with duties of members and operations as instructed and ordered. c Independence of an audit assistant i. An audit assistant shall work under the instructions and orders of an member, and as such is not subject to the instructions or orders of directors or any person positioned as his or her superior or the like in the organization unit to which the audit assistant belongs. ii. In performing their tasks, audit assistants may gather all information necessary for the audit. iii. Consent of the relevant member must be obtained for matters involving personnel changes (this includes consent for the transfer destination in case of personnel transfer), personnel evaluation and disciplinary action of an audit assistant. 11.Matters regarding ensuring effectiveness of members instructions to employees to assist them in their duties a Supervisory authority members may instruct employees as necessary for conducting audit work so that the employees will assist their duties. b Cooperative framework When such an employee concurrently serves as an employee of another department, priority must be given to the employee s duties pertaining to the member. Moreover, superiors of the other department with which the employee concurrently serves, and directors, must provide support as necessary upon request with respect to performance of such duties. 12.System for directors and employees to report to members and the system concerning other reports to members a s obligation to report A director must promptly report to an member with respect to any discovery of an incident where work performed by another director or an employee is in violation of laws and regulations, or threatens to cause significant damage to the Company. b Employees right to report An employee may report to an member with respect to any discovery of an incident where work performed by a director or another employee is in violation of laws and regulations, or threatens to cause significant damage to the Company. c Methods of reporting Methods of reporting shall be determined through mutual consultation between directors and the.

19 d Internal reporting The organizational contact set up to receive internal reports shall report matters involving the status of internal reporting to an member, pursuant to the Regulations on Operation of Whistle-Blowing System. 13.System for reporting to members by the following in subsidiaries: directors, accounting advisors, audit & supervisory board members, executive officers, executive members, persons executing duties set forth in Article 598, Paragraph 1 of the Companies Act, persons equivalent to such persons, and employees, or persons who receive reports from the foregoing persons a s and employees of a subsidiary shall immediately report the Company s office of affiliate management if they discover an incident that significantly damages the subsidiary or threatens to do so, or otherwise if they discover a material incident involving violation of laws and regulations, the articles of incorporation or internal regulations within the subsidiary. b With respect to matters involving reports received from directors of subsidiaries, any matters that the Company s office of affiliate management is to report to members of the Company shall be those determined through mutual consultation between the Company s officers in charge of subsidiaries and members. 14.System for ensuring that persons who have reported matters are not treated disadvantageously on the grounds of their reporting (Whistleblower protection) Persons who have reported matters to an member shall not be treated disadvantageously in any way on the grounds of their reporting as set forth in the preceding paragraphs. 15.Matters regarding policies pertaining to procedures for prepayment or reimbursement of expenses arising with respect to performance of an member s duties, or otherwise processing of expenses or debt obligations arising with respect to performance of such duties a Presentation of budget The shall present a preliminary budget to the Company with respect to expenses deemed necessary in performing duties. b Claims for expenses, etc. s may not reject the hereinafter listed claims made by an member, etc. with respect to performance of his or her duties, unless it has been demonstrated that an expense or debt obligation pertaining to the claim is unnecessary with respect to performance of the member s duties. i. Claim for prepayment of expenses ii. Claim for reimbursement of expenses already paid and interest on such amounts accrued after the date of payment iii. Claim for making repayment to a person to whom a debt obligation is owed (or provision of reasonable guarantee of such amount in cases where the repayment due date of the obligation has not yet arrived). 16.System for ensuring that members perform audits effectively members are provided preliminary explanations with respect to annual plans to be implemented by the Internal Audit Office, and may ask for revisions to such plans and make other such requests. Moreover, members may be appropriately provided reports regarding the status of internal audit implementation, and may call for performance of additional audits, improvement of business operations and other such requests, when deemed necessary.