Creating New Values for Local Communities

2016 Annual Report
Fiscal Year Ended March 31, 2016

Valor Holdings Co.,Ltd.

Our Journey in Creating Corporate Values

We have been offering new values for local communities
through multi-format retailing and business process integration.
Corporate Philosophy

The Valor Group has defined its philosophy, “Creation, Advance & Challenge” in mission statements.
Shared with all the employees since 1958, they have been considered as guiding principles in management.
Mission Statements

All the employees of the Valor Group should be aware of its social
responsibilities for advancement of local communities andculture. To fulfill them, we perform our duties sincerely; setchallenging goals in the spirit of the philosophy “Creation,
Advance & Challenge”; and put together our wisdom and power.
There is only one truth, “Pursuing prosperity is good”.

Corp

orat

ue In
e Va litiatives

1995–
Rolling out of Multi-format Retailing andEstablishment of Distribution Network

1958–
Startup Supermarket and Subsidiaries of
Manufacturing, Wholesale & Logistics Businesses

While we expanded the scale of supermarket business, we built thebases for multi-format retailing. We merged with Fujiya Co.,Ltd., ahome improvement center company and established AXTOS
Co.,Ltd. and spun off a sports club business. We also established a
distribution network in Hokuriku region in response to expanding
In 1958, we established Shufu-no-Mise Co.,Ltd. and opened the firstsupermarket in Ena-shi, Gifu (changed the company name to Valor
Co.,Ltd. in 1974). We also established Chubu Yakuhin Co.,Ltd., adrugstore subsidiary, Chubu Foods Co.,Ltd., a prepared food
manufacturing subsidiary and started a materials wholesale businessfor stores by Chubu Ryutu Co.,Ltd. We entered into a logistics
business by Chubu Kosan Co., Ltd., a logistics subsidiary and in
1989, established the first distribution center in Tajimi-shi, Gifu.

business areas.

P10 —11P12 —13

FY2010-2014 Strategic Plans

FY2015-2017 Strategic Plans
History

P8 — 9Growth & Expansion

Frontline Performance
Development

The “Three Gears” Strategy

Business Process
Integration

P6 — 7Long
Multiformat
Retailing

-t

alue
erm V

C re ation

Business
Process
Integration
Local
Communities

Excellence in ChainStore Management
Systems

2015–
Further Optimization ofBusiness Processes

2005–
Expansion of Supermarket Business andIntegration of Business Processes

In October 2015, we made a transition to a holding company topromote growth of business companies and improve corporate
governance.

In the supermarket business, we expanded our scale throughorganic growth and M&As. The major companies acquired are as
follows: Tachiya Co.,Ltd., Youth Co., Ltd. and Sun-Friend Co.,Ltd.
(currently Shokusenkan-Taiyo Co.,Ltd.). We also integrated businessprocesses between manufacturing and retailing by establishingsourcing subsidiaries, production bases and distribution centers.

CONTENTS
History

Our Journey in Creating Corporate Values ………………………………… 1
11-year Summary of Financial Results……………………………………… 2
VisionMessage from CEO ………………………………………………………… 4
Business Model ……………………………………………………………… 6
Business Strategies ………………………………………………………… 8
FY2010-2014 Strategic Highlights ………………………………………… 10
FY2015-2017 Strategic Plans …………………………………………… 12
Results

Segment Financial Review ………………………………………………… 14
Segment Information ……………………………………………………… 16

Foundation

Sustainability Management ………………………………………………… 19
Corporate Governance …………………………………………………… 20
Compliance and Risk Management Systems …………………………… 24Society (Human Resources Development) ……………………………… 26
The Environment …………………………………………………………… 28
Financial Information

FY2015 Financial Review ………………………………………………… 30
Consolidated Financial Statements (Summary) ………………………… 32
Corporate Data

Corporate Data/ Share Information ……………………………………… 36

Valor Holdings Co., Ltd. Annual Report 20161

11-year Summary of Financial Results
Valor Holdings Co.,Ltd. and its consolidated subsidiaries for the financial year ended March 31.

FY2005

FY2006

FY2007

FY2008For the year:
255,321288,168

318,026

336,342

Operating income

8,934

9,282

10,491

9,795

Ordinary income

9,824

9,965

10,835

10,186

Net income

1,653

3,915

4,136

3,387

128,629

156,086

164,609170,328

Revenues from operations

At year-end:
Total assets

48,26150,88953,77455,354

48,26150,16453,34154,56040,81957,55761,71069,631

Cash flows from operating activities

9,561

11,422

13,942

11,408Cash flows from investing activities(8,280)(20,520)(16,869)(15,929)

Free cash flows

1,281(9,098)(2,927)(4,520)Cash flows from financial activities(1,776)

8,515

3,643

6,150

Cash and cash equivalents at the end of fiscal year

7,237

6,655

7,372

9,000

13,692

21,40019,607

16,988for new store openings

9,746

14,615

15,243

13,072for refurbishing existing stores

2,278

4,530

3,025

2,562

for others

1,668

2,255

1,339

1,354

5,300

5,956

7,030

8,081

Net assets per share (BPS) (yen)1,844.74

965.901,027.07

1,071.19

Net income per share (EPS) (yen)

63.01

74.97

79.66

65.57

Net assets
Shareholders’ equity
Interest-bearing debt
Cash Flows:

Capital Expenditures:
Capital expenditures (based on payment)
Breakdown of expenditures:

Depreciation and amortization (CF)Per Share data:

Cash dividends per share (yen)Dividend payout ratio

28

15

18

20

44.4%

20.0%

22.6%

30.5%

8.1%

7.0%

6.8%

6.1%

Financial indicators:
Return on total assets (ROA)
Return on equity (ROE)

3.9%

8.0%

8.0%

6.3%

Shareholders’ equity ratio

37.5%

32.1%

32.4%

32.0%

0.8

1.1

1.2

1.3

Debt equity ratio (times)

Revenues from operations (millions of yen)

Operating income (millions of yen)

Total assets (millions of yen)

600,000

20,000300,000

450,000

431,218

470,564

497,463
15,00015,236

16,68315,852
14,287

15,000235,131225,000

300,000

10,000150,000

150,000

5,000

75,00002410,577

454,180

FY2011 FY2012 FY2013 FY2014 FY2015

Valor Holdings Co., Ltd. Annual Report 2016

0

FY2011 FY2012 FY2013 FY2014 FY2015

0

199,774

245,386

255,916

213,629

FY2011 FY2012 FY2013 FY2014 FY2015

FY2009

FY2010FY2011FY2012FY2013

FY2014FY2015344,900

379,172410,577

431,218

454,180

470,564

497,463

9,452

12,347

15,23615,852

14,287

15,00016,683

9,916

12,817

16,02016,844

15,311

16,10817,586

3,945

4,232

7,149

8,184

9,162

9,214

10,759176,440

190,065

199,774

213,629

235,131245,386

255,916

58,57861,821

68,13475,46682,94990,881

99,02757,76060,99867,24374,887

82,39590,301

98,408

69,107

69,746

69,38375,67987,26586,88084,952

16,004

20,32419,19021,13919,19822,25722,991(10,453)(14,428)(17,793)(20,961)(23,746)(15,660)(19,045)

5,550

5,895

1,397

177

(4,547)

6,596

3,945

(5,291)(1,608)(2,283)

2,914

5,983

(3,745)(6,758)9,259

13,547

12,676

15,764

17,055

19,96017,103

11,537

15,245

17,85922,101

25,226

20,22520,041

8,267

8,995

11,23014,414

12,851

12,763

11,628

2,663

5,007

4,114

1,788

2,306

2,237

3,650

607

1,243

2,515

5,899

10,069

5,225

4,763

8,399

9,017

9,612

10,255

11,09012,168

12,683

1,134.05

1,197.67

1,320.33

1,454.43

1,600.25

1,751.57

1,925.45

77.46

83.10

140.38159.56177.95178.91208.87

20

22

26

29

31

33

36

25.8%

26.5%

18.5%

18.2%

17.4%

18.4%

17.2%

5.7%

7.0%

8.2%

8.1%

6.8%

6.7%

7.0%

7.0%

7.1%

11.2%

11.5%

11.7%

10.7%

11.4%

32.7%

32.1%

33.7%

35.1%

35.0%

36.8%

38.5%

1.2

1.1

1.0

1.0

1.1

1.0

0.9

Net assets (millions of yen)

ROE∙ROA (%)

Cash Flows (millions of yen)
Cash flows from operating activities

History(Millions of yen)

Cash flows from investing activities

ROE

ROA

Free cash flows

120,000

30,00099,02790,881

20,00015

19,19021,13919,19822,257 22,991
11.2

11.5

8.2

8.1

11.7
10.7

82,94975,44680,00010,00068,134

6,596
1,397

0

177

11.4

10

3,945

6.8

6.7

7.0

(4,547)40,000-20,0000

5-10,000

FY2011 FY2012 FY2013 FY2014 FY2015-30,000(17,793)(15,660)(20,961)(19,045)(23,746)

FY2011 FY2012 FY2013 FY2014 FY2015

0

FY2011 FY2012 FY2013 FY2014 FY2015

Valor Holdings Co., Ltd. Annual Report 20163

Message from CEO

Shifting gears from supply chain investment tobusiness development will be shaped by the
Record-breaking results due to higher sales andprofits across all business segments
The fiscal year ended March 31, 2016 (FY2015) marked
a new starting point for the Valor Group in two ways: weadopted a holding company structure and began
implementing new three-year strategic plans. We
achieved new records for consolidated revenues fromoperations and earnings, along with higher sales andprofits across all business segments.
In our core supermarket business, we opened nine
new stores and refurbished eleven, while focusing on
upgrading our existing store network. We commenced
operations at a new processing center in Kani-shi, Gifu,
that now supplies packed fresh meat to the Valor
supermarkets. This center completes the upgrading of
our supply chain infrastructure. While we saw Valor’s
same-store sales dip slightly, the new support systems
are contributing to improved efficiency and have helpedo u r Ta c h i y a s u p e r m a r k e t c h a i n b e c o m e m o recompetitive.
Regarding the other business segments, we opened
33 new drugstores, more than ever, and made further
progress in developing our home improvement center
business centering on large-scale specialist stores. We
posted double-digit gains in profit in both of thesesegments. Our sports club segment also generated
solid growth with the development of a new fitness gym
format. Supported by the increased scale of our retail
operations, the distribution-related segment also madean excellent contribution to consolidated earnings.
We plan to open 62 new Valor Group stores in
FY2016, including 40 new drugstores, which is morethan the stores we opened in FY2015. We expect toachieve higher sales and profits on a consolidated
basis, on the foundation of continued growth in the
drugstore and home center segments and anticipatedimprovements in the profitability of our coresupermarket operations.
Using resources to leverage the strengths ofbusiness process integration
The objective of moving to a holding company structure
is to increase corporate value through a businessstrategy made efficient and flexible by our governance4

Valor Holdings Co., Ltd. Annual Report 2016

structure. Our new three-year strategic plans that began
in FY2015 seek to correct the previous situation where
our growth was primarily a function of scale expansionin our supermarket chain, and focus instead on
improving profitability. Under these plans, we will
establish the new business base for the Group, astargeted under the holding company structure.
Through business development based on this policy,
the drugstore and home improvement center chains
have steadily expanded to the point where they are now
growth drivers for the Group. However, we also aim toreposition the supermarket business as a growth driver
for the future since it is the essence of who we are as
Valor Group and how we ought to address social
issues.
Social issues are making a serious impact on retailingin Japan’s regions. Demographic factors such as low
birth rates and aging, food supply instability caused bya lack of people willing to inherit farms and continue
cultivating the land, and a lack of jobs caused by lower
population densities make retail operations tougher inthe provinces than in the cities. Our response to thesechallenges has been to create competitive formats while
trying to leverage business process integration fromsourcing to retailing.
Regarding peripheral operations such as
procurement, production, processing and distribution,
which have contributed to improvements in theefficiency of our operations, we aim to expand sales toexternal parties to secure a new source of earnings. We
intend to pursue business process integration fromsourcing to retailing while securing gains in productivity.
Shifting emphasis from supply systems to trainingof frontline staff
In an environment where supermarkets are competing
not only with one another, but also with other retail
formats, we need to develop stores that can attract
customers who come from afar to help deepen ourcustomer base. Going forward, we aim to create
supermarkets into category killers for fresh produce byoffering everyday low pricing and being capable ofevolving sales approaches in line with shifting customer
preferences.

This shift in emphasis, however, requires in-store staff
with a high degree of sales expertise, which issomething that takes time to develop. Consequently,
now that we have finished upgrading our supply chain
infrastructure, the Valor Group’s next policy is ininvesting more resources in the training of frontline
personnel. We are currently developing new training
facilities; and as we expand our recruitment efforts, wewill focus on developing excellent frontline staff.

Visionfrontline HR training, our medium- to long- term“Three Gears” strategy.

Implementing “Three Gears” strategy based on
medium- to long-term perspective
The policies I have outlined are a continuation of our“Three Gears” strategy that comprises “Growth andExpansion,” “Business Process Integration fromsourcing to retailing,” and “Frontline Performance
Development.” We have pursued the development of
the Valor Group consistently from a medium- to longterm perspective based on this strategy. As a holding
company, we can now optimally allocate businessresources to achieve consistent growth while continuing
to improve profitability.
In line with the strong performance in FY2015, weraised the year-end dividend to ¥19 per share, anincrease of ¥2 compared with the previous year.
Combined with the interim dividend of ¥17 per share,
this resulted in total annual dividends for FY2015 of ¥36
per share (a payout ratio of 17.2%), an overall year-onyear increase of ¥3 per share.
We expect to raise the annual dividends in FY2016
further to ¥40 per share (interim of ¥19, year-end of¥21). Our goal over the longer term is to increase thep a y o u t r a t i o t o 2 5 % . A s w e s t r i v e t o i m p ro v eperformance further, we are committed to increasing
returns to shareholders.
In closing, I would like to ask all of the shareholders
and investors for their continued support of the Groupfor years to come.

Chairman & CEO

Masami Tashiro

Valor Holdings Co., Ltd. Annual Report 20165

Business Model

Corporate Value Initiatives
The Valor Group has developed its business strategies and adjusted them to social changes by assuming upcoming needs anddemands. Our corporate values have been derived from the following initiatives:
excellence in chain store management systems, multi-format retailing and business process integration.

1 Excellence in Chain Store Management Systems
Firstly, chain store management systems have been effective for us to achieve rapid growth and sufficient scale for providing
goods at reasonable costs and quality. Under the systems, we have defined operational requirements for headquarters andstores, and then simplified and standardized operational processes at stores. We also have established a distribution networkand production bases to improve efficiency. It enables us to operate stores by a limited number of staff and reduce
operational costs. Under the recent changes such as aging and decline in workforce, simplifying and standardizing
operational processes remains crucial for achieving sustainable growth.

2 Multi-format Retailing
Since the early stage of our history, we have rolled out multi-format retailing. It was closely related to our locations with lower
population densities. Multi-format retailing has been useful for us to bring richness of lives in local communities as well as
gain better brand recognition and market shares through a broad assortment of products and services.
The recent fierce competition between formats, technological advancements in shopping behavior and decreasing local
suppliers force us to rethink our roles in local communities. Under these changes, we intend to provide customers withproducts and services through our all resources. In the fiscal year 2015, the home improvement center launched life support
services and Chubu Foods Co.,Ltd. accelerated to receive sales orders for local festivals.

3 Business Process Integration
In the food distribution industry, we have struggled for lean margins, which were shared by many intermediates. To optimize
the entire processes from sourcing to retailing, we have established an efficient distribution network. As many of our storesare located in lower population density, we have pursued operational efficiency and reduced the break-even point.
In our business processes, we are also responsible for maintaining sustainable societies through controlling carbon
dioxide emissions, reducing food waste and encouraging recycling. We take such environmental-friendly initiatives in our
production bases and distribution centers as well as in our stores.

6

Valor Holdings Co., Ltd. Annual Report 2016

Imbalance between Food
Supply and Demand

Changes in Labor Market- Intense competition between formats- Aging and lack of successors inregional agriculture- Possible impact of TPP
agreement on local suppliers- Aging and decline in workforce- Changing labor-related policies- Impact of increasing labor costs

Changing Consumers &Retail Market

Changing Global
Environment- Aging and declining population- Impact of IT innovation on
shopping behavior- Decreasing local suppliers
serving local communities

VisionSocial Issues- Global warming and climatechangeLong-term Value Initiatives

The “Three Gears” strategy
Creating New Values for
Local Communities

Multiformat
Retailing

Business
Process
Integration
Local
Communities

Excellence in ChainStore management
systems

We aim to- achieve sustainable growth against ‘lawof diminishing return’ rovide customers with goods & services-pof desired quality at reasonable costs- s erve the local communities throughleveraging our resources

Fine-tuning into
Strategies

Growth & Expansion
Frontline Performance
Development
Business Process
Integration

Our Solutions
Stable Procurement

Human Resource
Development & Recruitment- Collaboration with suppliers tosecure a stable supply of
produces- Simplification of operational
processes by utilizing infrastructures- Professional development- Increasing diversity in the workplace

Maintenance of Living Environment
for Local Communities

Recycling-oriented
Economic System- Format development- Taking over functions performedby local suppliers- Carbon dioxide emissions control- Reduction of food waste- Recycling encouragement

Valor Holdings Co., Ltd. Annual Report 20167

Business Strategies

Business Strategies“Three Gears”

Growth & Expansion

Offering New Values for Local Communities
Based on corporate value initiatives, the Valor Group has created its
unique business model that optimizes the entire process from sourcing
to retailing. It is sustained by business strategies called the “Three
Gears”:
1. Growth & Expansion
2. Business Process Integration between manufacturing and retailing
3. Frontline Performance Development
We make the gears mesh properly to obtain sustainable growth andincrease corporate values.
Our business model requires a sufficient scale of operations toprovide value-added products at reasonable costs. We have expanded
our store network around distribution centers, while raising density ofcoverage. It allows us to capture an overwhelming market share andincrease operational efficiency.

2

Business Process Integration
between Manufacturing and Retailing

Business Process Integration between
manufacturing and retailingControlling the entire process enables us to share demand forecast & production plan and eliminate waste in supply chains .We havedesigned effective distribution channels by coordinating our own sourcing companies, production bases and distribution centers.
We have developed private labels, which offer value for money and better margin than national brands. They are sold under thebrand names of “V-Select”, low-priced and “V-Quality”, value-added. In June 2014, we launched new brand, “V-Premium”. It contains
ingredients, which are selected and available at limited seasons. We provide the brands for supermarkets, drugstores, home
improvement centers and other companies through V-Solution Co., Ltd., a subsidiary. We manage the risk of demand-supply
mismatches by highly accurate sales plans and outstanding sales capabilities.
In the fresh meat category, we provide stores with packaged meat from our five processing centers, which source raw materials
from Chubu Meat Co., Ltd., a subsidiary. It brings us to reserve intermediate margins within the Valor Group. We also reduce costs atstores by eliminating operating processes such as trimming and cutting meat and decreasing spaces for processing.
The recent changes in fresh produce distribution forced us to secure stable procurement as well. They are mainly caused by aging& lack of successors in regional agriculture and climate changes connected with global warming. We intend to collaborate with local
suppliers and develop value-added products together.

“V Select” covers basic items
which are indispensable to yourdaily life. Under this brand name,
we offer good-quality products at
low prices.

“V Quality” represents tasty fooditems made from carefully chosen
ingredients. We deliver fine quality
at an affordable price.

“V Premium” refers to premium
food made from handpicked andsuperior ingredients and recipes.
Turn your meal into fine dining withthis brand!

SesameDressing

Tea 500ml

Coarsely Ground White Sausage

Sliced Ham 160g
Black Pork Dumplings

Japanese Soy
Beans Tofu

8

Valor Holdings Co., Ltd. Annual Report 2016

1

Growth & Expansion
In addition to the supermarket
business, we also consider

Frontline Performance
Development

Visionour drugstore and home
improvement center
businesses as key drivers for
growth. “V-drug”, a drugstore
chain has also focused on
establishing store network to
g a i n s h a re s a n d a c h i e v eeconomies of scale.
V-drug collaborates withlocal nursing homes to support their health care,while it meets customers’ needs for conveniencethrough a broad range of food.
“Home Center Valor”, a home improvement
center chain has developed relatively large storesover 10,000 square meters, which carry aprofessional assortment of building and farming
materials for business customers.

Supermarkets
Home Improvement Centers

3

Drugstores
Sports Clubs

Frontline Performance Development

To gain benefit from expanding scale of operations, we must
upgrade skills of frontline employees and improve productivity atstores. The skills combine a thorough knowledge of store
operations with abilities to implement sales plan and provide
outstanding customer services.

Valor Holdings Co., Ltd. Annual Report 2016

9

FY2010-2014 Strategic Highlights

FY2010-2014 Strategic Highlights
The FY2010-2014 strategic plans focused on expanding scale. We assumed that a certain volume was necessary to provide
customers with value-added products through efficient supply chains.
In the FY2010-2014 strategic plans, we planned to open 80 supermarkets and 100 drugstores. We also set financial targets
as bellows to achieve sustainable growth against ‘law of diminishing return’. Although we could not reach the targets, we gained
sufficient volume and established a network of infrastructures to improve productivity and supply stores located in expanding
areas.

FY2010-2014 Financial Results(Millions of yen)

FY2009FY2014 targets

FY2014The “Three Gears” Strategy

Business strategies

Business scale expansion

Strategic goals

344,900

500,000

470,564

Operating income

9,452

—

15,000Ordinary income

9,916

20,000

16,108Net income

3,945

10,0009,214

Revenues from operations

6.4%

CAGR (Revenues from operations)
ROA

5.7%

8.0%

6.7%

ROE

7.0%

—

10.7%

Dividend payout ratio

25.8%

—

18.4%

Progress in FY2010-2014
Expanding Sale

Development ofInfrastructures

Net increase instores76 supermarkets and 112 drugstores

Processing
centers- Developed 4 processing centers (3 for fresh meat and 1 for fresh vegetables & fruits) andacquired 2 processing centers (1 for fresh meat and 1 for fresh fish)

Production base- Established another production base for prepared food and renovated existing factory forfish products

Distribution
centers- Relocated 2 centralized distribution centers to improve sourcing and productivity- Developed 3 distribution centers for serving stores located in expanding areas- Refurbished distribution centers for drugstores and home improvement centers to handle
broad range of products

Business Process Integration

10 Valor Holdings Co., Ltd. Annual Report 2016

- Established whole subsidiaries of fresh meat, flowers and others to source high quality of
products at low costs- Entered into an agricultural business by running mushroom and tomato farms

Locations of Infrastructures related to the Supermarket Business

VisionNanto-shi

Fukui-shiTokyo

Kani-shi

Ogaki-shi

Tajimi-shi
Ichinomiya-shi
NagoyaToyota-shi
Shimada-shi

Yokkaichi-shi

Osaka

Distribution Centers :Processing Centers :Production Bases:for chilled products

for ambient- temperature products

for chilled & ambient- temperature products

for fresh meatfor fresh vegetables & fruits
for fresh fishfor prepared foodfor fresh bakery
for fish products

Distribution of Supermarket and Drugstores (as of FY2009 & FY 2014)
120

Supermarkets (FY 2009)
Supermarkets (FY 2014)
Drugstores (FY 2009)
Drugstores (FY 2014)

100

80

60

40

20

0

Kyoto

Shiga

Mie

Gifu

Aichi

Shizuoka

Fukui

Ishikawa

ToyamaNaganoNiigata

Valor Holdings Co., Ltd. Annual Report 201611

FY2015-2017 Strategic Plan

FY2015-2017 Strategic Plans
Improving Efficiency and establishing a Solid Foundation for Growth
The FY2015-2017 strategic plans focus on improving efficiency through reforming the supermarket segment, our core business.
It could bring us to next long-term targets, which are projected to accelerate growth with profitability. Thoroughly executing the
FY2015-2017 plans, we intend to build a strong relationship with stakeholders such as customers, business partners andshareholders.
The FY2015-2017 strategic plans consist of three major sections. Firstly, we improve profitability by strengthening existingsupermarkets through refurbishing stores and improving assortment. We also increase quality of products and productivity
through utilizing infrastructures. Secondly, we identify drugstore and home improvement center as key drivers for growth.
Thirdly, we sustain growth of each business unit and strengthen corporate governance by reforming organizational structures.

Positioning of FY2015-2017 Strategic Plans

FY2015-2017 Strategic Plans

Accelerating growth

FY2010-2014 Strategic Plans

Expanding scale

Improving
efficiency(Millions of yen)

FY2009FY2014FY2015FY2017 target

The “Three Gears” strategy

Business strategies

Strategic goals

Business scale expansion

Improving efficiency

Accelerating growth

Revenues fromoperations

344,900

470,564

497,463550,000

Operating income

9,452

15,00016,68321,000Ordinary income

9,916

16,10817,58622,000Net income

3,945

9,214

10,75913,000

6.4%

5.7%

5.3%

CAGR (Revenues fromoperations)
ROA

5.7%

6.7%

7.0%

8.0%

ROE

7.0%

10.7%

11.4%

above 11.0%

1.2

1.0

0.9

below 0.9

25.8%

18.4%

17.2%

D/E ratio
Dividend payout ratio

12 Valor Holdings Co., Ltd. Annual Report 2016

Long-term target

1,000,000

7-8%Over 25%(medium & long-term target)

Strategic Plan Progress Report (FY2015)
Structural reforms

In the Valor supermarket chain, we worked to make existing stores
more competitive by using the fresh produce section to attract
customers, while also improving merchandising and refurbishing stores.
Capitalizing on our supply infrastructure, we endeavored to bolster
productivity and improve our value proposition. With the opening of theKani Processing Center, our fifth fresh meat processing center, we can
now supply fresh meat to all Valor supermarket stores, making store
operations more efficient and optimizing personnel assignments.
Chubu Foods Co., Ltd., which handles production and sales ofprepared foods, promoted product development using the vegetablewashing and sterilization equipment newly installed at its Shizuoka
facility; it began in-house production of seasonings for prepared foods
as well. Furthermore, we enhanced our product development systems
and began fostering a category in which we can achieve competitive
advantage over other retail formats.

2

Upgrading the product development capabilities of Chubu Foods

Newly developed product: Chinese-style fried chicken

Development of key growth drivers

In the drugstore business, we focused on upgrading the lineup of foodmerchandise and on expanding drug dispensary operations. We used
the logistics functions developed in FY2014 to expand the distributionof frozen foods and perishables, while improving cosmetics sales
counters and adding beauty counseling functions to boost our stores’
specialty appeal. New store openings were mainly in Aichi and Gifu
prefectures; and after opening a record high of 33 new stores andclosing three outlets, we have expanded the chain to 301 stores as ofthe end of March 2016.
The Valor home improvement center business posted strong salesof agricultural supplies and DIY products. In October 2015, we opened
Home Center Valor Kitagata Store on an 8,200m 2 site, offering an
expanded lineup of building materials and horticultural supplies.

3

TOPICS
Vision1

TOPICS

Chubu Yakuhin with more than 300 drugstores

Organizational reforms

The Valor Group adopted a holding company structure on October 1,
2015. The holding company comprises operational management
functions such as general affairs, HR and finance; strategic Groupfunctions such as development, logistics and IT systems; and risk
management and other corporate governance functions. In March
2016, we opened a new HQ in Nagoya. Some headquarters functions
have been transferred to Nagoya as part of upgrading HR, training andother strategic Group functions.

TOPICS

Some headquarters functions have been transferred to the Nagoya HQValor Holdings Co., Ltd. Annual Report 201613

Segment Financial Review

Number of stores

Number of stores by format
Supermarkets
Sports Clubs

800

600

528

567

601

648

Drugstores
Pet Shops

690

New store openings by format

Home Improvement Centers
OthersSupermarkets
Sports Clubs

Drugstores
Pet Shops

1837Home Improvement Centers

1
3

65

1

7

9

266

400

301

33

200

0

690 stores in total

FY2011 FY2012 FY2013 FY2014 FY2015

51 stores in total(Millions of yen)

FY2009FY2010FY2011FY2012FY2013

FY2014FY2015

240,138

269,918

293,505

303,521313,208

321,458

329,266

7,683

9,580

10,783

11,028

8,443

9,760

9,887

105,438

114,693

119,293

127,490

142,260

144,604

153,045

Capital expenditures

7,477

12,012

9,199

12,915

17,931

12,07810,506

Depreciation and amortization

5,283

5,430

5,978

6,346

6,826

7,381

7,556

Revenues from operations

48,37350,651

54,85062,49773,02880,47095,152

Operating income

1,009

1,357

2,294

1,934

2,449

1,961

2,736

Total assets

21,493

22,81426,501

29,06533,64938,55744,602

Capital expenditures

947

1,400

2,547

3,134

3,893

4,333

5,776

Depreciation and amortization

817

860

979

1,183

1,454

1,780

2,114

36,91938,92841,734

43,81046,55946,556

48,629

677

1,269

1,677

1,869

2,330

2,011

2,450

17,633

17,47918,553

19,456

19,06822,43022,499Supermarkets
Revenues from operations
Operating income
Total assets

DrugstoresHome Improvement Centers
Revenues from operations
Operating income
Total assets
Capital expenditures

166

730

1,943

1,259

464

2,276

1,478

Depreciation and amortization

983

876

867

899

875

910

945

8,371

8,514

8,604

8,788

8,955

9,271

9,838

40

77

247

420

419

463

532

Total assets

13,023

12,00911,287

10,76010,382

10,611

10,634

Capital expenditures

1,755

146

124

319

338

527

791

747

770

669

666

636

655

711

Revenues from operations

5,282

5,929

6,383

6,699

7,228

7,638

8,590

Operating income

1,943

2,410

2,761

3,062

2,995

3,395

3,647

Total assets

11,456

15,33917,51418,80922,351

24,082

23,961

Capital expenditures

28

439

1,659

1,888

2,155

624

478

Depreciation and amortization

40

381

439

550

784

819

716

Sports Clubs
Revenues from operations
Operating income

Depreciation and amortization
Distribution-related operations

14 Valor Holdings Co., Ltd. Annual Report 2016

FY2009

FY2010FY2011FY2012FY2013

FY2014FY2015

187

202

218

238

251

263

266

Valor

131

147

163

179

221

232

235

Tachiya

10

10

11

11

13

13

13

Youth*

29

28

29

31

—

—

—

Shokusenkan-Taiyo

10

17

15

15

15

17

17

Varo Mart

—

—

—

2

2

1

1

Other

7

—

—

—

—

—

—

Drugstores

159

174

193

214

241

271

301

Home Improvement Centers

36

36

34

35

35

36

37

Sports Clubs

51

51

51

52

54

58

65

Pet Shops

17

16

17

17

17

17

18

Others

12

15

15

11

3

3

3

Total

462

494

528

567

601

648

690

Supermarkets

Results

Store Network

Note: *merged into Valor in October, 2013.
The figures indicate the number of stores;
the size of the pie charts corresponds to the number of stores by prefecture.

Stores by format and by prefecture (FY2015)

2

2

Niigata

4

1
14
27
1
17

Ishikawa

15

Fukui

25

1

10

1

10

Nagano72

16Overseas Other locationsin Japan

1

25

38

1

33
2

13

2

42

Toyama

18

11
1
7

108
1

Tokyo
Gifu
1
2
Kyoto

Osaka

1

3

1
13

Shiga

218
8

15

1

1

8

Tokyo

1
7

19

Kanagawa
65

Nagoya

2

1

8

10
116

8 10
4 9
Mie

Yamanashi

31

Aichi

209

37

Shizuoka

50

Supermarkets
DrugstoresHome Improvement Centers
Sports Clubs
Pet Shops
OthersValor Holdings Co., Ltd. Annual Report 201615

Segment Information

Supermarket BusinessThis business segment includes the operations of supermarket operators Valor Co.,
Ltd., Tachiya Co., Ltd. and Shokusenkan-Taiyo Co., Ltd.; food processing subsidiaries
Chubu Foods Co., Ltd. and Daien Foods Co., Ltd.; and food wholesalers Shufu-noMise Shoji Chubu Honsha Co., Ltd., Chubu Meat Co., Ltd. and V-Solution Co., Ltd. The
target business model is one that optimizes the entire business process from sourcing
to retailing.
Besides opening new stores, operating companies in this segment have expandedin scale through M&A. The main companies that have been converted into subsidiaries
are Tachiya Co., Ltd., Youth Co., Ltd. (merged into Valor in October 2013), andSunFriend Co., Ltd. (currently Shokusenkan-Taiyo). Valor Co., Ltd. has stores in 12
prefectures, centering in Gifu and Aichi prefectures; Tachiya Co., Ltd. has stores in
Aichi, Gifu and Mie prefectures; and Shokusenkan-Taiyo Co., Ltd. operates in Shizuoka
Prefecture. The Group is looking to increase store density steadily across each of theseparts of Japan.

FY2015 Results
Segment revenues from operations increased 2.4% year on year to ¥329,266 million,
while operating income rose 1.3% to ¥9,887 million. Efforts in this segment focused on
making existing stores more competitive by using the fresh produce section to attract
customers, as well as improving the merchandise lineup and refurbishing stores. Amid
increasingly fierce competition to secure sites for new stores, the Group worked tosecure well-located premises with fixtures and equipment and also vacant sites. New
Valor supermarkets were opened in Takatsuka, Hamamatsu in October 2015 and in
Hinode-cho, Anjo in December 2015. The Kitanomori and Akiwa supermarkets wererelocated to larger sites in October 2015 and November 2015, respectively, toaccommodate a greater choice of merchandise.
The Group sought to leverage its supply infrastructure to improve productivity andraise the quality of merchandise. With the opening of the Kani Processing Center, ourfifth fresh meat processing center, we can now supply fresh meat to all Valor
supermarkets, making store operations more efficient and optimizing personnel
assignments. Chubu Foods Co., Ltd., which handles production and sales of preparedfoods, promoted product development using the vegetable washing and sterilizationequipment newly installed at its Shizuoka facility; it began in-house production ofseasonings for prepared foods as well. Furthermore, we enhanced our productdevelopment systems and began fostering a category in which we can achieve
competitive advantage over other retail formats.
After of nine store openings and six closures in FY2015, the Valor supermarket chain
stands at 266 stores at the end of March 2016. The 0.2% year-on-year fall in samestore sales was more than offset by the increased competitiveness of Tachiya and of thestores we opened in FY2014 to FY2015, resulting in higher sales and profits at thesegment level.

16 Valor Holdings Co., Ltd. Annual Report 2016

266
1,723

No. of stores ………………………………
Ave. floor space ……………………

m2(Valor Co., Ltd.)

Revenues from operations by segment

66.2

%

Revenues from operations/operating income
Revenues from operations …

¥329,266¥9,887

Operating income …………
Revenues from operations

300,000
200,000

8,443

321,458

329,266

20,00015,000

9,760

9,887

100,000
0

millionOperating income (millions of yen)

400,000

313,208

million

10,0005,000

FY2013

FY2014FY20150Drugstore BusinessNo. of stores ………………………………
Ave. floor space …………………………

301
821

m2

Revenues from operations by segment

FY2015 Results
Segment revenues from operations increased 18.2% year on year to ¥95,152 million,
while operating income rose 39.5% to ¥2,736 million. Same-store sales grew 10.6%,
reflecting the efforts to upgrade the lineup of food merchandise and to expand
dispensary operations. The Group also used the logistics systems developed in FY2014
to expand distribution of frozen foods and perishables, while improving sales counters
using ID-POS systems technology. In other initiatives, the Group developed themed
product displays to improve cosmetics sales counters and added beauty counseling toboost the specialty appeal of these stores.
The drugstore chain has 301 stores as of the end of March 2016, with a record of
33 new outlets opened in FY2015 along with the closure of three stores. Most of the
new stores were located in the prefectures of Aichi and Gifu to help boost the Group’s
market share in these areas. Efforts also focused on upgrading personnel systems to
support continued chain development through recruitment and training, with the overall
aim of retaining more pharmacists, sales staff and store managers with the relevant
qualifications and experience.

Home Improvement
Center Business

19.1

%

Revenues from operations/operating income
Revenues from operations ……

¥95,152¥2,736

Operating income …………
Revenues from operations

millionmillionOperating income (millions of yen)

95,152100,000
75,00010,00080,47073,0287,500

50,000

5,000

2,449

25,0000Results

Established in February 1984 as a retailer of medicines, Chubu Yakuhin Co., Ltd. hassince steadily expanded its network of drugstores. Surpassing 100 stores in 2003, 200
stores in 2012, and 300 stores in 2016, the chain now extends across eight
prefectures, centering in Aichi and Gifu.

1,961

FY2013

FY2014

2,736

2,500
0

FY201537
5,467

No. of stores …………………………………
Ave. floor space ……………………

m2

Revenues from operations by segment
The home improvement center business began operations in August 1990 after thetransfer of assets from the other Group companies. It grew in scale in October 1995
resulting from a merger with Fujiya. Located mainly in Gifu Prefecture, the chain is also
expanding in Aichi and Mie prefectures.

9.8%

Revenues from operations/operating income

FY2015 Results
Segment revenues from operations increased 4.5% year on year to ¥48,629 million,
while operating income surged 21.8% to ¥2,450 million. Home Center Valor’s samestore sales rose 2.1%, boosted by brisk sales of agricultural supplies and homerenovation products. In October 2015, the Group opened Home Center Valor Kitagata
on an 8,200m2 site in Kitagata, Motosu-gun, Gifu Prefecture, offering an expanded
lineup of merchandise including building materials and horticultural supplies. The
network has 37 outlets as of the end of March 2016.
The Group sought to reinforce its position as a specialty retailer by investing in
product and service categories which require more specialist knowledge and expertise.
In November 2015, a pet products section was opened at Home Center Valor
Takayama. In March 2016, a “Tire Ichiba (Market)” facility opened inside Home Center
Valor Mizunami-Chuo, the seventh facility offering sales and maintenance services forautomobile tires within the network.

Revenues from operations ……

¥48,629¥2,450Operating income …………
Revenues from operations

10,00046,55946,566

48,6297,500

30,00015,000
0

millionOperating income (millions of yen)

60,00045,000

million

5,000

2,330

FY20132,011
FY20142,450

FY20152,500
0Valor Holdings Co., Ltd. Annual Report 201617

Segment Information

Sports Club
Business

No. of stores …………………………………

65

Revenues from operations by segment

2.0%

The sports club business commenced operations in April 1998 following the transfer ofassets from Valor. Its clubs feature a combination of training gyms, swimming pools,
tennis courts and other facilities. It also began operating the low-investment chain of“Will_G” fitness gyms in September 2013, which offers memberships on a relatively low
monthly subscription basis. The network of clubs is mainly based in the prefectures of
Aichi and Gifu, but is also expanding into other regions with higher population densities
such as the Kanto and Kansai regions.
Revenues from operations/operating income¥9,838¥532

Revenues from operations ………

Operating income ………………

FY2015 Results

Revenues from operations

millionmillionOperating income (millions of yen)

12,000

Segment revenues from operations increased 6.1% year on year to ¥9,838 million, while
operating income grew 14.7% to ¥532 million. After a full-scale expansion in theprevious year, the “Will_G” chain of fitness gyms recorded steady progress. Seven new
clubs were opened, including a major facility called “AXTOS Will_G Icora Mall
Izumisano” in Izumisano-shi, Osaka Prefecture in May 2015. The chain comprised 65
outlets as of the end of March 2016. The business posted higher sales and profits due
to increasing revenue from club membership fees and the various contributions from thefacilities opened from FY2014 to FY2015.

Distribution-related
operations

The principal subsidiaries operating in this segment are the logistics operator Chubu
Kosan Co., Ltd.; food, sundries and materials wholesaler Chubu Ryutu Co., Ltd.; andthe facilities maintenance services provider Mentex Co., Ltd. Besides helping toincrease the operational efficiency of other Group companies, these firms also engage intransactions with external customers.

1,200

9,000

9,838

9,271

8,955

900

6,000

419

463

3,000

300

0

FY2013

FY2014

1.7%

Revenues from operations/operating income

Operating income …………
Revenues from operations¥8,590¥3,647

7,500

7,228

7,638

5,000

18 Valor Holdings Co., Ltd. Annual Report 2016

2,995

FY2013

million

3,395

8,590

3,647

2,500
0

millionOperating income (millions of yen)

10,000

Segment revenues from operations increased 12.5% year on year to ¥8,590 million,
while operating income rose 7.4% to ¥3,647 million. Responding to the increasing scaleof the Group’s retail operations, subsidiaries operating in this segment focused on
improving the Group’s infrastructure while maintaining and raising the level of services.

0

FY2015

Revenues from operations by segment

Revenues from operations ………,

FY2015 Results

600

532

FY2014FY2015

Sustainability Management

The Valor Group is engaged in sustainability management using two approaches, namely 1) sustainability of business activities
and 2) management of the social and environmental impacts of business activities to contribute to realization of a sustainable
society, to enhance its corporate value over the medium to long term.
Regarding corporate governance, human resources development and the environment, we have clarified the organizational
structure of the Group and key issues concerning the business model. We are cultivating a corporate culture in which
continuous improvement is pursued.

Key issues

Activities to secure sustainability ofbusiness or activities to manage
impact of business

The Company’s characteristics and improvements· Transition to a company with audit & supervisorycommittee· Change of the composition of the Board of Directors
and change of the quorum of Outside Directors· Framework for decision-making concerning

2. Speedy decision-making

business execution

Governance· Compliance systems· Relations with organs· Expansion of the scope of application to include
operating companies

3. Risk management in relation
to the business model

Results· Organizational design

Foundation

1. Management transparency· Risk management systems· Integrated information management· Expansion of the scope of application to include
operating companies· Recruitment and fostering of
Humanresourcesdevelopment

Environment

Human resources development
to sustain growth

Reduction of environmental
impacts· Increase in the number of sites where recruitment ishuman resources

conducted· Supporting diverse people to· Support of female workers to enable them toenable them to maximize theirmaximize their capabilities, employment of thecapabilities

disabled· Reduction of CO2 emissions· Waste reduction· Promotion of recycling· Reduction of power consumption, energy-saving
operations· Reduction of food waste· Promotion of recycling of food waste

Constructive Dialogues with Shareholders
The IR Office represents the Company in its constructive dialogues with shareholders. It actively engages in dialogues with shareholders
and provides feedback to management. For effective IR activities, the IR Office has identified the composition of the Company’s
shareholders and endeavors to reflect it in the dialogues. Appropriate disclosure in a timely manner is also emphasized, hence theestablishment of a disclosure policy coinciding with the relaunch of the Company’s website in October 2015. Both financial information andnon-financial information are posted, including the management philosophy, business strategies, and the mid-term business plan.

Dialogues with shareholders in FY2015
58th Ordinary General
Meeting of Shareholders(Held June 25, 2015)

955 shareholders attended

Dialogues with institutional
investors

Direct dialogues: 150 times(In addition to business results presentations and small meetings attended by top management, includes
individual meetings, facility tours, teleconferences, etc.)

Valor Holdings Co., Ltd. Annual Report 201619

Corporate Governance

Basic Policy
The fundamental objectives of the Company’s corporate governance are to achieve efficient management and faster decision-making andenhance corporate value continuously, while ensuring management transparency and fairness, thorough risk management as well as timely
and appropriate disclosure from the viewpoints of shareholders, customers and all other stakeholders. Having established the basic policy
on corporate governance consisting of five points, namely 1. Upholding shareholders’ rights and equality, 2. Appropriate collaboration with
non-shareholding stakeholders, 3. Appropriate disclosure and securing of transparency, 4. Responsibility of the Board of Directors etc.,
and 5. Dialogues with shareholders, we are working to strengthen our corporate governance.

Corporate Governance Systems
In October 2015, the Company transitioned to a holding company structure. The Company as the holding company is responsible for theGroup’s strategic planning and for oversight of business execution of operating companies. The objectives are to maximize corporate value
through the optimum allocation of resources and to enhance governance. To realize these objectives, we have reviewed the organizational
structure of the holding company and operating companies and clarified responsibilities and authority for faster business execution andstrengthened oversight. For faster business execution, we have established the Group Management Executive Committee where decisions
are made on investment projects of operating companies and management issues of operating companies are discussed.
To ensure management transparency, we elected two Outside Directors at the Ordinary General Meeting of Shareholders held in June2015 and notified their appointment as independent directors to the Tokyo Stock Exchange. At the 59th Ordinary General Meeting of
Shareholders held in June 2016, a partial amendment to the Articles of Incorporation was approved and the Company transitioned to acompany with audit & supervisory committee system. The Board of Directors consists of 14 Directors: 10 Executive Directors and four
Directors who are Audit & Supervisory Committee Members (of whom three are Outside Directors).

Corporate Governance Initiatives
Initiatives

Basic Policy on Corporate Governance*
1

April 2015

Establishment of the IR Office

June 2015

Appointment of two Outside Directors

2

3

4

5

Transition to a holding company structure
October 2015
Relaunch of the Company’s website
Establishment of Basic Policy on Corporate Governance anda policy on constructive dialogues with shareholders
December 2015

Establishment of the Nomination and Compensation Committee (voluntary
advisory organ consisting of two Outside Directors and two Executive
Directors)

January-February
2016

Performance evaluation of the Board of Directors
Discussion at the Board of Directors meeting based on the results ofanalysis and evaluation

June 2016

Transition to a company with audit & supervisory committee
Change of the composition of the Board of Directors (total of 14 Directors
consisting of 10 Executive Directors and four Directors who are Audit &Supervisory Committee Members)

August 2016

Issuance of the annual report (Japanese and English)*1. Upholding shareholders’ rights and equality, 2. Appropriate collaboration with stakeholders other than shareholders, 3. Appropriate disclosure and securing of transparency, 4.
Responsibility of the Board of Directors etc., and 5. Dialogues with shareholders.

20 Valor Holdings Co., Ltd. Annual Report 2016

Overview of Valor’s Corporate Governance Structure

ReportAppointment /Dismissal

Legal Counsel, Tax Accountant, and Other Specialists
Management Advisory

Business Execution

Audit report

Appointment /Dismissal

Board of Directors
Consult

Executive Directors

Audit /
Supervision(10 Directors)
AdviseAppointment /Dismissal

ReportInternal Control & Risk Management

Appointment /Dismissal

Audit report

Collaboration

Audit & Supervisory Committee(

4 Audit & Supervisory Committee Members
Of whom 4 are Directors)

Audit report

Accounting Auditor
Ernst & Young ShinNihon
LLC

Foundation

Nomination and Compensation Committee

Management, Oversight and Audit

General Meeting of Shareholders

Audit /
Supervision

Accounting audit
ReportRepresentative
Director
Group Management
Executive Committee· Executive Directors (10)· Representatives of Group’s core companies (5)· Executive Directors (4)Refer matters fordiscussion / Report

Instructions

Executive Directors
Operating Companies

Instructions /Collaboration

Collaboration

Instructions

Collaboration

Group Manager
Conference

Instructions and supervision

Audit Office

Audit

Activities of the Audit Office, the Risk Management Committee, and the Compliance Committee cover the Group companies.

Risk Management Committee

Compliance Committee

Helpline

Valor Holdings Co., Ltd. Annual Report 201621

Corporate Governance

Policy and procedures for election of management executives by the Board of Directors and for nomination ofcandidates for Director, and explanation of reasons for election and nomination(1) Policy· Regarding Directors who are not Audit & Supervisory Committee Members, people with specialized knowledge and with excellent
management capabilities and decision-making capabilities or people who execute important businesses or are responsible for key
operating companies are nominated as candidates.
· Regarding Directors who are Audit & Supervisory Committee Members, in order to ensure accurate auditing of compliance andappropriateness of business execution, people who are knowledgeable about finance and accounting, knowledgeable about theGroup’s business, and can offer diverse viewpoints about corporate management are nominated as candidates. For Outside Directors,
people who have abundant experience in their respective fields, excellent character, and high level of insight, in addition to being
capable of providing objective and multifaceted advice and suggestions about management, are nominated as candidates.
(2) Procedures· Regarding Directors who are not Audit & Supervisory Committee Members, candidates shall be determined by the Board of Directors
after consideration by the Nomination and Compensation Committee consisting of two Executive Directors and two Outside Directors.
· Regarding Directors who are Audit & Supervisory Committee Members, candidates shall be determined by the Board of Directors, after
consideration by the Nomination and Compensation Committee and subsequently, after securing the consent of the Audit & Advisory
Committee.
(3) Explanation about election and nomination· Reasons for election of each candidate for Director are disclosed in the reference document for the General Meeting of Shareholders
etc.

Independence criteria
Our criteria for selecting Outside Directors are that they satisfy the requirements for independent officers pursuant to the Companies Act andas stipulated by the stock exchanges where the Company’s shares are listed; that they are unlikely to have conflicts of interest with generalshareholders; that they are not affiliated with a supplier or a customer of the Company with which transactions exceed an amount equal to
2% of the Company’s consolidated net sales or exceed 10 million yen in direct individual transactions; and they have specialized knowledge
about finance, accounting, law, management, etc. or experience in corporate management etc. If an Outside Director concurrently serves as
an officer of other listed companies, the number of companies where he/she serves as an officer shall not exceed four including theCompany, considering the time and effort required for fulfilling the role and responsibilities as an Outside Director of the Company.

Policy for determining the amount of compensation and the calculation method(1) Basic policy
1 For Directors who are not Audit & Supervisory Committee Members· Compensation consists of basic compensation, bonuses, and retirement benefits.
· Compensation shall be, in principle, provided in an amount that is adequate for securing (recruiting) excellent people as managers andshall be determined based on comprehensive evaluation of the Company’s financial performance, each Director’s status of
performance of duties, achievements, degree of contribution, etc.
· Regarding Directors who are also employees, the salary as an employee is paid in accordance with the Rules for Wages for Employees.
· The amount of bonuses shall be determined within the maximum amount of compensation approved at the General Meeting of
Shareholders and by considering the previous amount of bonuses paid and the company’s financial performance for the current year.
· The amount of retirement benefits shall be determined in accordance with the Rules for Payment of Retirement Benefits for Officers andpayment shall be subject to approval at the General Meeting of Shareholders.
· The Company has a stock option program for the Company’s Executive Directors and employees, as well as the directors andemployees of the Company’s subsidiaries, in order to enhance their motivation and morale with a view to achieving better financial
performance of the Group.
2 For Directors who are Audit & Supervisory Committee Members· Compensation consists only of basic compensation, in view of their roles and independence.
(2) Procedures· The amount of compensation for Directors shall be an agenda item of the General Meeting of Shareholders and shall be determinedwithin the maximum amount approved at the General Meeting of Shareholders.
· Regarding the amount of compensation for Directors, in order to increase transparency and objectiveness, the Nomination andCompensation Committee, which is an advisory organ for the Board of Directors consisting of two Executive Directors and two Outside
Directors, shall examine and review the details, after which the amount of compensation for Directors who are not Audit & Supervisory
Committee Members shall be determined by the Board of Directors; the amount of compensation for Directors who are Audit &Supervisory Committee Members shall be determined by the Audit & Supervisory Committee Members.

22 Valor Holdings Co., Ltd. Annual Report 2016

Numbers of meetings of the Board of Directors and the Audit & Supervisory Board held and attendance status (FY 2015)
Meetings of the Board of Directors

Meetings of the Audit & Supervisory Board

10

8

Outside Directors*

100%

—

Outside Audit & Supervisory
Board Members

100%

100%

Number of meetings

AttendanceNote: *Regarding the two Outside Directors (elected at the Ordinary General Meeting of Shareholders held in June 2015), the rate of attendance is calculated based on the number of
meetings of the Board of Directors held after their appointment (seven meetings).

Directors (as of June 30, 2016)
Title

Concurrent positions at major subsidiaries
Foundation

Name

Masami Tashiro

Chairman & CEO

Junji Nakamura

Senior Managing Director
Store Development & Property Management

Akira ShinohanaManaging Director
Human Resource Management & General Affairs andRisk Management

Yukihiko Shizu

Director
Finance & Information System

Chikayo Yasuhara

Director
Corporate Strategy

Satoshi Yoneyama

Director

Managing Director
Valor Co., Ltd.

Masami Shidara

Director

Director, Sourcing and Merchandise
Valor Co., Ltd.

Morisaku Wagato

Director

CEO
Home Center Valor Co.,Ltd.

Satoru Yokoyama

DirectorCEO
AXTOS Co.,Ltd.

Katsuyuki Mori

Director

CEO
Tachiya Co.,Ltd.

Koichiro Kubo

Director
Audit & Supervisory Committee member

Mutsuo Masuda

Outside Director
Audit & Supervisory Committee member

Hirofumi Hata

Outside Director
Audit & Supervisory Committee member

Tokimitsu Ito

Outside Director
Audit & Supervisory Committee member

Valor Holdings Co., Ltd. Annual Report 201623

Compliance and Risk Management Systems

Compliance system
The Company considers ensuring compliance to be an important management issue and has articulated the Corporate Philosophy, thebasic management policy, and the Action Guidelines for Corporate Ethics. Efforts are made to ensure that all officers and employees
comply with them as well as the Compliance Rules. The Compliance Committee is convened when deemed necessary to improve,
maintain, and develop the compliance system.

Relationship between the Company’s organs and the internal control system
The Audit Office conducts operational audits based on an audit plan. Audit results are reported to Directors and the relevant departments
to ensure sound business operation. The main role of Audit & Supervisory Board Members (currently Audit & Supervisory Committee
Members) is to oversee performance of duties by the Board of Directors and investigate operations and the financial positions of theCompany and of the operating companies. They attend meetings of the Board of Directors and monitor details surrounding management.
The Audit & Supervisory Board Members (currently Audit & Supervisory Committee Members), the Audit Office, and the Accounting
Auditor meet periodically and exchange information and views on matters including reporting and explanation of their respective audit
plans, progress, and results. The Audit & Supervisory Board Members (currently Audit & Supervisory Committee Members), the Audit
Office, and the Accounting Auditor receive reports from Directors and departments in charge of internal control, and discuss and consider
appropriateness of the design of the internal control system.

Reinforcement of the system following the transition to a holding company
The Company has established the rules for whistleblowing and operates a whistleblowing system as part of internal control systems
concerning violations of the law and other compliance issues. Following the transition to the holding company structure in October 2015,
the Audit Office has thoroughly notified all operating companies of the whistleblowing system and expanded its operation.
In order to ensure appropriateness of operation of all operating companies, manufacturing and processing sites established in recent
years are also subject to operational audits, in addition to the headquarters and stores that have been subject to operational audits. Groupwide audits are also conducted systematically in line with the transition to the holding company structure.

Operational audit

Number of operational audits

Of which the number of Groupaudits*

FY2013

FY2014FY2015

181

268

258

28

30

32

Note: * Excluding audits of Valor Co., Ltd. before transition to the holding company structure, and audits of Valor Holdings Co., Ltd., Valor Co., Ltd., and Home Center Valor Co., Ltd.
following transition to the holding company structure.

24 Valor Holdings Co., Ltd. Annual Report 2016

Risk management system
The Company has established the basic rules for risk management and manages Company-wide risk of losses in a comprehensive,
integrated manner under a clearly defined risk management system. The Audit Office audits risk management statuses when deemednecessary and reports the audit results to the Board of Directors and the Audit & Supervisory Board (currently Audit & Supervisory
Committee).

Business risks
The Company considers that the following matters may have a significant impact on investors’ decisions concerning the Company’s

1. Factors that may have an impact on the Group’s financial performance(1) External environment of the retail business (economic trends, competition, taxation on consumption, climate change, etc.)(2) Store opening policies (difficulty in securing land or premises satisfying the store opening criteria, regulatory restrictions, etc.)(3) Food safety (quality incidents such as food poisoning and contamination, erroneous food labeling, etc.)(4) Entry to new businesses (in the event that anticipated results cannot be achieved because of changes in the external
environment, etc.)(5) Natural disasters, etc.

Foundation

statuses of operations and accounting.

2. Regulatory restrictions concerning the Group(1) Act on the Measures by Large-Scale Retail Stores for Preservation of Living Environment (in the event that it is not possible
to open new stores or increase the floor space of existing stores as planned)(2) Leakage of personal information(3) Other regulatory restrictions
3. Accounting standard for impairment of fixed assets

Commitment to Food Safety
Risk concerning food safety has a great bearing on thebusiness model that optimizes the entire process fromsourcing to retailing, which is pursued by the Group. The
mainstay supermarket business includes not only thesupermarket outlets but also many other sites that handle
food, such as sites for food production and processing andproduction of agricultural produce. Moreover, the drugstoreand home improvement center businesses also sell food.
Much of the information concerning this risk is gained from
customers and we believe sharing such information
throughout the Group leads to enhancement of the level ofoverall control of the Group.
Taking the opportunity of the transition to a holding
company, the Company established the Risk Management
Department comprising the Quality Control Office, theCustomer Relations Office, and the Legal Affairs Office.

M e e t i n g s a re h e l d p e r i o d i c a l l y i n w h i c h t h e R i s k
Management Department, the Audit Office and thepersonnel responsible for quality control and customer
relations at operating companies participate; we are alsoestablishing systems for information sharing andimprovement.
We emphasized the following activities in FY2015.
· S etting of risk levels for information provided bycustomers· E stablishment of an information sharing system forcustomers’ requests etc.
· On-site inspection of stores and factories by the Quality
Control Office and sharing of the inspection results· Improvement concerning content and methods of foodquality inspection

Valor Holdings Co., Ltd. Annual Report 201625

Society (Human Resources Development)

Human resources development fuels growthBased on its Corporate Philosophy of “Creation, Advance & Challenge,” Valor seeks individuals who are ambitious and eager to take up
challenges. We are actively recruiting people with expertise in such areas as food production and processing and distribution, in order toestablish a business model that optimizes the entire process from sourcing to retailing, as well as in preparation for expansion of the scopeof the supermarket, drugstore, and home improvement center businesses.

More recruiting offices
In order to respond to expansion of the scope of the business and diversification of
the expertise required for operations, we are creating an environment that facilitates
recruitment, making it easier for recruitment staff to conduct interviews andenhancing convenience of the recruitment process for the candidates. In April 2014,
we opened the relatively accessible Valor Recruiting Office Meieki in Nagoya, Aichi
Prefecture. In February 2015, in line with the expansion of our geographicalcoverage, we opened the Valor Recruiting Satellite Kyoto Shijo-Karasuma in
Nakagyo-ku, Kyoto. Additionally, with the opening of the Company’s Nagoya
Headquarters in March 2015, we took the opportunity of integrating the recruiting
office in Nagoya into the Nagoya Headquarters.

Recruitment by business type
RetailSports club

Food production and processing

Distribution-related(people)
500

400

300

200

100

0

FY2012FY2013

FY2014FY2015

Education & training system
The Group’s education & training system is based on Group-wide standard education & training programs plus programs on the expertiseneeded at each operating company. Group-wide programs include a program focused on the Corporate Philosophy (DNA) offered to new
employees and managerial personnel, as well as position-based programs offered to personnel who have been promoted as a result
passing the Group’s qualification exams. The DNA program is an opportunity to connect philosophy and practice by cultivating the attitude
and mindset concerning work expressed in the Corporate Philosophy advocated by Valor’s founder Yoshimi Ito and from lectures by thecurrent management. The curriculum of the position-based programs puts emphasis on practicality, with several instructors invited fromoutside the Group. The objective is to equip personnel with the attributes required for managerial positions.

26 Valor Holdings Co., Ltd. Annual Report 2016

HR systems to help diverse people flourish
We support people who are highly motivated and whose experience and backgrounds are diverse. The principal HR systems are as
described below.
StatusResults in FY2015*

Promoting female workers
Ratio of female managerial
personnel to all managerial
personnel (managers or higher)

7.4%(Valor Holdings Co., Ltd: 5.6%)

Number of female workers who tookmaternity leave or child care leave

97 people

Maternity leave ………

(including 62 part-time workers)

118 peopleChild care leave ………

(including 73 part-time workers)

Foundation

Aside from offering all our employees opportunities todisplay their personalities and their capabilities, we also aim
to enhance the workplace environment where female
workers can flourish in their careers. The key initiatives are
as follows:
1. D evelopment of potential candidates for managerial
positions (buyers, deputy store managers, managers, etc.)
2. Improvement of the workplace environment corresponding
to the phase of the individual’s life and career- R aising awareness about maternity leave, child careleave, and family care leave- Creation of a workplace environment that facilitates easy
return to work

Hiring of the disabled
We are actively recruiting people with disabilities who wish
to work for regular companies and be independent. The Gifu
Prefectural Government established a registration system in
November 2011 to enable companies to support theemployment of people with disabilities in cooperation withschools for learners with special needs. Valor registered in
February 2012.
In order to facilitate employment of people withdisabilities also in other regions and support them so thatthey can work at Valor for a long time, we intend to promote
education and training of our store staff and while facilitating
collaborations with regional recruitment centers and thesocial welfare departments of municipalities.

Contracted by Gifu Prefecture
Adviser for people with disabilities seeking
jobs (from FY2013 to present)
Adviser for employment of people withdisabilities (from FY2015 to present)
Member of Gifu Prefecture taskforce forabolition of discrimination against people
with disabilities (from FY2015 to present)

Post-retirement reemployment program
Against the backdrop of population aging, Valor has
introduced a post-retirement reemployment program
whereby Valor reemploys all the employees who are willingto work after retirement, in principle. Eligible employees may
be reemployed after they retire until they reach 65 years old
if they wish to do so.

Usage rate of postretirement reemployment
program ……………………

93.1%

Promotion to full-time employees
Six of the nine key operating companies of the Group have programs topromote part-time workers to full-time employees. Part-time workers
have periodic opportunities for promotion to full-time employees. Parttime workers who satisfy the criteria can apply for promotion and, after
screening, successful applicants are promoted to full-time employees.
In addition, heads of departments can recommend part-time workers
as candidates for promotion to full-time employees.

Number of part-timeworkers promoted to fulltime employees ……………

123 people

Note*: Valor Holdings Co., Ltd. and key operating companies (Valor Co., Ltd., Home Center Valor Co., Ltd., Chubu Yakuhin Co., Ltd., Tachiya Co., Ltd., Shokusenkan-Taiyo Co., Ltd.,AXTOS Co., Ltd., Chubu Foods Co., Ltd., Chubu Kosan Co., Ltd., and Chubu Ryutu Co., Ltd.), which account for about 90% of the Valor Group’s workforce.

Valor Holdings Co., Ltd. Annual Report 2016

27

The Environment

Environmental Policy
We recognize that reducing the environmental impacts of our businessactivities is an important task. And for us to achieve reductions, we identified
issues that need to be addressed and tackle them in cooperation with local
communities.

Issues to be tackled
1. Reduction of CO2 emissions mainly through energy saving and resourcesaving
2. Reduction of food waste and other waste
3. Expansion of sales of environmentally friendly products
4. Promotion of green purchasing

Material FlowINPUTOUTPUT

Head office, offices, related facilities
Electricity and others
Electricity consumption ……

37MWh
179t

Copier paper ………………

CO2 emissions …………………
Head office, offices, etc.

18t

(from electricity consumption)(including Valor Holdings)

Fuel

Exhaust gas

All company-owned vehicles
Gasoline ………………

1,042kl

CO2 emissions ………

2,419tCompany-owned vehicles

Fuel

Distribution centers

All delivery vehicles

10,179kl

Light oil ………………

Exhaust gas

CO2 emissions ……

26,312t

Delivery vehicles

Electricity, water, gas
Electricity consumption …
Water consumption …
Gas consumption …

347,590MWh

Stores1,607,000m³
2,744,000m³

CO2 emissions …

179,546t(Total electricity and gas consumption)

Supermarkets
Home improvement centers

Note: *Calculation covers Valor Co., Ltd. and Home Center Valor Co., Ltd. For fuel, calculation covers all delivery vehicles including those owned by and chartered by Chubu Kosan Co., Ltd.

28 Valor Holdings Co., Ltd. Annual Report 2016

Activity Highlights
Results of the major management items for the year under review will be the basis for performance indicators for the next year andsubsequent years. We pursue initiatives in order to contribute to the environment, society and our customers.

Promotion of recycling

Reduction of waste

Management items

Specific initiatives

FY2015 targets

FY2015 results

Reduction ofpower
consumption· Demand management· Management of air-conditioning
temperature· T urning off of unnecessary lighting· Product display that does notinterrupt the flow of refrigeration· Introduction of highly efficientfacilities and equipment

Consumption rate:
525(excluding DC usage)(1% reduction of theconsumption ratecompared with theprevious year)

Results

FY2016 targets

Consumption rate:
508(excluding DC usage)(3.2% reduction of
the consumption ratecompared with theprevious year)

Lighting of supermarket stores was changed
to LED lighting to enhance the efficiency ofelectricity usage. Improved usage ofelectricity is the key to reducing
consumption.

Consumption rate:
503(excluding DC usage)(1% reduction of theconsumption ratecompared with theprevious year)

1% reduction of fuelconsumption

Compared with theprevious year
· Driving distance:107%· Amount of fuel used:110%· Fuel consumption:
103%

Trucks for logistics· Turning off engines whenvehicles are stationary· Instructions and educationfor energy-efficient driving

Because of store openings at distantlocations, driving distance, fuel consumption,and fuel economy all increased comparedwith the previous year.

1% reduction of fuelconsumption· Charging for plastic bags
· Implementation of “My Bag”
campaign· “No Plastic Bag Day”

Proportion ofcustomers avoiding
use of plastic bags:
87% (All stores ofValor Co., Ltd.)

Proportion ofcustomers avoiding
use of plastic bags:
84.7% (All stores ofValor Co., Ltd.)The proportion of customers avoiding the use ofplastic bags at all stores of Valor Co., Ltd. as ofMarch 2016 fell 2.3 percentage points comparedwith the figure for the previous year. The numberof stores charging plastic bag fees increased from
220 to 224, but 11 stores have yet to introduce
such fees. We will cooperate with our customers
to reduce the use of plastic bags.

Proportion ofcustomers avoiding
use of plastic bags:
87% (All stores ofValor Co., Ltd.)· Planned production· Early small discounts
Reduction of food· Review of merchandise mix
waste
for the evening andadjustment of volume

Ratio of waste
generated to net
sales
99% compared withthe previous year
(Rate: 0.0484)

Ratio of waste
generated to net
sales
109.7% comparedwith the previous year
(Rate: 0.0536)

Continued efforts to reduce unsold products
and other waste are necessary.

Ratio of waste
generated to net
sales
99% compared withthe previous year
(Rate: 0.0530)· Reduction of products to bedisposed ofPromotion of· More departments
recycling of foodconducting recyclingwaste· More products to berecycled

Number of storesrecycling foodwaste: 192(110% comparedwith the previous
year)

Number of storesrecycling food waste:
223(127% comparedwith the previous
year)

We will increase the number of stores where
food waste is recycled. Efforts to further
reduce the volume of products for disposal
are necessary.

Number of storesrecycling food waste:
230(103% compared with theprevious year)· Sorting and storage of used
Promotion of
paper at designated places
recycling of used
· More stores to recycle used
paper
paper

· Number of stores recycling
used paper: 92(128% compared withthe previous year)· Recycling volume:
100,000 kg(210% compared withthe previous year)· Number of stores recycling
used paper: 67(93% compared with theprevious year)· Recycling volume:
52,318 kg(110% compared withthe previous year)

The recycling volume exceeded the previous
year’s result. We will revise the system forrecovery of used paper to further reduce
waste.

· Number of stores recycling
used paper: 80(119% compared withthe previous year)· Recycling volume:
52,500 kg(100% compared withthe previous year)

Increase in thenumber of stores
where recyclingboxes are installed

Number of stores
where recyclingboxes are installed· Milk cartons: 235· Aluminum/steel cans:226· Plastic trays: 226· PET bottles: 223

The next step is to introduce more large
recycling boxes and increase the number ofrecyclable items.

Increase in thenumber of stores
where recyclingboxes are installed

Energy-efficientdriving

Increase of the
proportion ofcustomers
avoiding use ofplastic bags

Promotion ofrecycling ofcontainers andpackaging· Installation of more recyclingboxes· Expansion of the scope ofrecyclable items· Review of recycling stations

Evaluation

Foundation

Reduction of CO2 emissions

Environmental Performance

Note: * Calculation of “Reduction of CO2 emissions” covers Valor Co., Ltd. and Home Center Valor Co., Ltd. Calculation of other items covers Valor Co., Ltd.

Valor Holdings Co., Ltd. Annual Report 201629

FY2015 Financial Review

Summary of consolidated results and financial conditions
In FY2015, the first year of the three-year strategic plans, the ValorGroup worked to improve operational efficiency and focused on
three key policies: 1) structural reforms centering on reinforcementof the existing stores in the supermarket segment and efficientutilization of infrastructure, 2) development of key growth drivers
to expand drugstore and home improvement center operations,and 3) reform of the organizational structure to achieve growth ofoperating companies and strengthen governance. Targets on aconsolidated basis for FY2017, the final year of the three-year
strategic plans, are revenues from operations of ¥550.0 billion,
operating income of ¥21.0 billion, ordinary income of ¥22.0 billion,
and net income of ¥13.0 billion. Targets for efficiency indicators
are a return on assets (ROA) of 8.0% and a return on equity (ROE)of 11.0% or higher, and as a financial target, the Group pursues adebt equity ratio of 0.9 or lower.
Consolidated operating results for FY2015 were revenues fromoperations of ¥497,463 million, an increase of 5.7% year on year,
operating income of ¥16,683 million, an increase of 11.2%,
ordinary income of ¥17,586 million, an increase of 9.2%, and net
income of ¥10,759 million, an increase of 16.8%. Revenues fromoperations increased for the 21st consecutive year and earnings
were the highest ever.
The breakdown of the increase in revenues (¥26,899 million)
was ¥14,682 million for the drugstore business, ¥7,807 million forthe supermarket business, and ¥2,073 million for the home
improvement center business. In particular, in the drugstore
business, growth rate of existing stores increased to 10.6% andnew store openings, the highest for the second consecutive year,
also contributed. The breakdown of the increase in earnings(¥1,683 million) was ¥775 million for the drugstore business, ¥438
million for the home improvement center business, and ¥126
million for the supermarket business. Expansion of the drugstoreand home improvement center businesses and improved
infrastructure efficiency boosted profit.
Whereas the gross profit ratio was unchanged from theprevious year, the expense ratio decreased 0.1 percentage points
from the previous year owing to reduction of utilities cost(decrease of ¥495 million) and curtailment of advertisingexpenses. A reduced effective corporate tax rate and a merger ofsubsidiaries with deficits also contributed to higher profitability.
ROA improved from 6.7% for the previous year to 7.0% owing to
improvement of the ratio of ordinary income to revenues fromoperations, ROE improved from 10.7% to 11.4% owing toincrease in net income and purchase of treasury shares, and thedebt equity ratio improved from 1.0 to 0.9 as a result of promoting
the repayment of interest-bearing debts.

Financial position
Total assets increased ¥10,529 million from the end of theprevious year to ¥255,916 million. The main factors were an
increase of ¥2,575 million in inventories because of new store
openings and an increase of ¥6,658 million in property, plant andequipment.
Total liabilities increased ¥2,383 million from the end of theprevious year to ¥156,889 million, mainly due to an increase of

30 Valor Holdings Co., Ltd. Annual Report 2016

¥2,346 million in notes and accounts payable-trade and anincrease of ¥1,051 million in income taxes payable despite adecrease of ¥2,525 million in loans payable. Net assets excluding
non-controlling interests and subscription rights to new shares
increased ¥8,106 million from the end of the previous year to¥98,408 million and the shareholders’ equity ratio increased from
36.8% for the previous year to 38.5%.

Cash flows
Cash and cash equivalents at March 31, 2016 were ¥17,103 million, a decrease of 14.3% year on year. Although free cash flow (cashflows from operating activities minus cash flows from investing activities) was positive at ¥3,945 million, cash flows from financing activities
was negative at ¥6,758 million.
Cash flows from operating activities
Net cash provided by operating activities amounted to ¥22,991 million, having increased ¥733 million compared with the previous year.
This increase was mainly attributable to income before income taxes amounting to ¥16,443 million, depreciation and amortization
amounting to ¥12,683 million, and an increase in notes and accounts payable-trade amounting to ¥2,357 million, despite cash outlays
including an increase in inventories amounting to ¥2,580 million and income taxes paid amounting to ¥5,116 million.
Cash flows from investing activities
Net cash used in investing activities amounted to ¥19,045 million, having increased ¥3,384 million compared with the previous year. The
main factors were purchase of property, plant and equipment amounting to ¥15,895 million for new store openings and refurbishment andpayments for guarantee deposits amounting to ¥1,853 million, despite proceeds from collection of guarantee deposits amounting to ¥507
million.

Net cash used in financing activities amounted to ¥6,758 million, having increased ¥3,013 million compared with the previous year. The
main factors were a net decrease in short-term loans payable amounting to ¥700 million, repayments of long-term loans payableamounting to ¥11,925 million, cash dividends paid amounting to ¥1,753 million, and proceeds from sales of treasury stock amounting to¥1,253 million, despite proceeds from long-term loans payable amounting to ¥10,100 million.

Financial Information

Cash flows from financing activities

Policy on Profit Distribution and Dividends for FY2015
The Company’s basic policy is to ensure stable and continuous
returns of profit to shareholders while increasing the internal
reserves to strengthen its corporate structure in preparation forstable business development over the long term. In accordancewith this policy, our medium- to long-term target is to achieve a
consolidated payout ratio of 25%.

In view of the strong performance in FY2015, the Company
increased the year-end dividend by ¥2, compared with theprevious year to ¥19 per share. Combined with the interim
dividend of ¥17 per share, this resulted in total annual dividends
for FY2015 of ¥36 per share, ¥3 higher than for the previous year.
The payout ratio was 17.2%.

Forecasts for FY2016
The Valor Group will continue its efforts to achieve the threeyear strategic plan with the aim of improving operational efficiency
and establish the foundations for further growth. In the
supermarket business, the drugstore business, and the home
improvement center business, we will focus on establishingcompetitive formats; at the same time, we will work to improve
profitability through efficient utilization of infrastructure, which wehave been upgrading in recent years, and through the optimum
allocation of resources via the holding company system.
In FY2016, the plan calls for opening of a total of 62 stores in
the Group: 10 supermarket stores, 40 drugstores, one home
improvement center, 10 sports clubs, and one pet shop. In
addition to expansion of the existing stores, we also intend to
expand our operations. The plan calls for capital expenditure of¥22.0 billion, consisting of investment in new stores of ¥15.9,
investment in existing stores of ¥3.0 billion, and other investmentof ¥3.1 billion.
Based on the above-mentioned assumption, forecasts forconsolidated financial performance for FY2016 are as follows:
revenues from operations of ¥520.0 billion, an increase of 4.5%
year on year; operating income of ¥18.4 billion, an increase of
10.3%; ordinary income of ¥19.4 billion, an increase of 10.3%;
and net income of ¥11.5 billion, an increase of 6.9%. For
dividends, the Company intends to pay annual dividends of ¥40
per share, an increase of ¥4 compared with FY2015, consisting of
an interim dividend of ¥19 per share, an increase of ¥2 comparedwith FY2015, and a year-end dividend of ¥21 per share, anincrease of ¥2.

Valor Holdings Co., Ltd. Annual Report 201631

Consolidated Financial Statements (Summary)
Valor Holdings Co.,Ltd. and Subsidiaries
The financial year ended March 31, 2015 and 2016

Consolidated Balance Sheet(Millions of yen)

FY2014(Millions of yen)

FY2015FY2014FY2015

Notes and accounts payable-trade33,03035,376

Short-term loans payable

17,67016,970Current portion of bonds

42

7,000

Current portion of long-termloans payable

12,01012,892

Lease obligations

1,052

1,182

Income taxes payable

2,601

3,653

Provision for bonuses(Liabilities)(Assets)

Current liabilities

Current assets
Cash and deposits

20,10017,247

Notes and accounts
receivable-trade

5,744

6,348

Merchandise and finished goods

28,21830,774

Raw materials and supplies

485

505

1,631

1,569

Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets

8,165

10,223(9)(52)

64,336

66,615

Noncurrent assets
Property, plant and equipment
Buildings and structures

173,586

2,164

2,357

Provision for directors’ bonuses

161

163

Provision for point card certificates

424

484

Provision for loss onrecollection of gift certificates

182

200

184,277

Other

14,75815,177

Total current liabilities

84,09895,459Bonds payable

7,000

—

Long-term loans payable

41,191

38,483

Lease obligations

7,913

8,423

Accumulated depreciation(87,606)(94,822)

Buildings and structures, net

85,97989,454

6,314

7,067

Accumulated depreciation(3,400)(4,026)

Machinery, equipment
and vehicles, net

2,914

3,041

Deferred tax liabilities

312

239

Land

36,14637,415

Provision for directors’
retirement benefits

936

853

Lease assets

10,677

12,294

Provision for retirement benefits

2,714

2,738

Accumulated depreciation(3,925)(4,953)

Asset retirement obligations

4,606

5,014

Lease assets, net

6,751

7,341

Long-term deposits received

5,600

5,559

Construction in progress

2,260

2,912

Other

131

117

Other

25,202

27,905(18,996)(21,153)

6,206

6,752

140,260

146,918

Machinery, equipment
and vehicles

Accumulated depreciation
Other, net
Total property, plant andequipment
Intangible assets

Noncurrent liabilities

Total noncurrent liabilities

70,40761,429154,505

156,889

Capital stock

11,916

11,916

Capital surplus

12,69912,713Retained earnings

66,83475,841

Treasury stock(1,416)(2,596)

Total shareholders’ equity

90,034

97,875

306

368

4

(23)

131

161

(175)

26

267

533

Total liabilities(Net assets)
Shareholders’ equity

Goodwill

248

173

Lease assets

68

19

Other

6,488

7,105

Total intangible assets

6,804

7,298

1,898

2,306

871

785

Deferred gains (loss) on hedges

Deferred tax assets

4,143

3,995

Guarantee deposits

24,06824,960

Other

3,518

3,261

Foreign currency translation
adjustment
Remeasurements of defined
benefits plan

Allowance for doubtful
accounts

(515)

(225)

Total investments andother assets

33,98635,084

Total noncurrent assets

181,050

189,301

245,386

255,916

Investments and other assets
Investment securities
Long-term loans receivable

Total assets

32 Valor Holdings Co., Ltd. Annual Report 2016

Accumulated othercomprehensive income
Valuation difference on
available-for-sale securities

Total accumulated othercomprehensive income
Subscription rights to shares

38

52

Minority interests

540

565

Total net assets
Total liabilities and assets

90,881

99,027245,386

255,916

Valor Holdings Co.,Ltd. and Subsidiaries(Fiscal years ended March 31, 2015 and 2016)

Consolidated Statement of Income(Millions of yen)

FY2014FY2015Net sales

454,052

479,934

Cost of sales

341,024360,223
119,711Gross profit

113,028

Operating revenues

16,511

17,529Operating gross profit

129,539

137,240
5,946

Advertising expenses

5,913

Packaging expenses

77

73

Supplies expenses

479

537

Distribution expenses
Provision for point card certificates
Provision of allowance for doubtful accounts

536

618

1,372

1,679

4

60

515

475

Salaries and wages

45,03447,361

Bonuses

3,329

3,614

Provision for bonuses

2,052

2,181

Provision for directors’ bonuses

161

163

Retirement benefit expenses

567

598

Provision for directors’ retirement benefits

78

90

6,875

7,241

Directors’ remuneration

Welfare expenses
Utilities expenses

8,609

8,114

Rent expenses

17,97919,488

Repair and maintenance

2,468

2,571

Depreciation

10,646

11,250

Amortization of goodwill

168

164

7,667

8,323

114,539

120,556

15,00016,683

Interest income

208

113

Office work fee

814

878

Rent income

993

811

Other

1,553

1,433

Total non-operating incomes

3,569

3,235

Other
Total selling, general and administrative expenses
Operating income

Financial Information

Selling, general and administrative expenses

Non-operating income

Non-operating expenses
Interest expenses
Rent cost of real estate
Other

801

791

1,481

1,034

179

506

2,461

2,332

16,10817,586

Subsidy income

577

97

Other

188

90

Total extraordinary income

765

188

Total non-operating expense
Ordinary income
Extraordinary income

Extraordinary loss
Loss on sales of noncurrent assets

55

1

Loss on retirement of noncurrent assets

252

35

Impairment loss

841

681

Loss on reduction of noncurrent assets

572

151

Loss on valuation of investment securities

15

1

Provision of allowance for doubtful accounts

46

196

56

263

Total extraordinary loss

Other

1,840

1,331

Income before income taxes

15,032

16,443

Income taxes-current

5,276

5,655

Income taxes-deferred

492

51

5,768

5,706

9,264

10,736

Total income taxes
Net income
Profit (loss) attributable to non-controlling interests
Profit attributable to owners of parent

49

(23)

9,214

10,759Valor Holdings Co., Ltd. Annual Report 201633

Consolidated Financial Statements (Summary)
Valor Holdings Co.,Ltd. and Subsidiaries(Fiscal years ended March 31, 2015 and 2016)

Consolidated Statements of Cash Flows(Millions of yen)

FY2014FY2015

Cash flows from operating activities
Income before income taxes

15,032

16,443

Depreciation and amortization

12,168

12,683

Impairment loss

841

681

Amortization of goodwill

134

166

Increase (decrease) in allowance for doubtful accounts

(688)

(229)

Gain on bargain purchase

(116)

—

Increase (decrease) in defined benefit liabilities

206

321

Increase (decrease) in provision for directors’ retirement benefits

55

(83)

Increase (decrease) in provision for point card certificates

39

60

(240)

(131)
791

Interest and dividends income paid
Interest expenses received

801

Loss on retirement of noncurrent assets

252

35

Loss on reduction of noncurrent assets

572

151

Loss (gain) on valuation of investment securities

151

Equity in losses (earnings) of affiliates

(34)

71

Subsidy income

(577)

(97)

Decrease (increase) in notes and accounts receivable-trade

591

(616)

Decrease (increase) in inventories(4,397)(2,580)

Increase (decrease) in notes and accounts payable-trade

(421)

2,357

Increase (decrease) in accrued consumption taxes

3,723

(849)

Increase (decrease) in accounts payable-other and accrued expenses

375

90

Other

362

(419)

28,69828,847

SubtotalInterest and dividends income received
Interest expenses paid

55

27

(784)

(766)

Income taxes paid

(5,712)(5,116)

Net cash provided by operating activities

22,25722,991

Payments into time deposits

(136)

(60)

Proceeds from withdrawal of time deposits

102

53

Purchase of property, plant and equipment(17,263)(15,895)

Cash flows from investing activities

Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales of investment securities
Payments of loans receivable
Proceeds from collection of loans receivable

75

22

(679)

(1,191)

(1)

(41)

924

—

(0)

(110)

30

115

Payments for guarantee deposits(1,742)(1,853)

Proceeds from collection of guarantee deposits

3,211

507

Proceeds from guarantee deposits received

186

282

Repayments of guarantee deposits received

(402)

(335)

Purchase of stocks of affiliates

—

(390)

Subsidy income

577

97

Other

(539)

(245)

(15,660)(19,045)

Net cash provided by investing activities
Cash flows from financing activities
Net increase (decrease) in short-term loans payable(4,205)(700)

Proceeds from long-term loans payable

16,664

10,100

Repayments of long-term loans payable(13,454)(11,925)

Redemption of bonds

(85)

(42)

(1,104)(1,254)Purchase of treasury stock(0)(1,253)

Proceeds from sales of treasury stock

87

72

Payments from changes in ownership interests in subsidiaries that do not result in change in scope of consolidation—(2)

Cash dividends paid

(1,646)(1,753)

Net cash provided by financing activities(3,745)(6,758)

Repayments of finance lease obligations

53

(43)

Net increase (decrease)in cash and cash equivalents

2,904(2,856)

Cash and cash equivalents at beginning of period

17,055

19,960Cash and cash equivalents at end of period

19,96017,103

Effect of exchange rate change on cash and cash equivalents

34 Valor Holdings Co., Ltd. Annual Report 2016

Valor Holdings Co.,Ltd. and Subsidiaries(Fiscal years ended March 31, 2015 and 2016)

Consolidated Statements of Changes in Net Assets
FY2014(Millions of yen)

Shareholders’ equity

Balance, March 31,
2014

CapitalStock

CapitalSurplusRetainedearnings

11,916

12,67659,161

Cumulative effects
of changes inaccounting policies
Restated balance,
March 31,2014

Accumulated other comprehensive income
Treasury
stock(1,500)106
11,916

12,67659,268

Total
shareholders’equity82,254

Valuation
Deferred gains
difference on(loss) on
available-forhedges
sale securities

145

—

Total
Subscription
Foreign
Remeasurements accumulated
rights tocurrencyof defined
othersharestranslation
benefits plan comprehensive
adjustment
income

121

(126)

140

58

Noncontrollinginterests

Total net
assets495

82,949106(1,500)82,360

106
145

—

121

(126)

140

58

495

83,055

Dividends fromsurplus(1,647)(1,647)(1,647)

Net income

9,214

9,214

9,214

(0)

(0)

(0)

84

106

106

Purchase oftreasury stock
Disposal oftreasury stock22

Net changes of
items during theperiod

161

4

10

(49)

126

(19)

44

151

Total changes of items
during the period

—

22

7,566

84

7,673

161

4

10

(49)

126

(19)

44

7,825

Balance, March 31,
2015

11,916

12,69966,834(1,416)90,034

306

4

131

(175)

267

38

540

90,881FY2015(Millions of yen)

Shareholders’ equity

Balance, March 31,
2015

Financial Information

Changes of items
during the period

CapitalStock

CapitalSurplusRetainedearnings

11,916

12,69966,834

Accumulated other comprehensive income
Treasurystock(1,416)

Valuation
Total
Deferred gains
difference onshareholders’(loss) on
available-forequity
hedgessale securities

90,034

306

4

Total
Subscription
Foreign
Remeasurements accumulated
rights tocurrencyof defined
othersharestranslation
benefits plan comprehensive
adjustment
income

131

(175)

267

38

Noncontrollinginterests

Total net
assets540

90,881

Changes of items
during the period
Equity transaction
with noncontrollinginterests

(0)

(0)

(0)

Dividends fromsurplus(1,753)(1,753)(1,753)

Net income

10,75910,75910,759(1,253)(1,253)(1,253)

74

88

88

Purchase oftreasury stock
Disposal oftreasury stock

14

Net changes of
items during theperiodTotal changes of items
during the period
Balance, March
31,2016

61

(27)

29

202

265

13

25

305

—

13

9,006

(1,179)

7,840

61

(27)

29

202

265

13

25

8,146

11,916

12,71375,841(2,596)

97,875

368

(23)

161

26

533

52

565

99,027

Valor Holdings Co., Ltd. Annual Report 201635

Corporate Data/ Share Information

Corporate Data

Share Information (as of March 31, 2016)
Valor Holdings Co., Ltd.

Number of authorized shares

200,000,000(Changed from Valor Co., Ltd. in 1 October, 2015)

Number of outstanding shares

52,661,699

Registered head office180-1 Oi-cho, Ena-shi, Gifu 509-7201 Japan

Number of shareholders

14,258Headquarters

661-1 Ohari-cho, Tajimi-shi, Gifu 507-0062 Japan

Stock exchange listings

Tokyo Stock Exchange, first section

Established

July 1958

Representative

Masami Tashiro Chairman & CEO

Paid-in-capital¥11,916 million

Name

Nagoya Stock Exchange, first section

Major Shareholders

Distribution of shareholders by Type
Securities companies 27 shareholders
333 thousands of shares 0.6%

Foreign entities 227 shareholders
11,306 thousands of shares 21.5%
Other companies 396 shareholders
11,470 thousands of shares 21.8%

Number of Shares Percentage ofHeld (Thousands) Shares Held

Shareholder

The Norinchukin Bank

2,542

4.8%

Financial Institutions 51 shareholders
16,568 thousands of shares 31.5%

The Juroku Bank

2,536

4.8%

Individuals, others 13,557 of shareholders
12,983 thousands of shares 24.6%

Ito Youth Scholarship Foundation

2,400

4.5%

Masami Tashiro

1,570

2.9%

Japan Trustee Services Bank, Ltd. (Trust Account)

1,449

2.7%

Tomoko Ito

1,346

2.5%

Shiunsha Co., Ltd.

1,326

2.5%

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

1,256

2.3%

Chubu Agent Co., Ltd.

1,103

2.0%

The Master Trust Bank of Japan, Ltd. (Trust Account)

1,080

2.0%

Stock price and trading volume
Stock price (closing price after adjustment)
(yen)
4,000

3,000

2,000
1,000

0

Volume(thousands of shares)
80,00060,00040,00020,0000(month)4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Note: The Company conducted a 1.2-for-1 stock split on September 27, 2005 and a 2-for-1 stock split on March 28, 2006. The stock prices are retrospectively adjusted to reflect the
aforementioned stock splits.

36 Valor Holdings Co., Ltd. Annual Report 2016

Valor Group
Segment

Subsidiaries

Supermarkets

Valor Co.,Ltd.
Tachiya Co., Ltd.
Shokusenkan-Taiyo Co.,Ltd.
Chubu Foods Co., Ltd.
Daien Foods Co., Ltd.
Shufu-no-Mise Shoji Chubu Honsha Co.,Ltd.
Fukui Chuo Tsukemono Co., Ltd.
V-Solution Co., Ltd.

Chubu Taisei Co., Ltd.
Chubu Meat Co., Ltd.
Hida-Osaka Buna-Shimeji Co., Ltd.
Gujyo Kinoko Farm Co., Ltd.
Toho Sangyo Co., Ltd.
Valor Farm Kaizu Co., Ltd.
VARO Co., Ltd.

Drugstores

Chubu Yakuhin Co., Ltd.
V-drug International Co., Ltd.

V-drug Hong Kong Co., Ltd.
V-drug Chungdu Co., Ltd.

Home Improvement CentersHome Center Valor Co., Ltd.

Morosada Agri Co., Ltd.

Sports ClubsAXTOS Co., Ltd.

Distribution-related operations

Chubu Ryutu Co., Ltd.
Chubu Kosan Co., Ltd.
MENTEX Co., Ltd.
Seiso Co., Ltd.

OthersHome Center Valor Co., Ltd.*
Gito Family Department Co., Ltd.
Chubu Hoken Service Co., Ltd.

VMC (Vending Machine Corporation)
V-Flower Co., Ltd.
Shanghai Valor co., Ltd.

Note*: Pet Shop Business

1958

Established Shufu-no-Mise Co., Ltd. in Ena-shi, Gifu and opened the first supermarket.

1969

Established Chubu Kosan Co., Ltd., a logistics subsidiary.

1970

Changed the company name to Shufu-no-Mise Valor Co., Ltd.

1974

Changed the company name to Valor Co., Ltd.

1977

Relocated the headquarters from Ena- shi to Tajimi- shi, Gifu.

1984

Established Chubu Yakuhin Co., Ltd., a drugstore subsidiary.

1985

Established Chubu Foods Co., Ltd., a prepared food manufacturing subsidiary.

1989

Established a distribution center in Tajimi- shi.

1993

Listed on the Second Section of the Nagoya Stock Exchange.

1995

Merged with Fujiya Co., Ltd., a home improvement center company.

1996

Relocated the headquarters and the distribution center to the current location in Tajimi- shi.

1998

Established AXTOS Co., Ltd. and spun off the sports club business.

1999

Established MENTEX Co., Ltd., a facility maintenance service subsidiary.

2001

Established Hokuriku distribution center in Nanto- shi, Toyama.

2005

Acquired Tachiya Co., Ltd. and Youth Co., Ltd., supermarket subsidiaries.

2007

Acquired Sun Friend Co., Ltd (currently Syokusenkan- Taiyo Co., Ltd.), a supermarket subsidiary.

2010

Established Ichinomiya distribution center in Ichinomiya- shi, Aichi.

2012

Established Hokuriku processing center for fresh meat in Nanto- shi, Toyama.

2013

Established Shizuoka integrated center in Shimada- shi, Shizuoka.

Corporate Data

History

Started a material wholesale business for stores by Chubu Ryutu Co., Ltd.

Assigned to the First Section of Tokyo Stock Exchange and Nagoya Stock Exchange

Established Kani distribution center for products stored at ambient temperatures in Kani- shi, Gifu.

Established Kani distribution center for chilled products.
Established Ogaki processing center for fresh meat in Ogaki- shi, Gifu and Kani processing center for fresh vegetables and fruits in Kani- shi.
2015

Made a transition to a holding company and changed the company name to Valor Holdings Co.,Ltd.

Valor Holdings Co., Ltd. Annual Report 201637

“Valor” is derived from a Late Latin word meaning ‘a person of courage’.
We believe in courage as essential to fulfill our social responsibilities.

Forward Looking Statement
This report’s coverage extends beyond current
information and date for the Valor Group to futureforecasts. These forecasts represent assumptionsand viewpoint based on information available at thetime of publication. The actual results may differ
from the forecasts due to various circumstancesand external environmental factors.

Valor Holdings Co.,Ltd.
For IR-related Inquires
Investor Relations & Public Relations

661-1 Ohari-cho, Tajimi-shi, Gifu 507-0062 Japan
Phone: +81-572-20-0835

For Stock Transaction Inquires
Regal Affairs Department

3rd Fl., Nagoya-Mitsui Building, 1-16-21 Meieki-minami, Nakamura-ku, Nagoya, Aichi 450-0003 Japan
Phone: +81- 52-551-8601

URL: http://valorholdings.co.jp/ IR Site URL: http://valorholdings.co.jp/ir/