Creating New Values for Local Communities

2021 Annual Report
Fiscal Year Ended March 31, 2021

Annual Report

2021
CONTENTS

About valor
2

Our Journey in Creating Corporate Values

4

The Valor Group Business Models for
Sustainable Growth

Growth Strategy
6

Message from CEO

10 Review of medium-term strategic plans
12 F o r m u l a t i n g a m e d i u m - t o l o n g - t e r mmanagement policy

13 FY2021-2023 Strategic Plans

Results
14 Segment Overview/Segment Information
16 Segment Financial Review

Foundation for Value Creation
18 Sustainability Management
20 Global Environment
22 Local Communities and Global Environment
24 Diversity of Human Resources
26 Corporate Governance
29 Compliance and Risk Management Systems

Financial and Corporate Data
30 11-year Summary of Financial Results
32 FY2020 Financial Review
34 Consolidated Balance Sheet
35 Consolidated Statement of Income
36 Consolidated Statements of Cash Flows
37 Consolidated Statements of Changes in Net
Assets38 Corporate Data/Shares Information

Creating New Values
for Local Communities

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 inmanagement.

Mission Statements

All the employees of the Valor Group should be aware of its social responsibilities foradvancement of local communities and culture. To fulfill them, we perform our duties sincerely;
set challenging 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”.

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

On our way to becoming a destination company* that continues to provide new value
to local communities*Destination company … a company that is chosen by society.

Valor Holdings Co., Ltd. Annual Report 2021

1About Valor

Our Journey in Creating Corporate Values

We will create new values in response to changing social
needs by strengthening our connection with customers
leveraging Group management resources.
The Valor Group has met the diverse needs of local communities by rolling out multi-format retailing which
comprises supermarkets, drugstores and home improvement centers, while maintaining business models that
optimize the entire process from sourcing to retailing. We will achieve medium- & long-term growth by making atransition to a more competitive format and strengthening our connection with customers.

Clarifying our vision under the influence of the novel coronavirus disease (COVID-19)
Under the influence of COVID-19, we were reminded of both our unwavering social mission of providing a stable supply of
products essential to daily life, as well as the necessity to rethink the way we deliver products and services to address new
lifestyles and consumption behaviors. This led us to reorganize our thoughts on just how we see the Group’s role in society andhow we will create value.
As a result, we established “Valor Group Vision 2030” and “Sustainability Vision 2030,” our medium- to long-term
management policies with an eye to the year 2030, and to bring these to reality, formulated the “Valor Group New FY20212023 Strategic Plans.” We will continue to strive toward sustainable growth and the realization of a sustainable society, taking
the stance of “Creation, Advance & Challenge,” as set forth in our Corporate Philosophy.

Revenues Growth(Revenues from operations)Supermarket BusinessSports Club Business

Drugstore BusinessDistribution-related operations

Home Improvement Center Business

Others

1958

59

1960

61

62

63

64

65

66

67

68

69 1970

71

1958- Startup of Supermarket andRelated Businesses of Manufacturing,
Wholesale & Logistics
In 1958, we established Shufu-no-Mise Co., Ltd.
(changed the company name to Valor Co., Ltd. in1974) and opened the first supermarket in Ena-shi,
Gifu. We subsequently established Chubu YakuhinCo., Ltd., a drugstore subsidiary, and Chubu Foods
Co., Ltd., a prepared food manufacturing subsidiary, and started a materials wholesale businessthrough Chubu Ryutu Co., Ltd. We entered into thelogistics business through Chubu Kosan Co., Ltd.,a logistics subsidiary, and in 1989, established thefirst distribution center in Tajimi-shi, Gifu.

Changing Objectives of Capital andBusiness Partnerships
In the past, we executed M&As centering on the supermarket businessto expand the size and scope of our business. Since 2015, we haveacquired food manufactures with unique products and have concluded
capital and business partnerships that lead not only to product sourcing
and development improvements, but also to comprehensive approaches.
2

Valor Holdings Co., Ltd. Annual Report 2021

72

73

74

75

76

77

78

79 1980

81

82

83

84

85

86

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

While expanding the scale of our
supermarket business, we solidified
our foundations for multi-format
retailing. We merged with Fujiya Co.,
Ltd., a home improvement centerc o m p a n y, a n d t h e n est ab lished
AXTOS Co., Ltd. and spun off as p o r t s c l u b b u s i n e s s . We a l s oestablished a distribution network in
H o k u r i k u re g i o n i n re s p o n s e t oexpanding business areas.

Pursuit of Economies of Scales 1995

87

88

About valor

FY2020Exceeded700

billion yen

FY2019Exceeded600

billion yen(Revenues fromoperation)

6,000

FY2016
Exceeded500

billion yen
5,000

FY2011
Exceeded400

billion yen
4,000

FY2007
Exceeded300

billion yen
3,000

FY2004
Exceeded200

billion yen
2,000

FY1999Exceeded100

billion yen
1,000

89 1990 91

92

93

94

95

96

97

98

99 2000

01

02

03

04

2005- Expansion of Supermarket Business

and Challenge to Integrate Business
Processes
In the supermarket business, we
expanded our scale through organic
growth and M&As. The major companies
acquired are as follows: Tachiya Co.,
Ltd., Youth Co., Ltd. and Sun-FriendCo., Ltd.(currently Shokusenkan-Taiyo
Co., Ltd.). We also integrated the entire
process from sourcing to retailing via
our manufacturing and wholesale
subsidiaries, and developed production
bases and distribution centers.

05

06

07

08

09 2010 11

12

13

14

15

16

17

18

19

20 (FY)

2015- Business Process Integration and
Growth Gained from Multi-format
Group Management

In October 2015, we made a transition to a holding company to promote
the growth of business companies
and improve corporate governance.
We took the next step for growth byintegrating home center businesses
as of April 1, 2019 through a shareexchange agreement between
Alleanza Holdings Co., Ltd. andHome Center Valor Co., Ltd.

Expansion of Operational Areas 2005
Increase in Market Share 2005
Enhancement of Product Appeal/
Evolution of Business Models

2015

Valor Holdings Co., Ltd. Annual Report 2021

3

About Valor

The Valor Group Business Models for Sustainable Growth
The Valor Group Business Models
Social Issues

L• Intense competition between formats• Aging and lack of successors in regional agriculture• Possible impact of trade policies on local suppliers

Changes in Labor Market• Aging and decline in workforce• Changing labor-related policies• Labor shortage and increasing labor costs• Aging and declining population• Impact of IT innovation on shopping behavior• Decreasing local suppliers serving local
communities

Changing Global Environment

StoresSupermarket

Connections withcustomers

Drugstore
Home Improvement Center
Pet ShopSports Club

Business Process Integration

Accelerating Change in Consumer &Retail Market

Strengthening connections
with customers

Imbalance between Food Supply and
DemandProcurement& Production
Wholesale
Distribution

Creation ofGroup
Synergies

Maintenance• Impact of global warming and climatechanges on supply of produces

Solutions

Valor Group Vision2030
Our aim is to build a “Valor Economic Zone” thatconnects local communities conveniently andprosperously with the Valor Group’s products,
services, and payments and become a “destinationcompany,” that is chosen through the appeal of
products. To realize this goal, we will strengthen ourconnections with customers and evolve our businessmodel as a manufacturing and retailing company.

4

Valor Holdings Co., Ltd. Annual Report 2021

Sus

Connections with products
Valor Group’s product appeal
In creating a “destination store” that offers seasonal foods and gives
customers a purpose to shop, we will connect with customers throughappealing products that are only available from the Valor Group by utilizing
the Group’s manufacturing capabilities.

Business Process Integration
Together with enhancing the product development and manufacturing
capabilities, and productivity of each manufacturing company that makes
up the Group, we will coordinate
supply chain information throughdigital transformation (DX) and workto accommodate the expansion of
procurement and manufacturingbases as well as inter-company
collaboration.

About valor

Local Communities
Lu VitEC

Lu Vit Card

Valor Group’s product appeal

Digital transformation (DX)• ainoma• Store-based
wholesale business• Other non-store
sales (mobile sales,
others)• Amazon• EC Mall• FIRST, PROsite

Valor Group Lu Vit App

Solutions

Connect 2030
Connecting products, customers,
and society

Information
linkagetainability management

Connections with customers

Management that is conscious ofties with society

Strengthening connections with customers

Strengthening Group governance

Going beyond just our connections with customers that had been
primarily gained through stores, we will work to strengthen new
relationships that address the diversifying lifestyles of people by utilizing
e-commerce (EC) and the Lu Vit Card and app. In regions with lessdeveloped EC infrastructure, we will promote “the Company as adominant force in EC” by using our own management resources, and inlarge areas where EC infrastructure is more mature, we will promote“wide-area collaborative EC” by working with our partners.

We will further promote the Group’s growth potential by ensuringtransparency and strengthening functions of the Board of Directors, aswell as by enhancing the governance of Group management.

Connections with local communities as a particular
to be strengthened
We will use the Group’s management resources to strengthen ties withlocal communities while striving to resolve local issues.

Promoting activities of all Group employees
By promoting activities of all Group employees, we consider the “global
environment,” “local communities,” and “diversity of human resources” tobe key initiatives, to which we will
endeavor to find solutions whilestrengthening ties to the local
Energy and Water Food Loss
Recycling
community. We will implement“Globalenvironment,”“Localcommunities,”andproblem-solving programs in six“Diversity of human resources”
subcommittees, namely, Energy
and Water, Food Loss, Recycling,
Local Communities, Shopping
Local
Shopping
Human Resource
Communities
IssuesActivities
Issues, and Human Resource
Activities.

Valor Holdings Co., Ltd. Annual Report 20215

Growth Strategy

Message from CEO

Masami Tashiro
Chairman & CEO

6

Valor Holdings Co., Ltd. Annual Report 2021

To evolve into a destination company that is chosen bysociety, and grows together with the community

Since 2020, COVID-19 has cast a dark shadow acrossall of society, causing stagnation in a wide range of
economic activities and leading to changes in
consumer behavior. The Group, belonging to the food
distribution industry and active in peripheral fields, hasbeen no exception when it comes to feeling suchimpact, and there is an ongoing situation where eachcompany endeavors to adapt to environmental
changes in order to survive.
However, looking back from a medium- to long-term
perspective, even prior to the COVID-19 pandemic,
the Group’s business environment that focused onsupermarkets had for a decade or so dealt withmanagement issues concerning questions of just how
do we perceive and address changing customer needs
for the past ten years. The COVID-19 pandemic, is, we
believe, a factor that is accelerating those changing
needs. Approximately five years ago, we began trials
of a new store model, and based on the direction its
transformation has taken, we are adapting stores to
the COVID-19 environment.
A pillar of that transformation is the transition to“destination stores.” In recent years, convenience
stores and drugstores have bolstered sales of foodproducts, and furthermore, with the increasing
introduction and use of EC sales, the “proximity tomarket area” that supermarkets had used to theiradvantage has diminished in merit. In other words, we
can say that it is no longer possible for a store to
survive unless its customers feel a strong purpose in
making a visit. While curtailing what had been
aggressive launches of new stores, the Group believedthat it needed to convert existing stores to a model
where the unique product and category mix itself
would be the motivation for customer visits. We
therefore moved forward on the renovation andexpansion of fresh food sections, and strived to
improve product appeal by renewing private brands.

Grow th S trateg yTransformation by transitioning
into a destination store

This management policy, based on “undertaking aparadigm shift from expanding standardized stores toenhancing the appeal of products,” has enabled us toenhance store competitiveness and go beyond market
areas to acquire customers that would not normally betargets, while growing the support that they offer.

Accomplishments made through medium-term
strategic plans to date
Consolidated operating results for FY2020 were revenues
from operations of ¥730,168 million, an increase of
7.7% year on year, which marked an increase for the
2 6th consecutive year. In terms of profit, operating
income amounted to ¥25,648 million, an increase of
65.3%; ordinary income was ¥28,397 million, an increaseof 68.2%; and profit attributable to owners of parent
was ¥12,592 million, an increase of 94.4% for a substantial
increase and a new record high.
As a result, the three-year medium-term strategicplan, which commenced in FY2018, has achieved allits final-year targets, namely, revenues from operationsof ¥680.0 billion, ordinary income of ¥21.0 billion, ROA
of 5.6% or higher, and ROE of 7.7% or higher. We
believe that we are on track to improve the profitabilityof the supermarket business, mainly in existing stores,
which had been a pending issue.
In the supermarket business in FY2020 we leveraged
the stay-at-home demand that existed under the
COVID-19 pandemic to make huge gains, and thiswas a driver of performance growth throughout theGroup. Both the drugstore business and the home
improvement center business increased revenues fromoperations due to increased sales of products thatmeet the needs of new lifestyles within the COVID-19
environment and products that catered to stay-athome demand. The home improvement center
business made a particularly significant contribution to
the Group’s overall profit growth owing to the effects ofthe consolidation of Alleanza Holdings Co., Ltd. On theother hand, the sports club business experienced an
Valor Holdings Co., Ltd. Annual Report 2021

7

Growth Strategy

Message from CEO
unavoidable decline in sales and profit due to thevoluntary suspension of store operations in responseto the request for suspension of operations following
the declaration of a state of emergency, as well as theclosure of certain stores.
Looking back on the past, the Group’s basic policy inthe five-year medium-term strategic plan that began in
FY2010 was to “expand the scale of operations,” andwe aggressively opened new stores and expanded ourmanufacturing and retailing functions. In the following
three-year medium-term strategic plan that began in
FY2015, the Group sought to enhance efficiency, andfocused on structural reforms and streamlined
infrastructure in its supermarket business, while
continuing to open a high level of new stores andentrusting the drugstore business to drive the Group’s
growth.
As I mentioned earlier, in the final plan, which is a
succession of the previous plans, we have navigatedmanagement toward a basic policy of “undertaking aparadigm shift from expanding standardized stores toenhancing the appeal of products,” and have achieved
steady growth amid an environment transformed by
the COVID-19 pandemic, which we did not anticipate
when we formulated the plan.

Realizing two medium- to long-term visions on
our way to 2030
In rethinking just how we see the Group’s role insociety and in what way we will create value in thesociety of tomorrow, the Valor Group has clarified its
medium- to long-term management policies leading
up to 2 0 3 0 as the “Valor Group Vision 2 0 3 0” and“Sustainability Vision 2030.” In order to endure as an
indispensable company that is chosen by society, overthe next nine years we will realize the two visions
stated here, and through these efforts we will build
overwhelming strength.
With Valor Group Vision 2030 we will position ourdominant areas as central to the creation of Valor
Economic Zone that connects local communities with
the Valor Group’s products, services, and payments. As
a concept for all areas set for further development, we
aim to evolve from a destination store to a “destinationcompany” that is chosen by society. The expansion ofbusiness development and diverse functionality of theGroup are generating new business opportunities at the8

Valor Holdings Co., Ltd. Annual Report 2021

request of local communities, governments, andcompanies, and by giving form to these opportunities
we will build a comprehensive economic zone that
surpasses the framework of stores. Nine years fromnow, in FY2029, we are keen to expand the scale of ourbusiness to “over ¥1 trillion in revenues from operations,”“over ¥48.0 billion in operating income,” and “over ¥50.0
billion in ordinary income,” and to secure an efficiency of“9% ROIC” by increasing the operating margin and thereturn on invested capital.
Sustainability Vision 2030 seeks to contribute to asustainable society through our business activities andto continue as a company that grows together with all
our stakeholders. We have set KPIs relevant to therealization of a decarbonized society and the reductionof food waste, and will continue efforts to reduce ourenvironmental impact over the long term. Specifically,
we aim to lower by 40% total greenhouse gas emissions
from our supply chain in FY2029 (compared to FY2020)
and a 45% reduction in food waste generation (comparedto FY2016).

New three-year medium-term strategic plans
to connect products, customers, and society
Valor has commenced our new FY2021-2023 strategicplans as the first step toward realizing the Valor Group
Vision 2030 and Sustainability Vision 2030. The strategic
goal of this plan is “Connect 2030: Connecting Products,
C u s t o m e r s , a n d S o c i e t y, ” a n d t h r o u g h t h eimplementation of this goal we seek to achieve growth
into a destination company. Connect 2 0 3 0 is thefoundation that supports the realization of our vision,and guides the direction of our efforts toward our
vision for 2030 as the three “connections.”
First, in “connections with products,” we will
respond to changes in society and consumer behavior
by evolving our business model through leveraging ourfresh food sales and product capabilities and ourmanufacturing and retail supply chain functions. The
second is “connections with customers.” Here we will
strengthen ties woven through the new lifestyles ofc u s t o m e r s b y re i n f o rc i n g t h e L u V i t C a rd , o u r
proprietary card with app that provides prepaids e r v i c e s , a n d w i l l a l s o b u i l d o u t e - c o m m e rc e
c a p a b i l i t i e s . T h e t h i rd i s “ m a n a g e m e n t t h a t i s
conscious of ties with society,” where we confront
issues of sustainability, promote the activities of allBecoming a company that grows together withall our stakeholders
In terms of the return of profit to our shareholders, wewill continue to pay stable and continuous dividends

with a target consolidated dividend payout ratio of
25%. Based on this policy, we plan to pay an annual
dividend of ¥56 per share (interim dividend: ¥26 pershare; year-end dividend: ¥30 per share) for FY2021,
an increase of ¥2 over the previous fiscal year. To meetthe expectations of our shareholders, we will strive tofurther improve our business performance andincrease our corporate value while raising even higher
the level of returns.
In July 2021, the Company received the results ofthe determination of compliance with the listing
maintenance standards for the new market category
from the Tokyo Stock Exchange, and confirmed that itcomplies with the standards for the Prime Market.
Based on the results, we have selected the Prime
Market as our new market category and will proceedwith the application process. We would like to ask forthe continued support of our shareholders andinvestors.
By providing new value to local communities andsupporting the creation of a prosperous future, theValor Group will continue to grow together with all its
stakeholders. Please look forward to seeing us tackle
further challenges.

Valor Holdings Co., Ltd. Annual Report 2021

Grow th S trateg yGroup employees as a company that contributes tofuture environmental and community development,
while also endeavoring to bolster governance.
Using these to map out our course, over the next
three years, the Group will implement major policies andsustainability management, aiming to achieve revenues
from operations of ¥780.0 billion, operating income of¥29.0 billion, ordinary income of ¥31.0 billion, ROE of
9.3%, ROIC of 6.3%, and D/E ratio of 0.6 times in
FY2023. In FY2021, the first year of the strategy, we will
invest heavily in the renovation of approximately 30
existing supermarkets to transform them into
“destination stores,” and we also plan to make other
DX-related investments that will lead to the evolution of
our business model. As a result, profit is expected to
decline, but the current operating conditions arehealthy.

9

Growth Strategy

Review of medium-term strategic plans
Flow of three-year medium-term strategic plans
The Valor Group develops a diverse range of businesses, including supermarkets, drugstores, and home improvement centers, and builds
business models oriented toward manufacturing and retailing, which encompasses every step along the way, from manufacturing to
distribution and sales, creating synergies while integrating the Group’s management resources. The Group has been formulating andimplementing medium-term strategic plans since the fiscal year ended March 31, 2011, with the aim of increasing corporate value. In the first
five years, we set the strategic goal of “expanding scale” and accelerated the opening of supermarkets and drugstores while establishing andenhancing infrastructure such as logistics, manufacturing, and processing functions to keep up with business expansion. In the three years
under the FY2015-2017 plans, we aimed to “improve efficiency” through renovation of existing stores and streamlining of infrastructure, andpositioned the drugstore business as a key driver of the Group’s growth while continuing to open stores a high pace. In the following threeyear medium-term strategic plans that started FY2018, we promoted the transformation of supermarkets and other stores into “destination
stores” that offered products and categories that customers would find compelling to visit, and focused on heightening the appeal of
products, a component of this transformation. As stated in our basic policy of “undertaking a paradigm shift from expanding standardized
stores to enhancing the appeal of products,” we successfully transitioned away from growth based on store openings.

Founding
FY2009Corporate
Philosophy

FY2014FY2017

FY2020

FY2023

New three-year
medium-term
strategic plans

FY2029“Creation, Advance & Challenge”

Medium- to long-term
management policy

FY2010-2014
Strategic Plans

FY2015-2017
Strategic Plans

FY2018-2020
Strategic Plans

Strategic goals

Expandingscale

Improving
efficiency

Undertaking a paradigm
shift from expanding
standardized stores toenhancing the appeal
of products

Growth driver

Expansion of store
network

Stable growthbacked by main
businesses

Product
appealStore(Various businessformats)Store(Various businessformats)

Store
Partial EC, other

Connections withcustomers

FY2026Store(Various businessformats)

Valor Group Vision2030
Sustainability Vision 2030

Connect 2030
Connecting products, customers, and society

Product
appealStores, e-commerce (EC)
Proprietary electronic money Lu Vit

Results and topics of past medium-term strategic plans
PeriodChallenges• Secured a scale of operations and improved
infrastructures• Improved profitability• Improved balance sheet• Enhanced corporate values• Increase efficiency in the supermarket business• Strengthen existing stores and improve efficiency ofinfrastructure utilization• Nurture key drivers for growth• Improvement of governance in the holding
company and development of human resources

FY2015-2017
Strategic Plans• Expanded the drugstore business
Revenues increased from 80.4 billion yen to 117.9 billion yen.
• Improved utilization and efficiency of infrastructuresenhanced product development and secured
manufacturing profitschanged sales floor allocation centered on fresh vegetables& fruits, fresh meat and prepared food
• Created group synergies by combining resources
collaborations in opening new stores• Improvement of profitability
Improve profitability by enhancing the appeal of products
and frontline competitiveness• Improvement of asset efficiency
Enhance strategic functions of the holding company
From closed innovation to cooperation• Human resources development and improvement of
productivity

FY2018-2020
Strategic Plans• Enhanced competitiveness gained by transitioning format
to destination stores that clarified motivation to visit store• Platform creation for manufacturing and retailing• Human resources fostered by promoting exchange withinGroup• Improved management efficiency• Strengthened financial structure• Higher product appeal across Group• Crystallization of corporate value in response toaccelerating changes in environment and society

FY2010-2014
Strategic Plans

10

Results

Valor Holdings Co., Ltd. Annual Report 2021

Basic policy of the FY2018-2020 strategic plans
In the previous strategic plan commenced in FY2018, we established a basic policy of “undertaking a paradigm shift from expanding
standardized stores to enhancing the appeal of products.” We set “creation of a more competitive format with a focus on products” as a
medium-to long-term growth initiative, with the intention of improving profitability by growing sales and broadening the market area ofrespective stores.
(Millions of yen)

FY2009 results

FY2014 results

FY2017 results

FY2020 results(FY ended March 31, 2010)

Final year of FY2010-2014 strategic plans

Final year of FY2015-2017 strategic plans

Final year of FY2018-2020 strategic plans

344,900

470,564544,020

730,168

Operating income

9,452

15,00013,47025,648

Ordinary income

9,916

16,10814,93728,397

Net income

3,945

9,214

7,570

12,592

Total assets

176,440

245,386

285,905

404,458

Net assets

58,57890,881

113,167

155,190

Interest-bearing debt

69,10786,88088,821

120,884

Management
efficiency
indicator

ROA

5.7%

6.7%

5.4%

7.2%

ROE

7.0%

10.7%

6.9%

9.2%

D/E ratio

1.2

1.0

0.8

0.8

Based onpayment

11,537

20,131

24,01930,615(single year)(5-year average)(3-year average)(3-year average)

for new store
openings

71.7%

59.9%

57.1%

49.1%

for refurbishingexisting stores

23.1%

15.4%

29.4%

38.2%

for others

5.2%

24.7%

13.5%

12.7%

Revenues from operations

CapitalExpenditures(composition ratio)

Grow th S trateg yResults

Summary of medium-term strategic plans
Quantitative targets achieved
Results

We achieved all our quantitative targets for the fiscal year ended March 31, 2021, which were revenues fromoperations of ¥680.0 billion, ordinary income of ¥21.0 billion, ROA of 5.6% or higher and ROE of 7.7% orhigher. We are on track to improve the profitability of our supermarket business, especially in existing stores.

Improving management efficiency is an ongoing issue
Challenges

We are still on the starting line in terms of initiatives to raise product appeal across the Group and business inthe post COVID-19 period. Although the acquisition of Alleanza Holdings Co., Ltd. as a subsidiary has
contributed to enhancing the appeal of products, issues remain when it comes to management efficiency andfinancial position after consolidation, and our efforts to make further improvements are ongoing.

Valor Holdings Co., Ltd. Annual Report 2021

11

Growth Strategy

Formulating a medium- to long-term management policy
Valor Group Vision2030
Aiming “Destination Company” with product strength throughout the region, and the “Valor Economic Zone” in the dominant-form region.
Under the previous three-year medium-term strategic plan, along with promoting our transformation into a “destination store” withattractive products and categories that motivate customers to visit our stores, as well as advancing partnerships on comprehensive
initiatives, we are beginning to see results in areas such as product procurement, although we believe that it is necessary to make full use
of our diverse management resources in order to achieve further improvements in management efficiency. Our aim is to realize asustainable society and achieve corporate growth through the evolution of our business model, while utilizing our management resources.

Evolving our business model
Today we have a sales network of more than 1,200 stores, including supermarkets, drugstores, home improvement centers, and others,
which gives us the advantage of being in close proximity to our customers. In the future, though, we will strengthen connections with ourcustomers not only through our stores, but also through e-commerce (EC) and our own electronic money, Lu Vit. In addition to making ourmanufacturing capabilities more robust, the transition to a destination company will require the establishment of an efficient supply chainthat can accommodate the expansion of procurement and manufacturing bases and collaboration with partners. For this reason, we will
work to evolve our business model by linking information through digital transformation (DX).

Vision for 2030

Valor Economic Zone” concept“Destination Company” concept

Connect local communities conveniently and prosperouslywith the Valor Group’s product, services, and payments.

To be a company chosen throughappeal of products

Challenges
Advancement of Business
Process integration
between manufacturing
and retailing
Enhancing appeal of
products continuously.

The dominant-form region

Challenges

Maintenance

Strengthen points ofcontact with customers.

Procurement and Production

Move from store centric
to customer centric withresponding to lifestyles
and consumer behavior.

Medium- to long-term
quantitative targets(FY2021-2029)

Scale· Revenues from operations· Operating income· Ordinary income

Efficiency

Throughout the region

ROIC*

Supply chain needs informationsynchronization for responding
to bases and inter-company
collaboration and to efficiently
supply products.

Wholesale
Distribution
Retailing

FY2020

Final year of previous medium-term
strategic plans¥730.1 billion¥25.6 billion¥28.3 billion

FY2023

Final year of medium-term
strategic plans

6.0% (>WACC)

6.3% (>WACC)
Operating margin 3.7%

Gross profit ratio 26.4%
Selling, general and25.3%
administrative expenses ratio

Return on invested capital

2.7 times

FY2026

Reference¥780.0 billion¥29.0 billion¥31.0 billion

Operating margin 3.5%

Operating margin after tax

Data synchronization of
supply chain throughData-Hub

Gross profit ratio
Selling, general andadministrative expenses ratio

FY2029Valor Group Vision 2030

Over ¥1 trillion
Over ¥48.0 billion
Over ¥50.0 billion
8% (>WACC)
Operating margin

Gross profit ratio
Selling, general andadministrative expenses ratio

2.7 times

9% (>WACC)
Operating margin 4.8%

Gross profit ratio
Selling, general andadministrative expenses ratio

3.1 times

Note: Effective from the beginning of the fiscal year ending March 31, 2022, the Company will apply “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29).
In the summer of 2021, launch of a new service in collaboration with Amazon Japan G.K.
*Calculated as follows: Operating income after tax (using the income tax burden ratio after the application of tax effect accounting) / (interest-bearing debt + shareholders’ equity +non-controlling interests)

Business model KPI
Product appeal (Valor Co., Ltd.)· Products manufactured by the Group withannual sales of over \100 million

Store turnover rate (Valor Co., Ltd.)· Sales per store

Connections with customers· Number of LuVit Card holders· Number of registered app members· EC sales volume*

FY2020

Final year of the previous three-year
medium-term strategic plans

FY2023

Final year of the three-year mediumterm strategic plans

114 items¥1.24 billion¥1.3 billion

3.38 million
320 thousand¥5.1 billion

1 million¥10.0 billion

FY2026FY2029Reference

Valor Group Vision 2030

No. 1 in sales of prepared foods
manufactured by the Group“Ginger flavored! Deep fried chicken”

300 items¥1.4 billion¥1.5 billion
6 million
3 million¥50.0 billion

Note: *EC sales (drugstore and home improvement center businesses), ainoma online supermarket service delivering to offices, drive-through, and other non-store sales businesses.
In the summer of 2021, launch of a new service in collaboration with Amazon Japan G.K.

12

Valor Holdings Co., Ltd. Annual Report 2021

FY2021-2023 Strategic Plans
FY2021-2023 Strategic Plans
Quantitative targets (FY ending March 31, 2024)
Scale

Revenues from operations
ROE

Connect 2030

Connecting products, customers, and society

Major Policies

9.3 %

ROIC

6.3 %

D/E ratio¥31.0 billion

0.6 times

Enhancing the appeal of products• Promoting the transition to a “destination store”• Making our manufacturing capabilities more robust• Linking information in the supply chain

Strengthening connections withcustomers• Promoting EC strategy• Leveraging Lu Vit Card and app data
• Formation of foundation for low-cost management• Improving asset efficiency

Improving productivity

Sustainability
Management

ordinary income

Grow th S trateg yManagement efficiency¥780.0 billion operating income ¥29.0 billion

Strengthening Group governance• Improving Board of Directors’ effectiveness• Strengthening supervision of Group companies

Realizing a de-carbonized society
Reducing food waste• 10% reduction in CO2 emissions at Company sites (compared to FY2019)• 35% reduction in food waste generation (compared to FY2016)

Details of major policies• Approximately 30 existing stores in the supermarket business renovated annually• Expand product knowledge and sales training programs• Operation of the Meister system for the training and treatment of experts

Promote transition to a“destination store”
Make manufacturing capabilities
more robust
Link information in the supply chain
Promote EC strategy• Review of product development process for Group manufacturing capabilities• Improve quality and productivity through the replacement of equipment• Introduction of data HUB and improved accuracy of registered information• Company as dominant force in EC/ wide-area collaborative EC

Leverage LuVit Card and app data
Formation of foundation for
low-cost management
Improve asset efficiency• Promotion of digital sales promotions, testing, and marketing using purchase history information (ID-POS data) linked to membership information• Respond to reservation sales, business format links, and diversification of payment methods by enhancing app functionality• Maintain a smart device environment in stores• Business automation and simplification with RPA and AI utilization• Effective use of store assets, integration of functions among Group companies

Promoting EC strategy
Use Company resources in regions with less developed EC infrastructure, and in large areas where EC infrastructure is moremature, promote wide-area collaboration.
Company development

Priority area Company as dominant force in EC
ainoma online supermarket service delivering to offices (B-to-B-to-C)
ainoma pickup (B-to-C)
Degree of EC
infrastructuredevelopment

Store-based wholesale business (B-to-B)

Low

Other non-store sales businesses
Mobile sales (B-to-C)

Training area Specialized contents EC
Company site (B-to-C)
Degree of EC
infrastructuredevelopment

Connections with customers

High

Priority area Wide-area collaborative EC
Net-based supermarket for Amazon Prime members (B-to-C)
ainoma open patent business (B-to-B)
Entry into EC mall (B-to-C)

Valor Holdings Co., Ltd. Annual Report 2021

13

Results

Segment Overview/Segment Information
Revenues from operations by segment and their distribution

Supermarket Business

Drugstore Business

54.3%

20.6%

Revenues from operations

Operating income

Revenues from operations

Operating income

billion yen

billion yen

billion yen

billion yen

396.2

16.1

150.5

3.9

Revenues
from operations

730.1
billion yen(FY2020)

Home Improvement
Center BusinessSports Club
Business

17.8%

Distribution-related
operations

1.2%

1.5%

Revenues from operations

Operating income

Revenues from operations

Operating income

Revenues from operations

Operating income

billion yen

billion yen

billion yen

billion yen

billion yen

billion yen

130.1

7.3

Supermarket Business

9.1

1.9

No. of stores……………

297

11.2

Ave. floor space……………

3.2

1,813

m2

(Valor Co., Ltd.)Business summary
This business segment includes the operations of supermarket operators Valor Co., Ltd.,
Tachiya Co., Ltd., Shokusenkan-Taiyo Co., Ltd., Kohseiya Co., Ltd., Futabaya Co., Ltd.,Sanko Co., Ltd. and Terao Store Inc.; food processing subsidiaries Chubu foods Co., Ltd.
and Daien Foods Co., Ltd.; and food wholesalers Shufu-no-Mise Shoji Chubu Honsha Co.,
Ltd., Chubu Meat Co., Ltd., and V-Solution Co., Ltd. These companies aim at creating
business models that optimize the entire business process from sourcing to retailing.
Besides opening new stores, the segment has expanded in scale through M&As. The
operating companies have shared knowledge and skills in sourcing and selling fresh foods
through the conversion of Tachiya Co., Ltd. and others into subsidiaries. As for
operating areas, Valor Co., Ltd. operates stores in 13 prefectures, mainly in Gifu and Aichi
prefectures; Tachiya Co., Ltd. has stores in Aichi, Gifu and Mie prefectures; ShokusenkanTaiyo Co., Ltd. operates in Shizuoka prefecture; Kohseiya Co., Ltd. has stores in Yamanashi
and Kanagawa prefectures; Futabaya Co., Ltd. operates in Shiga prefecture; Sanko Co.,
Ltd. has stores in Toyama prefecture; and Terao Store Inc. operates in Chiba prefecture.
14

Valor Holdings Co., Ltd. Annual Report 2021

Drugstore BusinessNo. of stores……………

449

Ave. floor space……………

764

m2

Business summary
We started the drugstore business by establishing Chubu Yakuhin Co., Ltd. andselling medicines in February 1984. Expanding its store network under the brandname of “V-drug”, Chubu Yakuhin Co., Ltd. reached 100 stores in 2003, 200 stores in
2012, 300 stores in 2016, and 400 stores in 2019. It extends across ten prefectures,primarily in Aichi and Gifu prefectures. The chain has increased convenience by
expanding food offerings as well as medicines and cosmetics.
As a local medical support provider, it has developed pharmacies and drugstoreswith pharmaceutical functions, and acquired shares of Hida Pharmaceutical LLC in
July 2019. In 2020, it also acquired Sun Pharmacy LLC and Aoi Pharmaceutical LLC
as it continues to expand stores with pharmaceutical functions.

Home Improvement
Center BusinessNo. of stores……………

R esu l ts

*As of April 1, 2021, Sun Pharmacy LLC was merged into Chubu Yakuhin Co., Ltd.

152

Business summary
The home improvement center business began its operations in August 1990 after thebusiness transfer from Valor Co., Ltd. The segment grew in scale in October 1995
resulting from a merger with Fujiya Co., Ltd. Home Center Valor Co., Ltd. offers building
and agricultural materials for professional needs, mainly at large stores. It also strives tomeet customers’ lifestyle needs by offering a tire replacement and storage service
through “Tire Ichiba”. In February 2018, we acquired shares of FIRST Co., Ltd., an online
retailer of materials and tools. In April 2019, we integrated the home improvement center
business through a share exchange between Home Center Valor Co., Ltd. and Alleanza
Holdings Co., Ltd. As for operating areas of the major three operators, Daiyu Eight Co.,
Ltd. operates in the Tohoku and Kanto regions; Home Center Valor Co., Ltd. has stores in
the Tokai region; and Time Co., Ltd. operates in the Chugoku and Shikoku regions.

Sports Club BusinessNo. of stores……………

190

Business summary
The sports club business commenced operations in April 1998 following the transfer
of assets from Valor Co., Ltd. AXTOS Co., Ltd., which formerly operated general
sports clubs with swimming pools and tennis courts, began operating the low
investment chain of “Sports Club AXTOS Will_G,” also establishing its franchise
operations. These sports clubs are not only growing in the prefectures of Aichi andGifu, but are also expanding throughout the country, including regions with higher
population densities such as Kanto and Kansai. Considering the impact caused by
the spread of COVID-19 in 2020, we are moving forward with business operations
that contribute to local health-related demand while improving management efficiency
by reducing fixed costs and reviewing expenses.

Distribution-related operations
Business summary
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
in transactions with external customers.

Valor Holdings Co., Ltd. Annual Report 2021

15

Results

Segment Financial Review
Store Network

Supermarkets
Valor Co.,Ltd.
Tachiya Co., Ltd.
Youth Co., Ltd.*
Shokusenkan-Taiyo Co.,Ltd.
Kohseiya Co.,Ltd.
Futabaya Co.,Ltd.
Sanko Co.,Ltd.
Terao Stores Inc.
Yamato Store LLC.
VARO Co.,Ltd.
Other
DrugstoresHome Improvement Centers
Sports Clubs
Pet Shops
OthersTotal

FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

202
147
10
28
17
—
—
—
—
—
—
—
174
36
51
16
15
494

218
163
11
29
15
—
—
—
—
—
—
—
193
34
51
17
15
528

238
179
11
31
15
—
—
—
—
—
2
—
214
35
52
17
11
567

251
221
13
—
15
—
—
—
—
—
2
—
241
35
54
17
3
601

263
232
13
—
17
—
—
—
—
—
1
—
271
36
58
17
3
648

266
235
13
—
17
—
—
—
—
—
1
—
301
37
65
18
3
690

275
238
14
—
17
5
—
—
—
—
1
—
337
35
75
19
4
745

281
243
15
—
17
5
—
—
—
—
1
—
361
36
95
21
5
799

290
240
16
—
17
5
3
8
—
—
1
—
379
36
146
22
7
880

298
240
17
—
17
6
3
8
4
—
3
—
416
148
192
107
14
1,175

297
239
17
—
16
6
3
8
4
1
3
—
449
152
190
110
28
1,226

Note: *merged into Valor in October, 2013.

Number of Stores by Region and Locations of Infrastructures (FY2020)
Number of Stores by Region
The figures indicate the number of stores; the size of the pie charts
corresponds to the number of stores by prefectures.

2

Supermarkets
DrugstoresHome Improvement Centers
Sports Clubs
Pet Shops
OthersNanto-shi

Fukui-shi

Hokkaido2

Kani-shi
Ogaki-shi

Ichinomiya-shi
Yokkaichi-shi

9Toyota-shi

80
Shimada-shi

15 22
37 10

3

Distribution :Centers
Processing :Centers
Production :Bases

Drugstore BusinessDistribution Centers
Distribution Centers (Shared with the Supermarket Business)
Home Improvement Center BusinessDistribution Centers

16

Chugoku region

for chilled products
for ambient- temperature products
for chilled & ambient- temperature products
for fresh meatfor fresh vegetables & fruits
for fresh fish
5
for prepared foodfor fresh bakery
Kyushu region
for fish products

Valor Holdings Co., Ltd. Annual Report 2021

5

91

Koshinetsu region

Tohoku region

25

115

Hokuriku region

148

5 5

Kinki region

16 15
8

Supermarket Business

57

7 17

4
4
1 16

2

Tajimi-shi

84

41

42

7

25

74
3
8 6

194

37

89

3
Overseas

Shikoku region

17

Kanto region

38

359

Tokai region696

3

(Millions of yen)

FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

Revenues fromoperations

269,918

293,505

303,521313,208

321,458

329,266

336,555

345,960

353,311372,733

396,248

Operating income

9,580

10,783

11,028

8,443

9,760

9,887

9,738

8,518

9,433

9,050

16,103

Total assets

114,693

119,293

127,490

142,260

144,604

153,045

176,384

184,386

195,231200,720

207,938

Capitalexpenditures

12,012

9,199

12,915

17,931

12,07810,506

11,887

12,574

13,376

7,462

13,562

Depreciation andamortization

5,430

5,978

6,346

6,826

7,381

7,556

7,339

7,490

7,633

8,431

8,363

Revenues fromoperations

50,651

54,85062,49773,02880,47095,152

107,045

117,949

127,781

139,358

150,575

Operating income

1,357

2,294

1,934

2,449

1,961

2,736

2,692

2,532

3,488

4,317

3,978

Total assets

22,81426,501

29,06533,64938,55744,60252,01958,84958,72567,75575,511

Capitalexpenditures

1,400

2,547

3,134

3,893

4,333

5,776

8,087

5,359

4,622

6,135

7,123

860

979

1,183

1,454

1,780

2,114

2,588

2,927

3,104

3,170

3,533

Revenues fromoperations

38,92841,734

43,81046,55946,556

48,62950,37353,55555,173

114,301

130,177

Operating income

1,269

1,677

1,869

2,330

2,011

2,450

2,302

2,149

2,616

3,465

7,327

Total assets

17,47918,553

19,456

19,06822,43022,49923,942

25,562

31,02081,23981,602

Capitalexpenditures

730

1,943

1,259

464

2,276

1,478

4,777

1,316

645

4,677

3,595

Depreciation andamortization

876

867

899

875

910

945

1,000

1,099

1,083

2,505

2,440

Revenues fromoperations

8,514

8,604

8,788

8,955

9,271

9,838

10,45911,397

13,157

13,597

9,146

Operating income

77

247

420

419

463

532

639

680

672

556

(1,933)

Total assets

12,00911,287

10,76010,382

10,611

10,634

10,776

13,05915,175

15,76815,331

Capitalexpenditures

146

124

319

338

527

791

1,119

3,114

2,565

1,960

140

Depreciation andamortization

770

669

666

636

655

711

785

882

1,080

1,295

1,236

Revenues fromoperations

5,929

6,383

6,699

7,228

7,638

8,590

9,610

9,075

10,265

10,687

11,269Operating income

2,410

2,761

3,062

2,995

3,395

3,647

3,699

3,725

2,910

2,793

3,210

Total assets

15,33917,51418,80922,351

24,082

23,961

24,894

27,23028,56929,73332,519

Capitalexpenditures

439

1,659

1,888

2,155

624

478

2,018

3,044

384

1,050

965

Depreciation andamortization

381

439

550

784

819

716

721

758

817

846

976

Supermarkets

Depreciation andamortization

R esu l ts

DrugstoresHome Improvement
Centers

Sports Clubs

Distribution-related
operations

Valor Holdings Co., Ltd. Annual Report 2021

17

Foundation for Value Creation

Sustainability Management
The Valor Group Sustainability Management
The Valor Group has established its Valor Group Vision 2030, its vision of itself for 2030, and aims to build “Valor Economic Zone” thatconnects local communities conveniently and prosperously with the Valor Group’s products, services, and payments. It also seeks to become
a “destination company” that is chosen through the appeal of products while realizing a sustainable society through its Sustainability Vision
2030. As one basic policy under its FY2021-2023 strategic plans, the Company has the goal of management that is conscious of ties withsociety, and it endeavors to strengthen Group governance that underpins its business model while forging ahead on the three priority areas of“global environment,” “local communities,” and “diversity of human resources” that support sustainable business growth.

Sustainability Vision 2030
“The Valor Group will contribute to the development of local communities and the advancement of social life and culture basedon the efforts of all its employees, and through its business activities that lead to the realization of a sustainable society.”
The Valor Group has established six subcommittees, namely, Food Loss, Recycling, Energy and Water, Local Communities, Shopping Issues,and Human Resource Activities, for the three priority areas of the “global environment,” “local communities,” and “diversity of humanresources,” through the activities of all employees, with the promotion manager of each Group company taking the lead to carry out efforts.

Platform (shared platform) upon which actions are taken in FY2021

Initiatives taken fromorder of high priority
throughout the ValorGroup*Tackling the challenge of meeting

numerical targets with the goal of
Globaldelivering the connection of aenvironment sustainable global environment toSociety and local
communities

Diversity ofhuman resources

the next generation

CO2 emissions

Food loss

Globalenvironment
Water resources

Shopping issues

Health orientation

Recycling

Active roles
for women

Society and local
communities
Producer support

Local production for
local consumption

Senior citizens

Diversity of humanresources
People withdisabilities

Human Resources
Development

Subcommittee activities
In addition to the retail business, which includes supermarkets, drugstores, and home improvement centers, in each of the operatingcompanies involved in the sports business, manufacturing and processing business, distribution business, wholesale business, cleaning
business, security business, and others, we have been working on how to ensure the sustainability of business activities and how to manage
their impact on the environment and society. Based on this, we promote subcommittee activities to identify key issues and define targets foraddressing these issues, and to strengthen cooperation and information sharing within the Group on matters that are strongly related toachieving the goals of each operating company and the Group. A total of 70 members that comprise the six subcommittees gather at thesubcommittee meetings, which are held seven times a year (both online and offline), to promote the exchange of information that transcends
business segments and responsibilities. This works to expand food bank initiatives, to accelerate the installation of solar panels, and also thedevelopment of new ways to utilize food waste and other efforts that promote activity throughout the Group. The progress of subcommittee
activities is reported to the Group Management Executive Committee.

18

Valor Holdings Co., Ltd. Annual Report 2021

Setting goals for key issues
Establishing goals for key issues to be prioritized under the FY2021-2023 strategic plans
Objectives

Climate change
countermeasures

Food waste

Three-year targets (2021-2023)

2030 challenge targets

2050 challenge targets

Initiatives

10% reduction of emissionsof CO2 from Company sites*Compared to FY2019

40% reduction ofgreenhouse gas emissions
in the supply chain*Compared to FY2019

Greenhouse gas emissions
in the supply chain grossvolume of zero*Compared to FY2020

Promoting EMS utilization, energy
conservation activities
Promoting introduction of renewableenergyCollaboration with suppliers
Environmental training for all employees

35% reduction*Compared to FY2016

45% reduction*Compared to FY2016

55% reduction*Compared to FY2016

Improvement of store operations,infrastructure maintenance,collaboration with suppliers
Environmental training for all employees

Foundation for Value Creation

Initiatives for all Valor Group employees

For the Valor Group to support in realizing a sustainable society, we
held study sessions and moved forward on the distribution of action
declaration cards with the aim of enabling each and every employee of
the Group to think about social issues and take action to address
them. Considering what each of us can do and taking action will allow
us to expand our circle of activities.

1,000 participants in the Group SDGs learning program

To live prosperously even a century from now
SDG initiatives, taken together with customers
Connections with customers
Under the Company-wide slogan of “Delicious Future,” weare rolling out the “Temaedori (pick the item on the front of
the shelf) Movement.” In addition to promoting the reductionof food waste at food processing and manufacturing sites
and at each and every company in the Group, we are also
expanding the scope of our activities for what we can dotogether with our customers.

Exhibiting at SDGs AICHI EXPO 2021 (Oct. 2021)

2021 store SDGs educational poster

Valor Holdings Co., Ltd. Annual Report 2021

19

Foundation for Value Creation

Global Environment
Reduction of greenhouse gas emissions
At Valor Holdings Co., Ltd., we are working to calculate and reduce greenhouse gas (GHG) emissions at Group companies and to create
renewable energy sources.

Calculating greenhouse gas in the supply chain
Concerning the calculation of greenhouse gas emissions, following the calculation of its own emissions in FY2019, Valor Co., Ltd.
expanded the scope of its calculation to the entire supply chain in FY2020, and calculated its emissions in accordance with the GHG
Protocol, a recommended international standard. Going forward, we will continue to calculate the emissions of our Group companies andwork to accomplish reductions.

FY2020*1 Greenhouse gas (GHG) emissions*2
Category

Calculation target

Direct emissions frombusiness operators themselves

Scope 1

Emission volume (t-CO2)*3

Emissions associated with fuel combustion*4

Emissions due to leakage of CFCs

7,270
46,979

Scope 2

Indirect emissions from the use of electricity, heat,or steam supplied by other companies*5

131,252

Scope 3

Indirect emissions other than Scope 1, 2

1,059,763

Scope 3 emissions
Ratio

Scope/Category

Emission volume (t-CO2)

Supply chain emissions volume1,245,264

100.0%

Scope1

54,2494.4%

Scope2

131,252

10.5%

Scope3

Scope1,2,3

Category 1

Purchased goods

964,188

91.1%

77.4%

Category 2

Capital goods

30,9372.9%

2.5%

Category 3

Fuel- and energyrelated activities

22,6332.1%

1.8%

Category 4

Upstream transportation and distribution

9,795

0.9%

0.8%

Category 5

Waste generated in operations

24,6852.3%

2.0%

Category 6

Business travel

344

0.0%

0.0%

Category 7

Employee commuting

3,819

0.4%

0.3%

Category 8

Upstream leased assets

—

—

—

Category 9

Downstream transportation and distribution

—

—

—

—

—

—

Category 10

Processing of sold products

Category 11

Use of sold products

Category 12

End-of-life treatment of sold products

Category 13

—

—

—

3,360

0.3%

0.3%

Downstream leased assets

—

—

—

Category 14

Franchises

—

—

—

Category 15

Investments

—

—

—

1,059,763

100.0%

85.1%

Scope3*1 April 2020 to March 2021
*2 Among consolidated business operators, all locations (239 supermarkets, as well as distribution centers, chilled centers, processing centers, produce centers, etc.) of Valor Co., Ltd.
*3 Usage of city gas and LP gas at each site (including tenant usage), gasoline usage by Company-owned vehicles, usage of autogas for forklifts, etc.
*4 Leakage of HFCs due to the use of freezing and refrigeration, as well as air conditioning equipment at each site. Converted to CO2 equivalent by multiplying a global warming potential.
*5 Power usage at each site (including tenant usage)*6 In this fiscal year, only the scope of specific shipper reporting

20

Valor Holdings Co., Ltd. Annual Report 2021

Development of renewable energy

Number of solar panel installation sites andcumulative power generation capacity

The Group will work to create renewable energy sources in order to reducegreenhouse gas emissions. The use of renewable energy is expected to reduce
CO2 emissions by about 20% compared to before the panels were installed.
Concerning the third-party ownership model of solar power generation
systems with BCP functions (the “PPA model”), Valor Co., Ltd. madeinstallations at two stores in FY2019 and two stores in FY2020. Even in theevent of a power outage due to lightning strikes, disasters, or otheremergencies, store operations can be continued with power automaticallysupplied from the energy storage system, enabling activities withoutsuspending shopping by local customers.

Reduction of food waste

Number of solar panel installation sites

Cumulative power generation capacity (kw)

28,20530,00020,619300

20,000

181
136

8,779

10,000

400

200
100

1,222

76

6
0
FY2017FY2018FY2019FY2020Note: Installed at Valor Holdings Co., Ltd., Valor Co., Ltd., Chubu YakuhinCo., Ltd., Home Center Valor Co., Ltd., AXTOS Co., Ltd. andChubu Kosan Co., Ltd.
Added stores with PPA model type0

Changes in the rate of food waste generated forevery 1 million yen of net sales
Supermarket business*

Valor Co., Ltd.

(kg/million yen)

80

62.5
60

59.0

40

50.1

47.2

45.2

48.8

46.6

45.4

FY2018FY2019FY2020Foundation for Value Creation

The Group views the reduction of food waste as an important issue, and eachcompany strives at activities to reduce food waste. In Valor Co., Ltd.’s sales
policy, it has worked with its customers as it endeavors to reduce food waste
by improving order accuracy, product turnover rate, and product sell-through,while incorporating customer feedback. Initiatives at each Group company
remain ongoing.

20
0FY2016FY2017

Note*: Calculation covers Valor Co., Ltd., Tachiya Co., Ltd., ShokusenkanTaiyo Co., Ltd., and Kohseiya Co., Ltd.
From FY2019, Futabaya Co., Ltd. and Sanko Co., Ltd. were addedfor calculation.

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.

Reduction and recycling offood waste

Development of
renewable energy

Reduction of greenhouse gas emis

Environmental Performance
Management items

Specific initiatives

Development of power
consumption

Demand management
Management of airconditioning temperature
Turning off of unnecessary lighting
Introduction of highly efficientfacilities and equipment

1.04[kWh/million yen]*

0.95[kWh/million yen]*

At Valor, we achieved an approximately 4%reduction in usage. We
will continue to make efforts to improve the efficiency of our energy
use by utilizing energy management systems.

Energy-saving
deliveriesStore deliveries
Encouragement of idlingstop practiceInstructions and educationfor energy-saving driving

Compared with the previous
year
Driving distance:
99%
Amount of fuel used:98%
Fuel economy improved: 101%

Compared with the previous
year
Driving distance:
106%
Amount of fuel used: 106%
Fuel economy improved:
99%

Driving distance and amount of fuelused decreased by reviewing thenumber of deliveries and routes,
and fuel economy also improved.
We will continue to aim to improvedelivery efficiency.

Reduction of specified
CFCs emissions

Replacement of refrigerators
and air-conditioners
Regular facility inspections

Stores covered: 37

Stores covered: 26

We will continue replacement andregular facility inspections.

Development of energy

Installation of solar panels

Total wattage generated:
11,841kW
Business premises covered:
60

Total wattage generated:
7,586kWBusiness premises covered:45

We will consider where to install thesystem in each Group company
and make efforts in conjunction
with the BCP by introducing storage batteries.

Reduction offood waste

Implementation of plannedordering and production
Store shelf management
Review of product lineups
in evenings and volume
adjustment

Recycling encouragementof food waste

Reduction of disposing
products
Expansion of stores to
conduct recycling

FY2019 results

FY2020 results

46.6[kg/million yen]**Recycling rate:

42.0%

Evaluation

45.4[kg/million yen]**Recycling rate:

44.8%

Causes and Effects

Through planned production andsales floor planning and management, we significantly reduced theamount of waste compared to lastyear. We will continue to aim forzero waste.
Although the number of stores to
conduct recycling increased, thevolume decreased. We will strive toimprove the recycling rate.

Note: Covers each Valor Holdings Co., Ltd. company. Calculation covers food retail industry regarding power consumption and food waste generation. Covered: Valor Co., Ltd., Tachiya
Co., Ltd., Shokusenkan-Taiyo Co., Ltd., Kohseiya Co., Ltd., Futabaya Co., Ltd. and Sanko Co., Ltd. *Electricity usage as a percentage of net sales [1,000 kWh/million yen] (Units)**Food waste generated as a percentage of net sales [kg/million yen] (Units)

Valor Holdings Co., Ltd. Annual Report 2021

21

Foundation for Value Creation

Local Communities and Global Environment
We are cooperating in local activities while advancing sustainable production initiatives through resource circulation in order to solve global
environmental issues.

Participation in the ethical Re DESIGN PROJECT
Aiming for ethical production, this project is a collaboration
among various organizations, companies, and others acrossindustries to make local unused fiber materials usable and sell
products made of these fiber materials. Valor agrees with thisproject and has participated mainly as a sales outlet.

Local unused fiber materials

Contribution of design
students to theenvironment and society

Receive fabric samples fromcompanies and organizations

Local design students
participate in a contest

DesignMaterials

Ethical shopping

Support for the
self-sustainability ofa facility for the disabled

Production

Sold/purchased as a heartwarming present
Sales &
purchasing

Made with love by those at
the facility for the disabledThis year stores began charging for plastic bags, so the theme
was “SDGs Shopping,” which involved producing multipurpose
reusable bags that are made of unused fiber materials. Valor
stores in Tajimi (Gifu Prefecture) and Ryoge (Gifu Prefecture) soldthe Valor Prize bags and other bags and original bags, whichwere popular among customers.
Sales outlet

Food circulation initiatives

Valor Prize award ceremony

Food Circulation

Valor promotes food recycling. In FY2020, food waste fromstores in Mie Prefecture was composted by a contracted facility
and used to improve the soil for chrysanthemum production by acontracted flower producer, and then the chrysanthemums weresold at Valor Group stores.

Food
waste

Chrysanthemum sales

CompostingFertilizer

Chrysanthemum
production

Food Banks: Support mainly for children
Starting in Tajimi-shi in Gifu Prefecture, food support expanded toEna-shi and Aichi Prefecture. In FY2020, food support worth
approximately ¥8 million was provided from a total of 21 Valor,
Chubu Kosan, and V-Solution locations. By providing foodsupport to local Kodomo Shokudo (children’s cafeterias) andsocial welfare councils, we are creating a model for support thatmeets the needs of individual organizations and results in zerofood loss by partnering with Food Bank Aichi, which widely
promotes support activities primarily in the Tokai Region.
In FY2021, other Group companies will also begin providing
food, and we will work to provide food and other support to local
children with the aim of expanding locations and the type of
support offered.

Contribute to stronger local communities through food support
for a society where no one is left behind
Support isneeded for:Food Bank Depot•Children
Supermarket
Valor•College
students

ProvidePick up•Operators of children’s
cafeterias•Support•Local food banks
Etc. Distribute facilities•Impoverishedpersons

V-Solution•College students•Junior college
students•Single-parent
families

Chubu Kosan

DX paperless initiative
The Valor Group has operated using paper for pay slips, various personal information filings and applications, and so forth. Somecompanies have already systematized and gone paperless in more than 20 categories for which data can be collected andapplications filed using digital systems and smart phones. As a result, ¥15 million and 1.5 million sheets of paper have been saved.

22

Valor Holdings Co., Ltd. Annual Report 2021

Response to Consumer Needs

Improving Private Labels
In 2008, three brands were launched from the former “Aji Quality” brand. “V-Select” offers good quality products at low prices. “V-Quality”
offers tasty food items made from carefully chosen methods and ingredients. “V-Organic” was developed to offer JAS certified organic
products. In addition, in 2014, “V-Premium” debuted to offer food made from handpicked and superior ingredients and recipes. We havereinforced safety and security initiatives through audits in areas such as hygiene management and manufacturing process management at
manufacturing outsourcing plants, nutrition labels, and other measures, while also contributing to the expansion of sales to companies
outside the Group. In October 2020, we started to consolidate into two new brands, “Valor Select” and “Valor Plus,” in order to further
strengthen our brands. Our logo uses a flag meaning “support,” “symbol,” and “goal” in order to simply express Valor’s position of
supporting daily life, “Tasty Food Worth Eating from Valor to the Table.”
Valor Select: Support for daily life

Valor Plus: Better quality

This brand supports daily life and offers a wide variety of tasty basic productcategories at satisfactory prices.

A little better quality and a little more luxury than usual. This brand offers familiar
high quality products that brighten daily life.

V-Select
Mozzarella

V-Plus Valor
Oishii Hokkaido
Milk 1000ml

Foundation for Value Creation

V-Select Milk
1000mlV-PlusImo Kenpi
with Honey

Establishing a Sustainable Supply Chain
The Group believes it is essential to build a supply chain in order to increase the effectiveness of its business model as a manufacturing
and retailing company.

Initiatives for “White Logistics”
The Company submitted a declaration of voluntary actions in agreement with the objectives of the “White Logistics Movement” inwhich the Ministry of Land, Infrastructure, Transport and Tourism, the Ministry of Economy, Trade and Industry, and the Ministry ofAgriculture, Forestry and Fisheries are calling on to participate.
1. Utilize reservation system for product delivery
There have been problems at our distribution centers where our suppliers (manufacturers, wholesalers, and delivery companies) had to wait upon delivery, while
we also had problems such as taking too long to handle delivery, causing issues on both sides. Therefore, since March 2019, we have introduced a reservation
system for product delivery at multiple distribution centers. As more suppliers utilize the system, the advance reservation rate exceeded 90% by the end of June,
reducing waiting time and improving the efficiency of handling the delivery.

2. Extend lead time for delivery orders of processed food
Regarding delivery to distribution centers for ambient-temperature products, our suppliers (manufacturers and wholesalers) used to receive the orderdata from Valor Co., Ltd. one day prior to the product delivery date to stores. Our suppliers had to secure the necessary trucks in a short period of time
between receipt of data and shipment to the distribution center, which placed a burden on the shipping process, while distribution centers also had todeal with problems such as different delivery time by each supplier. Therefore, we have extended the lead time to receive the order data to two days
before the product delivery to stores. As a result, our suppliers have sufficient time to arrange shipments, and we are now able to flexibly scheduledeliveries from the distribution centers to stores, which has helped us to level the workload.

3. Review the “one-third rule” for acceptable rate of storage period
Valor Co., Ltd. has been making a full-scale effort to reduce food waste. As part of this initiative, we took steps to ease the limit on acceptable number of days forstorage, targeting products delivered to the distribution center for ambient-temperature products in Kani-shi, starting in July 2019. By reducing the number ofreturned products to suppliers (manufacturers and wholesalers), we hope to contribute to the reduction of food waste generated during the process frommanufacture to delivery to the distribution centers.

Initiatives to solve shopping issues
In order to develop mobile sales using 10 vehicles from five stores in Gifu Prefecture in cooperation with a partner for locations where
shopping is inconvenient and in order to solve a problem of the working generation not having time to go shopping, we started a service
called “ainoma,” an online supermarket service delivering to offices in July 2019, and based on this system, we started “ainoma pick-up”
for product pickup via drive-through in May 2020. We are also proceeding to develop services that meet local needs, such as deliveries tochildcare and other facilities, personal delivery, in-store pickup, and catalog-based shopping agency service.

Valor Holdings Co., Ltd. Annual Report 2021

23

Foundation for Value Creation

Diversity of Human Resources
Supporting a diversified workforce in HR system
We support people who are highly motivated and whose experience and backgrounds are diverse. The principal HR systems are as
described below.
StatusPromotingfemaleworkers

Aside from offering all our employees opportunities
to display their personalities and their capabilities,
we also aim to enhance the workplace environment
where female workers can flourish in their careers.

Diverseworkstyles
We a re w o r k i n g t o i m p ro v e t h e w o r k p l a c eenvironment corresponding to the phase of theindividual’s life and career, including raisingawareness of maternity leave, childcare leave, andfamily care leave, and creation of a workplace thatfacilitates easy return to work.

FY2018
Ratio of female managerial
personnel to all managerial
personnel (managers or higher)(The number of female
managerial personnel/The
number of all managerial
personnel)

FY20195.3%(23people/437people)

5.6

FY20205.8%(43people/774people)%(48people/826people)

224

165

Number of female workers
who took maternity leave or
child care leave

169

Maternity leave(Employees/Part-timers)

people(66people/103people)

Child care leave(Employees/Part-timers)

people(71people/108people)

179

peoplepeople(92people/132people) (62people/103people)

205

201

peoplepeople(68people/137people) (75people/126people)
Including 4 male employees

Hiring ofthe disabled

Post-retirement
reemployment
program

Promotion to
full-time
employees

Number of
Employees

We are actively recruiting people with disabilities whowish to work for regular companies and be independent. The Gifu Prefectural Government established aregistration system in November 2011 to enable
companies to support the employment of people
with disabilities in cooperation with schools 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 sothat they can work at Valor for a long time, we intend
to promote education and training of our store staff
and while facilitating collaborations with regionalre c r u i t m e n t c e n t e r s a n d t h e s o c i a l w e l f a redepartments of municipalities.

The rate of hiring people*
with disabilities

2.20 %

2.40 %

2.40 %

Contracted by Gifu
Prefecture
Adviser for people withdisabilities seeking jobs

from FY2013 to present

Adviser for employment ofpeople with disabilities

from FY2015 to present

Member of Gifu Prefecturetaskforce for abolition of
discrimination against
people with disabilities

from FY2015 to present

Against the backdrop of population aging, Valor
has introduced a post-retirement reemploymentp r o g r a m w h e r e b y Va l o r r e e m p l o y s a l l t h eemployees who are willing to work after retirement,
in principle. Eligible employees may be reemployed
after they retire until they reach 65 years old if theywish to do so.

Usage rate of postretirement reemployment
program

87.2 %

95.7 %

79.1 %

16 key operating companies of the Group have programs
to promote part-time workers to full-time employees.
Part-time workers have periodic opportunities forpromotion to full-time employees. Part-time workers
who satisfy the criteria can apply for promotion and,after screening, successful applicants are promoted
to full-time employees. In addition, heads ofdepartments can recommend part-time workers ascandidates for promotion to full-time employees.

Number of part-timeworkers promoted tofull-time employees

122 people

205 people

238 people

Following the transition of important issue in humanresources development to “Frontline performancedevelopment”, the Company will further promote
initiatives to establish an environment for better
places to work including programs for humanresources development and supporting diverse
human resources.
Through such policies, we aim to retain talented
human resources in addition to improving productivity
and organizational capabilities through developing
individual abilities and skills.

Number of employees(Average length of service)

Female workers(Average length of service)

Male workers(Average length of service)

6,501 people 8,168 people 8,661 people(9.0years)(9.0years)(9.1years)

1,739 people 2,299 people 2,552 people(5.6years)(5.9years)(5.9years)

4,762 people 5,869 people 6,109 people(10.2years)(10.2years)(10.5years)

Note: The above figures are based on the following 17 companies accounting for 89.1% of the Group’s total employees: Valor Holdings Co., Ltd., Valor Co., Ltd., Tachiya Co., Ltd.,
Shokusenkan-Taiyo Co., Ltd., Kohseiya Co., Ltd., Futabaya Co., Ltd., Sanko Co., Ltd., Chubu Foods Co., Ltd., Chubu Yakuhin Co., Ltd., Daiyu Eight Co., Ltd., Home Center Valor
Co., Ltd., Time Co., Ltd., Amigo Co., Ltd., AXTOS Co., Ltd., Chubu Ryutu Co., Ltd., Chubu Kosan Co., Ltd. and Core Support Co., Ltd.
*In FY2016, we started group reporting of the rate of hiring people with disabilities for operating companies, of which voting rights are directly held by the Company.

24

Valor Holdings Co., Ltd. Annual Report 2021

Human resources development to support medium-term 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, processing and distribution, in order toestablish business models that optimize the entire process from sourcing to retailing, as well as in preparation for expansion of the scope ofthe supermarket, drugstore, and home improvement center businesses.
Sales capabilities and frontline performance capabilities are important for “enhancing the appeal of products,” one of the basic policies
of our three-year medium-term strategic plans. Supermarket Valor established a new human resources system that appoints a Meister
product and sales professional to lead frontline performance capabilities. We support human resources development that bolsters mediumto long-term growth.
In August 2020, two Meisters in agricultural products and two Meisters in marine products were appointed, who support store growth andact as examples for employees who aim to be true professionals, while also doing their best to create sales floors that continue to evolve.

Meister Interview
Q What is motivating and interesting about your job, and what do you try to do in your job?
A The part that I feel is most enjoyable is the fact that there may be wrong answers about how to work but there are no rightFoundation for Value Creation

answers. The results of continuing to move forward and challenge myself appear in the numbers and lead to my evaluation. I
think the criteria for this evaluation are my biggest motivators. I try to see things subjectively from the customer’s perspective
and feeling. Daily conversations with customers are also important to me so that I do not forget that this work naturally is forthe benefit of customers.

Human resources development
We aim to strengthen our organizational competencies and improve corporate value by improving frontline performance capabilities
through offering on-the-job training and fostering self-motivating leaders who can identify problems and execute solutions. The Company’s
human resources development programs are based on Group-wide training programs plus training on the techniques and expertiseneeded at each business operation. The Group-wide position-based programs focusing on Corporate Philosophy (DNA) education are
mainly designed for those who have just joined the Company or those who have passed the Group qualification screening and beenpromoted. Attendees are helped to link philosophy to practice by cultivating an understanding of the Corporate Philosophy advocated by
Valor’s founder Yoshimi Ito, and listening to lectures by the current management. The Valor Historical Museum and the Company Founder
Yoshimi Ito Memorial Gallery, which are housed in the Human Resources Development Center, serve as venues for experience tounderstand the Corporate Philosophy. In addition, we have incorporated human rights related themes into position-based programs since
FY2018 in which participants learn how employee satisfaction leads to customer satisfaction by appropriately responding to various humanrights issues in the workplace and in business activities.

Expanding the field of activity for diverse humanresources
Connecting with society
Flower seedlings raised by students from the Gifu Prefectural
Kamo Special Needs School were sold at Supermarket Valor
stores. We will continue such activities that connect thestudents who raised the seedlings with our customers whobought them.

Promoting diverse workstyles
The Valor Group is improving and revising its systems in response to employee opinions, with the aim of creating an environment where
diverse workstyles are possible. In FY2020, four male employees took childcare leave. While working to raise awareness, which isnecessary for the penetration of this system, we will promote the sharing of experiences and the exchange of opinions within the Group, as
well as proceed to create a workplace environment where it is easy to work.
Valor Holdings Co., Ltd. Annual Report 2021

25

Foundation for Value Creation

Corporate Governance
Basic Policy
The fundamental objectives of Valor Holdings’ 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.

Corporate Governance Systems
Overview of Valor’s Corporate Governance Structure (As of June 25, 2021)
Upon the transition to a holding company structure in October 2015, the Company separated its management decision-making andoversight system and business execution system, aiming for faster business execution and strengthening oversight. For faster businessexecution, we have established the Group Management Executive Committee which is comprised of the Company’s Executive Directors,
the Standing Audit & Supervisory Committee Member and Representatives of the Group’s core companies, where decisions are made on
investment projects and management issues of operating companies are discussed. All decisions of the Group Management Executive
Committee are reported to the Board of Directors.
At the 59th Ordinary General Meeting of Shareholders held on June 30, 2016, a partial amendment to the Articles of Incorporation wasapproved and the Company transitioned to a company with Audit & Supervisory Committee System. By establishing an Audit &Supervisory Committee with more than half of the members being Outside Directors, the Company aims to enhance the oversight functionof the Board of Directors and further strengthen corporate governance.
Organization Form

Company with Audit & Supervisory
Committee System

Number of Directors

15 (of whom 5 are Outside Directors)

Chairperson of the Board

Chairman & CEO

Number of Audit &Supervisory Committee
Members

4 (of whom 3 are Outside Directors)

General Meeting of Shareholders
Appointment /Dismissal

Nomination andCompensation Committee
Management
Advisory

Internal Control & Risk
Management

Business Execution

Legal Counsel, Tax Accountant,and Other Specialists

Management,
Oversight and Audit

ReportConsult

Executive Directors (9)Outside Directors (2)Audit report

Board of Directors
Audit / Supervision

AdviseAudit & Supervisory Committee(

4 Audit & Supervisory Committee Members
Of whom 3 are Outside Directors)

Audit report
Collaboration
Audit report

Accounting Auditor
Ernst & Young ShinNihon LLC

Accounting audit

ReportRepresentative Director

Collaboration

Group Management Executive Committee· Executive Directors (8)· Representatives of Group’s core companies (6)· Audit & Supervisory Committee Member (1)Refer matters fordiscussion / Report

Appointment /Dismissal

Audit /
Supervision

Appointment /Dismissal

ReportAppointment /Dismissal

Instructions /Collaboration

Instructions

Executive Directors
Operating Companies
Audit

Instructions and supervision

Audit Office

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

Risk Management Committee

Compliance Committee

Internal Control Committee

Helpline

Performance evaluation on the Board of Directors
Since 2015, the Company has been considering whether or not the Board of Directors is functioning effectively. Based on the
results of this consideration, the Company intends to improve the Board of Directors as a whole through a continuous process oftaking appropriate actions to rectify weaknesses and build up strengths.
To improve the Board of Directors, all of the Directors have been conducting self-evaluation questionnaires, which are designed toevaluate the effectiveness of the structure of the Board of Directors and its discussion and consideration, etc. on a scale of one to five. In
FY2020, the Board of Directors scored 3.9 on average, up 0.1 points from FY2019, and the result indicates that the Board of Directors is
generally deemed to be effective. However, as the Group’s range of business expands, the number of matters to be resolved and reported has increased, there have been requests for stronger corporate governance and deeper discussions on business strategies.

26

Valor Holdings Co., Ltd. Annual Report 2021

Policy and procedures for appointment and removal of management executives by the Board of Directors, andreasons for nomination of candidates for Director
Reasons for appointment, removal and nomination(1) Policy· Regarding Directors who are not Audit & Supervisory Committee Members, people with specialized knowledge and excellent management &decision-making capabilities or people who execute important businesses or are responsible for key operating companies are nominated as
candidates. For Outside Directors, people with abundant experience in their respective fields, excellent character, and high level of insight as well as
the capability of providing objective and multifaceted suggestions about management, are nominated as candidates.
· Regarding Directors who are Audit & Supervisory Committee Members, people with knowledge of finance and accounting, understanding of theGroup’s business and diverse viewpoints about corporate management are nominated as candidates to ensure accurate auditing of complianceand appropriateness of business execution.
· The dismissal of a Director shall be deliberated at the Board of Directors meetings in the event that the Director is in violation of laws andregulations or the Articles of Incorporation, other circumstances occur that prevent the Director from properly performing his or her duties, or theCompany’s corporate value is significantly damaged by the Director due to negligence of his or her duties, etc.

(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 chaired by Representative Director Masami Tashiro consisting of two Executive
Directors and three 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 subsequent consent of the Audit & Supervisory Committee.
Foundation for Value Creation· The dismissal of a Director shall be determined by the Board of Directors after hearing opinions of the Audit & Supervisory Committee, in addition toreports from the Nomination and Compensation Committee.

(3) Explanation about appointment, removal and nomination· Reasons for election of each candidate for Director are disclosed in the reference document for the General Meeting of Shareholders.
· Reasons for election of each candidate for Outside Director are disclosed in [Directors] “Relations with Valor Holdings Co., Ltd. (2)” of “IIManagement Organization and Other Corporate Governance Systems Concerning Management Decision-Making, Execution and Supervision” in
the Corporate Governance Report.
· Explanation of the dismissal of Directors (excluding non-reappointment) shall be disclosed in the reference documents for the General Meeting of
Shareholders.

Policy for determining the amount of compensation and the calculation method(1) Basic policy· Directors’ compensation consists of basic compensation, performance-linked bonuses and share-based compensation, all of which shall be set
separately for inside and outside directors. For Outside Directors and Directors who are Audit & Supervisory Committee members, compensationconsists only of basic compensation, in view of their roles and independence.
· Basic compensation, paid monthly, shall be, in principle, provided in an amount that is adequate for securing (recruiting) excellent people as
executives and shall be determined based on comprehensive evaluation of the Company’s financial performance, each Director’s performance of
duties, achievements and degree of contribution. Regarding Directors who are also employees, the salary as an employee shall be paid inaccordance with the Rules for Wages for Employees. For Directors (excluding executive directors) from a consolidated subsidiary, compensation at
the subsidiary shall be paid in accordance with the subsidiary’s rules for directors’ compensation.
· The amount of performance-linked bonuses shall be determined within the maximum amount approved at the General Meeting of Shareholders inconsideration of the previous amount of bonuses paid, the Company’s financial results for the current year and the business performance that the
Director is delegated.
· Share-based compensation is an employee stock ownership plan approved at the 60th General Meeting of Shareholders held on June 29, 2017. At
the time of resignation or retirement of a Director, the Company’s shares are delivered to the Director in accordance with the Rules for Delivering
Shares to Directors, which was approved at the Board of Directors meeting held on the same date.

(2) Procedures
The amount of compensation for Directors shall be an agenda item of the General Meeting of Shareholders and shall be determined within the
maximum amount decided at the General Meeting of Shareholders.
Regarding the amount of basic compensation and bonuses, 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 three Outside Directors,
shall examine and review the details, after which the amount shall be determined by resolution of the Board of Directors; then the decision isredirected to the discretion of Chairman & CEO Masami Tashiro, on the condition that the report of the Nomination and Compensation Committee
is emphasized.
The amount of compensation for Directors who are Audit & Supervisory Committee Members shall be determined by resolution of the Audit &Supervisory Committee.

Independence criteria and qualifications for Independent Outside Directors
Our criteria for selecting Outside Directors are that they satisfy the requirements for independent officers pursuant to the Companies Act
and as specified by the stock exchanges where the Company’s shares are listed; that they are unlikely to have conflicts of interest withgeneral shareholders; that they are not affiliated with a supplier or a customer of the Company with which transactions exceed an amountequal to 2% of the Company’s consolidated net sales or exceed ¥10 million in direct individual transactions; and they have specialized
knowledge about finance, accounting, law, management, etc. or experience in corporate management, etc.

Valor Holdings Co., Ltd. Annual Report 2021

27

Foundation for Value Creation

Corporate Governance
Number of meetings of the Board of Directors and the Audit & Supervisory Board held and attendance status (FY 2020)
Meetings of the Board of Directors

Meetings of the Audit & Supervisory Board*

14

13

100%

100%

Number of meetings
Attendance of Outside Directors

Note: The figures are based on the number of meetings held from April 1, 2020 to March 31, 2021.

Dialogues with shareholders in FY2020
64th Ordinary General
Meeting of Shareholders(Held June 25, 2021)

89 shareholders attended

65 minutes (FY2020: 93 attendees, 46 minutes)

Directors (as of June 25, 2021)
Name

Title

Masami Tashiro

Chairman & CEO

Satoru Yokoyama

Executive vice-president

Akira ShinohanaManaging Director

Significant concurrent positions at major subsidiaries

CEO, AXTOS CO., Ltd.
Executive vice-president, Valor Co.,Ltd.
CEO, Chubu Agri Co.,Ltd.

Katsuyuki Mori

Director

Takayuki Koike

Director

Chairman, Tachiya Co., Ltd.
Senior Managing Director, Valor Co., Ltd.
Retail Technology
CEO, Chubu Kosan Co., Ltd.

Satoshi Yoneyama

Director

Director and General Manager, LuVit Business Department

Morisaku Wagato

Director

Motohiko Takasu

Director

Executive vice-president, Alleanza Holdings Co.,Ltd.
CEO, Home Center Valor Co., Ltd.
CEO
Chubu Yakuhin Co.,Ltd.

Shunichi Asakura

Director

Chairman, Alleanza Holdings Co.,Ltd.

Toshiyuki Takahashi

Outside Director

Mihoko Hayashi

Outside Director

Takashi Takayama

Director

Mutsuo Masuda

Outside Director

Audit & Supervisory Committee Member

Hirofumi Hata

Outside Director

Audit & Supervisory Committee Member

Tokimitsu Ito

Outside Director

Audit & Supervisory Committee Member

Audit & Supervisory Committee Member (full-time)

Basic Policy on the internal control system and the status of its development
The Company considers internal control and compliance to be an important management issue and has articulated the Corporate
Philosophy, the basic management policy, and the Action Guidelines for Corporate Ethics in order to gain trust from society and contributeto social development. Efforts are made to ensure that all officers and employees comply by defining and implementing the basic policies
and basic rules.

Internal control and compliance system
Regarding the internal control system, the Company has articulated the Basic Policy on the Internal Control System (partially revised on
April 19, 2021) and strives to improve and operate the internal control system. The Internal Control Committee meets regularly to confirm
the status of the improvement and operation of the internal control system. The Audit & Supervisory Committee Members may attend
meetings of the Internal Control Committee and state their opinions. The confirmation results of the Internal Control Committee arereported to the Board of Directors once a year. When promptly reportable matters are confirmed, they are also reported as needed to theBoard of Directors.

28

Valor Holdings Co., Ltd. Annual Report 2021

Compliance and Risk Management Systems
Risk management system
Regarding the establishment of a risk management system, the Company has established the Basic Rules for Risk Management andmanages Company-wide risk of losses in a comprehensive, integrated manner under a clearly defined risk management system. The Rules
were revised on April 1, 2021, to consolidate the relevant risks into six categories, establish working groups (subcommittees) to manage
each risk category, clearly specify the department(s) in charge, define the regular risk management promotion system of the Risk
Management Committee and establish an emergency risk management system including BCP.
The secretariat of the Risk Management Committee is the Risk Management Department. Meetings are held twice per year, and reports
are made to the Board of Directors once per year. The full-time Audit & Supervisory Committee Member and the Head of the Audit Office
may attend meetings of the Risk Management Committee and state their opinions.

ComplianceFoundation for Value Creation

Regarding the establishment of a compliance management system, the Company has articulated the Company-wide Basic Compliance
Rules, and in order to ensure compliance, efforts are made to improve, maintain and develop the internal control system by responding to
new and amended laws. In addition, the Compliance Committee usually meets jointly with the Risk Management Committee twice per year
and reports to the Board of Directors once per year. When a major compliance violation is discovered, an emergency meeting is convened
to discuss the formation and composition of a committee to investigate the matter, and the results of this meeting are escalated to theBoard of Directors. If necessary, the committee chairperson selects members. The full-time Audit & Supervisory Committee Member andthe Head of the Audit Office may attend meetings of the Compliance Committee and state their opinions. As part of internal control
systems concerning violations of the law and other compliance issues, the Compliance Committee also has established rules forwhistleblowing and adopted a whistleblowing system with the Audit Office as the contact point. Whistleblowing matters are reported to theCompliance Committee.

System to ensure the appropriateness of business operations of subsidiaries
The Action Guidelines for Corporate Ethics has been applied to all Group companies to foster the legal compliance awareness of all theGroup’s directors and employees. In addition, the Company has established the Rules for Management of Group Companies and Affiliates
and the Rules of Authority of Group Companies and Affiliates, which require Group companies to report to the Company on certain mattersbased on these rules. Matters that meet certain criteria are submitted to the Company’s Board of Directors or the Group Management
Executive Committee as matters to be discussed. The Audit Office, which reports directly to the Representative Director, audits theoperations of each Group company based on the internal audit plan, and reports the results of its audits to the Board of Directors, theAudit & Supervisory Committee, the Accounting Auditor and other relevant departments to ensure sound business operations.

Risk awareness
The Company considers that the following matters may have a significant impact on investors’ decisions concerning the Company’s
statuses of operations and accounting.
1. Factors that may have an impact on the Group’s financial performance(1) External environment of the retail business(economic trends, increased price competition, 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) Natural disasters, infectious diseases, etc. (in case that natural disasters such as earthquakes and typhoons occur or
infectious diseases spread)(5) Entry to new businesses (in the event that anticipated results cannot be achieved because of changes in the external
environment, etc.)(6) Interest rate fluctuations(7) Securing of human resources (difficulty in recruiting human resources and developing them as planned)(8) Security measures for information systems (in case of troubles beyond the Company’s expectation)
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. Impairment of noncurrent assets
4. Defferred tax assets

Valor Holdings Co., Ltd. Annual Report 2021

29

Financial and Corporate Data

11-year Summary of Financial Results
FY2010FY2011FY2012FY2013For the year:
Revenues from operations

379,172410,577

431,218

454,180

Operating income

12,347

15,23615,852

14,287

Ordinary income

12,817

16,02016,844

15,311

Net income

4,232

7,149

8,184

9,162

190,065

199,774

213,629

235,131

At year-end:
Total assets

61,821

68,13475,46682,94960,99867,24374,887

82,39569,746

69,38375,67987,265

Cash flows from operating activities

20,32419,19021,13919,198Cash flows from investing activities(14,428)(17,793)(20,961)(23,746)

5,895

1,397

177

(4,547)

Net assets
Net assets (excl. subscription rights to shares and non-controlling interests)
Interest-bearing debt
Cash Flows:Free cash flows
Cash flows from financial activities(1,608)(2,283)

2,914

5,983

Cash and cash equivalents at the end of fiscal year

13,547

12,676

15,764

17,055

15,245

17,85922,101

25,226for new store openings

8,995

11,23014,414

12,851for refurbishing existing stores

5,007

4,114

1,788

2,306

for others

1,243

2,515

5,899

10,069

9,017

9,612

10,255

11,090Net assets per share (BPS) (yen)1,197.67

1,320.33

1,454.43

1,600.25

Net income per share (EPS) (yen)83.10

140.38159.56177.95

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

Depreciation and amortization (CF)Per Share data:

Cash dividends per share (yen)

22

26

29

31

26.5%

18.5%

18.2%

17.4%

7.0%

8.2%

8.1%

6.8%

Return on equity (ROE)

7.1%

11.2%

11.5%

11.7%

Shareholders’ equity ratio

32.1%

33.7%

35.1%

35.0%

1.1

1.0

1.0

1.1

Dividend payout ratio
Financial indicators:
Return on total assets (ROA)

Debt equity ratio (times)

Revenues from operations (millions of yen)

Operating income (millions of yen)

Total assets / Net assets (millions of yen)
Total assets

800,000

730,168

Net assets

500,000

30,00025,648678,096

383,919400,000
600,000

520,530

544,020

404,458

565,931
20,00015,439400,000

13,47014,21015,515300,000

269,488311,813285,905

200,000
10,000200,000
100,000

030

FY2016 FY2017 FY2018 FY2019 FY2020

Valor Holdings Co., Ltd. Annual Report 2021

0

FY2016 FY2017 FY2018 FY2019 FY2020

0140,645
125,395
107,727 113,167

155,190

FY2016 FY2017 FY2018 FY2019 FY2020

(Millions of yen)

FY2014FY2015FY2016FY2017FY2018FY2019FY2020470,564

497,463

520,530

544,020565,931

678,096

730,168

15,00016,683

15,43913,47014,21015,51525,648

16,10817,586

16,762

14,937

16,091

16,87828,3979,214

10,75910,522

7,570

7,910

6,477

12,592

245,386

255,916

269,488285,905

311,813

383,919

404,458

90,881

99,027

107,727

113,167

125,395

140,645

155,190

90,301

98,408107,057

112,365

124,599

132,375

142,095

86,88084,952

87,231

88,821

96,717

124,872

120,884

22,25722,991

22,27027,79027,36930,871

44,138(15,660)(19,045)(21,569)(24,258)(31,621)(26,615)(28,137)

6,596

3,945

700

3,531

(4,252)

4,256

16,001(6,758)(3,168)(3,223)

7,302

(551)

(10,472)

17,103

14,65914,93817,93824,15929,34920,22520,041

24,441

27,57526,87832,13832,832

12,763

11,62815,144

14,394

14,903

20,457

9,742

2,237

3,650

7,709

9,850

9,451

8,498

17,145

5,225

4,763

1,587

3,332

2,524

3,183

5,945

12,168

12,683

13,125

13,952

15,163

17,665

18,234

1,751.57

1,925.45

2,093.74

2,196.89

2,320.53

2,435.06

2,660.56

178.91208.87205.83148.04153.06

120.63234.52

33

36

40

45

48

52

54

18.4%

17.2%

19.4%

30.4%

31.4%

43.1%

23.0%

6.7%

7.0%

6.4%

5.4%

5.4%

4.9%

7.2%

10.7%

11.4%

10.2%

6.9%

6.7%

5.1%

9.2%

36.8%

38.5%

39.7%

39.3%

40.0%

34.1%

35.3%

1.0

0.9

0.8

0.8

0.8

0.9

0.8

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

Cash flows from investing activities

Free cash flows

Annual cash dividends per share (yen)Dividend payout ratio (%)
Cash dividends per share

60,00022,27020,00016,001700

5250

30,871

40

45

10.2

(21,569) (24,258)(31,621)

9.2

31.4
6.4

6.9

6.7

5.4

5.4

FY2016 FY2017 FY2018 FY2019 FY2020

5

19.4

(26,615) (28,137)

7.2
5.1

23.0
20

-20,000-60,000

43.1
10

30.4

(4,252)-40,000

48

30

0

ROA

54

40

4,256

3,531

ROE

15

60

27,790 27,369

ROE∙ROA (%)

Dividend payout ratio

44,13840,000Financial and Corporate Data

(3,745)
19,9604.9

100FY2016 FY2017 FY2018 FY2019 FY2020

0

FY2016 FY2017 FY2018 FY2019 FY2020

Valor Holdings Co., Ltd. Annual Report 2021

31

Financial and Corporate Data

FY2020 Financial Review
Summary of consolidated results and financial conditions
Consolidated operating results for FY2020 were revenues fromoperations of ¥730,168 million, an increase of 7.7% year on year;
operating income of ¥25,648 million, an increase of 65.3%; ordinary
income of ¥28,397 million, an increase of 68.2%; and profit attributableto owners of parent of ¥12,592 million, an increase of 94.4%.
Revenues from operations increased for the 26th consecutive year,
and operating income, ordinary income, and profit attributable toowners of parent all reached record highs.
The breakdown of the increase in revenues of major segments(¥52,071 million) was ¥23,514 million for the supermarket business,¥15,876 million for the home improvement center business, and¥11,217 million for the drugstore business. Sales at existing stores
were strong in all three businesses and grew particularly
significantly in the supermarket business and home improvement
center business due to increased stay-at-home demand indivisions that strengthened merchandising policy.
The breakdown of the increase in earnings of major segments(¥10,133 million) was ¥7,052 million for the supermarket businessand ¥3,862 million for the home improvement center business. In
the supermarket business, Valor Co., Ltd., one of the corecompanies, has been steadily refurbishing its stores aiming tobecome a “destination store,” and fresh foods comprised a larger
percentage of sales. As a result, the gross profit ratio improved.
Lower advertising and other expenses also contributed. In thehome improvement center business, the consolidation of Alleanza
Holdings Co., Ltd. as a subsidiary resulted in lower cost of goods
sold, further development of private label products, and improved
gross profit ratio, as well as a lower expense ratio due toincreased revenues. Meanwhile, the sports club business wasaffected by COVID-19 and recorded an operating loss of ¥1,933
million. This was mainly due to a decline in membership fee

revenue caused by factors such as emergency shutdowns under
the Japanese government’s declarations of a state of emergency,
implementation of a special membership suspension system, andsports club closings. Although efforts were made to cut the fixed
costs and reduce the breakeven point, we were unable to absorb
the expenses and need to work more on earnings optimization.
An extraordinary loss of ¥4,751 million was posted, the major
breakdown of which was impairment loss of ¥2,843 million basedon the accounting standard for impairment on noncurrent assets,a loss of ¥702 million due to the voluntary business suspension.
The loss due to the voluntary business suspension includes ¥602
million for the sports club business and ¥99 million for the pet
shop business included in the other businesses.
The Company’s efficiency improved from the previous year,with ROA rising from 4.9% to 7.2% and ROE rising from 5.1% to
9.2%. The increase in ROA was mainly due to an increase in theratio of ordinary income to revenues from operations from 2.5% to
3.9%, and in particular due to a decrease in the expense ratio
from 26.1% to 25.3%. ROA and ROE exceeded the quantitative
targets (ROA at least 5.6%, ROE at least 7.7%) in the final year of
the FY2018-2020 strategic plans, but the total asset turnover ratio
remained at 1.9 from the previous year. In order to improve
efficiency, we believe that further use of Group management
resources is necessary. The financial policies of new FY2021-2023
strategic plans starting in FY2021 call for financial discipline in theform of reducing interest-bearing debt, with a debt-equity ratio
target of 0.6 times. Assuming a change in the financing balance,in order to shift to management that is more conscious of the costof capital, we have adopted ROIC as a new management
efficiency indicator.

Financial position
Total assets increased ¥20,539 million from the end of the previous
year to ¥404,458 million. The main factors were an increase of¥5,236 million in cash and deposits, an increase of ¥1,851 million ininventories, an increase of ¥8,741 million in property, plant andequipment, and an increase of ¥1,421 million in deferred tax assets.
Total liabilities increased ¥5,993 million from the end of theprevious year to ¥249,267 million. The main factors were an increaseof ¥1,822 million in notes and accounts payable-trade and anincrease of ¥4,188 million in income taxes payable. Net assets
increased ¥14,545 million from the end of the previous year to¥155,190 million. Net assets excluding non-controlling interestsand subscription rights to shares were ¥142,862 million, and theshareholders’ equity ratio was 35.3%. As a result, the debt-equity
ratio decreased to 0.8 times from 0.9 times from the previous year,
thus returning to the target level of the FY2018-2020 strategic plans.

Cash flows
Cash and cash equivalents at March 31, 2021 increased ¥5,190 million from the end of the previous year to ¥29,349 million.
Cash flows from operating activities
Net cash provided by operating activities amounted to ¥44,138 million, having increased ¥13,266 million compared with the previous year.
The main factors were increases of ¥11,681 million in income before income taxes, ¥3,170 million in notes and accounts receivable-trade,and ¥568 million in depreciation and amortization, despite a decrease of ¥3,730 million in notes and accounts payable-trade.
Cash flows from investing activities
Net cash used in investing activities amounted to ¥28,137 million, having increased ¥1,521 million compared with the previous year. The
main factor was increases of ¥975 million in proceeds from the sale of property, plant and equipment and ¥4,511 million in payments forpurchase of property, plant and equipment resulting from opening of new stores and renovations, despite decreases of ¥487 million in
payments for acquisition of subsidiary shares due to a change in the scope of consolidation and ¥1,105 million in payments for acquisitionof businesses.
Cash flows from financing activities
Net cash used in financing activities amounted to ¥10,472 million, having increased ¥9,920 million compared with the previous year. The main
factor was an increase of ¥10,000 million in proceeds from the issuance of commercial paper, which was offset by a decrease of ¥10,191
million in proceeds from long-term loans payable and increases of ¥7,224 million in repayment of short-term loans payable and ¥2,701 million
in repayment of long-term loans payable.
32

Valor Holdings Co., Ltd. Annual Report 2021

Policy on Profit Distribution and Dividends for FY2020
The year-end dividend for FY2020 was ¥29 per share. Combinedwith the interim dividend of ¥25 per share, the annual dividend for
FY2020 amounted to ¥54 per share, ¥2 higher than for the previous
year. The payout ratio was 23.0%. Our policies on creating cash
flow, fund employment, and financial discipline are set out in the
FY2021-2023 strategic plans, but we will continue to focus on
improving our ability to create cash flow. As for our approach toprofit distribution, the three-year total for capital expenditure is set
at ¥85,000 million, of which 45-50% is planned to be allocated toinvestments in new store openings, 35% to investments in existing
stores, and 15-20% to other investments including DX. Whileintending to maintain a steady return to shareholders with adividend payout ratio of 25%, we also believe it is important tomaintain business safety by raising our internal reserves.

Forecasts for FY2021
integration between manufacturing and retailing through DX (digitaltransformation). We will also contribute to the development of local
communities and the enhancement of society and culture throughcompany-wide business activities for a sustainable society.
The strategic goals of FY2021-2023 strategic plans based on
the visions described above are articulated in “Connect 2030:
Connecting Products, Customers, and Society,” we will
strengthen points of contact with customers through efforts toincrease product appeal by strengthening manufacturing
capabilities, and synchronizing supply chain information andthrough the promotion of EC strategies and the Lu Vit Card app.
We will also strengthen Group governance, work to become adecarbonized society, reduce food waste, and otherwise promotesustainability management.
With regard to capital expenditures for the year ending March
31, 2022, we plan to continue focusing on investing in existing
stores and will refurbish approximately 30 supermarkets in orderto promote our transition to the “destination store” concept. We
also plan to make other investments, including investments in DX,
in order to advance our business model. In terms of new store
investment, we plan to open a total of 67 new stores, including fivesupermarkets, 30 drugstores, nine home improvement centers(including specialized formats), eight sports clubs, seven pet
shops, and eight other stores.
Based on the above assumptions, forecasts for consolidated
financial performance for FY2021 are as follows: revenues fromoperations of ¥732.0 billion (see Note); operating income of ¥23.0
billion, a decrease of 10.3% year on year; ordinary income of¥2 5.0 billion, a decrease of 1 2.0%; and profit attributable toowners of parent of ¥12.0 billion, a decrease of 4.7%.

Financial and Corporate Data

Vaccination is expected to end the spread of COVID-19, but due toconcerns over the increase in variants, the situation is likely to remain
uncertain. In the food distribution industry, which is the Group’s main
business, demand for meals at home is expected to continue due topeople voluntarily staying at home and refraining from eating out, but
because of rapid changes in lifestyle and consumer behavior, theability to respond to change will be put more to the test.
The year ended March 3 1, 2 0 2 1 was the final year of theGroup’s FY2018-2020 strategic plans, and as stated in the basic
policy of “undertaking a paradigm shift from expanding
standardized stores to enhancing the appeal of products,” weachieved some positive results in shifting from growth by expansionof the store network. However, in order to further improve
management efficiency, we believe it is necessary to leverage thediverse management resources. Realizing both our unchanging
social mission to provide a stable supply of products essential todaily life and the need to change our methods of providing products
and services in conjunction with new lifestyles and consumer
behavior due to COVID-19, we also established the Valor Group
Vision 2030 and the Sustainability Vision 2030 as medium- to longterm management policies regarding the Group’s position in society
and how to create value looking ahead to 2030. The Valor Group’s
new FY2021-2023 strategic plans were formulated to make thesevisions a reality. In the dominant-form region, we will aim to build a“Valor Economic Zone” that connects local communities
conveniently and prosperously with the Valor Group’s products,
services, and payments, and throughout the region, we will aim to
be a “destination company” that is chosen through the appeal of
products. In order to achieve this, we will strengthen points ofcontact with customers and advance a business process

Note: The Accounting Standard for Revenue Recognition (ASBJ Statement No. 29) has been applied from the beginning of the fiscal year ending March 31, 2022. The forecast ofrevenues from operations presents the figures after said accounting standard is applied, but since accounting methods are different, year-on-year comparison figures are notprovided.

Financial policy in the FY2021-2023 strategic plans
Business portfolio
management

Generation of cash flow
Capital expenditure
Repayment of interestbearing debt

• Aim for stable growth in the highly efficient home improvement center business and in the core supermarket business, which is
expected to see sustained improvement in profitability.
• Profitability is still low in the drugstore business, but we will allocate funds to capital expenditures for now so that we can benefit
from economies of scale in product procurement and development.
• The sports club business, which was affected by COVID-19, will pursue further structural reforms to optimize profits from its
position of forming contacts with customers by providing value in health promotion.
• Create operating cash flow totaling at least ¥100.0 billion over the three years ending March 31, 2024.
• We plan to make capital expenditures totaling around ¥85.0 billion over the three years ending March 31, 2024, excluding M&A.
The breakdown of capital expenditures is 45-50% to new store investment, 35% to existing store investment, and 15-20% toother investment, including DX.
• Reduce interest-bearing debt to a D/E ratio target of 0.6 times

Shareholder return• Based on the dividend policy*, we will aim to maintain a steady return to shareholders at a targeted dividend payout ratio of 25%.

Financial discipline• Aim for a D/E ratio of 0.6 times. In light of the changes in the financing balance, we will begin to use ROIC as an indicator ofmanagement efficiency and pay more attention to the cost of capital.

Note: *Our basic policy is to maintain steady returns to shareholders while raising internal reserves in order to strengthen the corporate structure in preparation for long-term, stablebusiness development. Based on this policy, our medium- to long-term goal is a consolidated dividend payout ratio of 25%.

Valor Holdings Co., Ltd. Annual Report 2021

33

Financial and Corporate Data

Consolidated Financial Statements (Summary)
Consolidated Balance Sheet

Valor Holdings Co.,Ltd. and Subsidiaries (As of March 31, 2020 and 2021)(Millions of yen)

FY2019FY2020FY2019FY2020Notes and accounts payable-trade51,40059,423

Short-term loans payable

26,15921,962(Liabilities)(Assets)

Current liabilities

Current assets
Cash and deposits

24,68729,924

Notes and accounts
receivable-trade

12,77913,717

Commercial papers—

10,000

Merchandise and finished goods

51,28452,878Current portion of bonds

20

10,010Raw materials and supplies

891

1,149

Current portion of long-termloans payable

21,18020,495

14,932

14,537

Lease obligations

2,529

2,574

Income taxes payable

3,659

7,848

Provision for bonuses

3,143

3,634

Provision for directors’ bonuses

141

205

Provision for point card certificates

1,479

1,542

Provision for loss onrecollection of gift certificates

275

291

Other
Allowance for doubtful accounts(10)

Total current assets

104,565(7)
112,199

Noncurrent assets
Property, plant and equipment
Buildings and structures

277,323

292,338

Asset Retirement Obligations

91

30

Accumulated depreciation(144,695)(152,877)

Provision for loss on store closing

562

248

Buildings and structures, net

132,628

139,460

Other

31,143

27,218

Total current liabilities

141,786

165,484

Machinery, equipment
and vehicles

10,22913,593

Accumulated depreciation(6,966)(9,094)

Machinery, equipment
and vehicles, net

Bonds payable

10,010

—

3,263

4,499

Long-term loans payable

53,48944,52051,63652,096

Lease obligations

11,483

11,32023,681

Deferred tax liabilities

219

247

(13,209)(14,777)

Provision for directors’
retirement benefits

627

673

9,188

8,903

Land
Lease assets
Accumulated depreciation
Lease assets, net

22,397

Construction in progress

3,576

3,669

Other

42,39843,311(33,259)(33,767)

9,139

9,544

Accumulated depreciation
Other, net
Total property, plant andequipment

Goodwill
Lease assets
Other
Total intangible assets

Noncurrent liabilities

Provision for retirement benefits

4,743

5,804

Asset retirement obligations

12,703

13,342Long-term deposits received

6,906

6,603

Other

1,301

1,269

101,486

83,783

243,273249,267

13,609Total noncurrent liabilities
Total liabilities(Net assets)

209,431

218,173

Capital stock

13,609

1,390

1,496

Capital surplus

20,076

20,049144

157

Retained earnings

99,256108,998

14,172

14,339Intangible assets

Shareholders’ equity

Treasury stock
Total shareholders’ equity

(566)

(561)

132,375

142,095(1,865)880

15,70615,993

Investment securities

7,141

9,964

Valuation difference on
available-for-sale securities

Long-term loans receivable

1,052

1,106

Deferred gains (loss) on hedges

0—

Foreign currency translation
adjustment

273

140

Remeasurements of defined
benefits plan

(34)

(254)

(1,627)766

Investments and other assets

Deferred tax assets

9,599

11,039

Guarantee deposits

32,10232,350

Other

4,660

4,023

(341)

(392)

54,21558,092

279,353292,259

383,919

404,458

Allowance for doubtful
accounts
Total investments andother assets
Total noncurrent assets
Total assets

34(Millions of yen)

Valor Holdings Co., Ltd. Annual Report 2021

Accumulated othercomprehensive income

Total accumulated othercomprehensive income

142

134

Minority interests

9,754

12,194

Total net assets

140,645

155,190

383,919

404,458

Subscription rights to shares

Total liabilities and assets

Consolidated Statement of Income

Valor Holdings Co.,Ltd. and Subsidiaries (Consolidated fiscal years ended March 31, 2020 and 2021)(Millions of yen)

FY2020655,859
485,339
170,519
22,237
192,757

706,331519,555
186,775
23,837
210,613

8,486
38
1,206
1,353
3,352
2
972
65,435
5,258
2,919
136
908
40
11,141
10,01429,3304,110
15,412391
16,728177,241
15,515

5,842
141
1,405
1,679
3,601
4
988
69,773
6,120
3,403
203
1,240
61
12,0999,299
30,286
4,758
16,283434
17,336
184,964
25,648

133
223
1,425
834
39
1,356
4,013

133
186
1,576
855
19
1,927
4,698

875
710
696
367
2,650
16,878

854
—
680
415
1,950
28,397

10
—
2
40
150
283
303
138
930

47
103
42
17
170
467
—
50
898

3
218
3,065
221
90
365
272
707
4,944
12,863
6,439
(903)
5,535
7,328
851
6,477

24
287
2,843
197
138
—
702
557
4,751
24,544
10,877(1,793)
9,083
15,461
2,868
12,592

Valor Holdings Co., Ltd. Annual Report 2021

Financial and Corporate Data

Net sales
Cost of sales
Gross profit
Operating revenues
Operating gross profit
Selling, general and administrative expenses
Advertising expenses
Packaging expenses
Supplies expenses
Distribution expenses
Provision for point card certificates
Provision of allowance for doubtful accounts
Directors’ remuneration
Salaries and wages
Bonuses
Provision for bonuses
Provision for directors’ bonuses
Retirement benefit expenses
Provision for directors’ retirement benefits
Welfare expenses
Utilities expenses
Rent expenses
Repair and maintenance
Depreciation
Amortization of goodwill
Other
Total selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Office work fee
Rent income
Investment gain on equity method
Other
Total non-operating incomes
Non-operating expenses
Interest expenses
Foreign exchange losses
Rent cost of real estate
Other
Total non-operating expense
Ordinary income
Extraordinary income
Loss on sales of noncurrent assets
Gain on receipt of donated land
Gain on sale of investment securities
Gain on negative goodwill
Penalty income
Subsidy income
Insurance income
Other
Total extraordinary income
Extraordinary loss
Loss on sales of noncurrent assets
Loss on retirement of noncurrent assets
Impairment loss
Loss on reduction of noncurrent assets
Loss on valuation of investment securities
disaster Losses
losses of business restraint
Other
Total extraordinary loss
Income before income taxes
Income taxes-current
Income taxes-deferred
Total income taxes
Net income
Profit (loss) attributable to non-controlling interests
Profit attributable to owners of parent

FY201935

Financial and Corporate Data

Consolidated Financial Statements (Summary)
Consolidated Statements of Cash Flows

Valor Holdings Co.,Ltd. and Subsidiaries (Fiscal years ended March 31, 2020 and 2021)(Millions of yen)

Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Impairment loss
Amortization of goodwill
Gain on bargain purchase
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in defined benefit liabilities
Increase (decrease) in provision for directors’ retirement benefits
Increase (decrease) in provision for point card certificatesInterest and dividends income paid
Interest expenses received
Loss on retirement of noncurrent assets
Loss on reduction of noncurrent assets
Disaster losses
Payment for business acquisition
Loss (gain) on valuation of investment securities
Equity in losses (earnings) of affiliates
Subsidy income
Insurance income
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable-trade
Increase (decrease) in accrued consumption taxes
Increase (decrease) in accounts payable-other and accrued expenses
Other
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
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
Payments for guarantee deposits
Proceeds from collection of guarantee deposits
Proceeds from guarantee deposits received
Repayments of guarantee deposits received
Payment for acquisition of shares in subsidiaries resulting in change in scope of consolidation
Income for acquisition of shares in subsidiaries resulting in change in scope of consolidation
Payment for acquisition of businessSubsidy income
Other
Net cash provided by investing activities
Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Net increase (decrease) in commercial papers
Proceeds from long-term loans payable
Repayments of long-term loans payable
Redemption of bonds
Repayments of finance lease obligations
Proceeds from sales of treasury stock
Purchase of treasury stock
Purchase of shares of subsidiaries not resulting in change in scope of consolidation
Cash dividends paid
Dividends paid to non-controlling shareholders
Other
Net cash provided by financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease)in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase in cash and deposits due to share exchange
Cash and cash equivalents at end of period

36

Valor Holdings Co., Ltd. Annual Report 2021

FY2019FY202012,863
17,665
3,065
391
(40)
(7)
334
28
178
(356)
875
218
221
365
272
90
(39)
(283)
(303)
(3,427)
(917)
5,095
(622)
988
1,486
38,142
255(818)(6,708)30,871

24,544
18,234
2,843
434
(17)
42
624
21
57
(320)
854
287
197
—
702
138
(19)
(467)
—
(256)
(1,552)
1,364
1,306
847
1,952
51,822
220(834)(7,069)44,138(283)
676(22,469)
48(1,680)
(459)
115
(136)
22
(1,607)
1,967
333
(651)
(680)
43
(1,182)
283(953)(26,615)(427)
532(26,981)
1,023(1,250)
(118)
227
(6)
83
(1,766)
1,868
450
(770)
(193)
102
(76)
467
(1,300)(28,137)

2,983—
22,348(19,516)(100)(2,821)0(0)(361)(2,690)
(393)
0
(551)
(487)
3,217
17,9383,003
24,159(4,241)
10,00012,156(22,218)(34)(2,802)5(1)(46)(2,848)(441)
0(10,472)
(337)
5,190
24,159—29,349

Consolidated Statements of Changes in Net Assets

Valor Holdings Co.,Ltd. and Subsidiaries (Fiscal years ended March 31, 2020 and 2021)

FY2019(Millions of yen)

Shareholders’ equity

Balance, March 31,
2018

Accumulated other comprehensive income

CapitalStock

CapitalSurplusRetainedearnings

Treasury
stock

Total
shareholders’equity13,60915,543

95,468(566)

124,054

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

421

0

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

155

(33)

544

101

Noncontrollinginterests

693

Total net
assets125,395

Changes of items
during the period
Equity transaction
with noncontrollinginterests

(269)

(269)

(269)

Increase due to ashare exchange

4,802

4,802

4,802

Dividends fromsurplus(2,689)(2,689)(2,689)Net income

6,477

6,477

6,477

Purchase oftreasury stock

(0)

(0)

(0)

Disposal oftreasury stock

0

0

0

Net changes of
items during theperiod(2,287)

(0)

117

(1)

(2,171)

40

9,060

6,929

—

4,532

3,788

(0)

8,320

(2,287)

(0)

117

(1)

(2,171)40

9,060

15,250

Balance, March 31,
201913,60920,07699,256(566)

132,375(1,865)

0

273

(34)

(1,627)

142

9,754

140,645

FY2020(Millions of yen)

Shareholders’ equity

Balance, March 31,
2019

Financial and Corporate Data

Total changes of items
during the period

Accumulated other comprehensive income

CapitalStock

CapitalSurplusRetainedearnings

Treasury
stock

Total
shareholders’equity13,60920,07699,256(566)

132,375

Valuation
Deferred gains
difference on(loss) on
available-forhedges
sale securities(1,865)0

Total
Subscription
Foreign
Remeasurements accumulated
rights tocurrencyof defined
othersharestranslation
benefits plan comprehensive
adjustment
income273(34)(1,627)142

Noncontrollinginterests

9,754

Total net
assets140,645

Changes of items
during the period
Equity transaction
with noncontrollinginterests

(26)

(26)

(26)

Dividends fromsurplus(2,850)(2,850)(2,850)Net income

12,592

12,592

12,5925

5

Disposal oftreasury stock5

Net changes of
items during theperiod

2,746

(0)

(133)

(219)

2,393

(8)

2,440

4,825

Total changes of items
during the period

—

(26)

9,742

5

9,720

2,746

(0)

(133)

(219)

2,393

(8)

2,440

14,545

Balance, March 31,
2020

13,60920,049108,998(561)

142,095

880

—

140

(254)

766

134

12,194

155,190

Valor Holdings Co., Ltd. Annual Report 2021

37

Financial and Corporate Data

Corporate Data/ Share Information(as of March 31, 2021)

Corporate Data

Share Information
Valor Holdings Co., Ltd.

Number of authorized shares

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

Number of outstanding shares

53,987,499

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

Number of shareholders

16,635

Headquarters

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¥13,609 million

Name

Nagoya Stock Exchange, first section

Distribution of shareholders by Type

Major Shareholders

Financial Institutions 51 shareholders
17,881 thousands of shares 33.1%

Other companies 371 shareholders
14,012 thousands of shares 26.0%

Number of Shares Percentage of *Held (Thousands) Shares Held

Shareholder

Securities companies 27shareholders
399 thousands of shares 0.7%

Foreign entities 241 shareholders
11,504 thousands of shares 21.3%

Individuals, others 15,945 of shareholders
10,189 thousands of shares 18.9%

Ito Youth Scholarship Foundation

2,910

5.41

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

2,892

5.37

Shiunsha Co.,Ltd.

2,730

5.07

The Norinchukin Bank

2,542

4.72

The Juroku Bank

2,536

4.71

Custody Bank of Japan, Ltd. (Trust Account)

1,762

3.27

Masami Tashiro

1,475

2.74

Retail Partners Co.,Ltd.

1,260

2.34

Arcs Group Co.,Ltd.

1,260

2.34

MUFG Bank, Ltd.

1,223

2.27

Notes: Shareholders are listed by shareholder number if they hold the same number of shares.
*The percentages of total outstanding shares excluding treasury stock aredisplayed by rounding down after the three decimal points.

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)
8,000

6,000

4,000

2,000

0
(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

2010

38

2011

2012

Valor Holdings Co., Ltd. Annual Report 2021

2013

2014

2015

2016

2017

2018

2019

2020

2021

Valor Group
Segment

Subsidiaries

Valor Co.,Ltd.
Tachiya Co., Ltd.
Shokusenkan-Taiyo Co.,Ltd.
Kohseiya Co.,Ltd.
Futabaya Co.,Ltd.
Sanko Co.,Ltd.
Terao Stores Inc.
Yamato Store LLC.
Chubu Foods Co., Ltd.
Daien Foods Co., Ltd.
Fukui Chuo Tsukemono Co., Ltd.
Honda Suisan Co., Ltd.

Ishinomaki Foods Co.,Ltd.
Furuya Sangyo Co., Ltd.
Keirinkaku Co., Ltd.
Shiroishikandumekouzyou Co. Ltd.
Daitoh Shokken Co.,Ltd.
Shufu-no-Mise Shoji Chubu Honsha Co.,Ltd.
V-Solution Co., Ltd.
Chubu Meat Co., Ltd.
Chubu Agri Co.,Ltd.
Valor Max Co., Ltd.***VARO Co., Ltd.

Drugstores

Chubu Yakuhin Co., Ltd.
Hida Pharmaceutical LLC
Sun Pharmacy LLC*

Aoi Pharmaceutical LLC
V-drug International Co., Ltd.
V-drug Hong Kong Co., Ltd.

Home Improvement Centers

Daiyu Eight Co.,Ltd.
Home Center Valor Co., Ltd.
Time Co.,Ltd.
Alleanza Japan Co.,Ltd.

Nisshiki Co.,Ltd.
Aguriru Co.,Ltd
FIRST Co., Ltd.

Sports ClubsAXTOS Co., Ltd.

Approach Co.,Ltd.

Distribution-related operations

Chubu Ryutu Co., Ltd.
Chubu Kosan Co., Ltd.
SHIGA CHUO PACK Inc.
MENTEX Co., Ltd.
Seiso Co., Ltd.

V-Flower Co., Ltd.
Shanghai Valor co., Ltd.
Valor Vietnam Co., Ltd.
Valor Agency Co., Ltd.
Japan Clean Services LLC

OthersAlleanza Holdings Co.,Ltd.
Home Center Valor Co., Ltd.**
Amigo Co.,Ltd.
Joker Co.,Ltd.

Agri Genki Okayama LLC
Gito Family Department Co., Ltd.
Chubu Hoken Service Co., Ltd.
Valor Max Co., Ltd.***Financial and Corporate Data

Supermarkets

Note: *In April 1 2021,Ishinomaki Foods Co.,Ltd. was merged into Honda Suisan and Sun Pharmacy LLC was merged into Chubu Yakuhin Co., Ltd.
**Pet Shop Business ***Same company

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

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

2007

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

2012

Established Hokuriku processing center for fresh meat in Nanto- shi, Toyama.
Established Kani distribution center for products stored at ambient temperatures in Kani- shi, Gifu.

2013

Established Shizuoka integrated center in Shimada- shi, Shizuoka.
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.

2016

Established Nagoya Headquarters in Nakamura-ku Nagoya-shi.
Acquired Kohseiya Co., Ltd.,a supermarket subsidiary.

2018

Acquired Futabaya Co.,Ltd., a supermarket subsidiary.
Established capital and business partnership with Arcs Co.,Ltd. and Retail Partners Co.,Ltd.

2019

Acquired Sanko Co.,Ltd., a supermarket subsidiary.
Integrated the home improvement center business by a share exchange between Home Center Valor Co.,Ltd. and Alleanza Holdings Co.,Ltd.

2020

Acquired Daitoh Shokken Co., Ltd. a food and seasonings manufacturing subsidiary.

Valor Holdings Co., Ltd. Annual Report 2021

39

“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.
Headquarters

661-1 Ohari-cho, Tajimi-shi, Gifu 507-0062 Japan
Phone: +81-572-20-0860

For IR-related Inquires
Investor Relations & Public Relations

1957-2 Kita-tanda, Hiromi, Kani-shi, Gifu 509-0214 Japan
Phone: +81-574-60-0858

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